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Golden Tobacco Company Ltd. Vs. Union of India and Another - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMumbai High Court
Decided On
Case NumberMiscellaneous Petition No. 907 of 1975
Judge
Reported in(1982)84BOMLR274; 1983(14)ELT2238(Bom)
ActsCentral Excise Rules, 1944 - Rules 9, 11 and 173J; Central Excise Act, 1944 - Sections 4
AppellantGolden Tobacco Company Ltd.
RespondentUnion of India and Another
Excerpt:
central excises and salt act (i of 1944), section 4; first schedule, item 4 - central excise rules, 1944, rules 11, 173-j -- basis for determination of wholesale cash price for assessment of excise duty -- prices charged by wholesale dealer of manufacturer to other retail dealers whether wrong basin -- refund of excise duty recovered contrary to law -- limitation under rule 11, central excise rules whether attracted -- claim for refund of duty illegally recovered whether can be entertained in writ-proceedings -- period of limitation for suit under limitation act whether applicable to writ-petition -- excise duty paid according to law declared by several high courts without dissent -- payment whether under coercion or compulsion or under mistake of law -- limitation act (xxxvi of 1963),.....1. this petition under article 226 of the constitution of india has been filed by the golden tobacco company limited, who carry on the business of manufacturing cigarettes, against the union of india and the collector of central excise. at the relevant time the petitioners' factory was situate at swami vivekanand road, vile parle, bombay. the cigarettes manufactured by the petitioners were, at the relevant time, subjected to the payment of ad valorem excise duty under item 4 in the first schedule to the central excises and salt act, 1944 (1 of 1944). the petitioners had appointed sole distributors for different parts of india, and, therefore, for the purpose of marketing their goods the petitioners sold the cigarettes manufactured by them to such sole distributors, who in turn sold them.....
Judgment:

1. This Petition under Article 226 of the Constitution of India has been filed by the Golden Tobacco Company Limited, who carry on the business of manufacturing cigarettes, against the Union of India and the Collector of Central Excise. At the relevant time the petitioners' factory was situate at Swami Vivekanand Road, Vile Parle, Bombay. The cigarettes manufactured by the Petitioners were, at the relevant time, subjected to the payment of ad valorem excise duty under Item 4 in the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944). The Petitioners had appointed sole distributors for different parts of India, and, therefore, for the purpose of marketing their goods the Petitioners sold the cigarettes manufactured by them to such sole distributors, who in turn sold them to wholesale dealers, Such wholesale dealers would sell the cigarettes to ordinary retailers, who would finally sell them to consumers. The number of such distributors appointed by the Petitioners has varied from time to time but has been generally more than 200. According to the Petitioners, none of these distributors were in any way financially or otherwise related to or connected with the Petitioners or any member of the family of any of the directors of the Petitioners. This fact is not disputed by the Respondents.

In 1958 the Petitioners desired to know whether the excise duty payable on cigarettes manufactured by them was to be calculated on the basis of the prices received by the Petitioners from their distributors or on any other basis. The Petitioners accordingly approached the Assistant Collector of Central Excise at Bombay for a clarification on this issue. By his letter dated December 17, 1958 the said Assistant Collector referred the Petitioners to the provisions of Section 4 of the said Act and stated that what was relevant for the purpose of determining the wholesale cash price was a transaction in the ordinary course of business, that is to say, the open market, and that the prices received from a sole distributor could not be taken into consideration. According to the said Assistant Collector, the assessable value of the said products was the cost selling price to an independent wholesale dealer shown in the catalogue of the Petitioners' distributors. In accordance with what was stated in the said letter, the Petitioners from time to time paid excise duty on the prices at which the Petitioners' distributors sold to wholesalers the cigarettes manufactured by the Petitioners.

2. Until July 31, 1969 the procedure for the determination of the assessable value of cigarettes was for manufacturers to submit price-lists disclosing therein appropriate information and data, and the excise authorities who were physically present in the premises of manufacturers permitted the manufactured cigarettes to be cleared from the factory only after excise duty thereon was either paid or provided for. By a notification No. 171/69-C.E., dated June 21, 1969 the self-removal procedure prescribed under Chapter VII-A of the Central Excise Rules, 1944, was made applicable to manufacturers of cigarettes. Under this procedure the concerned manufacturers were to submit price-list from time to time for the approval of the excise authorities. Excise officers were no longer posted in the premises of the manufacturers, but instead the manufacturers were themselves responsible for ensuring the payment of excise duty, as and when the products were cleared, by maintaining appropriate records and by making the necessary entries therein and by paying the excise duty. In accordance with what they had been doing in the past, the Petitioners, when they submitted their price-lists from time to time for the approval of excise authorities, showed in such price-list the prices received by their sole distributors from wholesalers as the assessable value of cigarettes manufactured by the Petitioners.

3. According to the Petitioners, some time in August 1972 one A. D. Marphatia, who was at the time the manager of the Petitioner Company and was looking after the Petitioners' excise matters, came to know from some officers of the Excise Department in the course of informal discussions that one of the Petitioners' principal competitors, namely, Godfrey Phillips Limited, had submitted price-list showing in them as the assessable values the prices received by them from their sole distributors and the such price-lists of the said Godfrey Phillips Limited, were going to be approved by the concerned Assistant Collector. Paragraph 11 of the Petition further avers that it was on or about August 25, 1972 that the Petitioners came to know this fact for the first time. The Petitioners thereupon took legal advice, and the legal advice given to them was that the stand of the excise authorities, as mentioned in the said letter dated December 17, 1958, was not justified or correct in law and that on a true construction of the said Section 4 the excise authorities were bound to take into consideration the prices received by a manufacturer even from a sole distributor, such prices being the wholesale cash price within the meaning of that expression in the said Act, even though such sole distributor was purchasing manufactured goods under an agreement with the manufacturers. In the said paragraph 11 of the Petition it is further averred that 'as soon as they (that is, the Petitioners) became aware that there was some doubt as to the stand consistently adopted by the Excise Authorities which the Petitioners had accepted in good faith as representing the correct legal position, the Petitioners on or about 26th August, 1972 submitted to the Assistant Collector of Central Excise a fresh price-list in respect of the products to be cleared by them after 1st September, 1972 in which the Petitioners inter alia showed the assessable value on the basis of the prices received by the Petitioners from the distributors.' By his letter dated August 31, 1972 the Assistant Collector of Central Excise accepted the above method for the purpose of calculation of excise duty. The Petitioners have averred in the said paragraph 11 that 'the correctness of the advice given to the Petitioners was confirmed by the judgment of the Supreme Court delivered by it in Voltas's case in December 1972 and comprehensively clarified finally in the Atic's case in February 1975'.

4. By their letter dated September 27, 1972 the petitioners submitted a claim for refund of the sum of Rs. 53,86.474.79 P., being the difference in the duty payable on the basis of the price charged by the Petitioners to their distributors in respect of the goods cleared during the period March 1, 1971 to August 31, 1972 and the duty actually paid on the basis of the price charged by the Petitioners' distributors to wholesale dealers. As the tenor of the said letter shows, the application for refund was made under Rule 11 of the Central Excise Rules, 1944, as then in force, read with rule 173-J of the said Rules. Rule 11, as then in force, provided as follows :

'11. No refund of duties or charges erroneously paid, unless claimed within three months. - No duties or charges which have been paid or have been adjusted in an account-current maintained with the Collector under Rule 9, and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error of misconstruction, shall be refunded unless the claimant makes an application for such refund under his signature and lodges it with the proper officer within three months from the date of such payment or adjustment, as the case may be.'

Under Rule 173-J, as then in force, the period of limitation under Rule 11 in the case of products to which the self-removal procedure was applied was one year. In their said application the Petitioners made a claim for refund for a period of 18 months, that is, for six months more, on the ground that the assessment of their cigarettes had nor been finalized since March 1972, and contended that they were, therefore, entitled to refund for a period of one year prior to March 1972. The Assistant Collector of Central Excise rejected the Petitioners' said claim by his order dated February 25, 1974 on the ground that the assessments had been made on the basis of the assessable value declared by the Petitioners and as approved by the Department and by following the prescribed procedure. The Petitioners thereupon filed an appeal to the Appellate Collector of Central Excise. The Appellate Collector by his order dated September 17, 1974 allowed the Petitioners' appeal and set aside the order passed by the Assistant Collector. By a notice dated March 13, 1975 given by the Joint Secretary to the Government of India Ministry of Finance, the Central Government called upon the Petitioners to show cause why the said order of the Appellate Collector should not be reviewed and set aside. By its order dated July 5, 1975 the Central Government upheld the order of the Appellate Collector so far as it related to refund of duty paid on and from September 27, 1971 and set aside that part of the order of the Appellate Collector which had allowed refund of the excise duty paid prior to September 27, 1971.

5. Meanwhile the Petitioners by their letter dated September 12, 1973 intimated to the Assistant Collector of Excise that the prices in the price-list submitted by the Petitioners would have to be approved after deducting 3% thereof as being marketing expenses incurred in connection with the sale of their products. In support of this contention the Petitioners relied upon the decision of the Supreme Court in the case of A. K. Roy and Another v. Voltas Ltd., : 1973ECR60(SC) . By his letter dated October 8, 1973 the Assistant Collector, called upon the Petitioners to show cause why the Petitioners' claim to deduct 3% on account of marketing expenses should not be rejected. The Petitioners submitted their reply by their letter dated April 1, 1974 and also sent along with it their chartered accountants' certificate certifying that the sales and distribution expenses amounted to 4.39% for the year ended June 30, 1972 and 4.08% for the year ended June 30, 1973, and requested the Assistant Collector to approve the amounts of such percentages to be deducted. The Petitioners thereafter learnt that one of their competitors, Indian Tobacco Company Limited, had filed a writ petition in this High Court claiming deduction of similar expenses as post-manufacturing expenses. It appears that some interim order was passed in the said writ petition, and accordingly the Petitioners by their letter dated April 16, 1974, after referring to the said interim order, requested the Assistant Collector to permit the Petitioners to pay excise duty on the declared value after adjusting the post-manufacturing expenses, and also requested for a refund of excise duty paid on the amount of such post-manufacturing expenses from August 27, 1972. By his order dated April 25, 1974 the Assistant Collector rejected the Petitioners' said request. The Petitioners thereupon filed in this Court a writ petition, namely, Miscellaneous Petition No. 477 of 1974, claiming refund of excise duty paid by way of excise on sales and distribution expenses for the period September 1, 1972 to May 15, 1974. Learned Counsel have informed me that the said Petition was allowed on December 15, 1975 along with the said writ petition filed by the Indian Tobacco Company Limited.

6. The present Petition was filed by the Petitioners on August 11, 1975. In this Petition the Petitioners have asked for a declaration that the assessable value of the cigarettes manufactured by them should be determined on the basis of the prices recovered by the Petitioners from their distributors after excluding therefrom the post-manufacturing expenses, and for a further declaration that the assessment orders of the excise authorities purporting to determine assessable basis contrary to the above basis are ultra vires and a nullity. The Petitioners have also asked for a writ of certiorari or other appropriate writ or direction to quash the assessment orders from March 1, 1965 to August 31, 1972 and for directions to the Respondents to act in accordance with law on the correct basis of valuation under Section 4(a) of the Central Excises and Salt Act, 1944, and not according to the said assessments made and the payments made under a mistake of law. The Petitioners have also asked for a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ direction or order under Article 226 of the Constitution directing the Respondents to act in accordance with law on the correct basis and to refund to the Petitioners the sum found to be wrongfully retained, being the excess excise duty paid by the Petitioners between March 1, 1965 and August 31, 1972. The Petitioners have also asked for setting aside the said order dated July 5, 1975 of the Central Government in so far as it rejected refund to the Petitioners for the period March 1, 1971 to September 27, 1971 and for refund of the excess duty paid or collected and wrongfully retained by the Respondents.

7. The Petitioners' case is that the excise duty in respect of which they are asking for a refund by this Petition was paid by them under a mistake of law and that the moment they found that there was some doubt in the matter, they immediately on August 26, 1972 made an application under the said Rule 11 read with Rule 173-J for refund of excess excise duty paid by them, such application being confined to the statutory period provided under the said rules which the Petitioners had sought to extend by further six months as mentioned earlier. According to the Petitioners, the position in law was finally settled by the judgment of the Supreme Court in Voltas's case which was delivered in December 1972 and finally clarified further in Atic's case in February 1974. The Petitioners have also contended that the amounts in respect of which they are claiming refund were paid by them under duress or compulsion.

8. The main defence of the Respondents is that had this Petition been a suit, such suit would have been barred by the law of limitation and, therefore, though the Limitation Act, 1963, does not apply to a writ petition, the court should refuse to exercise its discretion in favour of the petitioners and should refuse to grant them any relief on the ground of gross laches and delays. It was further contended on behalf of the Respondents that the Petitioners' case was not that payment was made under mistake of law but was that of payment made under mistake of law but was that of payment made under duress or compulsion and that to a suit to recover money paid under compulsion Article 113 in the Schedule to the Limitation Act applied and the suit would be time-barred if filed three years after the date of payment. It was further submitted on behalf of the Respondents that if the Court held that the payments were made under a mistake of law, the mistake was discovered by the Petitioners in August 1972, that is, more than three years prior to the date of the filing of this Petition. A yet further contention of the Respondents was that the Petitioners knew in 1958 that there were two basis for assessing duty, namely, on the basis of the prices charged by the Petitioners to their distributors and on the basis of the prices charged by the Petitioners' distributors to wholesalers, and, therefore, they should have filed a writ petition for refund in 1958. It was further submitted on behalf of the Respondents that the mistake of law, if any, came to the knowledge of the Petitioners not when the Supreme Court delivered the judgment in the Voltas's case but when the Bombay High Court, from whose judgment the said appeal to the Supreme Court had been filed, delivered its judgment, namely, on August 14, 1970. The final submission on behalf of the Respondents was that even if the Writ Petition were within time, the Court should not grant any relief to the Petitioners because the Petition raised serious disputed questions of fact and suffered from insufficiency of particulars and pleadings.

9. Before dealing with the merits of the rival submissions advanced at the Bar, it will be better to refer to the law on the subject. Section 4 of the Central Excises and Salt Act, 1944, prior to its amendment by Act XXII of 1973, which Amending Act came into force with effect from October 1, 1975, provided as follows :

'4. Determination of value for the purposes of duty. - Where under this Act any dependent on the value of the article, such value shall be deemed to be -

(a) the wholesale cash price for which an article of the like kind and quality is sole or is capable of being sole at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture of production for delivery at the place of manufacturer or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exist, or

(b) where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacture of producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sole or is not capable of being sold at such place, at any other place nearest thereto.

Explanation. - In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of the trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid.'

Thus the value of an article exigible to excise duty was to be deemed to be the wholesale cash price. As mentioned earlier, when the Petitioners had sought a clarification in 1958 as to what the wholesale cash price of their cigarettes for the purpose of excise duty was, the Assistant Collector had, by his letter dated December 17, 1958, informed them that it would be the price shown in their distributors' catalogue as the cost selling price to an independent wholesale dealer. In national Tobacco Co. of India Ltd. v. Collector of Central Excise and Others, : AIR1961Cal477 , a learned Single Judge of the Calcutta High Court held that a price at which a manufacturer sells to his stockiest was not the wholesale cash price. This case was followed by a Division Bench of the Mysore High Court in Messrs Amco Batteries (P) Ltd., Bangalore v. Assistant Collector, Central Excise, Bangalore and Another, A.I.R. 1963 Mys 216 : 1979 ELT 451. In Messrs Queen's Chemists Mfg. Department v. G. Koruthu : AIR1967Bom338 , Tarkunde, J., Sitting singly, held that in determining the value for the purpose of Section 4(a) of the Central Excises and Salt Act, 1944, the higher wholesale price charged by the distributors to the wholesale traders had to be considered and not the wholesale price charged to the distributors by the manufacturers. In arriving at this conclusion Tarkunde, J., followed the judgments of the Calcutta and Mysore High Courts, above referred to. The judgment of Tarkunde. J., was delivered on March 10, 1965. The same view was taken by the Andhra Pradesh High Court in The Union of India v. Vengunta Suryaprakasa Rao and Another : AIR1967AP281 . In Collector of Central Excise an others v. Shankarlal Agarwalla and Dinanth Agarwalla : AIR1968Cal154 , the view of the learned Single Judge of that High Court in National Tobacco Co.'s case was approved. The same view was taken by the Gujarat High Court in S.C.A. No. 1219 of 1966 decided on March 30, 1970 (Unrep.). Thus the position as settled by decisions of various High Courts up to Voltas's case was that the assessable value was to be determined on the basis of the price charged by a manufacturer's stockiest or distributor to wholesale distributor and charged by manufacturer's stockiest or distributor to wholesale distributor and not on the basis of the price charged by a manufacturer to his distributor or stockist.

10. I will now turn to the Voltas's case. As considerable arguments have been advanced by Mr. Dalal, learned Counsel for the Respondents, on the basis of this case, it will be convenient to set out the facts which gave rise to that litigation. Voltas Limited carried on the business of manufacturing and selling air-conditioners, water-coolers and component parts thereof. Voltas sold these goods directly to consumers at list prices from their head office at Bombay and from their branch officer at Calcutta, Delhi, Madras, Bangalore, Cochin and Lucknow. Voltas had also entered into agreements with certain dealers inter alia agreeing to sell to these dealers for each different area all the different goods manufactured by them. To such dealers a discount of 20 to 22% in the price-lists was given by Voltas. It was the contention of Voltas that the price which it charged to these dealers was the wholesale cash price in respect of all the articles manufactured by that company. Though this stand was accepted in the beginning, some time later Voltas were informed by the Superintendent of Central Excise that duty would be assessed on the footing of the prices charged by Voltas directly to their consumers. Voltas then approached this High Court under Article 226 of the Constitution to set aside the orders of assessment passed on the basis of the prices charged by them to their consumers. A Division Bench of this High Court consisting of K. K. Desai and Nain, JJ., upheld the contention of Voltas and allowed the Petition, setting aside the orders of assessment. The judgment of the Bombay High Court is reported as Voltas Limited v. A. K. Roy : (1971)73BOMLR229 , and was delivered on August 10 and 14, 1970. The Division Bench held that the phrase 'wholesale cash price' contained in clause (a) of the said Section 4 was used in the section in contradistinction to the retail price and that price was relieved of the loading represented by post-manufacture expenses unless such expenses formed part of the profits of the manufacturer himself. It was held that the word 'wholesale' in the phrase 'wholesale cash price' in clause (a) had not the meaning of price for bulk sales and quantitative sales and that sales by manufacturers to consumers in large quantities and at prices which might in common parlance be described as wholesale prices could not be held to be at 'wholesale cash price' within the meaning of clause (a) of the said Section 4. The Division bench dissented from the view taken by the Calcutta high Court in National Tobacco Co.'s case. This was then the first case in which a view different from that of the Calcutta High Court in National Tobacco Co.'s case was taken by any High Court. Whether by this judgment it can be said that the position in law, so far as is material to the controversy in this Petition, was made clear and the Petitioners could with reasonable diligence have discovered this is a matter which I will discuss later. The Department went in appeal to the Supreme Court against the decision of the Bombay High Court. The decision of the Supreme Court is reported as A. K. Roy and Another v. Voltas Ltd. : 1973ECR60(SC) . The judgment of the Supreme Court was pronounced on December 1, 1972. The Supreme Court held that a wholesale market does not always mean that there should be an actual place where articles are sold and bought on a wholesale basis and that these words can also mean the potentiality of the articles being sole on a wholesale basis. The Supreme Court further held that even if there was no market in the physical sense of the term at or near the place or manufacture where the articles of a like kind and quality are or could be sold, that would not in any way affect the existence of market in the proper sense of the term provided the articles themselves could be sold wholesale to traders, even though the articles are sold to them on the basis of agreements which confer certain commercial advantages upon them. According to the Supreme Court, if a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and conditions, it would not follow from that alone that the price for those sales would not be the 'wholesale cash price' for the purpose of the said Section 4(a) if the agreements were made at arms length and in the usual course of business, but if there was a special or favoured buyer to whom a specially low price was charged because of extra-commercial considerations, for example, because he was a relative of the manufacturer, the price charged for those sales would not be the 'wholesale cash price'. The Supreme Court laid down that once wholesale dealings at arms length are established, the determination of the wholesale cash price for the purpose of the said Section 4(a) might not depend upon the number of such wholesale dealings. The Supreme Court further held that the real value could include only the manufacturing cost and the manufacturing profit, excluding any post-manufacturing cost and profit arising from post-manufacturing operation, namely, selling profit. The supreme Court accordingly dismissed the Department's appeal. In Atic Industries Ltd. v. H. H. Dave, Asst. Collector of Central Excise and Others, : 1978(2)ELT444(SC) , the Supreme Court, allowing the appeal and reversing the decision of the Gujarat High Court referred to earlier, clarified the legal position further. In that case the appellants carried on the business of manufacturing dye-stuffs. All the goods manufactured by the appellants were, during the relevant period, sold by them in wholesale units to two wholesale buyers only. These two buyers in their turn resold the goods purchased by them from the appellants to textile mills and large consumers and to distributors. The price which was charged by the appellants to the two buyers was a uniform price described as the basis selling price less a trade discount of 18%. When these two buyers sold the goods to textile mills and other consumers, the price they charged as the basic selling price was without any discount, but so far as their sales to distributors were concerned, they were at a higher price, though with trade discount. The distributors in their turn resold the dye-stuffs purchased by them from the two wholesale buyers to small consumers at a slightly higher price called 'small consumers price'. No discount was given by the distributors to the small consumers. The question which arose for determination was how the value of the dye-stuffs manufactured by the appellants should be determined. The appellants contended before the excise authorities that the value of the dye-stuffs manufactured by them should be taken to be the price at which the appellants sold the same to the said two buyers less a uniform trade discount of 18% which at the relevant period was being given to those buyers. The Department did not accept this contention but held that the assessable value would be the price at which these two buyers sold the goods to the distributors and that no deduction should be allowed in respect of the discount given by them to the distributors, the ground for that being that the discount being given by these two buyers was not the same. The Supreme Court held that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arms length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise duty and that the price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealers would be irrelevant for the determination of the value and the goods could not be chargeable to excise on that basis. The Supreme Court further reiterated that the value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturer's profit and it must not be loaded with post-manufacturing profits arising from post-manufacturing operations and that the price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment of excise duty, and if the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturer's profits but also the wholesale dealer's selling cost and selling profits.

11. It is not disputed that in view of the position as settled by the above judgments the Petitioners were assessed to excise duty on a wrong basis, but what is contended is that nonetheless the Petitioners are not entitled to refund of the amounts recovered from them contrary to law. In the affidavit in reply filed by Vinayak Nagorao Kullarwar, the Assistant Collector of Central Excise, affirmed on September 20, 1979 it is contended that the Respondents were not bound to refund to the Petitioners any amount collect by them contrary to law for any period which was beyond the period of limitation provided by the said Rule 11. In Associated Bearing Company Limited v. Union of India and Another, 1980 E.L.T. 415, a Division Bench of this High Court consisting of Chandurkar and Kotwal, JJ., held that the jurisdiction of the Central Excise Authorities was to recover duty according to law, and, therefore, if any duty was recovered on post-manufacturing expenses or on a price which was not permissible in law, such a levy clearly amounted to exercising excess of jurisdiction or acting without jurisdiction and could not be held merely to be an error of jurisdiction and it, therefore, could not be construed as resulting from any error or misconstruction as contemplated by the said Rule 11. The Division Bench further held that once the recovery of excise duty by the Excise Department was held to be illegal, the provisions of Rule 11 would not be attracted and a claim for such refund could be entertained within three years from the date when the mistake of law was discovered. The Division Bench further held that the claim of refund of duty illegally recovered by the Department could be entertained even in proceedings under Article 226 of the Constitution. This was a case in which the said Rule 11 prior to its amendment was before the Court. Where a similar argument was advanced in respect of the amended Rule 11, a Division Bench of this High Court consisting of Chandurkar and Bhonsale, JJ., reiterated in Maharashtra Vegetable Products Pvt. Ltd. and Another v. Union of India and Others, 1981 E.L.T. 468, what had been held in Associated Bearing Company's case. The same view was taken by another Division Bench of this High Court (Kanade and Pendse, JJ.,) in Wipro Products Ltd. and Another v. Union of India and Another, 1981 E.L.T. 531.

12. In view of the above decision, the contention of the Respondents based upon Rule 11 must be rejected. As mentioned earlier, in Associated Bearing Company's case this High Court has held that a claim of refund of duty illegally recovered by the Department could be entertained even in proceeding under Article 226 of the Constitution. In the case of Wipro Products it was held by this High Court that it is well settled law that recovery of duty by conclusion of post-manufacturing expenses being totally illegal, it would be futile to drive a litigant to a long drawn trial in a civil Court. The Petitioners would, therefore, be entitled to maintain this petition. What is, however, urged against the petitioners is that the jurisdiction of the High Court under Article 226 of the Constitution is discretionary and that the Court would not exercise its discretion in favour of a party who is guilty of laches. It is contended by the Respondents that the yardstick to be applied for judging whether a party was guilty of laches or not was to see whether, had that party filed a suit instead of a writ petition, the suit would be barred by limitation or not. It was further submitted by the Respondents that even where a writ petition was filed within the period of limitation for a suit, the Court could still refuse to grant relief if it felt that the circumstances showed that the party had not approached the Court diligently. Several authorities have been cited before me with respect to the position in law on this part of the case, and it will now examine them. In State of Madhya Pradesh and Another v. Bhailal Bhai and Others, : [1964]6SCR261 , the Supreme Court held that where sales tax assessed and paid by a dealer was declared by a competent Court to be invalid in law, the payment of tax already made was one made under a mistake within the meaning of Section 72 of the Indian Contract Act, 1872, and, therefore, the Government to whom such payment had been made by mistake must in law repay it. The Supreme Court further held that in this respect the High Court has, in exercise of its jurisdiction under Article 226 of the Constitution, power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law. The Supreme Court further held that at the same time the special remedy provided by Article 226 of the Constitution was not intended to supersede completely the modes of obtaining relief by an action in a civil Court or to deny defence legitimately open in such actions. The Supreme Court further held that though the Limitation Act did not as such apply to the granting of relief under Article 226 of the Constitution, the maximum period fixed by the Legislature as the time within which the relief by way of a suit must be brought might ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 of the Constitution can be measured. The Supreme Court further held that the Court might consider the delay unreasonable if it was less than the period of limitation prescribed for a civil action for the remedy, but where the delay was more than this period, it would almost always be proper for the Court to hold that it was unreasonable. The matter came to be further considerably the Supreme Court in M/s. Tilokchand Motichand and Others v. H. B. Munshi, Commissioner of Sales Tax, Bombay and Another, : [1969]2SCR824 . In that case Hidayatullah, C.J., held that the question was one of discretion for the Supreme Court to follow from case to case and that there was no upper limit and no lower limit and that a case may be brought within the period prescribed by the Limitation Act by reason of some article, but the Court need not necessarily give the total time to a litigant to move the Supreme Court under Article 32 of the Constitution and that similarly in a suitable case the Supreme Court might entertain such a petition even after the expiry of the period of limitation for a suit prescribed by the Limitation Act. On the merits of the case, Hidayatullah, C.J. expressed the view that there was no mistake of law on the part of the Petitioners entitling them to invoke the analogy of the period of limitation prescribed by the Limitation Act. Sikri, J., on the point of limitation expressed the same opinion as Hidayatullah, C.J. did. Sikri, J, held that if a claim was barred by the law of limitation, unless there were exceptional circumstances, prima facie it was a state claim and should not be entertained by the Supreme Court. He, however, further held that even if it was not barred by the law of limitation, the Supreme Court might not entertain it if on the facts of that case there was unreasonable delay. According to Sikri, J., one year's period would be a reasonable period for a party to approach the Supreme Court. He, however, further opined that though appeals and representations to higher authorities took time, the time spent in pursuing these remedies, though not excludable under the Limitation Act, might ordinarily be taken as a good explanation for approaching the Supreme Court under Article 32 of the Constitution. On the merits, Sikri, J. however, took the view that there was a mistake of law and that the Petitioners had approached the Court within six months of the discovery of that mistake and there was, therefore, no delay and the Petition should be allowed. Bachawat, J., on the point of limitation, held that the extraordinary remedies under the Constitution were not intended to enable the claimant to recover moneys the recovery of which by suit was barred by limitation, and that the Supreme Court should act on the analogy of the statutes of limitation in respect of a claim under Article 32 of the Constitution. On the merits he held that the case before the Supreme Court was not the case of a payment made under a mistake of law and the Petition should, therefore, be dismissed. On the point of limitation, Mitter, J., took the same view as Hidayatullah, C.J. did. He also agreed with Hidayatullah, C.J., and Bachawat, J., that the petition should fail as it was filed beyond the period of limitation. Hegde, J., however, held that the Limitation Act could not be made to apply directly to litigations under Article 32 of the Constitution and that a relief asked for under Article 32 could not be refused on the ground of laches.

13. The next decision of the Supreme Court on the point is M/s. D. Cawasji and Co. v. State of Mysore and another, : 1978(2)ELT154(SC) . In that case the Supreme Court held that though a party could, with reasonable diligence, discover a mistake of fact even before a court makes a pronouncement, it is seldom that a person can, even with a reasonable diligence, discover a mistake of law before a judgment adjudging the validity of the law is delivered. The Supreme Court further held that for filing a writ petition to recover the moneys paid under a mistake of law, the starting point of limitation was from the date on which the tax was paid was rendered, as that would normally be the date on which the mistake would become known to the party and that if any writ petition was filed beyond three years after that date, it would almost always be proper for the Court to consider that it is unreasonable to entertain that petition, though, even in cases where it is filed within three years, the Court has a discretion, having regard to the facts and circumstance of each case, not to entertain the application. The Supreme Court also held that there was no provision under which the Court can deny refund of tax unlawfully collected by the State because the person from whom it was collected had collected from his customers and had no subsisting liability of intention to refund it to them, or for any other reason it was impracticable for him to do so.

14. A different approach on the point of delay appears to have been adopted by the Supreme Court in some later decisions. In M/s. Shiv Shanker Dal Mills v. State of Haryana and others : [1980]1SCR1170 , Krishna Iyer, J., said [at p. 1038 (2) :]

'Where public bodies, under colour of public laws, recover people's money, later discovered to be erroneous levies, the Dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs.'

15. In M/s. Hindustan Sugar Mills v. The State of Rajasthan and others : AIR1981SC1681 , the Supreme Court held that the Central Government should honour its legal obligations arising out of contract and not drive the citizen concerned to file a suit for recovery of the amount. The Supreme Court observed that in a democratic society governed by the rule of law it is the duty of the State to do what is fair and just to the citizens and the State should not seek to defeat the legitimate claims of citizens by adopting a legalistic attitude but should do what fairness and justice demands. Decisions of several High Courts were also cited before me, but in view of the above pronouncements of the Supreme Court I do not think it necessary to refer to them.

16.The position which emerges from the above decisions of the Supreme Court is that thought the Limitation Act does not directly apply to writ petitions, the Court in judging whether a petition should be disallowed on the ground of gross delay or laches would take into account the period of limitation, were a suit filed for the same relief. If the petition were filed beyond the prescribed period of limitation for a suit, the Court would ordinarily hold the Petitioner guilty of delay and would not grant his petition. Even where the petition were presented within the period of limitation prescribed for a suit, in the special circumstances of a particular case the Court might refuse to exercise its discretion and grant relied to the Petitioner. In the special circumstances of a case the Court might interfere in the exercise of its writ jurisdiction even when a petition is filed after the expiry of the period of limitation for a suit. The Supreme Court in its later decisions has looked with great disfavour upon technicalities and objections raised by the State to returning money collected contrary to law and unlawfully retained by it. That this excess payment made by or collected from the Petitioners in the present case is an unlawful collection and is being unlawfully retained by the Respondents cannot be disputed in view of the judgments of the Supreme Court in the Voltas's case and Atic's case, and such collections have been expressly categorized as being without jurisdiction in Associate Bearing Company's case.

17. I will now proceed to consider whether, if the petitioners had filed a suit instead of a writ petition, their suit would have been time-barred, and then proceed to consider, depending upon the conclusion which I arrive at, whether this is a case in which discretion should be exercised in favour of the Petitioners or against them. It is the contention of the Respondents that the amounts were paid by the Petitioners under coercion, and, therefore, the period of limitation for a suit would be three years from the date of payment. The Petition is admittedly filed much after this period of three years, and according to the Respondents such a Petition Cannot be allowed. In support of this contention reliance was placed upon the following observations of Mitter, J., in Tilokchand Motichand's case (paragraph 50 page 914) :

'A payment under mistake of law may be questioned only when the mistake is discovered but a person who is under no misapprehension as to his legal rights and complains about the illegality or the ultra vires nature of the order passed against him can immediately after payment formulate his cause of action as one of payment under coercion.'

A little later the learned Judge observed (paragraphs 52 and 53, page 915) :

'While not holding that the Limitation Act applies in terms I am of the view that ordinarily the period fixed by the Limitation Act should be taken to be a true measure of the time within which a person can be allowed to raise a plea successfully under Article 32 of the Constitution.'

'A claim for money paid under coercion would be covered by Article 113 of the Limitation Act, 1963.'

The question, therefore, which falls to be considered is whether this is the case of payment under coercion or under a mistake of law or a payment made without any misapprehension of legal rights. In order to make out a case that there were payments made under coercion, certain submissions made in the Petition were relied upon. To refer to these submissions in a manner in which it was sought to be done at Bar is to tear these particular averments out of the context and to seek to make out as if it was the only basis upon which the Petition was founded, If one reads the petition in full and in a fair manner it is obvious that the main ground upon which the Petitioners have proceeded is that these were payments made under a mistake of law and that the further submissions that they were made under coercion and compulsion by reason of the coercive machinery of the Central Excises and Salt Act. 1944, are really alternative submissions. This is amply clear when we turn to prayers (c) and (d) of the Petition, in which also these payments have been described as payments made under a mistake of law and not as payments made under coercion. There could be no coercion in making payment according to law. Every citizens who pays taxes which are lawfully due from him of his own accord very probably pays them because he knows that it he fails to pay them, they would be recovered from him by means of the coercive machinery provided under the relevant law, but that does not mean that these are payments made under coercion or compulsion. The Petitioners had sought clarification in 1958 as to the basis upon which the assessable value was to be determined. They were informed by the Assistant Collector of Central Excise by his said letter dated December 17, 1958 that the price charged by them to their sole distributors could not be taken into consideration and what was relevant was the distributors' catalogue of the cost selling price to independent wholesale dealers. The Petitioners accepted the advice received by them from the Department as correct and made payments accordingly. Meanwhile on February 5, 1960 there came the Judgment of the Calcutta High Court in National Tobacco Co's. case. On October 12, 1962 came the judgment of the Mysore High Court in Messrs Amco Batteries' case, and on March 10, 1965 the decision of this High Court in Messrs Queen's Chemists Mfg. Department v. G. Koruthu. The Petitioners have claimed reliefs in this petition with respect to the period March 1, 1965 to August 31, 1972. The correctness of the stand taken by the Departmental had already been adjudged by two High Courts and affirmed by this High Court. Other Higher Courts too subsequently took the same view. The law, therefore, as it then stood, was that what was required to be taken for determining the assessable value of goods manufactured by the petitioners was the price charged by their distributors to wholesalers and not the prices charged by the petitioners to their distributors. The payments made according to the law which at the relevant time was the law declare by the several High Courts without any dissent can hardly be said to be payments made under coercion or compulsion, and this contention on the part of the Respondents cannot be accepted.

18. The other contention of the Respondents that these were voluntary payments made by the Petitioners, knowing full well the correct legal position, is equally unfounded. They were certainly voluntary payments because they were made in accordance with the law which then prevailed, but they cannot be said to be voluntary payments by a person 'who is under no misapprehension as to his legal rights', to use the words of Mitter, J., in Tilokchand Motichand's case, the passage in which these words occur being the one relied upon strongly by the Respondents in support of this contention. That the view which the Department and the different High Courts had taken was not the correct view came only to be known when the Voltas's case and the Atic's case were decided. Till then both the petitioners and the Department were under a misapprehension as to what the correct legal position was. In The State of Kerala v. Aluminium Industries Ltd., (1965) 16 S.T.C. 689, it was held that there is no question of estoppel when the mistake of law is common to both the parties and that in such a case where tax is levied by mistake of law, it is ordinarily the duty of the State to refund the tax. These payments, therefore, can only be characterized as payments made under a mistake of law.

19. It was next contended that the petitioners discovered, or should with reasonable diligence have discovered, their mistake when the Bombay High Court decided the Voltas's case, namely, on August 14, 1970. In support of this contention paragraph 11 of the Petition is relied upon by the Respondents as also the said application made by the petitioners on August 26, 1972. I fail to see what relevance the action of the petitioners in August 1972 can have with a mistake which they are supposed to have known of discovered in August 1970. The circumstances in which the said application dated August 26, 1972 came to be made have been set out in the said paragraph 11 and have been referred to by me earlier while relating the facts of this case. These facts and circumstances do not have any relation to the decision of the Bombay High Court in the Voltas's case. Obviously this application was made because the petitioners came to learn that a revised price-list filed by one of their competitors, Godfrey Phillips Limited, showing as the assessable value the prices received by the Company from its sole distributors was going to be approved by the concerned Assistant Collector, and it is obvious that the petitioners also wanted to take their chance, and if their competitors price-lists on this basis were to be accepted, also to get their price-lists on the same basis accepted by the excise authorities. In the supplemental affidavit in reply affirmed on November 18, 1981 by George Barla, Assistant Collector of Central Excise, an inter-departmental letter relating to the case of Godfrey Phillips Limited as also a letter addressed by the Assistant Collector to the said Company have been referred and copies of the said letters annexed. I do not wish to waste public time by dealing with these letters, because it is obvious that inter-departmental correspondence, even if it related to the petitioners' case, could not come to the knowledge of the petitioners, and much less so when it related to someone else's case. Similarly, a letter written by the Department to one of the competitors of the petitioners cannot possibly come to their knowledge.

20. It was then next contended that in any event the mistake of law came to the petitioners' attention in May, 1971. In support of this contention a trade notice dated May 26, 1971 issued by the Collector of Central Excise, Bombay, was relied upon. All that this trade notice does is to inform the trade that copies of 12 judgments mentioned in the list annexed to the said notice were available for sale to the Trade Association Chambers and others concerned on payment of charges shown against each such judgment. Among these judgments is the said decision of this High Court in the Voltas's case. I fail to see what relevance this trade notice has to the present case. This notice does not set out what has been decided in any of these cases. It merely offers for sale copies of 12 judgments. In view of the judgment of the Supreme Court in M/s. D. Cawasji and Co's., case, where it was observed that it is seldom that a person can, event with a reasonable diligence, discover a mistake of law before a judgment is delivered adjudging the validity of that law, and the decisions of this High Court in Associated Bearing Company's case and in the case of Maharashtra Vegetable Product Pvt. Ltd. and another v. Union of India and others, in which it was held that in such a cases the period of limitation of three years would start from the date on which the judgment declaring the law as void was rendered, It must be held that the starting point of limitation would be the date on which the particular judgment was pronounced. If the relevant judgment in this case is the decision of this High Court in the Voltas's case, namely, August 14, 1970, the petition is filed much after the expiry of the period of limitation for filing a suit. If the relevant decisions is the Supreme Court's decision in Voltas's case, the date upon which that decision was given was December 20, 1972 and the Petition is filed well within three years of the date of that judgment. If it is the decision of the Supreme Court in the Atic Industries' case, the date of that decision being February 14, 1975, the Petition is filed within six months of the giving of that judgment. I have, therefore, to see which of these decisions would lead to the Petitioners discovering their mistake. It was the contention of Mr. Dalal that the relevant decision would be the decision of this High Court in Voltas's case. I am unable to agree with this submission. The controversy between the parties in the Voltas's case was wholly different from what it is before me. In that case the manufacturers were charging two prices, one in respect of their direct sales to the consumers and the other to their distributors. The question was which of these two prices should be taken for the purpose of determining the assessable value of the goods manufactured by Voltas. Further, there was no question of any deduction in respect of post-manufacturing expenses to be made from either of the prices charged by Voltas because there was no contention whatever raided in that matter with respect to any post-manufacturing expenses. Any observations with respect to post-manufacturing expenses in the judgment of the Bombay High Court would be, therefore, obiter and not binding upon any court or authority, and even what was said about the post-manufacturing expenses in that judgment is not the same as what was finally held by the Supreme Court. The question, therefore, of the Petitioners discovering that the basis upon which they had been filing their price-list before the authorities and making payment of excise duty and the basis upon which prior to the introduction of the self-removal procedure excise duty was collected from the Petitioners was not the correct basis but was unlawful, when the decision in the Voltas's case given by the Bombay High Court does not, therefore, arise. It is true that the Supreme Court in the Voltas's case does state that in determining the assessable value all the was to be taken was the manufacturing cost plus the manufacturer's profits and that post-manufacturing cost and the profits arising from post-manufacturing operations, namely, the selling profits, were to be excluded, Even if it may be taken that the observations of the Supreme Court with respect to post-manufacturing cost in the Voltas's case were obiter, this being an obiter of the Supreme Court would be binding on all High Courts, but taking the date of the discovery of mistake, at least with respect to the post-manufacturing expenses, cannot help the Respondents, because the Petition is filed within the period of limitation, taking the starting point of limitation as the date of the Supreme Courts judgment. In fairness to the Petitioners, it must be pointed out that the position really became settled when the Supreme Court delivered its judgment in the Atic Industries' case. It was that case which was almost on all fours with the Petitioners', and the Petitioners have expressly averred in the Petition that it was by this case that the legal position was at last comprehensively clarified, but whether one takes the relevant date to be the date of the judgment of the Supreme Court in Voltas's case or in the Atic Industries case, it would make no difference because in either event it would not be correct to argue that if instead of filing this Petition the Petitioners had filed a suit, their suit would have been time-barred because in either event the suit would have been well within time.

21. It was next submitted that when the Petitioners wanted the clarification in 1958 as to what would be the correct basis for determining the assessable value, and when the Assistant Collector of Central Excise wrote to them by his said letter dated December 17, 1958 that the correct basis would be the distributors' catalogued costs selling price to an independent wholesale dealer and not the price charged by the Petitioners to their distributors, the Petitioners should have immediately come to this High Court and filed a writ petition under Article 226 of the Constitution. It is distressing that in order to evade and delay payment of money unlawfully collected and equally unlawfully retained the Government should stoop to advancing such puerile arguments. The question of filing a writ petition at that time did not arise. It could have only arisen had the Petitioners' contention been contrary to the stand taken by the Department. In any event, the period from 1958 to February 28, 1965 is irrelevant because the reliefs which the Petitioners are claiming are for the period March 1, 1965 to August 31, 1972. Further, as pointed out earlier, three different High Courts, including this High Court, had delivered judgments which were in conformity with the basis adopted by the Department, and the Petitioners would have no warrant for thinking that those cases were wrongly decided.

22. The last futile argument advanced before me was one based upon the Supreme Court's judgment in Dhanyalakshmi Rice Mills v. The Commissioner of Civil Supplies and another, : [1976]3SCR387 . In that case Ray, C.J., who spoke for the Court, observed [paragraph 29, page 2249 (2)] :

'The petitions solely for the writ of mandamus directing the State of refund the moneys in the present case have been rightly refused by the High Court on the grounds of delay, insufficiency of particulars and pleadings and voluntary payments. The additional reasons in our opinion are that various questions of fact arise as to whether there was really mistake or it was a case of voluntary payment pursuant to contractual rights and obligations.'

Relying upon this decision it was contended that this Petition was filed after gross delay, that this Petition suffers from insufficiency of particulars and pleadings and that the payments were voluntarily made. Mercifully, it was not argued that the voluntary payment was pursuant to contractual rights and obligations. Merely because in another case the Supreme Court held that the petition was not filed within time and suffered from insufficiency of particulars and pleadings and that the payments made in that case were voluntary, it does not mean that in all other petitions the same position prevails or that the same position prevails in this Petition. I have already pointed out that these voluntary payments were payments made under a mistake of law and a misapprehension both on the part of the Petitioners and the Department as to what the correct position was. In the case before the Supreme Court the payments which were made were a part of the payments to be made under the term of a permit, under which permit the Petitioners had already taken all the benefits they could. I have also dealt with the question of delay and have held that the Petition has not been filed after the expiry of the period of limitation for filing a suit. The insufficiency of particulars and pleadings, from which according to the Respondents the present Petition suffers, are the averments contained in paragraph 11 of the Petition. On a reading of the said paragraph 11 I am unable to accept this submission. In any event, paragraph 11 does not state that it was in August 1972 that the Petitioners discovered their mistake of law. What is stated therein is that on or about August 25, 1972 the Petitioners came to learn that the excise authorities were about to accept the price-list filed by one of the Petitioners' competitors on the basis of the price charged by that competitor to its distributors. From this it does not follow that the Petitioners discovered their mistake of law. It was also argued that there were various questions of fact in the Petition which were in dispute and that the writ petition was not a proper remedy. I do not find that there is any dispute as to any relevant fact in this case before me.

23. Lastly, after all the arguments were concluded, Mr. Dalal sought to tender a yet further supplemental affidavit in reply made by the said George Baria and affirmed that very day, namely, November 20, 1981, in which it was sought to be contended that the Petitioners having filed a writ petition earlier in respect of the period September 1, 1972 to May 15, 1974, they cannot be allowed to maintain the present Petition for the period March 1, 1965.


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