JUDGMENT
1. This petition under Article 226 of the Constitution arises out of proceedings under the Central Excises and Salt Act, 1944 (hereinafter “the Act”).
2. The Petitioner Shalimar Textile Manufacturing (Tube Division) is Private Limited Company (hereinafter “the Company”) carrying on business inter-alia of manufacturing various types of aluminium tubes, etc. at its factory at Kandivli (West), Bombay. The case of the Company is that under mistake of law it paid excise duty in excess of what was lawfully due from it for the period 1st October, 1975 till November 1982. Accordingly to the Company, the assessable value of the goods manufactured by it during this period was arrived at by including therein the cost and charges of post-manufacturing operations and profits thereon, though the same were liable to be excluded therefrom. The amount purported to have been so paid in excess was Rs. 30,92,796.30P. Discovering this mistake as a result of certain decisions relating to the manner of fixing assessable value under Section 4 of the Act and the exclusion/inclusion of post-manufacturing expenses and profits from/in the said value, the Company filed with the excise authorities in December 1982 an application for refund of the excess duty. However, before this application could be considered and decided, the Company filed this petition. And in view thereof, the excise authorities have been unable to decide the refund claim supra.
3. Now, and in the meanwhile, the Supreme Court has in the “P.M.E. Case”, Union of India and Others v. Bombay Tyre International Ltd. laid down the law relating to the correct construction and interpretation of Section 4 of the Act. While doing so the Supreme Court has also laid down certain tests and principles relating to exclusion or otherwise of post- manufacturing expenses and profits from the assessable value to be determined in accordance with section 4 of the Act. In view of this decision, Mr. A. Hidayatullah, learned Counsel for the petitioner- Company, has restricted the entire controversy in the present case to only four items viz. (a) additional Sales-tax, (b) cash or trade discount (c) transport charges and (d) cost of packing. According to him, expenses and charges under all these four items were liable to be deducted or excluded while determining the assessable value under section 4 of the Act. Now, taking up each item separately, following would be the position.
4. So far as additional Sales-tax is concerned, Mr. M. I. Sethna, learned Counsel for the respondents, fairly conceded that the Company would be entitled to claim deduction thereof from the assessable value under section 4 of the Act. Consequently, the only surviving question relates to the amount or the quantum of the sales-tax thus involved. This will be gone into and determined by the concerned excise authority after hearing the Company.
5. The next item is cash or trade discount. In relation thereto, the Supreme Court itself has in the same “P.M.E. Case” but by a subsequent clarificatory order dated 14th/15th November, 1983 reported in 1983 E.C.R. 2233D (S.C.) = 1984(17) E.L.T. 329 (S.C.), observed thus :
“1. Trade Discount : Discounts allowed in the trade (by whatever name such discount is described) should be allowed to be deducted lished under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price”.
It will thus be for the excise authorities to decide the Company’s claim on trade discount in terms of these observations of the Supreme Court.
6. The next item is transport charges. Here also it is best to reproduce what has been held by the Supreme Court in the “P.M.E. Case” Supra :
“But the assess will be entitled to a deduction on account of the cost of transportation of the excisable articles from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the gate to the place or places where it is sold.
Where freight is averaged and the averaged freight is included in the wholesale cash price so that the wholesale cash price at any place or places outside the factory gate is the same as the wholesale cash price at the factory gate, the averaged freight included in such wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no excise duty can be charged on it”.
It should go without saying that the excise authorities will decide the Company’s this claim also viz. transport charges, in accordance with the aforesaid observations of the Supreme Court.
7. Next and the last item is cost of packing. On this item contention of the learned Counsel Mr. Hidayatullah is that the packing here is primary packing as also durable and returnable by the buyer to the assessees in terms of section 4(4)(d)(i) of the Act and consequently the Company was entitled to a deduction of the cost thereof while determining the assessable value under section 4 of the Act. On the other hand, according to the learned Counsel Mr. Sethna for the respondents, the packing here is one in which the manufactured article is ordinarily sold in the time of removal and consequently the Company will not be entitled to deduct the cost of such packing from the assessable value under Section 4 of the Act. It is not possible to decide this question on the materials presently before this Court. But it may be observed that if the packing is found to be durable and returnable by the buyer to the assessee in terms of section 4(4)(d)(i) of the Act, the Company would then be entitled to deduct the cost thereof from the assessable value. Whether the packing is primary or secondary is not so relevant as to whether it is durable and returnable by the buyer to the assessee. If these latter conditions are satisfied, then and then only will the Company be entitled to the benefit of deducting the cost of such packing from the assessable value, but not authorities in this context and this in the light of, and with reference to, only that and only such evidence as relates to the period or periods for which refund is claimed viz., 1st October 1975 till November 1982.
8. The Company has filed in this Court an additional affidavit dated 7th August, 1984. Mr. Sethna, learned Counsel for the respondents, submitted that the respondents had no opportunity to meet the averments and statements made therein and, therefore, the same should not in the least be taken as admitted by the respondents. In fairness to the respondents it is directed that the averments and statement made in this affidavit of 7th August, 1984 shall be considered as not admitted by the respondents.
9. Before passing final orders, two questions survive viz. (a) limitation and (b) unjust enrichment. On Limitations, even assuming that the Company is found entitled to refund the entire or any particular amount, question then arising would be whether the claim in that behalf is or is not in time, with the further question as to what would be the period of limitation in that respect. On the question of limitation qua refund, we already have indication in the Supreme Court ruling in Shri Vallabh Glass Works Ltd. v. Union of India and Others – , holding that limitation for refund of excise Duty paid by the assessee would be three years prior to the date of the writ petition in question. The Writ Petition here has been filed on 24th December, 1982. Therefore, and, of course, subject to the Company establishing on merits its claim for refund, the said refund will be restricted to a period of three years prior to 24th December 1984 i.e. on and from 24th December, 1979. The excise authorities will, therefore, consider the Company’s claim for refund in respect of the aforesaid four items for the period 25th December, 1979 onwards only.
10. The next question is of unjust enrichment. Even if the Company establishes on merits its claim for refund and even if the claim so established is found to be within limitation, question nevertheless would arise whether the Company is entitled to the amount in question in view of what may be termed as the theory of doctrine of unjust enrichment. This question of unjust enrichment arose for consideration before a Division Bench of this Court (per Lentin and Sawant JJ.) in appeal No. 108 of 1977 – I.T.C. Ltd. v. M. K. Chipkar and Others – preferred against the decision dated 6th April, 1977 by a learned Single Judge of this Court in Miscellaneous Petition No. 1151 of 1976. However, on this question, the two learned Judges constituting the Division Bench have differed and have delivered dissenting Judgments on 15th December, 1983, with a joint request to the learned Chief Justice to give consequential directions. The matter would now, therefore, go to a learned third Judge in accordance with the directions of the learned Chief Justice and only after the decision of the learned third Judge will the final legal position on the question of unjust enrichment emerge so far as this High Court is concerned. Till then the excise authorities naturally will not be in a position to pass either way final orders on the refund claim and the revised price-lists. After the excise authorities consider the company’s refund claim in relation to the aforesaid four items to which it now stands rusticated and after considering the said claim on merits as also thereafter in the light of the period of limitation involved in that behalf, the said authorities will have to, stay the passing of final orders till the question of unjust enrichment is decided by this High Court. And only after the decision on this question by the High Court, the excise authorities will proceed to pass final order one way or the other on the Company’s refund claim and revised price-lists.
11. Learned Counsel for the Company contended that except for a period of about four and a half months, for which period the Company had already executed a bank guarantee in favour of the Assistant Collector/Collector of Central Excise in terms of this Court’s interim order dated 18th February, 1983, the Company has been paying duty for all the other periods under protest. Request is that the said bank guarantee may not be enforced by the excise authorities till final orders are passed on the Company’s refund application and on its revised price-lists. The request is reasonable and order accordingly is being passed below.
12. In the result, this petition is partly allowed. The excise authorities will consider and decide the petitioner-Company’s claim for refund and its revised price-lists in terms of this judgment and pass final orders thereon after the question of unjust enrichments in decided by the High Court.
13. The bank guarantee supra furnished by the petitioner-Company in terms of this Court’s interim order of 18th February, 1983 will be kept alive by the Petitioner Company but will not be enforced by the respondents until final orders are passed on the petitioner’s refund application and revised price lists and thereafter consistent with the orders thereon.
14. Rule is made partly absolute in terms aforesaid. In the circumstances of the case, however, there will be no order as to costs.
