IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 811 of 2006(V)
1. M/S.VENAD STRUCTURALS,
... Petitioner
Vs
1. KERALA STATE ELECTRICITY BOARD,
... Respondent
2. THE CHIEF ENGINEER, T.C.& M.,
For Petitioner :SRI.K.JAJU BABU
For Respondent :SRI.JOSE J.MATHEIKEL, SC, KSEB
The Hon'ble MR. Justice C.K.ABDUL REHIM
Dated :30/03/2010
O R D E R
C.K.ABDUL REHIM, J.
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W.P.(C).No.811 OF 2006
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Dated this the 30th day of March, 2010
J U D G M E N T
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1. This writ petition is filed by a Contractor who
had entered into an agreement with the 1st respondent Board
for manufacture and supply of “pre-stressed concrete poles”.
Challenge in this writ petition is against Ext.P10 letter of the
2nd respondent whereby the petitioner was required for
payment of an amount of Rs.12,61,426/-, towards repayment
of amounts remitted as Excise Duty, which is allowed by the
Board to the petitioner. In Ext.P10, coercive steps of
recovery was threatened on failure to remit the amount
demanded. It is admitted case of both sides that by virtue of
the contract in question the 1st respondent Board had
undertaken to pay Excise Duty, sales tax and other taxes,
leviable from the petitioner, apart from cost of the poles
which will be manufactured and supplied.
2. Dispute pertains to payments made by the 1st
respondent towards Excise Duty during the period between
July 1988 and March 1990. The above said amount of
W.P.(C).811/06 -2-
Rs.12,61,426/- received from the 1st respondent Board on
different dates was paid by the petitioner as Excise Duty to
the Central Excise Department. But as per order of the
Assistant Collector, Central Excise, Kottayam dt.22.10.1990
the petitioner was exempted from payment of Excise duty by
virtue of provisions contained in Notification No:171/1986.
3. In view of the above circumstances the respondents
directed the petitioner to file refund application before the
appropriate authority of the Central Excise Department. In
compliance with the direction, the petitioner filed refund
application. But the same was rejected through Ext.P2
noticing that the burden of payment of Excise Duty had
already been passed over by the petitioner to the actual
customer and hence refund if any made will result in undue
enrichment. Eventhough the petitioner filed appeal before
the Collector of Central Excise and Customs, Cochin, it was
dismissed through Ext.P3, upholding the very same view. The
petitioner took up the matter in further appeal before the
Customs, Excise and Gold (Control) Appellate Tribunal,
Madras.
4. During pendency of the above said appeal, at the
W.P.(C).811/06 -3-
insistence of the 1st respondent Board, the petitioner had
executed Ext.P4 agreement. Clause (1) and (2) of the said
agreement reads as follows:-
“(1) The Board authorises the contractor to take action
to realise the excess Excise duty payment of
Rs.12,61,426/- or any other amount from the Asst.
Collector, Central Excise, Kottayam or any other
representative of General Excise Department in the
event of the appeal filed before CEGAT being allowed.
(2) The contractor shall remit the refund amounts
within 30 working days of realisation of the said amount
from Excise Department to the Executive Engineer
Central Mechanical Division, Pallom failing which the
Board shall have the right to realise the said amount
with interest at 21% from the date of receipt of the
amount by attachment from the amounts due to the
contractor and by other means.”
5. But the Appellate Tribunal had dismissed the
appeal holding that it is only when the duty has not been
passed on by the appellant, they will become eligible for
benefit of refund, in terms of the provisions contained in
Section 11(b) of the Central Excise Act, 1944. Since it is
found that the burden of duty has already been passed on to
the customer, who is the 1st respondent herein, the rejection
of refund is sustainable.
6. After dismissal of appeal by the Tribunal, Ext.P6
W.P.(C).811/06 -4-
letter was issued by the respondents directing the petitioner
to file writ petition before this court, impleading the 1st
respondent as a respondent. It was also undertaken that
expenses for filing such writ petition will be met by the 1st
respondent Board. Subsequently, Ext.P7 letter was issued
directing the petitioner to file writ petition jointly along with
1st respondent Board and for this purpose to engage the
Senior Standing Counsel of the 1st respondent for conducting
the case. The above suggestion was again changed and
Ext.P8 was issued stating that on getting advice from the
Senior Counsel of the Board at the Supreme Court, the proper
remedy is to file a review before the CEGAT under Section 35
(2) of the Central Excise Act. However, through Ext.P9 letter
dt.3.6.1999 the Board ultimately has informed that the
request made by the petitioner for advancing an amount of
Rs.1 lakh for payment of Advocate fee for filing the review
petition, could not be granted. Through the said letter the
petitioner was requested to hand over necessary records to
the authority of the Board for filing the review petition.
According to the petitioner all the records were handed over
to the authority of the Board in compliance with Ext.P9 letter.
W.P.(C).811/06 -5-
7. Facts revealed are to the effect that subsequent to
Ext.P9 the respondent Board had filed claim petition before
the Assistant Commissioner of Central Excise, as a buyer,
seeking refund of the amounts. The said application was filed
along with petition seeking condonation of delay. But the
Assistant Commissioner had rejected the application through
an order dt.24.12.1998 since the application for refund was
not filed within six months. The Board has filed appeal before
the Commissioner of Central Excise against the decision. But
it was also rejected through order dt.17.12.2001. It is
admitted in the counter affidavit that eventhough advice was
received to approach the CEGAT, further appeal could not be
filed since there occurred delay in filing such appeal.
However, it is conceded that the Board has filed a writ
petition before this court and thereafter filed a Special Leave
Petition before the Hon’ble Supreme Court challenging the
decisions through which refund application was rejected. But
the Board was not successful in getting any favourable orders.
8. In Ext.P10 proceedings which is impugned in this
writ petition, it is stated that the Board has decided to request
the petitioner to reimburse the loss sustained on account of
W.P.(C).811/06 -6-
the lapses occurred on the part of the petitioner. It is also
stated that by virtue of Ext.P4 agreement the petitioner was
bound to reimburse the entire advance payment made by the
Board for remitting Excise Duty. According to the petitioner,
both the reasons stated in Ext.P10 is not true and correct. It
is an admitted case of both parties that whatever amount paid
by the 1st respondent had already been remitted to the Central
Excise Department. It is evident from the facts and
circumstances that all earnest efforts were taken both by the
petitioner and the respondent Board to get refund of the
amount, but it could not fetch any positive result.
9. The question to be decided is as to whether the
petitioner is liable to reimburse the amount to the respondent
Board. According to the Board, the amount is a loss sustained
to them on account of the lapses occurred on the part of the
petitioner. Going by the original contract it is evident that
the Board has undertaken to make payment of the Excise Duty
element, over and above value of the ‘PSC poles’ supplied. It
is in accordance with such agreement that the payment of
Excise Duty was made in advance by the respondent Board. It
could not be said that the petitioner has not remitted any such
W.P.(C).811/06 -7-
amounts to the Excise Department, due to availability of any
exemption order. It is clear and evident that the exemption
order in question was issued by the Assistant Commissioner
only after remittance of such amounts. Further, from the
facts and circumstances it is evident that the petitioner had
taken all steps to get refund of the amount as per instructions
given by the respondents. Therefore it could not be said that
there occurred any loss to the KSEB on account of any lapses
on the part of the petitioner. Further question to be
considered is as to whether the petitioner is liable for
payment of the amount by virtue of the provision contained in
Ext.P4 agreement. From clauses (1) and (2) of Ext.P4, which
is extracted above, the undertaking is only to the effect of
making payment of the amount if the petitioner gets refund
from the Excise Department. The respondent Board has no
case that inspite of getting refund the petitioner had failed to
make payment of the amount in question. Therefore I find no
reason as to hold that the claim raised in Ext.P10 is
sustainable.
10. However, since the respondent is maintaining a
case that by virtue of contractual obligations the petitioner is
W.P.(C).811/06 -8-
liable for payment of the amount under demand, I am of the
opinion that rights if any available to the respondents for
approaching the appropriate civil court shall not be
foreclosed. But the recovery steps without there being any
determination of any such liability on the basis of a proper
adjudication could not be enforced against the petitioner.
11. Accordingly the writ petition is allowed and
Ext.P10 is hereby quashed. It is made clear that none of the
observations made herein will stand in the way of the
respondents seeking any remedy through appropriate civil
forum, if available under law.
C.K.ABDUL REHIM, JUDGE.
okb