Agro Mills Ltd. Vs. Asstt. C.C.E  INSC 86 (4 February 1994)
Dayal (J) Yogeshwar Dayal (J) Bharucha S.P. (J)
1994 SCR (1) 650 1994 SCC (2) 546 JT 1994 (1) 610 1994 SCALE (1)552
This is a review petition filed by Respondents 1 and 2 in SLP (C) No. 18175 of
1993. By our order dated November
26, 1993, we granted
special leave and, having heard the appeal, we allowed it and directed
Respondents 1 and 2 to refund the monies recovered by them from the State Bank
of Patiala upon certain bank guarantees.
appellants had filed an earlier appeal in this Court against a decision of
CEGAT regarding the classification of toilet soap for the purposes of excise
duty. Interim orders were passed in the appeal whereby stay of recovery of
excise duty pursuant to the impugned order of CEGAT was granted on condition
that 50% thereof was paid by the appellants to the excise authorities within 3
months and for the balance 50% the appellants furnished bank guarantees. The
appeal was, ultimately, allowed. This Court then stated that it "did not
propose to go into the question of the refund as it is a matter to be dealt
with by the authorities concerned in accordance with law. The appellants shall
have to apply for refund and the authorities shall be required to deal with it
in accordance with the law. It is for the authorities, therefore, to decide the
question as per law."
Accordingly, on May 14,
1993 the appellants
wrote to the first respondent and requested him "to refund the amount and
the bank guarantees deposited from time to time under Supreme Court of India's
interim orders during the pendency of the above-referred appeals". Since,
in their view, the refund application was not being dealt with, the appellants
filed a writ petition on August
27, 1993 before the
High Court of Punjab and Haryana seeking its expeditious disposal. On October 18, 1993 the High Court issued a direction
to the excise authorities to dispose of the claim of the appellants for
"refund/release of bank guarantees" within one month. The High Court
directed the appellants to have the bank guarantees extended till the final
disposal of the claim for refund. Against this order of the High Court the
special leave petition aforementioned was filed, on which leave to appeal was
granted and the appeal was allowed by the order of which review is now sought.
excise authorities passed an order on November 15, 1993 holding that the amount
deposited by the appellants in court and withdrawn by the excise authorities
and the amounts covered by the bank guarantees furnished by the appellants
pursuant to the interim orders of this Court were not refundable to the
appellants having regard to the provisions of Section 11-B of the Central
Excises and Salt Act, 1944. The bank guarantees not having been renewed, the
first respondent then issued upon the bank a demand, pursuant to which the bank
guarantees were encashed on November 17, 1993.
By our order of November
26, 1993, allowing the
civil appeal as aforestated, we held that the direction issued by the High
Court in regard to the extension of the bank guarantees was bad because the
bank guarantees 549 were not the subject-matter of the application for refund
pending before the excise authorities. Once this Court had decided the earlier
appeal against the excise-authorities they did not have the power to get the
bank guarantees encashed. Accordingly, we directed the excise authorities to
repay the amounts collected upon the bank guarantees to the bank.
Section 11 -B of the Act provides that 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 and in such form as may be prescribed and the application shall be
accompanied by such documentary or other evidence 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.
A.K. Ganguli, learned counsel for Respondents 1 and 2 submitted that the
provisions of Section 11 -B were attracted to the bank guarantees in question;
that the bank guarantees, fumished under the interim orders of this Court as a
condition of stay of recovery of excise duty from the appellants, should be
deemed to be equivalent to monies deposited in Court; that, therefore, it was
for the appellants to establish before the excise authorities that they had not
passed on the incidence thereof to their customers; and that, since the
appellants had failed to establish this, the excise authorities were entitled
to encash the bank guarantees and retain the amounts thereof.
7. Mr Ganguli
relied upon the judgment of this Court in Union of India v. Jain Spinners Ltd.
1 This was a case in which the High Court had, on a writ petition filed by the assessee,
granted interim stay of collection of a demand of excise duty on condition that
the assessee deposited in court stated sums and for further clearances gave
bank guarantees for the amounts of the disputed duty. By a subsequent order the
excise authorities were permitted to withdraw the amounts deposited by the assessee
petition filed by the assessee succeeded, and it applied to the High Court for
refund of the amounts which had been deposited by it and which had been
withdrawn by the excise authorities. The High Court allowed the application.
excise authorities filed an appeal in this Court against the High Court's
order. This Court held that under the provisions of the Act a duty was cast
upon the Assistant Collector of Excise to consider the question. It could not
be disputed that the amount which was deposited by the assessee in the High
Court and was withdrawn by the excise authorities was towards the excise duty
which was assessed.
provisions of Section II -B were attracted and the assessee was not entitled to
take advantage of the order by which the deposit had been made unless it
succeeded in showing to the statutory authorities that it had not passed on the
whole or any part of the duty in question to others.
Court said that if the contentions advanced by counsel for the assessee were
accepted it would 1 (1992) 4 SCC 389: (1992) 61 ELT 321 550 defeat the amended
provisions of the Act. It would then be open to assessees to obtain orders from
the courts, as had happened in the case before it, and, instead of paying the
assessed amount of duty to the authorities, deposit it in court and raise the
plea that what it had deposited in court was not duty and the assessee was
entitled to get a refund, either directly from the court or, if it had been
withdrawn, from the authorities, notwithstanding that it had passed on the duty
judgment in the case of Jain Spinners' applies to a case where excise duty has
been deposited in court pursuant to an interim order and has been withdrawn by
the excise authorities. In such a case, clearly, the assessee has to make an
application for refund and to such a case, therefore, the provisions of Section
11-B squarely apply.
Section 11 -B applies when an assessee claims refund of excise duty. A claim
for refund is a claim for repayment.
presupposes that the amount of the excise duty has been paid over to the excise
authorities. It is then that the excise authorities would be required to repay
or refund the excise duty.
The question, therefore, is whether it can be said that the furnishing of a bank
guarantee for all or part of the disputed excise duty pursuant to an order of
the court is equivalent to payment of the amount of the excise duty. In our
view, the answer is in the negative. For the purposes of securing the revenue
in the event of the revenue succeeding in proceedings before a court, the
court, as a condition of staying the demand for the disputed tax or duty,
imposes a condition that the assessee shall provide a bank guarantee for the
full amount of such tax or duty or part thereof. The bank guarantee is required
to be given either in favour of the principal administrative officer of the
court or in favour of the revenue authority concerned.
event that the revenue fails in the proceedings before the court the question
of payment of the tax or duty, the amount of which is covered by the bank
guarantee, does not arise and, ordinarily, the court, at the conclusion of its
order, directs that the bank guarantee shall stand discharged. Where the
revenue succeeds the amount of the tax or duty becomes payable by the assessee
to the revenue and it is open to the revenue to invoke the bank guarantee and
demand payment thereon. The bank guarantee is security for the revenue, that in
the event the revenue succeeds its dues will be recoverable, being backed by
the guarantee of a bank. In the event, however unlikely, of the bank refusing,
to honour its guarantee it would be necessary for the revenue or, where the
bank guarantee is in favour of the principal administrative officer of the
court, that officer to file a suit against the bank for the amount due upon the
bank guarantee. The amount of the disputed tax or duty that is secured by a
bank guarantee cannot, therefore, be held to be paid to the revenue. There is
no question of its refund and Section 11-B is not attracted.
find, therefore, no merit in the review petition.
reiterate out finding that the bank guarantees given by the appellants were not
properly the subject-matter of the writ petition before the High Court and the
High Court was in error in directing the appellants to renew the same. We
reiterate 551 our direction to the first and second respondents forthwith to
repay to the State Bank of Patiala,
Overseas Branch, Millar Gang, Ludhiana, the
amount of Rs 1, 18,00,000 collected upon the bank guarantees within two weeks.
The review petition is dismissed. The first and second respondents shall pay to
the appellants costs quantified in the sum of Rs 5000.
This order will also dispose of I.A. No. 3 in the appeal.