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Madras Rubber Factory Ltd., Madras Vs. Union of India and Another - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtDelhi High Court
Decided On
Case NumberOriginal Suit No. 324 of 1978
Judge
Reported in1981(8)ELT879(Del)
Acts Customs Act, 1962 - Sections 80; Central Excise Act - Sections 9(1); Code of Criminal Procedure (CrPC) , 1973 - Sections 260 and 386
AppellantMadras Rubber Factory Ltd., Madras
RespondentUnion of India and Another
Cases ReferredMadras Rubber Factory Ltd. v. Union of India and
Excerpt:
the court adjudged that the value of goods for purpose of excise duty was to take into account only the manufacturing costs and manufacturing profits and was not to be loaded with post manufacturing cost or profit arising from the post manufacturing operation under section 4 (4) (d) (i) of the central excise act, 1944 - - an appeal lies against the order of the assistant collector of customs against an order imposing duty as well as an order refusing to refund duty, and the grievance may be carried to the central board of revenue......it has to be imported. the suit relates to imports made during the period 1963 to 1968. under the indian customs tariff this material was classified by the customs authorities as synthetic resin coming within entry no. 87, whereas according to the plaintiff it comes under item no. 39, namely, rubber raw. it is the case of the plaintiff that in the case of another manufacturer, m/s. dunlop india limited, the supreme court gave a judgment on 6th october, 1975, holding that 'v.p. latex' was not a synthetic resin. according to the plaintiff, the effect of the supreme court's decision is that a refund of the duties wrongfully paid during the years 1963 to 1968 is to be made by the union of india because an excessive duty has been charged. the sum due is claimed to be rs. 15,54,214.80 as.....
Judgment:

D.K. Kapur, J.

1. The plaintiff instituted Suit No. 324 of 1978 on the Original Side of this Court on the contention that one of the raw material imported by it is Pyratex-vinyl Pyridine Latex, which is shortly called 'V.P. Latex' for the purpose of manufacturing rubber tyres and tubes in the company's factory at Madras. This material has been described as an essential ingredient for the manufacture of automotive tyres, manufactured in India, it has to be imported. The suit relates to imports made during the period 1963 to 1968. Under the Indian Customs Tariff this material was classified by the Customs authorities as synthetic resin coming within Entry No. 87, whereas according to the plaintiff it comes under Item No. 39, namely, rubber raw. It is the case of the plaintiff that in the case of another manufacturer, M/s. Dunlop India Limited, the Supreme Court gave a judgment on 6th October, 1975, holding that 'V.P. Latex' was not a synthetic resin. According to the plaintiff, the effect of the Supreme Court's decision is that a refund of the duties wrongfully paid during the years 1963 to 1968 is to be made by the Union of India because an excessive duty has been charged. The sum due is claimed to be Rs. 15,54,214.80 as particularised in Annexure 'A' which has been filed Along with the plaint.

2. While stating the cause of action, the plaintiff urges that the mistake was discovered on 6th October, 1975, when the Supreme Court delivered its judgment. (It may be mentioned that the judgment is reported as A.I.R. 1977 S.C. 597, under the heading; Dunlop India Ltd : Madras Rubber Factory Ltd. v. Union of India and others, the decision being in two connected appeals). It is also urged that the period of limitation started on 6th October, 1975, when the Supreme Court pronounced its judgment. As far as the question of jurisdiction is concerned, it is urged that the mistake of law was discovered in New Delhi and the liability to repay the money has also arisen in New Delhi, and hence, this Court has jurisdiction.

3. A written statement was filed on behalf of the defendants who are the Union of India and the Assistant Collector of Customs, Refund Section, Madras, claiming that the suit was not maintainable; claiming that the Civil Court has no jurisdiction and there is a machinery under the Customs Act for refunds and also raising the plea that this Court had no territorial jurisdiction and the cause of action arose at Madras, and further raising the question of limitation, etc.

4. On the entire pleadings, several issues were framed on 3rd May, 1979 of which, I directed that some should be treated as preliminary. I now reproduce the issues which have been treated as preliminary :-

'1. Whether this court has no territorial jurisdiction to entertain the claim for refund of Customs and Countervailing Duty

2. Whether the suit is not maintainable because of the provisions of the Customs Act, 1962

3. Whether the suit is barred by limitation

4. Whether the period of limitation is to commence from October 6, 1975, which was the date when the Supreme Court pronounced judgment in Civil Appeal Nos. 1146 and 2746 of 1972 ?'

These issues have been raised with a view to determining whether the suit is within time and whether this Court can proceed with the suit. In order to avoid controversy, I decided to deal with the question of territorial jurisdiction first because if this Court has no territorial jurisdiction, it would not be fair to decide the suit on even the question of limitation. I would accordingly deal with Issue No. 1 first.

5. On this point, decision of the Supreme Court in Union of India and another v. Sri Ladulal Jain, A.I.R. 1963 S.C. 1631 has been relied upon on the ground that the principal place of business of the Union of India is Delhi and, thereforee, the suit can be filed at Delhi. No doubt, customs duties are chargeable under law by the Union of India and collected through the Customs authorities at various places in India, mainly ports, etc. In the case before me, it is not the case of plaintiff that the Delhi Courts have jurisdiction because any duty was chargeable at Delhi or, even that the Union of India is located at Delhi, but also that part of the cause of action for the purpose of this suit is Delhi because the judgment was pronounced by the Supreme Court at Delhi and the plaintiff was also a party in that case. In other words, the mistake on which the plaintiff relies was discover at Delhi.

6. I am not at all of the view that the judgment in Ladulal Jain's case is at all applicable to the circumstances of the present case. That case specifically dealt with the Union of India in its capacity when carrying on a business. The Court observed that the expression 'voluntarily resides' or the phrase 'personally works for gain' is inappropriate in the case of Government, still the Government can be said to be carrying on business. In that sense, when maintaining the Railways, the Government was not in different position from a private contractor. In the present case, the point involved is the collection of customs duty, so the Government was not acting as a business man and, hence, the only case in which this Court would have jurisdiction is if it could be said that the cause of action arose in Delhi. On this aspect, it is urged that the part of the cause of action in the present suit is the discovery of the mistake and the same took place at Delhi.

7. Reliance has been placed before me on the judgment of N. N. Goswamy J. delivered in Suit No. 1081 of 1978 on the question of territorial jurisdiction. In that case the plaintiff was Dalmia Dairy Industries Limited carrying on business at Rajasthan. The product in question was skimmed milk powder and the claim was that excise duty had been levied on the skimmed milk powder and paid under a mistake of law. It was claimed that the amount had been credited to the Consolidated Fund of the Union of India at Delhi. It was further claimed that the excise duty was not payable for reasons stated in the plaint. That is how the question of territorial jurisdiction arose because the objection was that the plaintiff was in Rajasthan and the Departments concerned were also at Rajasthan and the duty was also paid in Rajasthan. One of the points raised in support of the Court having jurisdiction was that the notice under Section 80 was issued to the authorities at Delhi. It was held by Goswamy J. that the notice was not part of the cause of action and this Court did not have jurisdiction because of the notice being served at Delhi. It was further observed in the judgment on the basis of Lord Esher's statement that the cause of action meant those facts which were necessary for the plaintiff to prove in order to support his right to the judgment of the Court. It was accordingly held on the facts of that case that no part of the cause of action arose in Delhi and hence the plaint was ordered to be returned.

8. I would have come to the same view on the first issue in this case except that the judgment relied upon was delivered at Delhi. I would go to this extent that even the delivery of the judgment at Delhi would not be a part of the cause of action except for the fact that the plaintiff was itself a party to that appeal and, hence, when the judgment was delivered in the Supreme Court, it necessarily followed that the mistake became known to the plaintiff on that very date because the plaintiff was represented and was a party to the decision. I would thus come to the conclusion that this Court does have territorial jurisdiction and decide Issue No. 1 in favor of the plaintiff. In fact the suit is based on the discovery of the mistake.

9. Issue No. 2. Now turning to the question whether the Customs Act bars the suit which is the subject matter of the second issue, I may state that reliance has been placed on the judgment of the Supreme Court in Union of India v. A. V. Narasimhalu, : 1983(13)ELT1534(SC) , in which it was held that an erroneous decision of the Customs authorities cannot be said to be without jurisdiction merely because it may be shown to be wrong. It was observed :

'Normally an action of an administrative authority interfering with the right to property may be challenged by resort to a civil court. Yet in the case of a right which depends upon a statute, the jurisdiction of the civil court to grant relief may by express provision or by clear implication of the statute be excluded. Where a statute re-enacts a right or a liability existing at common law, and the statute provides a special form of remedy, exclusion of the jurisdiction of the civil court to grant relief in the absence of an express provision, will not be readily inferred. Where, however a statute creates a new right or liability and it provides a complete machinery for obtaining redress against erroneous exercise of authority, jurisdiction of the civil court to grant relief is barred. Liability to pay a duty of customs is not common law liability; it arises by virtue of the Sea Customs Act : in respect of any grievance arising in consequence of enforcement of that liability machinery has been provided by the Act. Having regard to the complicated nature of the questions which arise in the determination of liability to pay duty of customs the Legislature has invested the power of determining liability and the manner of enforcement thereof upon a specially authorised hierarchy of tribunals. An appeal lies against the order of the Assistant Collector of Customs against an order imposing duty as well as an order refusing to refund duty, and the grievance may be carried to the Central Board of Revenue. In our judgment, the jurisdiction of the civil court is by clear implication of the statute excluded.'

There is then a further observation that in certain cases a civil suit will lie, but that is when the provisions of the statute have not been acted upon or the authority has acted in violation of the fundamental principles or judicial procedure etc. That no doubt is not the case in the present case. I would, thereforee, come to the conclusion that the present suit is not maintainable unless it is shown that there has been a breach of the procedure prescribed by the Customs Act, 1962. It is not sufficient to say that the order imposing excessive customs duty was wrong. I would accordingly decide the second issue in favor of the defendants.

10. Issue No. 3. The next question raised in issue No. 3. is whether the suit is barred by limitation. I am of the view that on this issue, the case of M/s. D. Cawasji and Co. etc. etc. v. State of Mysore and another, : 1978(2)ELT154(SC) , can usefully be referred to. In that case, the view of the Bench was expressed by Mathew J. as follows :

'Section 17(1)(c) of the Limitation Act, 1963, provides that in the case of a suit for relief on the ground of mistake, the period of limitation does not begin to run until the plaintiff had discovered the mistake or could, with reasonable diligence, have discovered it. In a case where payment is made under a mistake of law as contrasted with a mistake of fact, generally the mistake becomes known to the party only when a court makes a declaration as to the invalidity of the law. 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.'

It was then stated further in the same judgment as follows :-

'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 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.

We are aware that the result of this view would be to enable a person to recover the amount paid as tax even after several years of the date of payment, if some other party would successfully challenge the validity of the law under which the payment was made and if only a suit or writ petition is filed or refund by the person within three years from the date of declaration of the invalidity of the law. That might both be inexpedient and unjust so far as the State is concerned.'

From this, it would be gathered that if a mistake of law is discovered, then a suit would lie within three years from the date of the knowledge of mistake. But I am of the view that the type of mistake has taken place in the present case is quite different from the mistake that was being referred to in the judgment of the Supreme Court. What had happened in that case was that certain payments had been made towards what was called Education Cess. This cess was challenged in the High Court of Mysore where the Mysore Elementary Education Act under which the Cess was paid had been struck down as being unconstitutional. The said view was affirmed in State of Mysore v. D. Cawasji and Co., : [1971]2SCR799 . In the meantime, the Mysore Education Cess (Validation and Levy) Act, 1969, had been passed, but that Act was also struck down by the Mysore High Court. In any case, the point before the Supreme Court was that the Cess in question was paid under a mistake of law because the High Court had passed judgment declaring the Act under which the Cess was levied unconstitutional and hence, the levy had been collected without any force of law.

11. In the present case, no doubt, the fact that the rate of tax has been ascertained by the Supreme Court, in the eventual decision reported as Dunlop India Ltd : Madras Rubber Factory Ltd. v. Union of India and others, A.I.R. 1977 S.C. 597, it is not the levy which has been struck down as unconstitutional, but the rate at which it has to be computed has been determined. It does not appear to be that kind of mistake of law which was in the contemplation of the Supreme Court. Nevertheless, assuming that it is a mistake of law which could give a cause of action for a suit, I must hold that the mistake was discovered when the Supreme Court gave its decision, and thereforee, the suit is not barred by time even though the tax was paid long before. I would, thereforee, hold on Issue No. 3 that the suit is not barred by limitation, and I would hold on Issue No. 4, that the period of limitation started when the Supreme Court pronounced its judgment. The result would be that I would hold under Issue No. 1 that this Court has territorial jurisdiction. I would hold that the suit is not barred by limitation under Issue No. 3, and I would hold under Issue No. 4 that the period of limitation started on 6th October, 1975. So, the suit is within time.

12. However, I would hold Issue No. 2 against the plaintiff. I would hold that the suit is not maintainable because the levy of tax made by the Customs authorities was not attacked any further, and thereforee, whether it was wrong or right, the payment of Customs duty became final and that is not to be reviewed merely because it is contrary to a subsequent judgment of the Supreme Court.

13. In view of the fact that I am holding the suit to be not maintainable and I dismiss the suit on that basis, I do not propose to deal any further with the issues on merits. As a consequence of this discussion, I dismiss the suit with costs.


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