Manufacturers cannot claim tax refunds when burden passed to consumers through pricing under unjust enrichment doctrine

The SC dismissed the appeal challenging a validation act regarding refund of amounts paid under protest. The Court reaffirmed the doctrine of unjust enrichment, holding that a person who passes on the tax burden to others, directly or indirectly, cannot claim refund of tax later declared illegal or unconstitutional. The Court noted that manufacturers typically include both raw material costs and tax components in final product pricing, passing the burden to consumers. The principle applies regardless of specific statutory provisions, and the Court found no grounds to interfere with the lower court's judgment.

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Issues involved:
The appeal involves the constitutionality of two imposts, a cess and a tax levied under specific Acts, and the subsequent challenge to the Validation Act in relation to these imposts. The main issue is the entitlement of the Appellant to seek a refund of the amounts paid under protest for the period when the imposts were in force.

Constitutionality of Two Imposts:
The Appellant, a cement manufacturing company, challenged the constitutionality of two imposts - a cess and a tax levied under specific Acts - successfully before the High Court based on the judgment of the Constitution Bench of the Supreme Court. This led various States to face the need for refunds due to the declaration of unconstitutionality. The Parliament then enacted the Validation Act to address this situation.

Challenge to Validation Act:
The constitutionality of the Validation Act itself was challenged by the Appellant before various courts. The Appellant initially did not pay the imposts under interim orders of the High Court but later paid the amounts due under protest after the vacation of the interim orders. The Supreme Court had previously upheld the constitutionality of the Validation Act in a separate case.

Refund of Amounts Paid:
The High Court declared that the Appellant was entitled to a refund of the cess and mineral rights tax paid for a specific period, following a judgment by the Supreme Court. However, a review petition was filed by the Respondents, arguing against the automatic entitlement of the Appellant for a refund, citing a previous ruling related to passing on tax liability to consumers.

Principle of Passing on Tax Liability:
The Appellant claimed entitlement to a refund based on the principle that passing on tax liability to consumers should not preclude the refund. Reference was made to previous cases where refund claims were allowed due to the absence of passing on the tax burden. The Supreme Court clarified that a person passing on the tax burden to another party is not automatically entitled to a refund of the tax deemed unconstitutional, unless it is proven that the tax liability was not transferred to a third party.

Dismissal of Appeal:
The Supreme Court dismissed the appeal, upholding the restriction on the Appellant's right to seek a refund unless the Appellant can demonstrate that the tax burden was not passed on to consumers. The Court allowed the Appellant the opportunity to establish this before the competent authority within a specified period, emphasizing the need for evidence to support the claim.

Separate Judgement:
In related special leave petitions, the Court disposed of the matters in line with the order in the main appeal, noting the similarity in the issues involved. No costs were awarded in these matters.

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