Refund claims in writ jurisdiction and unjust enrichment: duty refund maintained with interest where no passing-on was proved

A refund claim for duty collected on manufactured goods was treated as maintainable in writ jurisdiction where the delay in approaching the Court was explained, and the departmental limitation under Rule 11 was not applied rigidly against the assessee. The plea of unjust enrichment also failed because it was not the basis of the refund rejection and there was no factual foundation showing that the duty burden had been passed on to consumers. On that footing, the refundable amount carried interest from the date the classification issue was settled, and the refund with interest was upheld.

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Issues: (i) whether the petitioner's refund claim for duty collected on manufactured goods was barred by limitation in writ jurisdiction, and (ii) whether the plea of unjust enrichment could defeat the refund and consequential interest claim.

Issue (i): whether the petitioner's refund claim for duty collected on manufactured goods was barred by limitation in writ jurisdiction

Analysis: The petitioner had been pursuing refund since 1971 and the delay in approaching the Court under Article 226 of the Constitution of India was explained as arising from a mistaken understanding that the statutory proceedings could still sustain the claim. The Court held that, in writ proceedings, the general principles of limitation could be applied and Rule 11 of the Central Excise Rules did not control the claim in the same way as it did before the departmental authorities. On the facts, the claim for refund for the relevant period was maintainable.

Conclusion: The limitation objection failed and the refund claim was held to be maintainable in writ jurisdiction, in favour of the assessee.

Issue (ii): whether the plea of unjust enrichment could defeat the refund and consequential interest claim

Analysis: The plea of unjust enrichment was not a ground on which the departmental authorities had rejected the refund, and no factual foundation had been laid to establish that the burden had been passed on to consumers. The Court also noted that refund had already been granted for part of the relevant period, which was inconsistent with the Department's objection. As to interest, the Court held that once the classification issue was settled by the Assistant Collector's order dated 16-3-1979, withholding the refundable amount was unjustified and interest was payable from that date until payment.

Conclusion: The plea of unjust enrichment was rejected and interest at 12% per annum on the refundable amount was upheld, in favour of the assessee.

Final Conclusion: The writ petition succeeded, and the petitioner was held entitled to refund of the duty collected for the relevant period together with interest, with the request for leave to appeal to the Supreme Court being refused.

Ratio Decidendi: In writ jurisdiction, a refund claim for illegally collected duty is not necessarily defeated by the departmental limitation under Rule 11 where the delay is explained and the general principles of limitation are applied, and a plea of unjust enrichment cannot be entertained without a factual foundation showing that the duty burden was passed on.

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