MAFATLAL INDUSTRIES LTD. ETC. ETC. v. UNION OF INDIA ETC. ETC.

A term "assessment". It may include both "imposition" of a tax as well as_ assessment. The term "imposition" is generally used for the levy of a tax or duty by legislative provisions indicating the subject-mat- ter of the tax and the rates at which it has to be taxed. The term "assessment", on the other hand, is generally used in this country B for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate "levy'' with an "assessment" as well as with the collection of a tax when it held that "when the c payment of tax is enforced, there is a levy". We think that, although the connotation of the term "levy" seems wider than that of "as- sessment", which it includes, yet, it does not seem to us to extend to "collection". Article 265 of the Constitution does not seem to us to extend to "collection". Article 265 of the Constitution makes a distinction between "levy" and "collection". We also find that in D N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Others v. The Elphinstone Spinning and Weaving Mills Co. Ltd., this Court made a distinction between "levy" and "collection" as used in the Act and the rules before u~. It said there with reference to Rule 10: E "We are not inclined to accept the contention of Dr. Syed Moham- mad that the expression 'levy' in Rule 10 means actual collection of some amount. The charging provision Section 3(1) specifically says: There shall be levied and collected in such a manner as may F be prescribed the duty of excise...... It is to be noted that sub-sec- tion (i), uses both the expressions - 'levied and collected' and that clearly shows that the expression 'levy' has not been used in the Act or the Rules as meaning actual collection."

G I fail to see how a person who has been subjected to levy of excise duty and from whom the duty has been collected cannot get the refund of the duty but only a person who has neither been charged any duty nor paid any duty under the Act can claim refund of the duty. This will be clearly H against Article 265 of the Constitution.

MAFATLAL INDS. LTD. v. U.O.I. [SEN, J.] 823

REFUND A

Sections llA and 118 before its amendment in 1991 stood as under:

"llA. Recovery of duties not levied or not paid or short-levied or B short-paid or erroneously refunded. - (1) when any duty of excise has not been levied or paid or has been short- levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person charge- able with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has er- C roneously been made, requiring him to show cause why he should not pay the amount specified in the notice :

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade

- payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words "Central Excise Officer," the words "Collector of Central Excise, " and for the words "six months", the words "five years" were substituted.

Explanation, - Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the afore~aid period of six months or five years, as the case may be.

(2) The Assistant Collector of Central Excise or, as the case may be, the Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(3) For the purposes of this section, H

824 SUPREME COURT REPORTS(1996J SUPP. 10 S.C.R. ·; A (i) "refund" includes rebate of duty of excise on excisable goods . exported out of India or on excisable materials used in the ' manufacture of goods which are exported out of India; i (ii) "relevant date" means :

B (a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short levied or short-paid -

(A) Where under the rules made under this Act a monthly return, showing particulars of the duty paid on the excisable goods removed during the month to which the said return c relates, is to be filed by a manufacturer or producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed;

(B) where no monthly return as aforesaid is filed, the last D date on which such return is to be filed under the said rules;

(c) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder :

E (b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; - ~.

(c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund."

F· JJB. Claim for refund of duty. - (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date:

Provided that the limitation of six months shall not apply where any duty has been paid under protest.

(2) If on receipt of any such application, the Assistant Collector of Central Excise is satisfied that the whole or any p_art of the duty of excise paid by the applicant should be refunded to him, he may make an order accordingly.

MAFA1LAL INDS. LTD. v. U.O.I. [SEN, J.] 825

(3) Where as a result of any order passed in appeal or revision under this Act refund of any duty of excise becomes due to any person, the Assistant Collector of Central Excise may refund the amount to such person without his having to make any claim in that behalf.

(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained.

(5) Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount· <'.Ollected as duty of excise made on the ground that the goods in respect of which such amount was collected were not c excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim.

Explanation : For the purpose of this section : D (a) "refund" includes rebate of duty of excise on excisable rebate of duty India or on excisable materials used in the manufacture of goods which ar exported out of India;

(b) "relevant date" means. - E (a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, -

(i) if the goods are exported by sea or air, the date on which the F ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or G (iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any H

826 SUPREME COURT REPORTS[1996] SUPP. 10 S.C.R.

A factory, the date of entry into the factory for the purposes aforesaid:

(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been B removed from such factory for export out of India, the date of entry into the factory;

( d) In a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central c Government by notification in the Official Gazette in full discharge of his liability of the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

'Q. (e) in a case where duty of excise is paid provisionally under this Act or the Rules made thereunder, the date of adjustment of duty after the final assessment thereof;

.(t) In any other case, the date of payment of duty. E Section llB before its amendment in 1991 provided by sub-section (1) "Any person claiming refund of any of duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date". By sub-sec- tion (2), the Assistant Collector was required to examine the application p and if he was satisfied that "the whole or any part of the duty of excise paid by the applicant should be refunded to him, he may make an order accordingly''. Sub-section (3) dealt With the consequence of an order passed in appeal or revision under the Act. It provided that if as a result of any appellate or revisional order, any duty of excise becomes due to any person, the Assistant Collector of Central Excise may refund the amount. G Sub~section (4) provided that no claim for refund for any duty of excise shall be entertained except as provided by or under this Act. Sub-section (5) laid down that the provisions of this Section Will also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty.

MAFATLALINDS.LTD. v. U.O.I. (SEN,J.] 827

In order to claim refund, a person has to establish that he has paid the duty. The duty is what is paid pursuant to the charge levied by Section 3 and quantified in the manner laid down in the rules. Rule 3{v) of the Central Excise Rules also says that "duty" means the duty payable under Section 3 of the Act. The time and manner of payment of duty will have to be in accordance with the provisions of Rules 9 and 9A (4). There is no other duty charged under the Central excise Act and there is no other way a duty can be paid under the Central Excise Act. It is the person who has paid the duty of central excise under the charge imposed by the Act and within the time and in the manner laid down by the Act, who can claim the refund of duty under Section llB. "Any person claiming refund of any duty of excise" must be the person who has paid the aforesaid duty in the c aforesaid manner. A consumer or buyer cannot say that he has paid any duty of excise. The duty is only on the manufacturer and not on the consumer. Under sub-section (2), the Excise Officer has to be satisfied that whole or any part of. the duty of excise should be refunded to the person who has paid the duty. D This is the law in respect of payment of duty as obtaining refund of duty paid in excess. The buyer or the consumer does not pay any "duty" and, therefore, he is precludeq from making any application for refund under Section llB. A person who has not paid any duty in law cannot claim a refund on the ground that he has borne the burden of duty. E

The Excise offict<r is a creature of the statute. H:s powers and functions are circumscribed by the statute. He can realise tax strictly in accordance with the statute. He cannot realise tax beyond the charge imposed by Section 3 out of any extra-statutory considerations. If more tax F than permissible under the charge imposed by Section 3 has been collected, it must be returned to the taxpayer. There is nothing in the Act which enables the Excise Officer to embark upon an inquiry to find out whether after payment of the duty, the manufacturer has sold his goods and if so, has included this amount in his price. It is not a ground on which the Excise officer can refuse to refund the excess amount of duty paid by the manufac- G turer in the mode and manner laid down by the Act. A taxation statute has to be construed strictly. The Excise Officer cannot insert a proviso to the Section and say that even if the levy is illegal and the manufacturer is otherwise entitled to refund of duty under Section llB, he will not be given this refund if he has included the duty element in the price of the goods H

828 SUPREME COURT REPORTS(1996] SUPP. 10 S.C.R.

A manufactured by him.

The Excise Officer has no discretionary power to refuse to pay refund. even when he was satisfied that excess payment of duty contrary to law has been collected or paid. Though sub-section (2) of Section llB or B earlier Rule llA used the language that the .Central Excise Officer "may make an order of refund". The word 'may', in this context, has to be construed as 'must'. The section does not give the Central Excise Officer any discretion once he was satisfied that excess payment had been made. He cannot withhold payment on some extraneous reasons. This point was dealt with at length in the Australian case of Commissio11er of State C Reve11ue v. Royal ll!surance, {1995) 69 Australian Law Journal 51 by Dawson, J. There, Section 111{1) of the Stamps Act, provided :

"Where the comptroller fit!ds in any case that duty has been over-paid, whether before or after the commencement of the Stamps Act, 1978 he may refund to the company, person or firm of persons which or who paid the duty the amount of duty found to be overpaid."

This section was later on amended to provide that the Comptroller "must refund the amount of the overpaid duty" upon an application made within three years of overpayment. There was no dispute that a huge amount of Stamp duty had been overpaid by Royal in respect of premiums for workers compensation insurance. The overpayments had been passed on. The comptroller made a decision not to refund the overpaid duty. Royal initiated an action for the recovery of the amount. It was unsuccess- F ful before the Trial Judge who reached the conclusion that the use of the word 'may' in Section 111{1) gave the Comptroller a discretion whether or not to refund the overpaid tax. The Full Court on appeal came to a contrary conclusion. It held that after being satisfied that over payment had been made, it was not open to the comptroller to refuse to refund the duty. One of the points argued was the Act was amended later to use the word G 'shall' in place of 'may'. Dawson, J. observed that this was of no conse- quence. On behalf of the Comptroller it was argued that a number of considerations might justify her withholding of refund of overpaid stamp duty and submitted that the possibility of these situations arising explains why the Legislature had used the word 'may'. Chief among these considera- H tions was the impossibility of ensuring that where the duty had been passed

MAFATLALINDS. LID. v. U.O.I. [SEN, J.) 829

on to some other person, any refund should be similarly passed on. It was A argued that unlikelihood of Royal's passing on of any refund would result in a windfall to it because the burden of the duty had in fact been borne by its customers.

Dawson, J. repelled this contention by saying ; B "But that it is a situation for which the legislature might have provided had it wished to do so and its failure to do so does not indicate an intention to give to the Comptroller a discretion to retain payments of stamp duty which were not made pursuant to any legal obligation. c

The absence of any qualification of this kind in s.111(1) suggests to my mind an obligation to refund the overpaid duty rather than a discretion to withhold repayment in situations which the legisla- D ture might have specified but did not.

It must be borne in mind that the occasion for the exercise of the authority conferred by s.111(1) is the finding of an overpayment of stamp duty; that is to say, a finding that the comprtroller received moneys to which she had no entitlement. The sub-section E must be read either as requiring her to refund the overpayment or as conferring a discretion upon her to keep the moneys not- withstanding that she had no entitlement to receive them. The principle that a statute will not be read as authorising expropriation without compensation unless an intention to do so is clearly ex- F pressed has been described as a firmly established rule of law'."

Dawson, J. also expressed the view that the. Comptroller did not have a discretion which had tci be exercised in accordance with law of restitution. He pointed out that the occasion for the exercise of the authority was identified. The only question which arose was whether the authority must G be exercised when the necessary finding of overpayment had been made or whether its exercise was discretionary. Dawson, J. observed that "if the common law, rather than the sub-section, were to govern the Comptroller's obligation to make a refund, then no doubt a refund would now be required." H

830 SUPREME COURT REPORTS(1996) SUPP.10 S.C.R.

A In fact, this principle is very important to understand the problem raised in this Court. The Central Excise Act provided for every situation for levy, collection and refund of tax. If an overpayment has been made for whatever reason, the amount ~as to be refunded. The Excise Officer, who deals with an. application for refund, has to find out whether an overpay- B ment has been made under the Act. He may, for any reason to be found in the Act, decline to give refund. He cannot travel beyond the Act to find other considerations for withholding the refund. As Dawson, J. pointed out if that was the intention of the Legislature, the Legislature would have expressly provided for it. Dawson, J. observed :

c "However, as I have said, I do not regard s.111(1) as conferring a discretion. Once the Comptroller found that duty had been over- paid, she was under an obligation to refund it."

Since Dawson, J. concluded that Section 111(1) did not confer any discretion to the Comptroller to withhold payment of an unlawful levy, he did not express any final opinion on the question of unjust enrichment and passing on of the overpayment of stamp duty to the insurer in that case. However, Dawson, J. observed:

"The better view would seem to be that it is the unjust enrichment of the payee rather than loss suffered by the payer which should govern entitlement to restitution, but, having regard to the view which I take, it is unnecessary to determine that question in these proceedings."

I am also of the view that the Excise Act before its amendment in F 1991, in particular Rule lOB and later Section llB, did not confer any power on the Excise Officer to withhold refund on any ground of "unjust enrichment", after being satisfied that overpayment of tax has been made.

Moreover, refund is to be claimed within six months from the date G of payment of tax which means within six months from removal of the goods from the factory. A company may take a very long time to dispose of its goods after clearance. But a claim for refund has to be made within the short time permitted by the Act. These provisions are indicative of the fact that refund claim has to be made regardless of the sale of the goods.

H That passing on of the incidence of tax was not relevant consideration

MAFATLALINDS. LTD. v. U.0.1. [SEN,J.] 831

is also borne out by sub-section (3) of Section llB as well as sub-rule (3) A of Rule lOB, e.g., if there is dispute as to classification of the goods and the assessee takes resort to filing of an appeal which ends in favour of the assessee, refund will have to be made of the excess amount of tax realised to the assessee without his having to make any claim in that regard. In such a situation, the Assistant Collector of Central Excise is not empowered, . B before refunding the money, to make an enquiry as to whether the duty has been passed on to the consumers.

The concept of "passing on the duty " cannot be fitted in the provisions of the Excise Duty Act before its amendment in 1991. As has been repeatedly asserted in a number of cases that in a taxing statute, there c is nothing to be added and there is nothing to be taken out and the words must be interpreted as they stand. There is no equity about taxation. To introduce the concept of "unjust enrichment" in the Act even before its amendment in 1991 is not permissible by any canon of construction. Our attention has not been drawn to any provision of the Act which is con- D cerned about the consumer of the product after they pass out of the factory gate. The rule and the Section dealing with the refund do not contain any provision that the Excise officer will be entitled to withhold refund if it is found that the duty has been passed on to the consumers. As I have stated earlier powers and functions of the Excise Officer are circums~ribed by the Act. He cannot take into consideration anything which is not specifically contained in the Act.

The contention of Mr. Parasaran on behalf of the Union of India has been that the incidence of tax is on the ultimate consumer. As I have pointed out earlier, the Central Excise Act is not at all concerned with the ultimate consumer. Even if it is not possible for a manufacturer to sell the goods, the duty will have to be paid. If it is found after sale of the goods that there is any short levy or underlevy, the duty will still have to be paid by the manufacturer. If there is a penalty imposeable because of short levy or underlevy or any interest is payable, it is the manufacturer who has to bear it. If the goods are lost after production, the manufacturer will have to pay duty on the lost goods.

The sum up, under the Central ExcL<;e Act, 1944, there is only one duty and that has been imposed on manufacture. This duty has to be paid before clearance. This duty has to be paid in the manner and mode laid H

832 SUPREME COURTREPORTS(1996j SUPP.10 S.C.R.

A down by the Act. The Act does not impose any other duty. The Act is not concerned with what happens after the goods have been cleared. If the duty has been erroneously imposed, the refund of the duty must be made to the person on whom it is imposed. Refund of tax must not be confused with restitution or compensation. In my judgment, there is only one taxpayer and it is the person who pays the tax at the time of clearance of goods. There is no other tax imposed by the Central Excise Act. How the burden of tax is borne or its economic impact on the manufacturer are not matters within the purview of the Central Excise Act. No notice of these considera- tions can be taken in deciding the application for refund by the Excise Officer. Article 265 of the Constitution enjoins that no duty shall be levied and collected except in accordance with law. If it is found that a manufac- turer has been asked to pay more than what he is liable to pay under the Central Excise Act, he is immediately entitled to get the refund of the wrongfully collected duty. This constitutional guarantee cannot be side- tracked in any manner. D PRICE

Every manufacturer tries to maximise his profits. When he sells goods, he fixes a price at which he can make the maximum profits. Higher prices do not necessarily fetch higher profits. the manufacture has to sell E his products and if the prices are to high, the products will not sell. He has to fix a price keeping in view the costs incurred by him (this will include costs of production as well as selling costs and also the overheads) and also the taxes he has to pay. He will also have to take into consideration the market forces, the effective demand for his products and also the nature and price of the competing products in the market. He will only fix such a F price which "the traffic can bear'. It is wrong to presume that if taxes are raised, the manufacturer has merely to pass on the burden to the con- sumers by raising the price.

It should always be borne in mind that a manufacturer has to generate sufficient income to pay for the prices of inputs, wages to the employees, rents, fuel charges, overheads and many other charges, includ- ing direct and indirect taxes.

Every type of tax, except only those which are levied on the profits like Income Tax and Surtax on company's profits, will have to be included in the price. The price must be high enough to fetch~sufficient income to

MAFATLALINDS. LTD. v. U.O.I. [SEN,J.] 833

the manufacturer to pay for all these things and stay in business. If the manufacturer is a company, as the appellant herein is, out of the profits, specific and general reserves will have to be created. Provisions have to be made for known liabilities like provident fund and gratuity for workers, etc. Debenture holders and preferential share- holders will have to be paid. Dividends will also have to be paid to the share-holders who have invested their money in the company. All these things will have to be paid out of the profits made by a company after paying all the expenses including excise and other duties. A manufacturer has also to take into account that all the goods produced by him may not be sold in the year of production itself. That means a large amount of circulating capital will remain blocked. This will also lead to higher interest charges. In fact, there is hardly a c company which does not have to carry inventories of tax-paid finished good year after year. Goods distributed for sale to various outlets may not be sold for months or even years. Such goods may ultimately have to be sold at large discounts or even at a loss. Many products after some time cannot be sold at all for various reasons. In the case of BSC Footwear Limited v. D Ridgway, (1972) A.C. 544, the House of Lords dealt with a case of a well-known shoe manufacturing company. It was found that the unsold stock of shoes of the company at the end of the trading year was generally about a third of the quantity actually sold in that year. Substantial part of . the stock-in-hand at the end of the year would be sold either at reduced prices in January sales and thereafter at even lower prices in later sales. E The question in that case was how to value the unsold stock at the end of the trading year. That question does not arise in this case, but it is illustrative of the difficulty of selling goods produced by a manufacturer. Can it be said in such cases when a substantial portion of the goods are being sold at an undervalue and thus causing large erosion of profits, that the incidence of duty has been merrily passed on to the consumers? The goods could not be sold except by reducing the price drastically. It is difficult to say that in such a case incidence of tax is being borne by the ') consumers and the loss by the producer. BSC Footwear's Case illustrates the predicament of an average manufacturer. A substantial quantity of tax-paid products cannot be disposed of as a matter of course and the manufacturer has to get rid of the unsold products by organising first sale at a discount thereafter at even lower prices.

This is a problem with every manufacturer and to assume that the excise duty can be passed on to the consumer without any corresponding H

834 SUPREME COURT REPORTS[1996] SUPP. 10 S.C.R.

A loss to the manufacturer is to ignore reality.

In the case of B1itish Paints India Limited v. Commissioner of Income Tax, West Bengal, (1978) 111 ITR 53, the problem was once again of valuation of unsold stock of a paint manufacturer. It was recognised that B paints had a very short "shelf life". In other words, unsold cans of paints lying on the shelves of the various outlets of the manufacturer could not retain its quality and utility for indefinite length of time and became unfit for market. In that case, the question was whether the Company was entitled to depart from the usual practice of valuing the unsold stock at the end of the year on cost or market price, whichever was lower, basis. The C Court said Yes. The Court held that the Company was entitled to value its unsold stock of the goods "in process" on the basis of the cost of raw materials and finished products on the basis of its costs. It was recognised that the company might have to sell a portion of its products ultimately at a vastly reduced price.

D I have not understood the concept of passing on of tax liability. If this argument is taken to its logical conclusion, then it means that the manufacturing company does not incur any expenditure at all. The taxes as. well as the costs of production are recovered through price. Will that mean that a company does not have any cost of production? The wages of labourers, their provident fund, gratuity, bonus, the costs of raw-material, the fuel charges, the overheads; all these things have to be paid out of the money generated by the company. This can only be done through price obtained by the sale of goods. A suit for short sale by a manufacturing company or recovery of money for over charging can be defeated by saying that all these things have been passed on to the consumer. An electricity supply company or a coal supplier can also take the plea, faced with an allegation of excessive charge, that in any event the charges have been passed on to the consumers. As I have emphasised earlier that it is not L - possible to split up the price of a commodity and find out how much is attributable to labour, how much to cost of production and how much to the overheads.

That the buyer pays nothing but the price, has been made clear by Section 2(10) and also Section 4 of the Sale of Goods Act. Section 64A permits the seller to add an amount equal to any new tax imposed or any tax increased if such imposition or increment has taken place after the

MAFATLALINDS. LTD. v. U.0.1. [SEN, J.] 835

contract was entered into and' if a different intention does not appear from the terms of the contract.

Incidentally, it should be noted that Lord Goddard, J. took into consideration Section 27 of Finance (No. 2) Act, 1940 which appears to be similar to Section 64A of our Sale of Goods Act, 1930. Section 64A provides: B

"64A. In contracts of sale, amount of increased or decreased taxes to be added or deduced. - Unless different intention appears from the terms of the contract in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract c for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax paid where tax was chargeable at that time,- D (a) if such imposition or increase so takes effect that the decreased tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such E addition; and

(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract p price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in - ; respect of, such deduction.

(2) The provisions of sub-section (1) apply to the following taxes, namely; G (a) any duty of customs or excise on goods;

(b) any tax on the sale or purchase of goods."

The English Law in this regard is the same. H

836 SUPREME COURT REPORTS(1996) SUPP. 10 S.C.R.

A Lord goddard's judgment goes to show that even if the duty element was separately shown in the invoice what the buyer pays is the price of the product and nothing else. The seller similarly gets only the price. Lord Goddard, J. also noted the fact in that case that the burden of the tax had been passed on. This according to Lord Goddard J., did not make any difference. B In the case of Pap1ika v. Board of Trade, (1944) 1 KB 327, ·a person was called upon to pay penalty which was three times the price at which the articles were expected to be sold. The Divisional Court rejected the argument that the tax element in the price should be excluded because it C was no price at all. It was an amount which would ultimately go to the Government. The Court recognised the fact that the price could be af- fected by the tax element but "it does not cease to be the price which buyer has to pay even if the price is e>..pressed to be as X plus purchase tax."

This case was cited with approval by Lord Goddard, J. (as His D Lordship then was) in the case of Love v. Nomian Wright (Builders) Ltd., (1944) 1 All England Law Reports 618, the question before the Court of Appeal was whether the seller of goods under a contract made after the purchase tax had been imposed by law could call upon the purchaser to pay the tax exigible in respect of the sale in addition to the agreed price E at which the goods were to be supplied. Goddard, J., pointed out that a seller quoted a price X plus purchase tax, the buyer must pay the tax as part of the purchase price. Conversely, if a seller agreed to supply goods for a certain sum, then he could not call on the buyer to pay anything extra for tax additionally, unless he was authorised by any statute to do so.

F In George Oakes (Private) Ltd. v. State of Madras and Others, this Court was called upon to consider whether a dealer can pass on his tax liability as such to his customer. In that decision while rejecting the contention that the tax liability as such can be transferred to the buyers, this Court referred to the observations of Lawrence. J. in Paprika Ltd. and G Another v. Board of Trade, (supra) and Goddard, L.J., in Love v. Norman Wright (Builders) Ltd. (supra).

In the former case, Lawrence, J. observed :

"Whenever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands it

MAFATLALINDS.LID.v. U.O.L [SEN,J.) '/)37

does not cease to be the price which the buyer has to pay even if the price is expressed as X plus purchase tax."

In love's Case, Goddard, L.J. observed:

"Where an article is taxed, whether by purchase tax, customs duty or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an omice of tobacco is what it is because of the rate of tax but on a sale there is only one consideration, though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for. him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not.

In that decision, reference was also made to the decision of this Court in Tata Iro11 and Steel Co. Ltd. v. State of Bihar, (1958] SCR 1355. Therein Das, CJ. who delivered the majority judgment of the court said: D

"The circUIIlstance that the 1947 Act, after the amendment, per- mitted the seller who was a registered dealer to collect the sales . tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise. See Love v. Norma11 Wright G (Builders), Ltd.."

From all these observations, it is clear that when the seller passes on his tax liability to the buyer, the amount recovered by the dealer is really part of the entire consideration paid by the buyer and the distinction between the two amounts - tax and price H

838 SUPREME COURT REPORTS[1996] SUPP. 10 S.C.R.

A - loses all significance."

These decisions were re-affirmed by this Court in the case of Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore, (1971) 28 STC 331.

B In the case of Delhi Cloth and General Mils Co. Ltd. v. The Commis- sioner of Sales Tax, Indore, (1971) 2 SCC 559, Hegde, J., speaking for the Court, once again emphasised :

"Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price to be payable. c While doing so it is open to the dealer to include in the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law 'and not by contract. So long as there is no law empowering the dealer to collect tax from his D buyer or seller, there is no legal basis for saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection that may be made by the dealer from his customers the same can only be considered as valuable considera- tion for the goods sold." · E I have been at great pains to emphasise that if the seller passes on his tax liability to the buyer, the amount equivalent to the tax received by the Seller is part of the entire sale consideration. It is not collection of tax, because levy and collection of tax is regulated by law and not by contract. Whatever may have been collected by a seller from his customer on account of tax, the same can only be considered as valuable consideration for the 'price' of the goods sold.

What the buyer pays is the price of the goods and not the com- ponents of the price. Production costs, selling costs, overheads, taxes, 17'"" everything goes into fixation of the price. Moreover, the market conditions will have to be taken into account. If the price is too high for the market to bear, the goods will not sell. In order to absorb the excise duty the manufacturer may have to cut various types of costs. It may have to reduce its profit, pay lesser dividends to shareholders, he may not readily agree to any increment in pay or payment of bonus or other benefits to the workers. H It has not been explained how it can be readily assumed that all that the

MAFATLALINDS. LTD. v. U.O.I. (SEN,J.] 839

seller has to do to absorb higher duty is to include it in its price and pass it on to the consumers?

If preamble to the Constitution and social justice is borne in mind, then it may as well be argued, as Karl Marx did, that every article of manufacture is congealed labour. If the labour is given just reward for the work done by him, no surplus value will be left. It is this surplus value extracted from the labour through the pricing mechanism that becomes the manufacturer's profit. To prevent "unjust enrichment", the entire surplus should go back to the labour.

But, here we are not concerned with social and economic theories, but only with the prosaic realm of law as it stands. Harold Laski in his well-known book "Introduction to. Politics" pointed out the difference between role of law and role of politics by saying that the lawyers will have to take the law as it stands. It is not for them to ask why those laws should be our laws? What ends do these laws serve? Why should these ends be our ends? Whereas a student of politics may ask all these questions. Laski D said, "We have to add, so to say, a teleology to law."

In this case also we are not entitled to add any teleology to law. We have to take the Central Excise Act as it stands. We may- or may not like the law. But for that reason we cannot discard it or its language to bring E out an abnormal meaning. If the meaning of 'price' as given in the Sale of Goods Act is borne in mind and its implications as explained in judgments referred to hereinabove are kept in view, then it can never be said that the seller has charged anything but the price of the goods from his buyer. He cannot by a contract call upon the buyer to pay any tax which is the prerogative of a taxing statute. Even if he quotes the price as x (Costs) + F Y (Taxes) + Z (Profit), what the buyer will pay is the price of the goods and nothing else, neither the costs nor the taxes are passed on to the buyer.

UNJUST ENRICHMENT

The facile assumption that when excise duty is imposed or raised,, it G can be passed on to the consumer by merely raising the price with no corresponding loss or detriment to the manufacturer has not been made on the basis of any market study. In fact, before the new amendments were effected no in-depth study was at all done by the legislawre. The basic premise of this line of reasoning is fallacious. The Finance Minister in his H

840 SUPREME COURT REPORTS[l996] SUPP.10 S.C.R.

A budget speech for the year 1994-95 (206 ITR Page 19) stated :

"Over the years, our indirect tax structure has grown into a complex maze of high and multiple rates, with numerous exemptions, and different rates being applicable for the same product for different uses and users, This has resulted in unnecessary complexity leading B to administrative abuse, mounting litigation and uncertain economic impact. All this has effectively eroded the tax base and ' buoyancy of the system and created serious economic distor- tions .......... "

C To illustrate the enormity of excise burden which has to be borne by the manufacturers, it may be mentioned that in the Central excise Tariff Act, 1985, duty on oils used for skin-care was 105 per cent and duty on residual oil which was not specifically mentioned under the heading 3305.90 was 105 per cent. The duty on paints and varnishes under the heading 32.09 was as high as 60 per cent. Under the heading 33.07 pre-shave, shaving or after-shave preparations had to bear duty of 105 per cent. The example of · high excise duty can be multiplied. It cannot be blindly assumed that levy of excise duty does not cause any financial hardship or loss to the manufac- turers because they can merrily pass it on to the consumers. In fact, in very many cases, the Central Government had to issue exemption notifications on the representation made by industries exemption goods wholly or partially from excise duty having regard to the plight to which the industries had been reduced under the impact of taxation. The economic reality that rise in duty causes financial hardship to the manufacturer and that the manufacturer cannot get rid of that hardship by simply passing on the duty has been recognised by the Central Government itself by giving relief to the manufacturers by various exemption notifications. Even in cases where exemption notifications could not be issued retrospectively, an Act was passed to help the manufacturers.

The Central Duties of Excise (Retrospective Exemption) Act. 1986 was H: G passed on 8th September, 1986 to give retrospective effect to certain notifications to enable the excise authorities to refund duties of excise which had already been collected in certain cases. It was stated by Section 2 of the Act that the Act shall be deemed to have and to have always had, effect on and from the 1st day of March, 1986. It went on to provide : • H "(2) The duties of excise which have been collected, but which

MAFATLALINDS. LTD. v. U.0.1. [SEN,J.] 841

would not have been so collected if the said notification had been A in force at all material times, shall be refunded :

(3) The duties of excise which have become payable, but which would not have been so payable if the said notification had been in force at all material times, shall not be required to be paid. B (4) Any person claiming refund of any duty of excise under sub-section (2) may make an application for refund of such duty to the Assistant Co,llector of Central Excise before the expiry of six months from the. _commencement of this Act."

It had the effect of refunding the duties of excise which had already c been collected and declaring the duties of excise which had become payable (but would not have been payable if the notifications had been in force) shall not be required to be paid. This Act was passed in recognition of the fact that high excise duty causes hardship to the manufacturers. They must be given relief even with retrospective effect. D

This Act is important for the purpose of this case because it goes to show the legislative intent. The Legislature never intended before 1991. that refund of excise duty will not be given to the manufacturers but to the , buyers of the goods. The Central Excise Act is totally silent on this aspect E of the matter and we shall not add a rider to the Central Excise Act to deny any refund due to the manufacturer.

It has also to be borne in mind that the rates of duty in India is much higher than in U.S.A., Australia or Canada. Its economic impact is much greater. In fact in the case of United States v. Jefferson Electric Manufactur- F ing Company, (supra), the dispute related to levy of excise duty at the rate of 5 per cent. In Air Canada' Case, the disputed duty was 5 cents per gallon. It is needless to speculate how the Courts would have reacted if they had to face the high tax regime that exists in India .. G Mason, CJ. in the case of Commissioner of State Revenue v. Royal Insurance Australia Ltd., (supra), noted how the theory that the burden imposed by higher excise duty can be passed on to the consumers without any economic loss to the manufacturer has been rejected in various Courts in the United States, Canada and also Australia. Mason, CJ. observed that · this economic theory had major difficulties. The first was that to deny H

842 SUPREME COURT REPORTS[1996) SUPP. 10 S.C.R. A recovery when the plaintiff shifted the burden of the imposition of the tax or charge to third parties will often leave a plaintiff who suffered loss or damage without a remedy. Another reason given by Mason, CJ. was that an inquiry into and a determination of the loss or damage sustained by a plaintiff who had passed on a tax or charge was a very complex undertak- ing. B Mason, C.J. also pointed out that the basis of restitutionary relief was not compensation for loss or damage sustained but restoration of the plaintiff of what has been taken or received from the plaintiff without justifica- tion. Mason, C.J in his judgment illustrated the proposition with a number of cases to show that the doctrine of "Passing on" was fraught with many difficulties. An American case was cited where the Supreme Court of U.S. had rejected the doctrine ·of "passing on" under anti- trust .laws where plaintiff had passed on overpayments to their customers (Hanover Shoe Inc. v. United Shoe Machinery Corp., (1%8) 392 US 481. Commenting on this, Mason, C.J. obsetVed that though the context is different, the reasons given for the rejection were relevant for the present case. They include the difficulty of determining the economic impact upon the plaintiffs business of passing on the overpayment, the practical problems which availability of the defence would generate involving "massive evidence and complicateCI theories". Further the defence would probably apply all the way down the cltain of distribution to the ultimate consumer who would have little interest to sue. The U.S. Supreme Court also noted that economic theories rely upon the assumptions which do not operate in the real world, thereby making the proof of passing on extremely difficult. This view was also expressed in the opinion of Advocate General in Amministrazione delle Finanze dello Stato v. San Giorgio SPA, (1985) 2 CMLR 658. F Mason, C.J. Concluded that:

"The United Sta~es and European decisions demonstrate that any acceptance of the defence of passing on is fraught with both ·practical and theoretical difficulties. Indeed, the difficulties are so great that, in my view, the defence should not succeed unless it is established that the defendant's enrichment is not at the expense of the plaintiff but at the expense of some other person or persons."

In view of all these, I see no basis to deny the refund to a manufac- turer on the facile assumption that burden of duty has been passed on to the consumers without any loss or detriment to the manufacturer. The

MAFATLALINDS.LTD.v. U.O.I.[SEN,J.] 843

absurdity of this doctrine of "passing on" can well be demonstrated by the following exampfos.

Supposing, a manufacturer of pulp sells his product to a rayon manufacturer which uses the pulp to manufacture rayon it can be said that the burden of duty has been passed on to the rayon manufacturer. The rayon manufacturer, in his turn, includes the cum-duty price in his costs and includes it in his price when he sells his yarn to a cloth manufacturer. The cloth manufacturer in his turn will include the duty-paid price of rayon in his costs and will sell his products to a garment manufacturer at duty-paid price. The garment maker will sell the garments to the actual users. Can the last consumer establish that he has borne the incidence of c an illegal excise duty imposed on pulp and claim refund of the unlawful duty on pulp. Can he at all be made aware of such an unlawful levy on pulp? Or will it be that the rayon manufacturer will get the refund as a consumer of pulp even though he has included the duty paid price in his costs of raw material for production of rayon and has thereby passed on D the burden to his customers. These illustrations can be multiplied ad infinitum. If a scrap dealer buys duty paid scrap and sells to a car-parts manufacturer who in his turn treats such price as his cost and includes it in his price (duty included) and sells the parts to a car manufacturer, who in his turn sells cars to the actual users, who will get back any illegal levy of excise duty on scraps? E

This problem has other dimensions. Excise Act cannot be viewed in isolation. If there is an illegal levy of paper and a lawyer buys paper at cum-duty price, he gets deduction of the entire sum in computation of income under the Income Tax. Can he claim refund of excise duty as being F the ultimate consumer? As I said earlier, these are not isolated examples. But things that are happening in everyday life. Duty paid price charged by a manufacturer is his income for Income Tax purposes, turn over for sales . tax and turn over tax. It has a variety of other fiscal dimensions. How can it ever be assumed that an illegal levy of tax will be a source of joy for the taxpayer? He will happily pass on the burden and merrily enjoy the refund. G

The argument by reference to the Directive principles that unlawfully collected tax must be retained by the government for the common good of the people and also to involve the weaker sections of the people may have a populist appeal, but is without any basis having regard to the provisions H

844 SUPREME COURT REPORTS[1996) SUPP. 10 S.C.R.

A of the Central Excise Act as well as Excise Tariff Act.

The Central Excise Act levies a tax on manufacture of goods. Very often goods are manufactured by small scale industries or individuals for the benefit of large industries. If a small scale paper pulp manufacturer who struggles to exist, cannot get back an illegal levy of excise duty because the consumer, a large scale viscose fibre manufacturer, has ultimately borne the burden of the duty and the illegally collected duty is paid back to that large company, the weaker section far from being benefitted, will be thoroughly robbed. In fact, if we look at the Central Excise Tariff Act, it will be seen that the vast majority of the products are not for household use or for common man." The list of excisable commodities starts with Animal Products, which may include products of the kind unfit or un- suitable for human consumption; Guts, bladders or stomachs of animals or animal blood; or animal fat, other than pig fat (Chapter 2). Obviously these have industrial uses, but a common man will not buy them. Likewise, lac, D Gums, Resins (Chapter 13), Bituminous and Asphalt, chemical compound (Chapter 27), Chemical Compounds - Organic and Inorganic (Chapter 28), Explosives, Pyrotechnic Products; Pyrophoric Alloys and other Combus- tible Preparations (Chapter 36) will only be used by large industries. A large number of chemical products are taxed 1;1nder the heading Miscel- laneous Chemical Products, like Graphite, Activated Carbon, Rubber Ac- E celerators, compound plasticisers, organic composite solvents (Chap~er 38), charged fire extinguishing grenade are not used by the common rrian.

In fact, the Schedule to the Central Excise Tariff Act has as many as 96 chapters and appears to contain more entries relating to goods which F are used by trade and industry than common man in every day life like Base Metals, Iron and steel. Aluminium Metal (Chapter 72), Nuclear Reactors, Boilers, machineries, mechanical appliances; parts thereof, electric motors and generators, rotary converters, transformers, static con- verters, electro-magnets, etc. (Chapter 85). The Schedule also include G Railway or tramway Locomotives, Rolling-Stock and parts thereof; Railway or Tramway Track Fixtures and Fittings and parts thereof; Mechanical Traffic Signalling Equipment of all kinds (Chapter 86). This Entry is followed by Vehicles other than Railway or tramway etc. (Chapter 87). This Entry includes motor cars, motor vehicles, tanks and other armoured fighting vehicles and also parts and accessories of the motor cars and motor vehicles principally designed for transport of persons, motor vehicles for

MAFATLALINDS.LID. v. U.O.I. [SEN,J.] 845

the transport of goods. Even here it should be noted that, having regard to the price of the motor cars and motor vehicles, it is not the weaker section of the population who uses these vehicles. In the name of benefit- ting the weaker section, unlawfully and illegally levied duty of excise on parts and accessories and various inputs manufactured by small manufac- turers for use of the large manufacturers will not be returned to them but handed over to the large manufacturer or rich consumers who has the resource and ability to claim it.

There are of course household goods or goods of everyday necessity like edible oil, toothpaste, tooth brush, soap, some textile articles and possibly some items falling under paper and paper board are used by c common man in everyday life. But taking an overall view of the tariff items in the Schedule to the Central Excise Tariff Act, it can hardly be said that excise duty by and large is on goods to be used by the common man. Moreover, there are many industries reserved for small scale sector. This has been done to protect small scale industries from competition from the .- big manufacturers. If for example, a manufacturer of wrist watch strap D (reserved for small sector) is unable to get back any illegally imposed duty of excise because the watch straps have been sold to large watch manufac- turing company and that large company is given the refund, the weaker section will not benefit in any way. E Even for the consumer goods, it is not in the realm of belief that an ordinary buyer will be able to chase the Excise Officer and claim refund of duty illegally imposed on the manufacturer. For example, a person buying tooth brush from the local grocery shop, will not retain the cash memo for years and years and even if he does so, he will not know that there is a .dispute about the levy of excise duty pending. Furthermore, a F man who purchases tooth brush in Madras will not be able to claim refund of duty from the proper Excise Officer who has jurisdiction over the company at Bombay. We shall bear all these considerations in mind before trying to interpret the law in a way which will benefit the weaker sections of the people and give them a sense of participation in the development of G· the country.

Moreover, only the manufacturer has to separately show the duty element in his invoice. The wholesaler, the distributor or the retailer has no such obligation. Ordinary customers buy their goods at the retail outlet, where even if a cash-memo if given, the duty element will not be shown H

846 SUPREME COURT REPORTS(1996] SUPP.10 S.C.R.

A separately. How will the common man know that he has paid any duty and if so of what amount? ·

In my view, the entire argument based on "unjust enrichment" is founded on a false premise. It will be wrong to assume that the duty element can be included in the price and that no prejudice will be caused B to the manufacturer by the levy or enhancement of the duty. To take this position is to ignore the economic realities.

There may also be situation when a manufacturer will not be able to certify that he has not passed on the duty even though he has borne it. C Supposing a manufacturer is charging Rs. 100 per unit of good. The price of Rs. 100 is calculated on the basis of Rs. 80 as costs, Rs. 10 as profits and Rs.10 as excise duty. The excise duty element is enhanced unlawfully by Rs. 5. In such a case. the manufacturer may either raise the price of the goods by Rs. 5 or he may decide to reduce his profit to Rs. 5 and sell the goods at the same price. In the second case when the manufacturer redJces D the profit element to Rs. s·and sells the goods at Rs. 100, caµ it be said. that he has passed on the burden of excise duty to his customers. The price . is inclusive of the duty element. In a sense, the burden of duty borne by the manufacturer has been passed on. But then again, the manufacturer has suffered diminution of profit. Can it be said in such a case that if the · E manufacturer manages to get an order of refund of duty, it will be unethical for him to get the amount because this will be "unlawful enrichment"? The manufacturer in a case like this will not b.e in a position to certify that the burden of duty has not been included in the price of the goods but the fact remains that in order· to maintain the price of goods at the optimum level the manufacturer had to suffer loss of profit. The Central government has F been empowered to exempt, generally or absolutely by notification, ex- cisable goods from the whole or any part of the duty imposed thereon. Judicial notice must be taken that in very many cases, having regard to the hardship suffered by the industry and representations made by the industry, duties have been reduced or exempted by issuing appropriate notifications or even by legislation. G SCOPE OF SECTION llB, llD, 12A, 12B, 12C AND 12D OF THE CENTRAL EXCISE ACT, 1944

Sections llB and llD in Chapter II and Sections 12A, 12B, 12C and · H 12D in Chapter II-A are now to be considered :

MAFATI..ALINDS. LID. v. U.0.1. (SEN,J.) 847

"1 JB. Claim for refund of duty. A (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commis- sioner of Central Excise before the expiry of six months from the relevant date in such form and manner as may be prescribed and B the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person : c PROVIDED that where an application for refund has been made before the commencement of the Central Excises and Cus- toms Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act;

PROVIDED FURTHER that the limitation of six months shall not apply where any duty has been paid under protest. E (2) If, on receipt of any sue~ .application, the Assistant Com- missioner of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund : F

PROVIDED that the amount of duty of excise as determined by the Assistant Commissioner of Central Excise under the forego- ing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to - G

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) unspent advance deposits lying in balance in the applicant's H

848 SUPREME COURT REPORTS(1996] SUPP. 10 S.C.R.

A account current maintained with the Commissioner of Central Excise;

(c) refund of credits of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act; B (d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;

(e) the duty of excise borne by the buyer, if he had not passed on th\! incidence of such duty to any other person; c (f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify :

PROVIDED FURTHER that no notification under clause (f) D of the first proviso shall be issued unless in the opinion of the Central Government the ~ncidence of duty has not been passed on by the persons concerned to any other person.

(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

(4) Every Notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should ceases to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.

MAFATIALINDS. LTD. v. U.0.I. [SEN, J.) 849

(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-sec- tion (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Govern- ment at any time by notification in the Official Gazette.

Explanation : For the purposes of this section, - B

(A) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) "relevant date" means, - c (a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable material used in the manufacture of such goods, - D (i) if the goods are exported by sea or air, the date on

- which the ship or the aircraft in which such goods are loaded, leaves indja, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii} if the goods are exported by post, the date of despatch of goods by Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purpose aforesaid;

(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

. (d) in a case where a manufacturer is required to pay a sum, for H

850 SUPREME COURT REPORTS(1996] SUPP.10 S.C.R.

A a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of B such reduction;

(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

c (ea) in the case of goods which are exempt from payment of duty by a spedal order issued under sub-section (2) of section 5A, the date of issue of such order;

(f) in any other case, the date of payment of duty.

D llD. Duties of excise collected from the buyer to be deposited with the Central Government.

(1) Notwithstanding anything to the contrary contained in any E order or direction of the Appellate Tribunal or any court or in any other provision·of this Act or the rules made thereunder, every person who has collected any amount from the buyer of any goods in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.

F (2) The amount paid to the credit of the Central Government under sub-section (1) shall be adjusted against the duty of excise payable by the person on finalisation of assessment and where any surplus is left after such adjustment, the amount of such surplus shall either be credited to the Fund or, as the case may be, G refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section llB and the relevant date for making an application under that section in such cases shall be the date of the public notice to be issued by Assistant Commissioner of Central Excise. • H ............;.........................................................................

MAFATLAL INDS. LTD. v. U.O.I. [SEN, J.) 851 12A. Price of goods to indicate the amount of duty paid thereon. A Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assess- ment, sale invoice and other like documents, the amount of such B duty which will form part of the price at which such goods are to be sold.

12B. Presumption that 1i1cidence of duty has bee11 passed 011 to the buyer. c Every person who has paid the duty of excise on any goods under this Act shal~ unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods. D 12C Consumer welfare fund.

(1) There shall be established by the Central Government a fund, to be called the Consumer Welfare Fund.

(2) There shall be credited to the Fund, in such manner as may E be prescribed, -

(a) the amount of duty of excise referred to in sub- section (2) of section llB or sub-section (2) of section UC or sub-section (2) of section 110; F (b) the amount of duty of customs referred to in sub- section (2) of section 27 or sub-section (2) of section 28A, or sub-section (2) of section 28B of the Customs Act, 1962 (52 of 1962);

(c) any income from investment of the amount credited to the Fund and any other monies received by the Central Govern- G ment for the purposes of this Fund.

120, Utilisation of the fund.

(1) Any money credited to the Fund shall be utilised by the Central Government for the welfare of the consumers in accord- H

852 SUPREME COURT REPORTS(1996) SUPP. 10 S.C.R.

A ance with such rules as that Government may make in this behalf.

(2) The Central Government shall maintain or, if it thinks fit, specify the authority which shall maintain, proper and separate account and other relevant records in relation to the Fund in such B form as may be prescribed in consultation with the Comptroller and Auditor-General of India.

Section llB(l) contemplates that for claiming refund of any ~uty of excise a person has to apply with documentary evidence to establish, (1) C the amount of duty of excise was collected from him or paid by him and (2) the incidence of such duty has not been passed on by him to any other person. Sub-section (2) of Section llB provides that if the Excise officer is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly. The refundable amount, however, will be credited to a Fund. The proviso lays down certain circumstances under which the duty may be paid to applicant. Clause (d) of the proviso says that the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person, will be refunded to him. These provisions are not in consonance with the charging provisions of the Excise Act and the Rules. The well-known principle of fiscal legislation is that the charge lies where it falls. It cannot be shifted by a contract. Acts relating to Income Tax, Wealth Tax, Sales Tax as well as Excise Duty have charging sections. A man may contract with somebody to pay his Income Tax, a seller may contract with somebody else to pay his Sales Tax and a manufacturer may contract with a third party to pay the duty of excise. These contracts are not enforceable by or against the Revenue. The Central Excise Act imposes a tax on manufacture. This tax has to be paid before the goods are cleared in the manner laid down by the Act and the Rules. There is no other duty of excise payable under the Act. I have referred to various decisions wherein it has been pointed out that the contract between the manufacturer and a buyer is of no conse- quence in the matter of payment and collection of excise duty. The ques- tion of passing on can only arise after the duty has been fully paid. The duty of excise is never borne by the buyer as stated in clause ( e) of the proviso. The buyer may pay a sum equivalent to the duty of excise pursuant H · to a contract with the manufacturer, but that is a matter of contract. )

MAFATLAL INDS. L'fO. v. U.O.I. [SEN, J.] 853

The duty impose on and collected from manufacturer, if it is found A. to be in excess of the charge imposed by Section 3, has to be returned to manufacturer and nobody else, otherwise charging provision, rules for computation of charge and imposition and collection of duty will become meaningless. If any amount has been realised by the Excise Officer in excess of the charge imposed by the charging section, then such collection B is beyond the competence of the Act and also violates Article 265 of the Constitution. It was pointed out in the case of Assista11t Collector of Ce11tral Excise, Calcutta Divisio11 v. Natio11al Tobacco Co. of l11dia Ltd., [1972] 2 SCC 560, 572, that Article 265 of the Constitution makes a distinction between levy and collection. Levy may include both imposition of a tax as well as assessment. 'Collection' will be recovery of tax. If it is found that a c tax-payer has been levied more than the permissible limit imposed by the charging section read with Excise Tariff Act and the Rules, the levy is bad. The Collection pursuant to this levy is eq_ually bad. Such levy and collection are dehors the provisions of the Excise Act. There is no way that the Central Excise Authority can retain the amount or use the amount. In any D way it has to refund the amount to the person from whom it has been unlawfully collected by the Excise Officer. The Central Excise Act, as Hegde, J. pointed out in the case of Delhi Cloth a11d Ge11eral Mills (supra), dµty is imposed by a statute whereas the cum-duty price is paid by the / purchaser under a contract with the manufacturer. No portion of the E • cum-duty price in law can be treated as the duty of excise. Nothing which · is not imposed by Section 3 and collected under the provisions of the Excise Act and Rules, can be called "duty of excise". In my view this is the basic principle of any tax law. If by any device any amount which is not leviable in law has been levied and collected from a tax- payer, then F retention of such amount will be unlawful.

Any provision appearing or trying to bar recovery of illegally col- lected tax is violative of Article 265 of the Constitution and must be struck down as the Barring Act was struck down by the Privy Council in the case of Commissio11er for Motor Transport v. Antill Ra11ger & Co. Pty. Ltd. G (supra). If the realisation of tax in excess of the chanre imposed by the Excise Act read with Excise Tariff Act and Rules, then such levy of tax is not authorised by law. The Collection of such excess unlawful levy is also invalid. As the judicial Committee pointed out if the levy is invalid as an offence against Section 92, it is equally an offence to deny the right to H

854 SUPREME COURT REPORTS[1996) SUPP. 10 S.C.R. '

A recover it after it has been unlawfully exacted. Therefore, in my view, once it is established that more than what is payable under the statute has been . collected from the tax-payer, the tax-payer automatically gets a right to get back the whole amount. If the right is sought to be effectively taken away. by imposing conditions, then the law imposing these conditions must be B declared to be bad and ultra vires the Constitution.

There is another aspect of this matter. Excise Officer cannot tax more than what is permitted by the statute. If the levy is in excess of the statute, then its retention by the State is unauthorised by law. What is being retained is not in enforcement of the charging section but something else. C Such illegally collected tax is not the property of the State and is not within the disposing power of the State. If the money has to be utilised by the State, the State has to find out some legitimacy for having possession of the money. In the Canadian case of Air Canada v. British Columbia (supra) retroactive amendment of the Gasoline Tax Act was passed with a new D definition of 'purchaser.' to make a levy valid and retain the illegally ..- collected amount by setting off against the claim raised by the amended Act. That is the only way in which La Forest, J. could justify, what was otherwise a confiscatory provision. In this case, there has been no attempt to give legitimacy to the hol&ig of the amount or utilisation of the amount · by the Government. The entire amount was collected unlawfully. The E original sin has not been cured as in Canada by a retroactive charge.

I shall now examine the other provisions of the newly added sections. Sub-section (1) of Section llB requires an application for refund to be made. Sub-section (2) requires the Assistant Commissioner to pass an order of refund provided the conditions set out therein are fulfilled. Sub-section (3) merely lays down that no refund shall be made except as provided in sub-section (2). There is a non obstante clause that this will operate notwithstanding anything to the contrary contained in any judg- ment, decree, order etc. It is obvious that new provisions will apply in cases where applications for refund were made before the new provisions came into force and also subsequently. Sub-section (3) has no retrospective effect. When a case has been finally heard and disposed of and no applica- tion for refund need be made, sub-section (3) cannot apply. If there is a judgment, decree or order which has to be carried out, the Legislature cannot take away the force and effect of that judgment, decree or order, except by amending the law retrospectively on the basis of which the

MAFATLAL INDS. LTD. v. U.0.I. (SEN, J.] 855

judgment was pronounced. A

I have indicated earlier in the judgment and shall not repeat that it is practically impossible for an ultimate consumer to make an application for refund under Section UB. He has to know that there is a dispute about levy of excess duty which is going on between the manufacturer and the excise authority. He has to know the outcome of that dispute. He has also B to find out what is the amount of duty he has borne. This is a difficult process because the ultimate consumer may have a cash-memo from his retail-seller. Retail-seller usually does not give the break up of duty in the price he charges. The new law requires a manufacturer at the time of clearance of the goods to prominently indicate in the invoice and other c documents the amount of such duty which will from part of the price. There is no such requirement for the dealers down the line. It is incomprehensibe how a person who buys a cake of soap will know the duty content in the price and whether the excise duty levied was valid or not and how will he find out which is the proper officer, to whom to make an application in the D prescribed form for refund of duty and what sort of evidence will he be having in his possession to authenticate his claim? It is rightly contended by Mr. Nariman that all these provisions are only an eye-wash to retain the illegally exacted excess levy by the Government which as a matter of fact what is actually being done. E Now I shall deal with Section 110. Excise duty is levied by the charging section 3. It has to be paid according to the Excise Tariff Act, 1985 and the rules. Before clearance of the goods, the assessee is required by Rule 173B to file what is known as price/classification List in which full particulars of the goods manufactured and intended to be removed from his factory has to be given. The Chapter heading and sub-heading number under which the goods are to be assessed under Tariff Act has also to be indicated. The assessee has also to sfate the rate of duty leviable on each such goods. On the basis of the declaration made by the assessee, the Excise Officer has to make his calculation of duty. For the purpose of proper valuation of the goods assessable ad valorem, pro-forma price list for commodities has to be filed. The value of the goods have to be calculated by making deductions from the wholesale price in accordance with Section 4(4) of the Excise Act. There may be dispute as to the valuation or rate of duty for which an adjudication proceedings may have to be taken. But without the approval, of the Excise Officer, no goods can H

856 SUPREME COURT REPORTS(1996] SUPP.10 S.C.R.

A be removed from the factory. The assessee has also to maintain an Account Current. This is laid down by Section l 73G :

RULE 173G. Procedure to be followed by the assessee. - (1) Every assessee shall keep an account-current with the Commissioner separately for each excisable goods ....... , in such forms and manner B · as the Commissioner may require, of the duties payable on the excisable goods and in particular such account.. .......shall be main- tained in triplicate by using indelible pencil and double-sided carbon, and the assessee shall periodically make credit in such account-current, by cash payment into the treasury so as to keep c the balance, in such account- current, sufficient to cover the duty due on the goods intended to be removed at any time; and every such assessee shall pay the duty determined by him for each consignment by debit to such account-current before removal of the goods :"

D This rule requires advance payment of tax. Money has to be deposited in the treasury well in advance before removal of the goods.

Section llD is a curious piece of legislation. Even after the full amount of duty has been paid and goods have been cleared, the manufac- E turer is being called upon to deposit with the Central Government any amount collected from the buyer representing duty of excise. In other words, having paid the full amount of Cluty of excise, the manufacturer is being called upon deposit the duty element in the price of his goods to be deposited to the credit. of the Central Government. The only justification p for this appears to be that the entire amount will be held till finalisation of the assessment. But the Section provides that if there is any surplus left after such adjustment, the surplus shall not come back to the seller but will be credited to the Fund or paid to the person who has borne the incidence of the duty in accordance with the provisions of section llB which means the ultimate consumer.

An attempt has been made to salvage this Section by construing that this Section will apply only if duty has not been paid on the goods or if any excess collection has been made over and above the duty already paid. It is very difficult to agree to such a construction. There cannot be a blanket statutory direction to pay everything collected from a buyer on account of

. MAFA'f!.-AL INDS.LTD. v. U.O.I. [SEN, J.] 857 excise duty to be paid over to the Excise Officer. If it is in the nature of advance tax, there has to be some attempt to fix a percentage which needs to be handed over. Otherwise, it will be unreasonable restriction on trade. The sale price is a part of the circulating capital. Goods are converted into money and money is again utilised to manufacture goods. If a substantial portion of this money is taken away without having regard to the actual or probable necessity for the collection, it will be unreasonable restraint on the right of a person to carry on business. Moreover, the amount may be kept till finalisation of assessment. The assessment may not be finalised till the dispute has been decided finally by CEGAT or even by this Court. Will the money be blocked up till then? Supposing the assessee succeeds, why will he not get back the money with interest? c This provision has to be contrasted with the advanced tax collected under the Income Tax Act. Such collection is authorised by the charging Section of the Act Section 4(2) because otherwise, the collection would have gone beyond the scope of the charge. The rate on which the tax is to be collected and the basis is clearly stated, High Court rates of interest is payable both by the assessee and the Government in appropriate cases. But if an amount is taken in advance, then the residue after adjustment of tax must go back to the taxpayer.

That is not the scheme here. So, this cannot be treated something in the nature of advan,ce collection of tax where duty has not at all been paid on the goods.

The second point that this has been done to safeguard against any excess collection from the consumer is equally unreasonable. The excise duty is a duty on the manufacture of the goods. Once full amount of duty has been collected, the excise authority cannot control any contract be- tween the purchaser and the seller. The Excise Act imposes a charge on manufacturer. There is no charge of duty levied by the Excise Act on exccess collection by the manufacturer from the buyer. Any question of exccess cilllection by the manufacturer from the buyer is entirely out of the purview of the charging section. If the assessee has collected on account of excise duty from the purchaser more than what he has paid, perhaps, a purchaser can bring an action against the seller. In the event of a contrac- ., tual dispute between the purchaser and the seller, the relevant statutes will be the Contract Act, the Sale of Goods Act and similar other statutes. But the Central Excise Officer cannot under any circumstances, lay his hands H

858 SUPREME COURT REPORTS[l996) SUPP.10 S.C.R.

A on anything more than what is actually levied by the Act. He cannot collect something which is not payable under the charging section even for the purpose of directing it to the Fund or to the actual consumer. The entire Section llD is ultra vires the charge levied by the Excise Act itself.

Moreover, the entire sale price (duty included), will' form part of the B sales turn over of the assessee on which sales tax will have to be paid under the State Acts. Turn over tax will have to be paid by big assessees. The purchaser may also have to pay purchase tax on the purchase price. In such cases, how will the State Revenue authorities determine the quantum of turn over of sales or purchase for levy of sales tax or purchase tax? The C sales proceeds will be income of the assessee for the purpose of levy of income tax.

Unlike the Income Tax, Act, the assessee has not been given any option to show that he is not liable to pay the amount which is being taken away from his proceeds. He has no opportunity of getting a hearing on this D issue. The Income Tax Act enables the assessee, in such circumstances, to dispute the estimation of advance tax made by the the Income Tax Officer and file 'his own estimate (or course at his own peril). Here he has no option but to pay without any hearing.

E I repeat that a manufacturer cannot be called upon to pay anything except the duty imposed by the charging provisions. Even if the final assessment has not been made, goods may be allowed to be cleared by paying the admitted amount of duty and furnishing the security for the disputed amount. The security may be keeping sufficient money in the Account CUrrent with the Excise Department or even by furnishing a bond F or a bank guarantee. This is provided by the Rules.

There is no legal or rational basis for a blanket provision to deposit whatever is included on account of excise duty in the price of the goods sold.

G The position gets curiouser after the deposit. After adjustment of the tax against the deposit, the surplus amount is not returned to the manufac- turer. It has to be credited to the Fund or paid to the person who has borne the incidence of tax i.e., the ultimate consumer. In other words, the , manufacturer will be robbed of a portion of his sale price for no rhyme or ,. H reason. This may also have the effect of nullifying the sale contract entered

MAFA1LALINDS. LTD. v. U.0.1. (SEN, J.] 859

into by the manufacturer with the buyer. The buyer had agreed to pay an agreed price which may include the duty element. The seller agreed to sell the goods to the buyer at that price. Section 64A of the Sale of Goods Act protects the interests of both. How can a portion of that price be taken away and credited to a Fund or paid to the ultimate consumer? What will happen to the contract? Thi;: only effect of Section llD is to rob the manufacturer of a portion of his legitimate dues. These provisions are not in aid of the charge on manufacture levied by the Central Excise Act, but are in excess of the charge and are confiscatory in nature and have to be struck down.

It appears to me that by these newly amended provisions, the Legis- C lature has merely created a device or a cloak to confiscate the property of the tax-payer. In such a situation, a Bench of Five Judges of this Court in Raja Jagannath Baksh Singh v. State of Uttar Pradesh, AIR {1962) SC 1563, said that the law has to be struck down as passed in colourable exercise of the power of taxation. It was observed by Gajendragadkar, J., speaking for the Bench:

"... the conclusion that a taxing statute is colourable would not and cannot normally be raised merely on the finding that the tax . imposed by it is unreasonably high or heavy, because the reasonableness of the extent of the levy is always a matter within the competence of the Legislature. Such a conclusion can be reached where in. passing the Act, the Legislature has merely adopted a device. and a cloak to confiscate the property of the citizen taxed. If, however, such a conclusion is reached on the consideration of all relevant facts, that is separate and independent ground for striking down the Act."

So far as Sections 12A and 12B are concerned, only thing that, has to be pointed out is that these two sections do not change the character of the price of the goods. Both these elements were taken into consideration by Lord Goddard, J. in the case of Love v. Nonnan Wright (Builders) Ltd. (supra). It was stated that even if the burden of duty was passed on and the price was expressed as Pound X plus duty, even then what the buyer paid was price of the goods and not the duty and the seller obtained the price and nothing else. This principle was reaffirmed time and again, as we have noted earlier in the judgment, in a number of cases by this Court. H

860 SUPREME COURT REPORTS(1996] SUPP. 10 S.C.R.

A Apart from what has been stated hereinabove, I find that the entire group of these sections is dehors the charging section of the CentratExcise Act. The Central Excise Act imposes a duty on manufacture of goods. Various provisions have been made for computation and collection of that duty. Anything collected in excess of that charge is unlawful. If any provision is made for retention of duties collected without any authority of law, then such provision will be beyond the scope of the charge. It will amount to collecting and retaining something which is not at all duty payable under Section 3.

The Legislature has now authorised the Excise Department to retain the illegal levy. In my judgment, these provisions are ultra vires the charge levied by Section 3 and cannot be sustained in any way. In the language of Lord Mac Millan in Avrshire Employers Mutual !11Surance Association Ltd. v. Commissioners of Inland Revenue, 27 Tax Cases 331, 337, the legislature has missed fire. D The scope of charge in a taxing Act is of the highest importance. Nothing can be realised under a taxing Act beyond that. The new provisions of the Excise Act are not in aid of the charge imposed by Section

3. These sections are designed to '<nable the Excise Department to retain what was collected over and above the charge. The amounts collected in excess of what is actually payable under the charging section is not excise duty at all. Nothing can be collected under a taxing Act which is not authorised by the charging section read with the machinery provisions.

The new provisions not only effectively bar recovery of unlawful levies by the tax-payer but have also taken away from him a portion of the price at which he has contracted to sell the goods to the purchasers. How can a portion of the sale price be taken away and retained by the Excise Officer or returned to the buyer in derogation of a contract of sale passes comprehension.

G I have already noted earlier in the judgment the impossibility of finding out on whom the incidence of charge falls and also the various unworkable problems created by these ill-conceived amendments. In my view, the amended provisions must be struck down as violative of Article 265 and the guarantee contained in Article 19(1)(g) of the Constitution of H India.

MAFA1LAL INDS. LTD. v. U.O.I. [SEN, J.] 861 I am further of the view, the Legislature has merely adopted a device A and a cloak to confiscate the property of the tax-payer by not only with- holding repayment of unlawfully gathered tax but also taking away a portion of the sale price collected from the buyer without any lawful demand or excuse. Every person has a right to contract and bargain for the price. Section llD places unreasonable fetter to the freedom to carry on trade and commerce and violates the guarantee given by Article B 19(1)(g) of the Constitution.

Various other points were raised in these cases. I am not dealing with them separately, but I express my respectful concurrence with the views of my learned Brother Paripoornan, J. that an action by way of a suit or writ petition will be maintainable, depending upon the facts and cir- c cumstances of the case. I am en~irely in agreement with the view expressed by him and the reasoning thereof on points E, F and G of the concluding part of his judgment.

In conclusion, I hold that the Government is permitted to levy and D retain only that much of excise duty which can be lawfully levied and collected under the Central Excise Act read with the Central Excise Tariff Act, 1985 and the Central Excise Rules and various notifications issued from time to time. Anything collected beyond this is unla:-vful and cannot be· retained by the Government under any pretext. The illegal levy and collection of duty violate not only the Central Excise Act and the Rules E but also offends Article 265 of the Constitution of India.

I am of the view that the provisions of Section llB is a device for denying the claim for refund of duty to a tax-payer and must be struck down as violative of Article 265 of the Constitution. It in effect tries ·to perpetuate an illegal levy without altering the basis of the law under which the levy ·was made in any way. It is also a colourable piece of legisiation and must be struck down.

Section llD imposes unreasonable restriction on the right to carry trade and violates Article 19(1)(g). Excise authority cannot deny the manufacturer the freedom to commerce and trade and take away a portion of the contract price even without raising any demand or giving any hearing. The Excise Officer cannot under any circumstance give the balance to the ultimate consumer or credit the amount to the Fund. Section llD is arbitrary and is a colourable piece of legislation and is hereby struck down. H

862 SUPREME COURT REPORTS[1996] SUPP. 10 S.C.R.

A Section 12C and 12D are parts of a device to withhold refunds of unlawfully gathered tax. These provisions are also violative of Article 265 of the Constitution.

I express my respectful agreement with the views expressed by my learned Brother Paripoornan, J. that an action by way of a suit or writ B petition will be maintainable, depending upon the facts and circumstances of the case. I am entirely in agreement with the views expressed by him and the reasoning on points 'E', 'F' and 'G' of the concluding part of his judgment. I also agree with my learned brother Paripoornan, J.'s holding on points 'H' and 'I' subject to my views that in view of Article 265 of the C Constitution, the Excise Department is not entitled to withhold refund of any unlawfully collected duty of excise under any circumstances. Any provision to that effect will be ultra vires Article 265 of the Constitution. Such illegally collected duties must be returned to the person from whom it has been collected.

D In my judgment, the.appeal should be allowed and the writ petitions should succeed.

There will be no order as to costs.

G.N. Matters disposed of.