1993 (8) TMI 66 - SC - Central Excise

Supreme Court denies refund of excise duty on ship scrap, upholds consent terms.

The Supreme Court held that the consent terms and subsequent documents did not provide for the refund of the 25% excise duty paid by the respondents ... Refund of the 25% of the central excise duty paid by them in accordance with the interim order passed by the High Court in the writ petitions rejected Held that:- Paragraph 3 of the consent terms was thus related only to the waiver of the liability in respect of the said 75% of the duty of excise. 25% duty of excise, which had already been paid by the petitioners in pursuance of the interim order, could not be treated as part of the arrears of excise duty and, therefore, neither paragraph 3 of the consent terms nor the letter dated April 6, 1989 can be construed as referring to the payment of 25% of duty of excise made by the petitioners in pursuance of the interim order passed by the High Court. The expression 'waiver of the arrears of excise duty' can only mean waiver of something which has not been paid and is payable. The direction to withdraw the show cause notices and the confirmed demand notices in the letter dated April 6, 1989, only means that no further action be taken for the recovery of the arrears, namely, 75% of duty of excise. The said withdrawal cannot be construed to mean that 25% of duty of excise which had been deposited by the petitioners in pursuance of the interim order of the High Court is required to be refunded. Unable to uphold the direction given by the High Court for refund of 25% of the duty of central excise deposited by the petitioners in pursuance of the interim order passed by the High Court in the earlier writ petitions. Issues:Interpretation of consent terms regarding refund of excise duty paid during pendency of writ petitions.Analysis:The case involved respondents engaged in ship breaking business who were required to pay excise duty on scrap material. The respondents filed writ petitions in the Gujarat High Court challenging the levy of excise duty on ship scrap. An interim order allowed them to clear goods by paying 25% of the duty, with a provision for refund if they succeeded in the petitions. Subsequently, the parties reached consent terms, which did not explicitly address the refund of the 25% excise duty paid during the pendency of the writ petitions. The High Court disposed of the writ petitions in accordance with the consent terms, which did not mention the refund of the 25% excise duty.The Central Government issued a notification exempting certain goods from excise duty related to ship breaking, but this exemption was prospective and did not cover the period before the notification. Additionally, a letter from the Government directed the waiver of arrears of excise duty on ship scrap for the past period. However, the High Court's interpretation that this waiver included the 25% excise duty paid during the pendency of the writ petitions was deemed incorrect by the Supreme Court.The Supreme Court held that the consent terms and subsequent documents did not provide for the refund of the 25% excise duty paid by the respondents during the pendency of the writ petitions. The Court concluded that the High Court's direction for the refund was not justified based on the terms of the consent agreement and related notifications. As a result, the Supreme Court allowed the appeals, set aside the High Court's judgment, and dismissed the writ petitions filed by the respondents, with no order as to costs.