1987 (4) TMI 83 - HC - Central Excise

Court rules Tyrecord Warpsheets not liable for excise duty, orders refund. Unjust enrichment principle applied.

The Court held that Tyrecord Warpsheets were not liable to Central Excise duty. The petitioner was entitled to a refund of the excise duty paid under ... Refund - Writ jurisdiction Issues Involved:1. Whether the Tyrecord Warpsheet is a separate item of manufacture and liable to Central Excise duty.2. Whether the petitioner is entitled to a refund of the excise duty paid under protest.3. Whether the principle of unjust enrichment applies to the refund of excise duty.4. Whether the claim for refund is barred by delay and laches.Issue-wise Detailed Analysis:1. Whether the Tyrecord Warpsheet is a separate item of manufacture and liable to Central Excise duty:The writ petitioner contended that no manufacturing process was involved in making warpsheets and that no new commodity known to commerce or industry came into being when yarn was arranged or assembled to form a warpsheet. The excise authorities in West Bengal, however, demanded excise duty on such warpsheet, arguing that a nylon or rayon tyrecord warpsheet was a separate item of manufacture and liable to Central Excise under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944. The learned Single Judge held that no duty of excise was to be levied on tyrecord warpsheets, a decision upheld by the Division Bench and the Supreme Court.2. Whether the petitioner is entitled to a refund of the excise duty paid under protest:The petitioner applied for a refund of the duty amounting to Rs. 1,57,251.96, which was refused by the excise authorities. The writ petition was filed for directing a refund of the said sum with interest. The learned Single Judge allowed the writ petition and directed the refund of the said sum. The Union of India and the Assistant Collector of Central Excise appealed against this decision.3. Whether the principle of unjust enrichment applies to the refund of excise duty:The appellants argued that the petitioner had not borne the burden of the excise duty but had passed it on to its customers. Therefore, refunding the amount to the petitioner would result in unjust enrichment. They relied on the Supreme Court decision in State of Madhya Pradesh v. Vyankatlal, which held that only the persons who had ultimately borne the burden of the tax were entitled to a refund. The respondents countered this by arguing that the principle of unjust enrichment did not apply in the case of excise duty and that the excise duty was not charged separately but was part of the integrated price.The Court referred to several decisions, including Shiv Shankar Dal Mills v. State of Haryana, which emphasized that public bodies should return money wrongly collected. The Court concluded that the principle of unjust enrichment applies to both the Department and the assessee. If the assessee had passed the burden to its purchasers, it should not receive a refund. The Court noted that the respondents had admitted in their affidavit that they would refund the excise duty to their customers if refunded by the Department.4. Whether the claim for refund is barred by delay and laches:The appellants argued that the claim was barred by delay and laches, as the payment was made between 24th March, 1975 and 28th June, 1976, and the writ petition was moved in August 1984. The Court did not specifically address this argument in its decision, focusing instead on the principles of unjust enrichment and the procedural aspects of refund.Decision:The Court directed the refund of the sum of Rs. 1,57,251.96 to be paid to a Special Officer/Receiver appointed by the Court. The Special Officer was tasked with issuing public notices and scrutinizing claims for refund from the purchasers who had paid the excise duty. The Court provided detailed guidelines for processing the claims and ensuring that the refund reached the rightful claimants. The appeal was disposed of accordingly, with no order as to costs.