2005 (3) TMI 116 - SC - Central Excise

Appeal denied: no octroi exemption or refund for reprocessed sugar; unjust enrichment bars recovery under Section 11B

SAHAKARI KHAND UDYOG MANDAL LTD. Versus COMMISSIONER OF C. EX. & CUS.

SC dismissed the appeals, holding the appellant not entitled to octroi/exemption or refund for re-processed sugar. The Court ruled the doctrine of unjust ... Entitlement to benefit of exemption from octroi duty for excess production - re-processed sugar - time barred under Section 11B - Ratio of Levy Sugar and Free Sale Sugar - Whether the doctrine of 'unjust enrichment' is based on equity. Held that:- In our opinion, irrespective of applicability of Section 11 B of the Act, the doctrine of 'unjust enrichment' can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11 B of the Act or similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the petitioner/appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss. In the present case, not only no such case has been made out by the appellant-Mandal, the position is to the contrary. All the authorities below have expressly recorded a finding that the appellant-Mandal has recovered the amount from consumers and as such excise duty is passed on to consumers/customers. In view of specific finding, in our opinion, the conclusion is inescapable that the appellant-Mandal is not entitled to claim any amount. Allowing exemption or refund of amount would result in 'unjust enrichment' by the appellant which cannot be permitted. In our opinion, therefore, even on that count, orders passed by the authorities and refusal to grant benefit cannot be held arbitrary, unreasonable or inequitable. The said ground also, therefore, has to be rejected. Thus appeals deserve to be dismissed Issues Involved:1. Time-barred Claims2. Calculation of Average Production3. Ratio of Levy Sugar and Free Sale Sugar4. Application of Doctrine of Unjust Enrichment5. Applicability of Section 11B of the Central Excises and Salt Act, 1944Issue-wise Detailed Analysis:1. Time-barred Claims:The appellant-Mandal's claim for rebate was held to be time-barred under Section 11B of the Central Excises and Salt Act, 1944. The claim, related to the production year 1976-77, should have been filed by March 31, 1978, but was submitted on August 14, 1978. Both the Assistant Collector and the Collector of Central Excise (Appeals) upheld this finding, and the CEGAT confirmed the order, stating the claim was 'clearly barred by limitation.'2. Calculation of Average Production:The appellant argued that the average production should be calculated over three years, including a year with nil production. However, Clause 3 of Notification No. 108/78 specifies that the average production should be calculated based on the years the factory actually worked, ignoring the years with no production. This interpretation was upheld by the authorities and confirmed by the Supreme Court, referencing a similar decision in Sidheshwar Sahakari Sakhar Karkhana Ltd. v. Union of India.3. Ratio of Levy Sugar and Free Sale Sugar:The appellant's claim was reduced because the actual sale of sugar did not adhere to the required ratio of 65% levy sugar and 35% free sale sugar. The authorities recalculated the rebate based on the actual sale ratio, and the Supreme Court upheld this decision, stating that the notifications clearly required compliance with the specified ratio to claim the benefit of exemption from excise duty.4. Application of Doctrine of Unjust Enrichment:The authorities invoked the doctrine of unjust enrichment, as the appellant had already passed on the excise duty to consumers. The Supreme Court supported this application, stating that unjust enrichment occurs when a person retains money or benefits unjustly. The Court cited several precedents, including Mafatlal Industries Ltd. and Orient Paper Mills Ltd., to affirm that the appellant could not claim a refund as it would result in unjust enrichment.5. Applicability of Section 11B of the Central Excises and Salt Act, 1944:Section 11B, amended in 1991, applies to pending claims and requires proof that the duty was not passed on to consumers. The Supreme Court referenced Union of India v. Jain Spinners Ltd. and Mafatlal Industries Ltd., which established that the amended provisions apply to pending claims. The Court found that the appellant had passed on the duty to consumers, and thus, under Section 11B, the appellant was not entitled to a refund.Conclusion:The Supreme Court dismissed both appeals, upholding the findings of the lower authorities. The appellant's claims were time-barred, the calculation of average production was correct, the ratio of levy sugar and free sale sugar was not maintained, and the doctrine of unjust enrichment was rightly applied. The applicability of Section 11B further disqualified the appellant from claiming a refund.