1. The only point that I am called upon to decide is whether the petitioner is entitled to a refund of excise duty paid to the Excise authorities for the period 1st October, 1973 to 11th May, 1974, aggregating to Rs. 7,09,419.69.
2. The petitioner is a public limited company carrying on business of manufacturing, inter alia, a certain moulding powder technically known as phenol formaldehyde synthetic resin. Prior to 10th May, 1975, the petitioner submitted to the excise department its price lists for the excisable goods manufactured by it under the Self-Removal Procedure. These price lists included post-manufacturing costs and/or profits attributable to post-manufacturing operations and the petitioner paid excise duty on the value of the products thus computed. In December 1972, the Supreme Court delivered its judgment in A. K. Roy v. Voltas Ltd., which was reported in : 1973ECR60(SC) , holding that on a true construction of the Central Excises and Salt Act, 1944, the assessable value of manufactured products was to be ascertained on the basis of manufacturing costs, excluding from the sale price all post-manufacturing expenses and profits attributable to post-manufacturing operations. This view was confirmed by the Supreme Court in its later decision delivered in February 1975 in Atic Industries Ltd. v. H. H. Dave, Asstt. Collector, Central Excise = : 1978(2)ELT444(SC) . In para 8 of the petition, it is averred that after the declaration of law by the Supreme Court the petitioner was advised that it was liable to pay excise duty in respect of its products after excluding the post-manufacturing costs and profits arising from post-manufacturing operations. On 10th May, 1975 the petitioner addressed a letter to the Superintendent, Central Excise and Customs, and referring to the decisions of the Supreme Court in Voltas case and the Atic case, pointed out that excise duty was being collected from the petitioner on post-manufacturing expenses also, which was included in the assessable value of the petitioner's products and that by reason of the aforesaid decisions of the Supreme Court post-manufacturing expenses could not be included in the assessable value. With this letter, the petitioner submitted its Revised Classification List and Revised Price Lists from 12th May, 1975, after deducting the post-manufacturing expenses. By its letter dated 12th May, 1975 addressed to the Assistant Collector, Central Excise, the petitioner enclosed its application for refund of duty paid on such post-manufacturing expenses in respect of the clearances made for the period 12th May, 1974 to 11th May, 1975, aggregating to Rs. 16,41,120.46. On 20th June, 1975, the Assistant Collector passed his order declining to approve the said price lists. The petitioner's appeal was rejected by the Appellate Collector on 13th March, 1976 on the ground that the 'sale pattern remains the same'. On 1st October, 1976, the petitioner filed the present petition for setting aside the order dated 13th March, 1976 and for refund of the amount of Rs. 16,41,120.46. On 15th March, 1976, a letter was addressed to the petitioner by the Superintendent stating that the petitioner's claim for refund of Rs. 16,41,120.46 was premature, the matter being sub-judice.
3. During the pendency of this petition, the petitioner took out a Chamber Summons on 29th January, 1981 for amendment of the petition claiming a refund of Rs. 7,09,419.69 being the excess duty paid for the period 1st October, 1973 till 11th May, 1974. By an order passed on 10th March, 1981, the petitioner's Chamber Summons was allowed 'subject to the right of respondents to raise limitation'.
4. On 24th April, 1981, a further amendment of the petition was allowed pertaining to a certain Notification dated 1st September, 1962 issued by the Central Government despite which it was also contended by the petitioner that the department was liable to refund to the petitioner the excess duty paid by the petitioner and illegally recovered by the Department.
5. Regarding the petitioner's claim for refund of Rs. 16,41,120.46, for the later period 12th May, 1974 to 11th May, 1975, Mr. Dalal, the learned Counsel appearing on behalf of the respondents, fairly stated that in view of several decisions of this Court, he did not dispute in this Court that under section 4 of the Act excise duty is chargeable only on manufacturing costs and manufacturing profits (a similar statement had also been made by Mr. H. H. Advani, the learned Counsel then appearing for the respondents when the petition was before my learned Brother Bharucha on 24th April, 1981) and that the petition having been filed on 1st October, 1976, namely, within 3 years from the period 12th May, 1974 to 11th May, 1975, he could not, in this Court resist the refund to the petitioner of the excess duty amounting to Rs. 16,41,120.46. It was solely on the question of refund of the excess duty amounting to Rs. 7,09,419.69 for the earlier period 1st October, 1973 to 11th May, 1974, that Mr. Dalal confined his arguments, resisting that demand on the ground of limitation.
6. On behalf of the petitioner, it was urged by its learned Counsel Mr. A. H. Desai, that the petitioner was entitled to this refund of Rs. 7,09,419.69 as it was paid under mistake of law and was recovered by the Department from the petitioner without authority of law. In support of this proposition, reliance was placed by Mr. Desai on the decision of the Division Bench of this Court in Associated Bearing Co. v. Union of India, 1980 E.L.T. 415, and the unreported judgment of my learned Brother Pendse in Miscellaneous Petition No. 413 of 1975, Tipco industrial Plastic Corporation v. Union of India, delivered on 14th/16th April, 1981, with both of which I am in respectful agreement, and on an earlier decision in Ceat Tyres v. L. C. Nangia, 1980 E.L.T. 139, with which I am in immodest agreement. Relying further on the Ceat Tyres case, Mr. Desai urged that mistake is a matter of fact and that no rational person would go out of his way and pay a higher duty than what he would be liable to do. The propositions enunciated by Mr. Desai were not seriously challenged by Mr. Dalal who confined his resistance to the refund by contending that the amendment having been sought by the petitioner in January 1981, i.e. more than 3 years after the discovery of the mistake, the petitioner's claim for refund in respect of the earlier period was time barred.
7. The question that arises is at what point of time was the mistake discovered by the petitioner. In the amended para 24 of the petition, the petitioner says that after the filing of the present petition, a judgment was delivered by this Court in Bombay Tyres International v. Union of India, reported in 1979 E.L.T. 625 which in effect held that any duty collected in variance with the principle that even under the new section 4 excise is leviable only on the value representing manufacturing costs plus manufacturing profits excluding post-manufacturing costs and profits arising from post-manufacturing operations, viz. selling profit, is duty collected without authority of law and hence refundable. Thus according to the petitioner, it was by reason of this judgment (referred to with approval by the Division Bench of this Court in Flexoplast Abrasives (India) Ltd. v. Union of India, 1980 E.L.T. 513, that the petitioner realised that it was entitled to recover the amount of Rs. 7,09,419.69 paid by the petitioner to the Department under mistake of law and collected by the Department without the authority of law. On the other hand, what the respondents state in their affidavit-in-reply dated 25th June, 1981 is that 'several years prior to the filing of the petition the petitioner knew or would have known with reasonable diligence about the judgment delivered by the Hon'ble Supreme Court in Voltas Case and Atic Industries Case.' It was, therefore, urged by Mr. Dalal that the claim for refund having been made for the first time by the amendment in March 1981 was more than 3 years after knowledge of the petitioner's alleged right to recover the same.
8. I do not think Mr. Dalal is quite correct. To start with, Voltas and Atic cases decided by the Supreme Court were concerned with the question as to which price was to be accepted as the wholesale cash price under section 4 of the Act. They did not deal with the right of a party to claim a refund of duty collected by the Department without the authority of law. What also is not entirely without its own significance is that if the petitioner had realised its mistake after the decision in Voltas case and Atic case as urged by the respondents, it is inconceivable that the petitioner, a business concern, would act in such an irrational manner as not to claim this large amount running into several lacs of rupees in the petition as initially filed, instead or restricting its claim only to the later period of 12th May, 1974 to 11th May, 1975. No prudent and reasonable person, much less a business concern, would wantonly make an overpayment running into lacs of rupees and thereafter deliberately refrain from taking the earliest possible steps to recover money collected by the Department without authority of law. It is therefore not as inconceivable as Mr. Dalal seeks to make out that it was after the decision in Bombay Tyres International case, 1979 E.L.T. 625, that the petitioner came to be aware that it could recover from the Department the amount of Rs. 7,09,419.69 collected by the Department without authority of law. Within 3 years of such discovery the petitioner moved for the requisite amendment claiming refund in respect of the earlier period. The observations in D. Cawasji & Co. v. State of Mysore, : 1978(2)ELT154(SC) , relied on by Mr. Dalal can be of no assistance to the respondents. Those observations are as under :-
'Therefore, where a suit will lie to recover moneys paid under a mistake of law, a writ petition for refund of tax within the period of limitation prescribed i.e. within 3 years of the knowledge of the mistake, would also lie. For filing a writ petition to recover the money paid under a mistake of law, this Court has said that the starting point of limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered, as that would normally be the date on which the mistake becomes known to the party. If any writ petition is filed beyond three years after that date, it will 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 circumstances of each case, not to entertain the application.'
To start with, D. Cawasji's case does not lay down that if a petition is filed after 3 years of the discovery of the mistake, relief must necessarily be refused or if a petition is filed within 3 years, relief must necessarily be granted. Furthermore, in D. Cawasji's case the mistake was discovered when the provisions of the Mysore Education Cess Act were struck down and hence the levy thereunder was invalid. Voltas and Atic cases did not strike down any provision but merely interpreted wholesale cash price under section 4. In the present case, the petitioner discovered its mistake in not claiming a refund for the earlier period when it came to be aware of the judgment in Bombay Tyres International case. It was then that the petitioner discovered that the Department was bound to refund this amount also as the same was recovered by the Department without authority of law, and within 3 years of that realisation the petitioner amended the petition and claimed the amount thus collected by the Department without authority of law. Relying on certain observations in State of M. P. v. Bhailal Bhai, A.I.R. 1964 S C 1007, Mr. Dalal urged that there was unreasonable delay on the part of the petitioner in claiming refund in respect of the earlier period. The observations relied on by Mr. Dalal are as under :-
'.........Among the several matters which the High Courts rightly take into consideration in the exercise of that discretion is the delay made by the aggrieved party in seeking this special remedy and what excuse there is for it. Another is the nature of controversy of facts and law that may have to be decided as regards the availability of consequential relief. Thus, where, as in these cases, a person comes to the Court for relief under Art. 226 on the allegation that he has been assessed to tax under a void legislation and having paid it under a mistake is entitled to get it back, the Court, if it finds that the assessment was void, being made under a void provision of law, and the payment was made by mistake, is still not bound to exercise its discretion directing repayment. Whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances. It is not easy nor is it desirable to lay down any rule for universal application. It may, however, be stated as a general rule that if there has been unreasonable delay the court ought not ordinarily to lend its aid to a party by this extraordinary remedy of mandamus.'
These observations can be of no assistance to the respondents in the facts and circumstances of the present case. The petitioner having amended the petition within 3 years from the decision in the Bombay Tyres International case, cannot be said to have been guilty of unreasonable delay meriting refusal of discretion in its favour. Mr. Dalal also relied on the decision of the Division Bench of this Court in Associated Bearing Co. v. Union of India, 1980 E.L.T. 415, where it was held that once recovery of excise duty by the 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 3 years from the dated of the discovery of the mistake. It is difficult to see how that decision can be of assistance to the respondents.
9. In brief, the excess duty recovered by the Department from the petitioner in respect of the earlier period 1st October, 1973 to 11th May, 1974 was indisputably without authority of law. That being so, the Department was in duty bound to refund it. When the petitioner filed the petition, it was not aware that such duty even for the earlier period could be recovered. That it came to realise after the decision of this Court in Bombay Tyres International case. Within 3 years thereafter the petitioner amended the petition and claimed the requisite refund. There was no gross or undue delay on the part of the petitioner in doing so. It is not open to the respondents to resist the petitioner's claim to refund on that ground. In this connection, it would perhaps not be entirely inappropriate for the Department to be reminded of the words of the Supreme Court in Shiv Shanker Dal Mills v. State of Haryana, : 1SCR1170 , where it was observed as under :-
'.........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 belong.'
10. Mr. Dalal next relied on a Notification dated 1st September, 1962 (which was in force till 1st March, 1974), in resisting the petitioner's claim for refund of duty for a part of the earlier period. The relevant excerpts of that Notification relied on by Mr. Dalal are as under :-
'......The Central Government hereby exempts with effect from the 1st September, 1962, plastics, all sorts, falling under item 15A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) in respect of which the list fixing the price at which they would be sold to the consumer is available, from so much of the duty of excise leviable thereon as is in excess of 20% of the value calculated after allowing a discount of 12.5% on the price specified in the said list.'
Mr. Dalal urged that the Notification would be the valid method of assessing duty and that an assessable value having been fixed under the Notification and the petitioner having elected to accept that assessable value under that Notification, the petitioner was estopped from claiming a refund for a part of the earlier period. Mr. Dalal further urged that if it was held that only valuation under section 4 of the Act must prevail, the petitioner was not entitled to any benefit of the concession under the Notification. Such were the contentions of Mr. Dalal which I took down verbatim. Mr. Dalal also relied on a decision of the Calcutta High Court in Bata Shoe Co. Ltd. v. Collector of Central Excise, Calcutta and Orissa, 1979 E.L.T. 464, where it was held that the value for the purpose of exemption notification is the real value after the duty has been paid and calculated and not the deemed value of section 4.
11. Mr. Dalal's contentions cannot be accepted. It is obvious that where the price includes elements of post-manufacturing activity, it has to be relieved of the same in order to arrive at the value for excise purposes. This off-loading is not a deduction but the value determined according to the basic concepts of excise, viz. that it is a tax on manufacture and not marketing and that excise is to be levied on the factory gate price. Furthermore, the notification cannot prevail over section 4 of the Act which provides for the determination of assessable value, while Rule 8(1) (under which the Notification was issued) only provides for exemption from duty. The determination of the assessable value of goods for excise duty must be according to the concept of value in the statute. Even assuming that the Notification prevails over section 4, it would still be in the nature of a machinery provision which cannot transgress the scope of section 3 which is the charging section under the Act. The Notification, therefore, cannot have the effect of including post-manufacturing costs in the assessable value of the goods, else it would be contrary to the charging section itself. There is no room for reading any supposed intention into a Notification under a taxing statute. It is not open to the respondents to urge that the 12.5% discount in the Notification was intended to include all deductions contrary to the plain reading of the Notification. Furthermore, it is manifest that the Notification only grants an exemption from duty, and does not concern itself with the off-loading of the post-manufacturing costs. Post-manufacturing elements are not a deduction but off-loading of the price if it includes post-manufacturing elements. The decision of the Calcutta High Court can be of no assistance to the respondents, inasmuch as the question of post-manufacturing costs or post-manufacturing expenses was not under consideration.
12. In the result, the petition is allowed in terms of prayer (a). In respect of prayers (c) and (c-1), the respondents shall make the requisite calculations within six months from today and shall within two months thereafter refund to the petitioner such excess duty liable to be refunded. Rule is made absolute accordingly. There will be no order as to the costs of this petition. Bank guarantees given by the petitioner to stand discharged.