ORDER
Gowri Shankar, Member (T)
1. These two appeals are against the orders of the Collector of Central Excise (Appeals) in which he has confirmed the findings of the Assistant Collector of Central Excise that the appellants were not eligible for sanction of refund of central excise duty. The reason advanced by the Assistant Collector was that such sanction would amount to unjust enrichment.
2. Shri R.K. Sharma, Assistant Manager of the first appellant requested adjournment on the ground that issue of unjust enrichment is pending before the Larger Bench of the Supreme Court. The same plea was declared by Shri K.K. Anand, advocate, appearing for the second appellant. However, for reasons which will become apparent, I am of the view that the matter can be decided straightway. Therefore, after hearing the appellants’ advocate and Shri R.K. Sharma and after hearing Shri Y.R. Kilaniya, DR for the department, I proceed to decide the case. The amendment to Section 11B of the Central Excises and Salt Act provided for denial of refund to an assessee on the ground of unjust enrichment was made in September 1991. Therefore, when the refund claims arise and the orders of the original and appellate authorities were passed, there was no specific provision in the Act to deny the grant of refund on this ground. The judgements cited by the Collector (Appeals) in both the orders, which are more or less identically worded, have to be distinguished. In these judgements opinions have been expressed by the Courts (sic) amendment to the law relating to the refund so that manufacturer or other claimant for refund is not unduly benefited at the expenses of other persons who may have actually borne the incidence of tax. The settled position of law is that prior to the amendment in September 1991 benefit of central excise could not be denied on the ground of unjust enrichment. This is the view that has been held by the Bombay High Court in its various decisions such as New India Industries v. UOI – 1990 (46) E.L.T. 23. While the DR strongly argued on behalf of the Collector (Appeals), he could not find any specific order or judgment retracting the ratio of these decisions.
3. The Collector (Appeals) has also advanced another ground for rejecting the claim. He says that Section 11B (as it then stood) provided that before sanctioning the claim, the Assistant Collector should be satisfied that all or part of the duty paid by the appellant should be refunded to him. He says that this confers on the Assistant Collector discretion to decide as to the grounds on which he should be satisfied, that refund should be sanctioned. According to him, as long as the Assistant Collector has ‘cogent grounds’ and records his reasons, he may reject the refund provided that the ground for rejection is not unreasonable. This argument is wholly unacceptable. The expression that the Collector has extracted from the section has to be read within the larger context of the Act. The satisfaction that the Assistant Collector is required to exercise would obviously be limited to ensure that duty which ought to have been paid had in fact been paid either by the mistake of law or mistake of facts and that such duty was actually been paid and the claim is in time. The Collector (Appeals)’ view if accepted would mean that it is entirely up to the discretion of each Assistant Collector to sanction or to reject the claim. The fact that he may give cogent reasons and take grounds which appear to him to be reasonable, does not limit this arbitrary discretion that the Collector (Appeals) has conferred upon the Assistant Collector. The Cogent reasons may be advanced and indeed have in the past been advanced, for doing Acts which are incorrect and illegal. On the basis of these reasonings one Assistant Collector may reject the refund on the ground that the appellant is unduly enriched by his activity; another may reject it on the ground that activity of the appellant does not fulfil a socially useful role. Obviously the intention behind the words in question not to confer exclusive discretion to each of the Assistant Collector to sanction or reject the claim according to his personal or moral beliefs. This view has to be rejected out of hand.
4. In the result therefore, rejection of the refund claims on the ground of unjust enrichment cannot be upheld. The appeals are therefore, allowed. The matter is remanded to the Assistant Collector of Central Excise for deciding the refund claims in accordance with the law.
EDITIOR’S COMMENTS
The bar of ‘unjust enrichment’ as contained in Section 11B of the Central Excises and Salt Act, 1944, has a retrospective operation in view of the first proviso to Sub-section (1) and Sub-section (3) of the said Section 11B. Even the Hon’ble Supreme Court in Jain Spinners’ case -1992 (61) E.L.T. 321 (SC) has held that amendments made to Section 11B of the Central Excises and Salt Act, 1944 incorporating the bar of “unjust enrichment” by amending Act of 1991, are retrospective in operation and applicable to all earlier orders and directions for refund given by any authority or court.
The Hon’ble Supreme Court in a subsequent decision in the I.T.C. ‘s case – 1993 (67) E.L.T. 3 (S.C.) again held that the bar of unjust enrichment incorporated w.e.f. 20-9-1991 has retrospective operation and, therefore, applies to refund claims already decided but still pending in appeals etc. proceedings.
It appears that the Hon’ble Bench of the CEGAT has overlooked not only the aforesaid statutory provision but also the well known decisions of the Hon’ble Supreme Court in Jain Spinners’s case, when it held that the rejection of the refund claim by the Assistant Collector on the ground of unjust enrichment cannot be upheld because prior to the amendment of Section 11B in September, 1991, the refund claim could not be rejected on the ground of unjust enrichment. The CEGAT order in question being contrary to the statutory provision and Supreme Court’s pronouncements, needs to be rectified under Section 35C(2) of the Central Excises and Salt Act, 1944.
The Hon’ble Bench in para 2 has recorded that Departmental Representative “strongly argued on behalf of the Collector (Appeals)”. As per provisions of Central Excises and Salt Act, 1944, the Appellate Authority is never a party to the proceedings filed against its order, therefore, the question of DR arguing on behalf of the Collector (Appeals) does not arise.