Shree Digvijay
Cement Co. Ltd. & Anr Vs. Union of India
& Anr [2002] Insc 548 (17 December 2002)
Y.K.
Sabharwal & H.K. Sema. Y.K. Sabharwal, J.
[With
CA Nos. 45, 47 and 48 of 1993]
The
appellants are cement manufacturers. They challenge the legality and validity
of Clause 9A of the Cement Control Order 1967 (for short, 'the Control Order').
Clause 9A and some other clauses were incorporated by amendments made in the
Control Order in the year 1982. Clause 9A requires every producer to pay to the
Cement Regulation Account (for short, 'CRA') an amount at the rate of Rs.9/-
per metric tonne of production of non-levy cement. This payment to be made by
the producer on production of non-levy cement was withdrawn on 15th December, 1986. One of the manufacturers (Andhra
Cements) filed the writ petition in the High Court challenging the validity of
the clause in September 1986; two of them (Mysore cement and Raymond Woolen) filed writ petitions in 1987 and Digvijay
Cement in the year 1992. Their principal contention before the High Court was
that the amount payable under Clause 9A was in the nature of tax and there was
no authority of law to impose that tax. Undoubtedly, no tax can be levied or
collected except by authority of law. The contention of the writ petitioners
did not find favour with the High Court and, therefore, these appeals were
filed on grant of leave.
Cement
is a schedule industry under the provisions of the Industries (Development and
Regulation) Act, 1951 (for short, the 'Act'). Section 18G of the Act, inter alia,
empowers the Central Government to provide for regulating the supply and
distribution of any article relatable to any schedule industry. The acute
shortage of cement in the country resulted in the making of the Control Order
in exercise of powers conferred by Sections 18G and 25 of the Act. The cement
manufacturing units in India were located in different places.
Some of the units manufacturing cement were located at a long distance from
consumption centres. A huge amount on freight had to be incurred in
transporting the cement from various factories to the market. The manufacturing
cost varied depending upon the age of the unit, manufacturing process and
technology utilized etc. The transportation cost varied considerably depending
upon the location of the unit. In the Control Order a mechanism was devised for
equalizing the freight cost on the cement. An equalization account was provided
for in the Control Order. Different ex-factory retention prices were provided
in respect of various cement manufacturing units keeping their varying cost of
production. It provided for the manufacturer to get a retention price to cover
his cost and yield a reasonable return to the manufacturer. A uniform FOR
(free-on-rail) destination price for cement was fixed in respect of the whole
of India irrespective of the distance over
which the cement had to be transported. The excess of FOR destination price
realized by a cement manufacturer over his retention price, subject to certain
adjustments, had to be paid by the cement manufacturers into the Cement
Regulation Account (CRA). In cases where freight actually incurred was in
excess of the specified amount, the differential amount was paid to the
manufacturer out of the CRA.
The
operation of the Control Order brought out certain serious problems affecting
the cement industry. The control resulted in the fall of the fresh investments
in the cement industry. Further, there were consistent demands for revision of
the retention prices on the basis that the cost of manufacture had increased
considerably. The burden of CRA increased rapidly because of the rapid increase
in fuel and transport cost. The CRA went into deficit. It was unable to meet
its commitments.
Considering
the problems, the Government on 23rd March, 1981 constituted a high level Committee to review the
developments of the cement industry and recommend measures to accelerate its
progress including incentives and fair prices. The terms of reference of that
Committee were :
"(i)
To review the present system of pricing in the cement industry (consisting of
existing factories, new factories and mini cement factories), including the
merits of establishing uniform prices for different varieties of cement,
suggest modifications to ensure the healthy growth of this industry including
the achievement of production at optimal levels and recommend fair prices
payable to producers for the next pricing period commencing from April 1982;
(ii)
To review the incentives (including rebates and concessions) available to
cement factories and suggest what change in these should be made to rapidly
augment the domestic production of cement. In this connection, also review the
incentives available for the erection of cement factories in remote, difficult
and deficit areas and recommend what alternatives should be made in these to
accelerate the production of cement in these areas in a cost-effective manner;
(iii)
To review the progress of modernization and introduction of technological
improvements (including efficiency in the use of energy; research and
development and quality control) in domestic cement factories and recommend
measures (including system of incentives to accelerate these in order to reduce
costs and effect economies in domestic production; and
(iv)
To consider any other matter relating to rational development of the cement
industry."
After
detailed and exhaustive study of all aspects in relation to cement industry, a
large number of recommendations were made by the aforesaid Committee including
recommendation for a partial decontrol so that the cement manufacturers are
allowed to sell a certain specified percentage of their production in the open
market without any price control. It was expected that the cement prices in the
open market would be far higher than the controlled prices and this would
create incentives for the fresh investment in the cement industry. The
Committee felt that the need for freight subsidy by payment, out of the CRA
would have to be continued otherwise serious problems would arise in remote and
far-flung areas. It was noticed that there is already sizeable deficit in the
CRA which would make it unable to make its past payment commitments. The
Committee, therefore, recommended, as an integral part of the package of
amendments, that an amount of Rs.10/- per MT should be recovered from the
cement manufacturers for payment into the CRA on every tonne of cement
produced, irrespective of whether it was levy cement or non-levy cement.
With
some modifications, the recommendations of the Committee were accepted by the
Central Government. The Central Government allowed partial decontrol. It
allowed sale of non-levy cement to the extent of 33.34% and not 25% as
recommended by the Committee. Further, instead of recommended payment of
Rs.10/- per MT, the Central Government reduced the payment to the CRA at the
rate of Rs.9/- per MT. It was felt that the payment into CRA on decontrolled
quantity of cement was necessary because to the extent of decontrol, there will
be no contribution into the CRA of the differential amount between FOR
destination price and the manufacturer's retention price. It was felt that the
Government's duty and obligation to pay freight subsidy on the controlled
output of levy cement which accounted for 66.66% of the total production continued
and was expected that this burden would increase sharply because of substantial
increases in the transport cost. The CRA would, therefore, balance in this
situation of decontrol only if the said contribution of Rs.9/- per MT was
received into CRA on the non-levy cement. It was also contemplated that the
sale price of the non-levy cement would be far higher than the price of the
levy cement and, therefore, there will be no unnecessary burden on the cement
manufacturers inasmuch as this will be passed on to the customers in the shape
of higher prices. It seems that by and large, the cement industry welcomed the
new package pricing policy. It complemented the High Level Committee for
departing from the conventional approach to the problems of pricing and distribution
and submitted report to the Government which will stimulate the cement industry
and ensure its healthy growth.
It
appears that out of a large number of cement manufacturers in India, only four
manufacturers, namely the appellants, challenged clause 9A and consequent
payment under the said clause, three of them filing the writ petitions after
the liability to pay had been withdrawn and one manufacturer in September 1986.
The High Court by the impugned judgment did not accept the contention that the
payment under Clause 9A amounted to tax and, thus, upheld the validity of the
impugned clause. The High Court held that the partial decontrol and the
impugned contribution was one single integrated and inseverable package.
The
contention urged on behalf of the appellants is that the payment under Clause
9A constitutes levy and collection of tax without authority of law. It is
contended that Clause 9A is ultra vires Section 18G of the Act. The impugned
clause requires the manufacturers to compulsorily pay Rs.9/- per MT on the
non-levy cement produced by them. There is no authority under the Act to levy
or recover such a payment. It was contended that no tax can be imposed by any
subordinate legislation unless the principal statute specifically authorises such
imposition. The submission is that the Act does not authorise levy and recovery
of any such tax and, therefore, Clause 9A is ultra vires the Act.
Clause
3 of the Control Order contains prohibition to remove the cement from the
precincts or premises of the manufacturer. Clause 4 empowers the Central
Government to direct sale or transport of cement to any person or class of
persons and on such terms and conditions, as may be specified in the Order. The
obligation on the producer to maintain and produce the accounts as the Central
Government may require is provided in Clause 6. Clause 7 provides that the
ex-factory prices admissible to the producer for the different varieties of
cement shall be as specified in the Schedule, namely, the retention price. Clause
8 provides the price at which the producer can sell the cement.
Clause
9 provides for payment by the producer of the cement into the CRA. Clause 9
reads as under :
"Payment
to cement regulation account.
9. (1)
Every producer shall, in respect of each transaction by way of sale of cement
effected by him or in respect of every removal of cement made by him, under
clause 3 pay within one month of the close of the month in which such sales or
removals take place, to the Development Commissioner for Cement Industry, an
amount equivalent to the amount, if any, by which the free on rail destination
price of such cement exceeds the aggregate of the following amounts, namely :-
(i) the
ex-factory price of such cement calculated in accordance with the rates specified
in the Schedule;
(ii) selling
and distribution expenses calculated at the rate of Rs.4.00 per tonne;
(iii) the
excise duty paid thereon; and
(iv)
in the case of packed cement, the charges fixed by the Central Government in
respect of packing under the first proviso to clause 8 and where a producer
uses second hand jute bags in excess of the limit, if any, specified under the
second proviso to that clause such charges as proportionately reduced :
provided
that the expenditure incurred by the producer on freight by the cheapest mode
of transport or where any other mode of transport has been specified by the
Central Government under clause 4, by such mode of transport in respect of such
transaction shall be reimbursed to the producer by the Development Commissioner
for Cement Industry from out of the Cement Regulation Account referred to in
clause 11." Clause 10 provides for the maximum price at which cement could
be sold.
Clause
11 stipulates the maintenance of CRA and the purpose for which the amount credited
into CRA could be spent. Clause 11 reads as under :
"Cement
regulation account.
11.
(1) The Development Commissioner for Cement Industry shall maintain an account
to be known as the Cement Regulation Account to which shall be credited the
amounts paid by the producer under clauses 9 and 9A and such other sums of
money as the Central Government may, after due appropriation made by Parliament
by law in this behalf, grant from time to time.
(2)
The amount credited under sub-clause (1) shall be spent only for the following
purposes, namely :- (i) paying or equalizing the expenditure incurred by the
producer on freight in accordance with the provisions of this Order;
(ii) equalizing
concession, if any, granted in the matter of price, freight supplies to Government
or public or for purposes of export under the second proviso to clause 8 or for
import;
(iii)
expenses incurred by the development Commissioner for Cement Industry in
discharging the functions under this Order subject to such limits, if any, as
may be laid down by the Central Government in this behalf.
(iv) such
reimbursement of expenses by the Development Commissioner for Cement Industry
as may be incurred by the producers of cement for the purpose of increasing the
production for securing the equitable distribution and availability at fair
prices of cement.
(3)
The Development Commissioner for Cement Industry shall cause accounts to be
kept of all moneys received and expended by him from out of the Cement
Regulation Account and he shall prepare and submit such report and returns
relating to the said account as may be required by the Central Government from
time to time.
(4)
The balance, if any, remaining unspent in the Cement Regulation Account shall
be disbursed in accordance with such directions as may be given by the Central
Government in this behalf." The amendments made to the Control Order on 28th February 1982, that are relevant for appreciation
of respective contentions are as under :
"Applicability.
1A. The
provisions of the said Order except clause 9A thereof shall apply only in
relation to levy cement.
Definitions.
2. In
this Order, unless the context otherwise requires,-- (a) to (cc) ...
(d)
"levy cement" means that part of production of cement with reference
to the installed capacity of a cement plant as may be determined by the Central
Government, from time to time, not being more than per cent of the installed
capacity of the cement plant;
(e)
"non-levy cement" means that part of production of a cement plant
which is in excess of the production mentioned in sub-clause (d).
9A. Every
producer shall, in respect of the production of non-levy cement pay to the
Cement Regulation Account an amount at the rate of rupees nine per metric tonne
of such production, within one month of the close of the month in which such
production takes place." It is apparent that except Clause 9A, no other
clause of the Control Order applies to non-levy cement. There is no control on
supply, distribution or price of the non-levy cement. The non-levy cement is free
from price and distribution control in contrast to levy cement. Whereas in
respect of levy cement, under Clause 9, the cement producers were required to
pay into CRA the difference between FOR destination price charged by them and
the retention price admissible to them, in respect of non-levy cement under
Clause 9A, they were required to pay in CRA Rs.9/- per metric tonne. According
to the appellants, in respect of non-levy cement whatever money is paid by the
buyer of the cement to them becomes their money and thereafter the requirement
of payment as provided in Clause 9A is a compulsive payment and hence a tax.
For such a tax, it is contended, there is no sanction of law. The contention is
that the impugned clause is a compulsion on manufacturers of non-levy cement to
pay Rs.9/- per metric tonne as above, which constitutes levy and recovery of
tax that cannot be imposed by any subordinate legislation unless the principal
statute specifically authroises such imposition. There is no such authorization
in the Act. Therefore, it is contended that Clause 9A is ultra vires the Act.
In
support of the submission that the impugned levy under Clause 9A, in fact, i s
a tax, learned counsel for the appellants has placed reliance on the decision
of the House of Lords in Attorney-General v. Wilts United Dairies [1922 (91)
Law Journal Reports (Kings Bench) 897]. In that case, the Food Controller was
empowered by the Defence of the Realm Regulations to make orders regulating or
giving directions with respect to the production, manufacture, treatment, use,
consumption, transport, storage, distribution, supply, sale or purchase of or
other dealing in or measures to be taken in relation to any article as appear
to him necessary or expedient for the purpose of encouraging or maintaining the
food supply of the country. It was found that there was disparity in the prices
of milk prevailing in different areas and in order to equalize these prices,
the Food Controller purporting to exercise powers conferred on him by the Defence
of the Realm Regulations, entered into agreements with the defendant-company by
which the latter were permitted to purchase milk within certain defined areas
on terms that they should pay him a sum of two pence per gallon for this
privilege. The defendant-company which was required to make this payment,
refused to do so and to the information laid against it raised the contention
that the charge amounted in effect to a tax levied in an unconstitutional
manner. The company succeeded in the Court of appeal and the Attorney General
brought the matter in appeal before the House of Lords. In dismissing the
appeal, Lord Buckmaster after accepting the argument based upon the extreme
difficulty of the situation in which the country found itself owing to the war,
and the importance of securing and maintaining vital supplies essential for the
life of the community, proceeded to consider the question whether a power to
make such a levy was granted. The statute had confined the duties of the Food
Controller to regulating the supply and consumption of food and taking the
necessary steps for maintaining proper supplies. It was observed that :
"The
question before this House is not whether or not that was a wise and necessary
step to take having regard to the difficulties by which the whole question of
the milk supply was surrounded; the only question which we have to decide is
whether there was any power conferred upon the Food Controller to do what he
did. They Attorney-General has urged your Lordships to consider the extreme difficulty
of the situation in which the country found itself owing to the war, and the
importance of all the officials who had charge of our vital supplies being
enabled to act under the powers conferred upon them without fear of technical
and vexatious objections being taken to the powers which they used. All that
may be readily accepted but it cannot possibly give to any official a right to
act outside the law; nor can the law be unreasonably strained in order to legalise
that which it might be perfectly reasonable should be done if, in fact it was
unauthorized. The real answer to such an argument is to be found in this, that
in times of great national crisis Parliament should be, and generally is, in
continuous session, and the powers which are required for the purpose of
maintaining the integrity of the country, both economic and military, ought
always to be obtained readily from loyal Houses of Parliament. The only
question here is, Were such powers granted? There are only two sources from
which those powers can possibly be derived. One is the Act creating the
Ministry, and the other the Regulations under the Defence of the Realm Act.
Neither of these either directly or, in my opinion, by inference, enabled the
Food Controller to levy the payment of any sums of money from any of His
Majesty's subjects. The statute of 1916 confines his duties to regulating the
supply and consumption of food and taking the necessary steps for maintaining a
proper supply of food. The powers so given are no doubt very extensive and very
drastic, but they do not include the power of levying upon any man payment of
money which the Food Controller must receive as part of a national fund and can
only apply under proper sanction for national purposes. However, the character
of this payment may be clothed, by asking your Lordships to consider the
necessity for its imposition, in the end it must remain a payment which certain
classes of people were called upon to make for the purpose of exercising
certain privileges, and the result is that the money so raised can only be
described as a tax the levying of which can never imposed upon subjects of this
country by anything except plain and direct statutory means." (emphasis
supplied by us) In Attorney General for New South Wales v. Homebush Flour Mills
Ltd. [56 C.L.R. 390 at 400] the High Court of Australia held that when the
exaction of money by a Government in obedience to what is really a compulsive
demand, the money paid is paid as a tax.
Reliance
was also placed on the decision of Privy Council in Lower Mainland Dairy
Products Sales Adjustment Committee v. Crystal Dairy Ltd. [1933 AC 168]. The
case was concerned with the legality of certain adjustment levies imposed on
farmers by an adjustment Committee created by an enactment of British Columbia
by which the disparity in the production of fluid milk as compared with milk
products was sought to be countered. It was contended on behalf of the State
that the levies were not taxes but merely a scheme for pooling profits in a
provincial trade. Lord Thankerton speaking for the Board said :
"The
main issue of this appeal is whether the adjustment levies are taxes,.... In
the opinion of their Lordships, the adjustment levies are taxes. They are
compulsorily imposed by a statutory committee... They are enforceable by law.
Compulsion is an essential feature of taxation. The Committee is a public
authority, and the imposition of these levies is for a public purpose. The fact
that moneys so recovered or distributed as bonus among the traders in the manufactured
products market does not affect the taxing character of the levies made."
Reliance was also placed on A. Venkata Subba Rao v. State of Andhra Pradesh
[(1965) 2 SCR 577]. In this case the Government of Madras passed various orders
for procurement and distribution of paddy and rice. Persons were appointed as
procuring agents and wholesalers and their duty was to procure rice from
specified areas at prices specified by the Government from time to time and to
deliver it at prices so specified to the Government or to the persons nominated
by it or to other licensed purchasers. The purchasing agents were to get the
difference between the purchase price and the sale price. During the year
1947-48 the Government increased the price and this resulted in excess profits
to procuring agents. The Government insisted that this excess sum so earned by
the procuring agents should be paid to the Government and this sum was directed
to be collected as surcharge. It was held by the Supreme Court that recovery of
this money amounted to a tax imposed by an executive fiat without any
legislative sanction on the capital value of the stocks of foodgrains held on a
particular date.
This
Court observing that if there is no legal basis for these demands by the
Government, it is not possible to characterize them anything else than as
taxes; they were imposed compulsorily by the executive and are sought to be
collected by the State by the exercise, inter alia, of coercive statutory
powers, though these powers are vested in Government for very different
purposes. This Court has approved the statement of law and the essential
characteristics of tax as contained in the aforequoted observations of Lord Thankerton.
For
deciding the validity of Clause 9A, in view of the aforesaid legal position ,
it is to be determined whether the contribution payable amounts to compulsory
exaction of money and hence has an essential feature of taxation. The core ques
tion that has to be decided is as to whom the money paid by the buyers of
non-le vy cement belongs. The real question, therefore, is: are the appellants
merely holders of the money paid to them by their customers for purchase of
non-levy ce ment and are not, in fact, entitled to it or the money, in fact,
belongs to them ? In support of the contention that the money, in fact, does
not belong to the appellants and they are merely holders thereof, learned
counsel for the responde nts, besides placing reliance on two decisions, one of
the Calcutta High Court u pholding the validity of Clauses 4A and 4B of the Aluminium
Control Order, 1970 and the other of Delhi High Court upholding validity of
Clause 9 of the Control Order, has placed, rather emphatically, strong reliance
on the background, scheme and the circumstances under which Clause 9A was inserted
in the Control Order by 1982 amendment. We have already noticed that Clause 9A
was inserted while simultaneously introducing partial decontrol of cement. No
fault can be found with the object behind the levy in question. As a result of
partial decontrol, the cement manufacturers were expected to earn huge profits
by sale of non-levy cement in open market. There was no limitation or
restriction on sale price. The effect of Clause 9A was to make them contribute,
out of those profits, Rs.9/- per metric tonne into the CRA. Howsoever laudable
the object behind the levy and collection of any sum of money may be, but if it
does not have sanction of law, it has to be struck down. The contention that
the partial decontrol and contribution under Clause 9 are inseparable and part
of the same scheme, though looks attractive at the first brush but closer
examination thereof shows that it has no substance. The question before this
Court is only about the validity of Clause 9A for want of legal sanction to
impose the levy and collect that amount and not about the validity of the
partial decontrol. From the affidavit of the respondents filed in this Court as
well, it appears that on payment of the sale price of the non-levy cement by
the buyers to the sellers, i.e., the cement manufacturers, the amount so paid
becomes their property - amount belongs to them, though they may have passed on
the burden to the customers, it cannot be held that the appellants are merely
holders of that amount. It would be useful in this connection to quote from the
affidavit filed on behalf of the Ministry of Commerce and Industry, Department
of Industrial Policy and Promotion which itself shows that the money received
by sale of non-levy cement becomes the money of the sellers. The affidavit states
:
"Further,
it was contemplated that the non-levy open market cement price would be far
higher than the levy price or the controlled price by much more than the
required contribution of Rs.9/- per MT and, as a result, the said contribution
of Rs.9/- on the non-levy cement would be easily and effortlessly passed on by
the cement manufacturers to their customers in the shape of higher prices. In
fact, this is exactly what happened. Thereafter, the non-levy cement price was
at all points of time far higher than the levy cement price. For example, in
June 1985, the levy price of cement was Rs.532/- per MT whereas, on the other
hand, the non-levy price of cement per MT was as much as Rs.1660/-, i.e., three
times the levy price. Even earlier, right from February 1982 onwards, when the
Cement Control Order, 1967 was amended, the non-levy cement price was at least
double the levy cement price and the manufacturers, therefore, realized a sale
price for his 33.34% non-levy production a total sale price which was much more
than the retention price in respect of the 66.66% production of levy cement.
The said contribution of Rs.9/- per MT of non-levy cement was, therefore,
passed on by the cement manufacturers and was wholly recovered from their
customers. This factual position was made abundantly clear by the letter dated
March 12, 1982 addressed to the Government of India by the Cement Manufacturers
Association which showed that the contribution to the Cement Regulation Account
at Rs.9/- per MT of non-levy cement was built into the price of non-levy cement
and recovered from the customers." The decisions relied upon by learned
counsel for the respondents have no relevance. In Union of India & Ors. v.
Hindustan Aluminium Corporation Limited & Anr. [AIR 1983 Cal. 307] while
examining the validity of the aforenoticed provisions of Aluminium Control
Order, 1970, it was held that the person challenging the validity of the clause
which related to the fixation of retention price of indigenous aluminium
(Clause 4A) and fair price of aluminium (Clause 4B) is merely the holder of the
money. In that case, the Government had fixed the sale price of indigenous aluminium
which was considered to be fair and within the pecuniary limits of the
consumers. The Government, finding that mere fixation of sale price would serve
no purpose of the consumers and consequently the objectives under Section 3 of
the Essential Commodities Act, 1955 cannot be achieved, introduced the concept
of retention price in order to obviate the difficulties of the consumer. The
Calcutta High Court held that as the retention price fixed for HINDALCO was
lower than the sale price, HINDLCO has to pay to the Aluminium Regulation
Account, the sum which is the difference between the sale price and the
retention price. Under these circumstances, it was held that the steps taken by
the Government by fixation of the retention price for each producer and the
sale price and the provision for payment to the Aluminium Regulation Account
were necessary in the interests of the consumers so as to maintain supply of aluminium
consistent with the demand thereof and to make it available to the consumer at
a fair price.
Likewise,
in R.D. Aggarwala & Anr. v. The Union of India & Anr. [ILR 1974 (2)
Delhi 520], the Delhi High Court was concerned with the validity of Clause 9.
In that case, the contention that was urged was :
"the
requirement in clause 9 that every producer should pay to the Controller the
balance that remains from out of the f.o.r. destination price, and the
provision in clause 11(4) enabling the Government to disburse the unspent
amount in the Cement Regulation Account in any manner it likes, amount to a colourable
exercise of the taxing power of the State, and beyond the legislative
competence of the executive under Section 18G of the Act, in-as-much as the
out-right deprivation of the balance of the freight in the hands of producer
and the power of the Government to disburse the same as it likes, amount to a
direct and variable levy of tax without any authority of law under Article 265
of the Constitution." The High Court held that the contention was based on
the assumption that the producer was deprived of the balance of the freight in
his hands. It was clear that the producer was not entitled to the said balance of
freight according to the scheme of the Control Order. The Court said :
"Coming
now to the contention urged by the learned counsel, it was based on the
assumption that the producer was deprived of the balance of the freight in his
hands. It is clear from what has been stated above that the producer was not
entitled to the said balance of the freight according to the scheme of the
Control Order. Once it is held, as we did, that the fixation of the ex-factory
or retention price is valid, it would follow that the balance of the f.o.r.
destination price that remains after deducting the said retention price and the
other items allowed to be deducted by the producer under clause 9 of the
Control Order, does not belong to the producer and, therefore, he cannot be
said to be deprived of the same when he pays to the same to the Controller
under clause 9. In that view, the payment of the balance to the Controller
cannot be described as levy of tax qua the producer. Nor can it be a tax qua
the consumer, as the amount of freight is paid by the consumer as part of the f.o.r.
destination price." The High Court, therefore, held that the balance of
FOR destination price does not belong to the purchaser under the scheme of the
Control Order and cannot, therefore, be regarded as tax qua the producer.
Factual
matrix of the two cases relied upon by learned counsel for the respondents and
of the present case is entirely different. As already noticed, there is no
control on price of sale of the non-levy cement. Except Clause 9A, no other
clause of the Control Order is applicable to non-levy cement. There is no sale
price, there is no retention price and the manufacturers are free to sell the
non-levy cement at whatever price they like. There is no power in the
subordinate legislation to impose levy on that cement which is not covered by
the Control Order.
It is
no doubt true that in taxing legislation, legislature deserves greater latitude
and greater play in joints. This principle, however, cannot be extended so as
to validate a levy which has no sanction of law, however, laudable may have
been the object to introduce it and howsoever laudable may have been the
purpose for which the amount so collected may have been spent.
It is
clear from the above discussion that the impugned levy under Clause 9A is a
compulsory exaction. The amount paid by the customers of non-levy cement
belongs to the appellants. Such a levy amounts to levy of tax and, therefore,
invalid for want of sanction to levy such a tax. Clause 9A is, therefore, ultra
vires Section 18G of the Act. To this extent we set aside the impugned judgment
of the High Court.
The
next question is: whether the appellants are entitled to refund of the
contribution made by them under Clause 9A of the Control Order? There is no
automatic right of refund. In Mafatlal Industries Ltd. & Ors. v. Union of
India & Ors. [(1997) 5 SCC 536], the Constitution Bench has held that the
right to refund of tax paid under an unconstitutional provision of law is not
an absolute or an unconditional right. Similar is the position, even if Article
265 can be invoked. The principles of unjust enrichment are applicable in claim
of refund. The claimant has to allege and establish that he has not passed on
the burden to another person. The Constitution Bench has held 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 as explained in the judgment. Where the
burden of duty has been passed on, the claimant cannot say that he has suffered
any real loss or prejudice. Real loss or prejudice is suffered in such a case
by the person who has ultimately borne the burden and it is only that person
who can legitimately claim its refund. But where such person does not come
forward or where it is not possible to refund the amount to him for one or the
other reason, it is just and appropriate that that amount is retained by the
State, i.e., by the people. The doctrine of unjust enrichment is a just and
salutary doctrine. The power of the Court is not meant to be exercised for
unjustly enriching a person. The doctrine of unjust enrichment is, however,
inapplicable to the State for the State represents the people of the country.
No one can speak of the people being unjustly enriched.
In the
present case, it is clear that the burden of payment under Clause 9A was passed
on to the customers. The President of the Cement Manufacturer Association, soon
after the insertion of the amendment in February 1982, in a communication dated
12th March, 1982 sent to the Secretary of Ministry of Commerce, Department of
Industrial Development, Government while giving break-up of the price of
non-levy cement added in the said price, a sum of Rs.9/- per MT payable under
Clause 9A on production of the non-levy cement. Further, it appears that the
levy under Clause 9A was accepted by the entire cement industry except the
challenge made by the four appellants by filing the writ petitions; one just
before the contribution under Clause 9A was withdrawn and three after it was
withdrawn. Besides the principles of unjust enrichment on equitable principles
which squarely apply here, the applicants are not entitled to claim refund of
amount paid into CRA under Clause 9A. It is evident that the amount so
deposited was expanded for the purpose under the Control Order. Under these
circumstances, we direct that pursuant to declaration of invalidity of Clause
9A of the Control Order, the amount of contribution already paid under Clause
9A will not be liable to be refunded to the appellants.
The
appeals are accordingly allowed to the above limited extent. In the facts and
circumstances of the case, parties are left to bear their own costs.
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