SRF
Limited Vs. Assistant Collector of Central Excise, Trichy [2001] Insc 604 (7 November 2001)
Cji,
Y.K. Sabharwal & Brijesh Kumar Y.K.Sabharwal, J.
The
appellant is a manufacturer of industrial fabrics. It is claimed that the said
fabrics have to be dipped in a solution of Resorcinol Formaldehyde Latex
Solution (RFL solution) in order to achieve a good adhesion of rubber to such
fabrics. The appellant manufactures Resorcinol Formaldehyde solution (RF
solution) by mixing Resorcinol and Formaldehyde in the presence of Sodium
Hydroxide and water and consumes the same in the manufacture of RFL solution,
otherwise known as 'dipped solution'. The appellant paid excise duty on RF
solution which is stated to have been captively consumed in the manufacture of
dipped solution used for the manufacture of dipped fabrics.
The
claim of the appellant that RF solutions are not 'goods' under Section 3 of the
Central Excise and Salt Act, 1944 (for short 'the Act') and, therefore, not
subject to any central excise duty was initially rejected by the concerned
Assistant Collector of Central Excise. The result was that pending the appeal
proceedings the appellant paid the excise duty under protest. This controversy
was, however, finally decided by the Tribunal by order dated September 25, 1990 whereby the Tribunal held that no
duty was leviable on RF solutions.
As a
result of the order of the Tribunal, the appellant filed a refund claim dated March 14, 1991 under Section 11-B of the Act
seeking refund of Rs.5,41,498.67 being the amount of duty paid under protest
during the period from April
1, 1983 to October 20, 1986. While the application claiming
refund was pending, Section 11-B was substantially amended with effect from September 20, 1991. By the same amendment, certain
other provisions were also inserted in the Act including Sections 12-B and
12-C. Section 12-B provided for presumption that the incidence of duty has been
passed on to the buyer. Section 12-C provided for the establishment of consumer
welfare fund. It is not in dispute that these provisions were applicable to the
pending applications of refund. Under Section 11-B as amended, refund could not
be granted if the duty had been passed on to the customer. Under this
provision, it was for the appellant 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 by him to any other
person.
The
respondent issued to the appellant a show cause notice dated January 6, 1992
calling upon it to show cause why the amount of refund claimed by the appellant
should not be credited to the consumer welfare fund in terms of Section 11-B
read with Section 12-C. The appellant filed a reply to the show cause notice.
The respondent, however, by order dated March 25, 1994 directed that the sum of Rs.5,41,499/-
be credited to the consumer welfare fund under Section 12-C of the Act. This
order was challenged by the appellant by filing a writ petition in the High
Court which was dismissed by the judgment and order under appeal.
The
questions involved in the appeal are no more res integra after the decision of
nine judges' bench in Mafatlal Industries Ltd. & Ors. v. Union of India & Ors. [(1997) 5 SCC 536]. Learned
counsel for the appellant has, however, contended that the present case was
outside the provisions of the Act as the RF solution was not 'goods' within the
meaning of the Act that having been finally decided in appellant's favour in
terms of the order of the Tribunal dated September 25, 1990, and, therefore,
the receipt and retention of the amount of the excise duty was totally without
the authority of law and without jurisdiction. Such a claim of refund, it was
contended, can be entertained as held in Mafatlal Industries' case in paragraph
108(ii) in the following words:
"Where,
however, a refund is claimed on the ground that the provision of the Act under
which it was levied is or has been held to be unconstitutional, such a claim,
being a claim outside the purview of the enactment, can be made either by way
of a suit or by way of a writ petition." For more than one reason we find
it difficult to accept the contention. Firstly the present is not a case of an
unconstitutional levy as contemplated by the nine judges' bench decision. That
is where a provision of the Act under which tax is levied is struck down as
unconstitutional for transgressing constitutional limitations. It is this class
of cases where the claim for refund was held to be outside the purview of the
Act which for sake of convenience it was called as 'unconstitutional levy' in Mafatlal
Industries' case.
Secondly,
assuming it to be a case of unconstitutional levy still the appellant would not
be entitled to refund in terms of law settled by the Mafatlal Industries' case.
Even in that eventuality it has to be established that incidence of duty has
not been passed on to others. It has been held that whether the claim for
restitution is treated as a constitutional imperative or as a statutory
requirement, it is neither an absolute right nor an unconditional obligation
but is subject to the requirement that the burden of duty has not been passed
on to others. It was not submitted before us that this requirement had been
fulfilled by the appellant. Thus, looking from any angle, the appellant is not
entitled to refund.
For
the aforesaid reasons, the appeal is dismissed. The parties are left to bear
their own costs.
.....................CJI.
[S.P. Bharucha]
.......................J.
[Y.K. Sabharwal]
........................J.
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