Dismissed

M/S. Voltas Ltd. v. the Union of India and Others

Bombay HC17 Oct 2012WP/992/1989

Case brief

AI extract

What is this about?

The Bombay High Court rejected a writ petition challenging a show cause notice issued by the Central Excise Department. The Court held that res judicata did not apply as the notice alleged a change in the petitioner's sales pattern. The refund claim was also rejected for failing to establish that the duty burden was not passed on to others.

What did the court decide?

The petition was rejected; the show cause notice remained valid, and the petitioner was directed to file a reply within three months.

M/S. Voltas Ltd. Vs the Union of India and Others — Cheque Dishonour | Bombay HC (2012)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.992 OF 1989

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1.	Voltas Limited, a Company incorporated under the provisions of the Indian Companies Act, 1913, and having its registered office at 19, J.N. Heredia Marg, Ballard Estate, Bombay – 400 038.	) ) ) ) ) )
2.	Shri S.B. Joshi of Bombay, Indian Inhabitant, residing at Lalbaug, Datta Mandir, Dr. Moose Road, Thane – 400 602.	) ) ) )..	Petitioners
	Versus
1.	Union of India,	)
2.	The Superintendent of Central Excise Thane Division II, Range VI, having his office at New Central Excise Building, 1^stFloor,	,) ) ) )
	Wagale Industrial Estate,	)
	Thane – 400 604. –	)..	Respondents

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Shri Darius B. Shroff, Senior Advocate along with Shri H.C. Daruwalla, Shri N.N. Vakil, Shri Sunil Chavan i/by M/s. Mulla & Mulla and Cragie Blunt and Caroe for the Petitioners.

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Srhi Vijay H. Kantharia and Shri Neelash Kalanti for the Respondents.

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CORAM : A.S. OKA & SMT. SADHANA S. JADHAV, JJ

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ash 2 wp-992.89 DATE ON WHICH SUBMISSIONS WERE HEARD : 21ST AUGUST, 2012 DATE ON WHICH JUDGMENT IS PRONOUNCED: 17TH OCTOBER, 2012

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JUDGMENT ( PER A.S. OKA, J )

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. In this Petition under Article 226 of the Constitution of India, the challenge is to the show cause notice dated 4^th November, 1988 ( ExhibitN to the Petition ) issued by the second Respondent. The challenge is basically on the ground that the second Respondent will not have jurisdiction to issue the same as the issues raised in the show cause notice have been finally concluded. With a view to appreciate the submissions made by the learned counsel appearing for the parties, a reference will have to be made to the facts of the case in brief.

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The first Petitioner Company from the year 1975 was manufacturing forklift trucks which were individually sold directly to the buyers in retail. The case of the first Petitioner Company is that the sale was a negotiated contract sale and the sale was at separate prices. According to the Petitioner, the valuation of the forklift trucks ( for short “forklift” ) was required to be done in accordance Rule 6(a) of the Central Excise Valuation Rules, 1975

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( for short “the Valuation Rules of 1975”). It is contended that the valuation would be based on the retail price reduced by such amount as was necessary and reasonable to arrive at a price at which the assessee would have sold such forklifts in the course of wholesale trade to nonrelated person. On 15^th September, 1975, the first Petitioner Company filed a price list in the prescribed format for sales made in retail price. The first Petitioner claimed a rebate of 9.66% from the retail price to arrive at the wholesale price. On 22^nd June, 1976, the Assistant Collector passed an order approving the price list, but while doing so, he allowed the rebate of only 7.5%. The Appellate Authority proceeded to set aside the order and passed an order of remand. Thereafter, on 15^th October, 1976, a show cause notice was issued directing the first Petitioner to show cause as to why rebate should not be restricted only to 7.5%. By an order dated 13^th September, 1978, the Assistant Collector held that the first Petitioner was not entitled to any abatement whatsoever. He accepted the different prices which are charged from the buyers of the same class provided, the first Petitioner files lists in ProformaII.

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According to the case of the Petitioners, by letter dated

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15^th December, 1978, they informed to the Assistant Collector that they had preferred an Appeal against the order dated 13^th September, 1978 and that they had been informed by the Excise Department that in view of the order dated 13^th September, 1978, the Petitioners were required to file a revised price list in the proper format. The Petitioners also informed that since the clearance would be adversely affected, they will be doing so under protest and without prejudice to their contention that the case was governed by Rule 6(1)(a) of the Valuation Rules of 1975. The Petitioners also informed the Assistant Collector that they would be paying excise duty under protest by reserving the right to file the same price list again under Rule 6(1)(a) of the Valuation Rules of 1975. By an order dated 11^th June, 1980, the Appellate Collector proceeded to set aside the order dated 13^th September, 1978 passed by the Assistant Collector and directed the Assistant Collector to determine the valuation in accordance with the law under Section 4(1)(b) of the Central Excise and Salt Act, 1944 ( for short “the said Act of 1944”) read with the Valuation Rules of 1975 and to determine the extent to which the first Petitioner would be entitled for an abatement as claimed. A notice of the review was issued by the Central Government which was replied to

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by the Petitioners. The review was placed before the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi ( for short “CEGAT”).

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By the judgment and order dated 28^th November, 1986, the CEGAT dismissed the review. The CEGAT observed that on verification of the various invoices produced by the Petitioner, it appeared that the forklifts were sold to different persons or institutions individually who were the direct users. Therefore, the CEGAT was satisfied that the sale of forklifts was by way of retail sales only. Therefore, the CEGAT upheld the order of the Collector in the Appeal.

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On 8^th January, 1987 and 18^th March, 1987, the first Petitioners wrote to the Assistant Collector to expeditiously decide the pending price lists in the light of the order of the CEGAT and considering the fact that he himself had granted abatement of 7.5%. The request was made to approve all the price lists by treating them as retail sales and granting them an abatement of 7.5%. On 11^th may, 1987, the first Petitioner again wrote to the Assistant collector by pointing out that the forklifts have been sold

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only in retail and, therefore, they are entitled to abatement of such retail prices. It was also pointed out that the price lists dated 12^th December, 1986 to 16^th April, 1987 and the price list dated 26^th December, 1986 had been filed in the Proforma II though the CEGAT held that the applicable proforma was the Proforma V. Therefore, the first Petitioner again submitted the same price lists in the correct Proforma V and claimed abatement of 7.5%. On 7^th August, 1987, an order was passed by the Assistant Collector holding that the assessable value of forklifts was governed by Rule 6(a) of the Valuation Rules of 1975 and the first Petitioner was entitled to rebate of 7.5% from the retail price to arrive at the wholesale price. Under the said order, the Assistant Collector approved the price list dated 15^th September, 1975 and held that the subsequent price lists filed on that count were also approved accordingly.

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On 28^th September, 1987 and on 30^th October, 1987, the Petitioners filed refund applications for the period from 22^nd October, 1975 to 28^th November, 1986 and for the period from 4^th May, 1987 to 30^th September, 1987. It is alleged that in spite of making applications, no refund has been granted.

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From 24^th April, 1987 to 28^th February, 1988, according to the first Petitioner, 49 price lists were filed in Proforma V claiming on abatement of 7.5%. Out of 49 price lists, except four, rest of the price lists were approved. From 29^th February 1988, the price lists were not approved. On 4^th November, 1988, the Superintendent of Central Excise issued a show cause notice calling upon the first Petitioner to show cause as to why the abatement of 7.5% claimed in the price list No.199 dated 27^th October, 1980 to the price list No.220 dated 24^th February, 1988 in Part V against the contract with their customers should not be disallowed. The first Petitioner was called upon to show cause as to why the price list No.221 dated 29^th February, 1988 to Price List No.257 dated 17^th October, 1988 should not be approved in Proforma II and the abatement of 7.5% be disallowed. The first Petitioner was also called upon to show cause as to why the central excise duty amounting to Rs.7,94,648.42 should not be demanded in respect of 153 forklifts falling under chapter Subheading 8427.00 and valued at Rs.5104,53,868/ wherein the price lists are filed against the individual contracts cleared during the period from 6^th May, 1988 to 27^th October, 1988. The main challenge in

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this Petition under Article 226 of the Constitution of India is to the said show cause notice. The second prayer is for refund of the amount of Rs.88,66,292.70 being the refund due for the period 22^nd October, 1975 to 30^th September, 1987 together with interest thereon at the rate of 18% per annum from the date of filing of the refund applications. In the alternative, it is prayed that a direction be issued forthwith to deal with and dispose of the said applications. The rule was issued on the Writ Petition and injunction was granted by way of interim relief restraining the Respondents from taking any action in pursuance of the show cause notice.

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The learned Senior Counsel appearing for the

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Petitioners has invited our attention to Section 4 of the said Act of 1944 and the Valuation Rules of 1975 and in particular, Rule 6 thereof. His basic submission is that the issue whether the forklifts are sold by the Petitioners in retail or wholesale has been finally decided in their favour by the CEGAT on the basis of which the price lists in respect of the period from 1975 to 1987 have been finalized by the officers. His submission is that the issue has, therefore, become final and conclusive between the Petitioners and

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the Department. Inviting our attention to the impugned show cause notice, he submitted that by the show cause notice, an issue is sought to be agitated which is already decided conclusively. He relied upon various decisions in support of this proposition including the decision in the case of Union of India v East & West Shipping Agency [2010(253) ELT 12 (Bom)] and several other decisions. He relied upon the said decisions in support of the said contention based on the doctrine of res judicata. He pointed out that the Petitioners have been consistently selling the forklifts directly to the customers on retail basis. He submitted that in case of all the forklifts manufactured, the pattern of sale is the same. He submitted that right from the years 19751976 to 1988 1989, the pattern of the sale of the forklifts of the first Petitioner has remained unchanged. He pointed out that by the order dated 13^th September, 1978, the Assistant Collector held that the wholesale price was available in respect of the forklifts sold by the Petitioners and, therefore, they were disentitled to any rebate. On the basis of the said finding, the Petitioners were directed to file price lists in Part I. The finding of the Appellate Authority by which the said order was set aside is that there was no justification for the finding that wholesale of cash price was available. The

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Appellate Authority held that from the delivery pattern of forklifts, it is seen that normally, the forklifts are sold otherwise than in wholesale. He submitted that it is this view which has been approved by the CEGAT. He submitted that the issue decided by the CEGAT has attained finality and on the basis of that, the Assistant Collector approved all the price lists filed up to 19^th February, 1988. He stated that in case of all the price lists, the rebate of 7.5% was granted. He submitted that these orders have been accepted by the Department. He pointed out that the Superintendent who is subordinate even to the Assistant Collector, has issued the impugned show cause notice. He invited our attention to the assertions made in the show cause notice. He pointed out that in fact, the show cause notice itself notes that the forklifts are being sold in retail and in fact, it is noted that the Petitioners have cleared 153 forklifts valued at Rs.5,04,53,868/ during the period 6^th May, 1988 to 27^th October, 1988 and that the prices were based on the individual contracts with the customers. He, therefore, submitted that the show cause notice is illegal. He urged that the first Petitioner is entitled for refund for the period from 22^nd October, 1975 to 30^th September, 1987 of the duty amounts which were paid under protest. He urged that as the

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duty has been paid under protest, the refund could not be denied by invoking the doctrine of unjust enrichment. He lastly submitted that the doctrine of res judicata also applies to the quasi judicial proceedings and, therefore, the Department cannot reopen the concluded issues. He urged that the Department has not placed any material on record of this Petition to show even prima facie that it is entitled to assume jurisdiction by issuance of a show cause notice relating to the same issue which has already been adjudicated upon in the past. He urged that even in this Petition, the Respondents have not placed any material to show that the pattern of sale of forklifts has undergone a change. The learned counsel appearing for the Respondents opposed the submissions made by the learned Senior Counsel appearing for the Petitioners and supported the show cause notice.

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We have given careful consideration to the

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submissions. As far as the issue of applicability of the principles of res judicata is concerned, it will be necessary to make a reference to what is held by a Division Bench of this Court in the case of Union of India v East & West Shipping Agency (supra), which reads thus:

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“20. ….. Section 11 of the Code of civil Procedure lays down that an order or issue which had arisen directly or substantially between the parties or their privies and decided finally by a competent court or Tribunal of a limited jurisdiction which include pecuniary jurisdiction will operate as re judicata in the subsequent suit or proceedings notwithstanding the fact that such court of limited jurisdiction was not competent to try the subsequent suit. The effect of insertion of explanation VIII by 1976 amendment is that it has widened the scope of Section 11 as the earlier restriction that both the Courts should also be of concurrent pecuniary jurisdiction for a decision on an issue in previously decided suit to become res judicata in the subsequent suit has been removed.

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In the present case the Settlement Commissioner passed the order after hearing both sides. The said order is not challenged by the appellants till today. The doctrine of res judicata has received a statutory sanction in the Code as a matter of prudence and to give due weightage to the finding or decision so as to reach a finality in the matter of a dispute between the same parties or litigating under the same parties. The doctrine, thus, is to provide finality of dispute between the parties based on the principle of prudence so as to give finality to a finding of a Court rather than permitting the parties to go on to trial more or less on the same issue over again and thus introducing a possibility of conflict of views.”

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What is held by the Division Bench is that the principles of res judicata will have application when the issue which had arisen directly and substantially between the parties has been decided by a Tribunal of a limited jurisdiction. The Division Bench has relied upon the amended Section 11 and in particular the Explanation VIII to Section 11 of the Code of Civil Procedure, 1908. This Court held that the proceedings under the said Act of 1944 which are judicial in nature will attract the principles of res judicata.

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It is, therefore, necessary to make a reference to what

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was the controversy in the proceedings which were concluded. We have already pointed out that after the first order of remand, the Assistant Collector by an order dated 13^th September, 1978 held that the wholesale cash price at which the first Petitioner sells the forklifts to the buyer was available and, therefore, there cannot be any abatement from the said price. He, therefore, directed that the Petitioners should declare the price lists in PartI in respect of forklifts as required under clause (a) of Subsection (1) of Section 4 of the said Act of 1944. He also directed that differential duty on all the past clearances effective from 1^st October, 1975 onwards should be recovered from them. Thereafter, there are two

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communications issued on 15^th December, 1978 and 6^th December, 1979 by the Petitioner in which it is recorded that an Appeal has been filed against the order of the Assistant Collector and without prejudice to the contentions of the Petitioners that the case will be governed by Rule 6(1)(a) of the Valuation Rules of 1975, the Petitioners will be filing revised price lists in appropriate format. It was pointed out that the excise duty would be paid under protest. Accordingly, the price lists were filed in the revised format and duty was paid under protest.

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Now, it will be necessary to make a reference to the order in Appeal passed by the Collector on 11^th June, 1980. He observed that the Assistant Collector recorded a finding that the Petitioners sold the forklifts in wholesale in view of the existence of rate contracts. Therefore, the Collector perused the terms and conditions of the rate contract. After perusal of the terms and contract, he came to the conclusion that it cannot be said that the sale was made in wholesale. He, therefore, came to the conclusion that the assessable value will have to be determined as per the clause (b) of Subsection (1) of Section 4 of the said Act of 1944 and the said Valuation Rules of 1975. He specifically directed the

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Assistant Collector to determine the extent to which the Petitioners are entitled for the abatement on account of selling and administrative expenses and interest on working capital claimed by them.

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12. Before dealing with the subsequent orders passed, it

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will be necessary to make a reference to Section 4 of the said Act of 1944.

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“SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. (1) Where under this act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be

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(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration of the sale :

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Provided that

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(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other

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circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers;

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(ii) where such goods are sold by the assesseee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in the clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof;

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(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail;

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(b) where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be

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prescribed.”

13. Section 4 lays down the manner in which the valuation

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of the excisable goods for the purposes of charging duty of excise shall be made. Clause (a) of Subsection (1) of Section 4 of the said Act of 1944 provides that when the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale, the normal price thereof shall be the value of excisable goods for charging of duty of excise. Clause (b) thereof is applicable when normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason. In such cases, it provided in clause (b) that the value for the purposes of charging duty of excise will be nearest ascertainable equivalent thereof determined in such manner as may be prescribed. The Valuation Rules of 1975 provide for determination of the ascertainable equivalent of value in terms of Clause (b) of Subsection (1) of Section 4 of the said Act of 1944. We are concerned with the Rule 6 which reads thus:

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“6. If the value of the excisable goods under

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assessment cannot be determined under rule 4 or rule 5, and –

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(a) where such goods are sold by the assessee in retail, the value shall be based on the retail price of such goods reduced by such amount as is necessary and reasonable in the opinion of the proper officer to arrive at the price at which the assessee would have sold such goods in the course of wholesale trade to a person other than a related person :

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Provided that in determining the amount of reduction, due regard shall be had to the nature of the excisable goods, the trade practice in that commodity and other relevant factors

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(b) Where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based

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(i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee:

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Provided that in determining the value under this subclause the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any in the material characteristics of the goods to be assessed and of the comparable goods;

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(ii) if the value cannot be determined under sub clause (i) on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods;

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(c ) where the assessee so arranges that the excisable goods are generally not sold by him in the course of wholesale trade except to or through a related person and the value cannot be determined under clause (iii) of the proviso to clause (a) of subsection (1) Section 4 of the Act, the value of the goods so sold shall be determined

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(i) In a case where the assessee sells the goods to a related person who sells such goods in retail, in the manner specified in clause (a) of this rule;

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(ii) In a case where a related person does not sell the goods but uses or consumes such goods in the production or manufacture of other articles, in the manner specified in clause (b) of this rule;

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(iii) in a case where a related person sells the goods in the course of wholesale trade to buyers, other than dealers and related persons, and the class to which such buyers belong is known at the time of removal, on the basis of the price at which the goods are ordinarily sold by the related person to such class of buyers.”

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Clause (a) of Rule 6 applies to the goods which are

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sold by the assessee in retail. It provides that the value shall be based on the retail price of such goods reduced by such amount which is necessary and reasonable to arrive at the price at which

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the assessee would have sold such goods in the course of wholesale trade to a person other than a related person. The proviso to Clause (a) lays down that in determination of the amount of reduction, due regard shall be given to the nature of the excisable goods, the trade practice in that commodity and other relevant factors.

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Coming back to the facts of the case, it appears that after the order of the Appellate Authority, a notice of review was issued by the Union of India which was transferred to the CEGAT. The CEGAT decided the matter by its judgment and order dated 29^th November, 1986. The CEGAT referred to the original notice dated 15^th October, 1976 in which the Assistant Collector had mentioned in the annexure that the sales were made by the first Petitioner in retail. Therefore, the CEGAT held that the finding of the Assistant Collector that there existed a wholesale price and, therefore, assessable value has to be determined in terms of Clause (a) of SubSection (1) of Section 4 of the said Act of 1944 was rightly set aside by the Appellate Authority. It is material to note what was observed by the Tribunal in Paragraph 5 of its judgment.

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“5. …..The Tribunal thus held that a retail sale would be sale to any individual consumer for his own consumption. During the course of the hearing before us the assessee made available to the department its various invoices etc. for the relevant period and the same had been checked by the department also, the result of the check being that all the sales by the respondents appear to have been to persons or institutions who were direct users of the fork lift trucks supplied by the respondents. Hence even as a question of fact we are satisfied that the sales by the respondents were by way of retail sales only.”

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(Underline supplied)

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On the basis of the said order of the CEGAT, an order passed by the Assistant Collector on 7^th August, 1987 holding that the first Petitioner was entitled to abatement of 7.5% on the declared price in the price list dated 15^th September, 1975 filed in the Proforma V. He directed that the subsequent price lists filed on this account were also approved after arriving abatement of 7.5%. On the basis of the said order, the price lists filed up to 19^th February, 1988, except four or five, were approved. However, the price lists filed between the period 24^th February, 1988 to 27^th January, 1989 were not approved.

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Now it will be necessary to make a reference to the impugned show cause notice. The show cause notice has been

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issued calling upon the Petitioner to show cause as to why :

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“(a) The abatement of 7.5% claimed in the price list nos.SHQ/MH/CPL199 dt. 27.10.87 to SHQ/MH/CPL220 dt. 24.2.88 in part V against contract with their customers should not be disallowed;

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(b) the price list Nos. SHQ/MH/CPL221 dt. 29.2.88 to SHQ/MH/CPL257 dt. 17.10.88 should not be approved in proforma II of II of the price list and the abatement of 7.5% be disallowed;

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(c ) the Central Excise duty of Rs.7,94,648.42 should not be demanded and recovered from them under section IIA of the Central Excise and Salt Act, 1944, on the said 153 fork lift trucks failing under chapter sub heading 8427.00 and valued at Rs.5,04,53,868.00 cleared by them wherein the price lists are filed against individual contracts during the period 6.5.88 to 27.10.88 as detailed in Annexure 'B'.”

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18. The learned Senior Counsel appearing for the

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Petitioners has invited our attention to the following part of the show cause notice which reads thus:

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“M/s. Voltas Ltd., Thane have also filed price list No.SHQ/MH/SPL051 (Revised) dt. 11.5.87 in part V which is one price for each model of fork lift truck. They have claimed 7.5% discount from the declared price so as to arrive at the deemed

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wholesale price in view of Asstt. Collr's adj. Order No. C.Ex./CLPL/Appeals/37/AP/BIII/86 dt. 7.8.87. Now therefore their wholesale price is available after deducting 7.5% from the retail price. Any deviation from such wholesale price is not justifiable under section 4 of the Act or the valuation Rules 1975 except for the proviso (I) to section 4(1)(a). Therefore, the price lists are to be filed in proforma II, an appropriate format for approval of price under section 4(1)(a)(i) and not proforma V without claiming any abatement therefrom. They have cleared 153 fork lift trucks valued at Rs.5,04,53,868.00 during the period 6.5.88 to 27.10.88 wherein the prices were based on individual contracts with their customers.”

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It will be necessary to make a reference to the

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annexure “A” to the show cause notice wherein there is a reference to the earlier orders. In the annexure “A”, it is stated that the adjudication proceedings by the Assistant Collector in view of the order of the CEGAT will have to be restricted to the approval of price list dated 15^th September, 1975 and the subsequent price lists filed in Part I which are uniform to all customers. It is stated that the Assistant Collector in the order dated 7^th August, 1987 has specifically mentioned that the price lists dated 15^th September, 1975 filed in Part V were approved allowing the abatement of 7.5%. It is observed that the revised price lists dated 26^th December, 1986 in Part V claiming of abatement of 7.5% show

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that the price lists are uniform to all. It was specifically observed that the CEGAT has passed the order based on various invoices made available for the relevant period at the time of personal hearing. The material part of Annexure “A” reads thus:

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“The relevant period in the instant case is from 1.10.75 to 13.9.78 i.e. the period of order in original No.PI/V(6)134B/PL/77 dt. 13.9.78. They have changed their selling pattern subsequent to the relevant period but this fact was not brought to the notice of CEGAT at the time of personal hearing (Ref: Party's letter No.MTHB/15360/SHQ dt. 11.6.81). Therefore, the relevant remarks made by CEGAT on the pattern of sales pronouncing them as retail sales have to be restricted to the period 1.10.75 to 13.9.78 and clearances effected under similar price list (prices which are uniform to all) for the subsequent period. This order cannot be made applicable to the sales effected by them against individual contract in the subsequent period to the orderinoriginal dt. 13.9.78.”

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Thus, what is alleged is that after the order in original was passed, the first Petitioner had changed the pattern of sale. Thus, the show cause notice is based on the allegation that the pattern of sale has subsequently undergone a change. We may note here that the finding of fact recorded by the CEGAT which was relied upon by the Petitioners is based on the perusal of the various invoices made available by the first Petitioner during the

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course of hearing before CEGAT. After going through the documents, the CEGAT observed that the sales were made by the first Petitioner to the persons or institutions who are the direct users of the forklifts. Moreover, the CEGAT proceeded on the basis of the earlier show cause notice dated 15^th October, 1976 which proceeds on the footing that the sale was on the retail basis.

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The impugned show cause notice proceeds on the footing that subsequently there is a change in the pattern of sales. If that be so, the principles of res judicata will have no application. Moreover, the finding of CEGAT is on the basis of consideration of the invoices for the relevant period which were produced before it. The learned Senior Counsel appearing for the Petitioners submitted that neither the Department has proved that there was a change in the pattern nor the Petitioners have been called upon to produce the material before this Court. However, all this is a matter of adjudication after reply to the show cause notice is given. The show cause notice specifically makes factual allegations regarding change of pattern of sales. The principles of res judicata cannot be applicable as a change in pattern of sales is alleged. Therefore, we are of the considered view that by

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invoking principles of res judicata, the show cause notice cannot be quashed, and therefore, the Petitioners will have to file a reply to the show cause notice and the issue whether there is a change of pattern of sales will have to be decided by the concerned Authority. All issues in that behalf are kept open.

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Now turning to the claim for refund, the decision of the Apex Court in the case of Mafatlal Industries Limited vs. Union of India [(1997)5 SCC 536] is relevant. In paragraph 108 of the said decision, the Apex Court has held that :

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“ 108. The discussion in the judgment yields the following propositions. We may forewarn that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive. In case of any doubt or ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment.

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( i ) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff — whether before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter — by misinterpreting or misapplying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by misinterpreting or misapplying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified thereunder and within

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the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 — and of this Court under Article 32 — cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.

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The said enactments including Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute “law” within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition ( ii ) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal — which is

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not a departmental organ — but to this Court, which is a civil court.

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( ii ) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: Where a person approaches the High Court or the Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, C.J. in Tilokchand Motichand¹⁶ and we respectfully agree with it.

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Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying clause ( c ) of subsection (1) of Section 17 of the Limitation

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Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview.

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( iii ) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition ( i ) above or in a suit or writ

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petition in the situations contemplated by Proposition ( ii ) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.

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The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.

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( iv ) It is not open to any person to make a refund claim on the basis of a decision of a

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court or tribunal rendered in the case of another person. He cannot also claim that the decision of the court/tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another person's case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well-established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)( c ) of the Limitation Act, 1963, has no application to such a claim for refund.

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( v ) Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes like Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty.”

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In the present case, it is not established that the Petitioner has not passed on burden of excise duty on third parties.

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The refund applications are still pending. If that be so, the refund applications will have to be decided expeditiously. Hence, we find that there is no merit in the Petition, and therefore, all the prayers except the prayer clause b(iv) will have to be rejected.

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The Civil Application No. 5434 of 1989 has been filed

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seeking to challenge the subsequent demands for execution of bond and furnishing of bank guarantee on the ground that the same is contrary to interim order in the Petition. In view of rejection of the Petition now the interim order stands vacated. Hence, this application does not survive. However, remedies of the

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Petitioners will remain open.

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25. Accordingly, we pass the following order:

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ORDER :

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(a) The Petition is rejected. The Petitioner will be entitled to file a reply to the show cause notice within a period of three months from today. However, we direct that the Respondents shall deal with and dispose of the refund applications in accordance with law and as expeditiously as possible;

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