CEAC/3/2001 of M/S MARUTI UDYOG LTD. Vs COMMISSIONER OF CENTRAL EXCISE on 4 May 2001

1. Heard learned counsel for the parties.

2. On an application under Section 35G{3) of the Central ExciseAct, 1944, the Customs Excise and Gold {Control) Appellate Tribunal(hereinafter referred to as the 'CEGAT') referred the following question to us for our opinion:- "Whether Section 118 of the Central Excise Act, as amended,applies to cases where though an order has been passeddirecting refund, implementation of the order is pending?"

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Digitally Signed By:AMULYACertify that the digital file andphysical file have been compared andthe digital data is as per the physicalfile and no page is missing.

3. The proceedings arose out of applications for refund filed by -thea!sessee before the Assistant Collector, Central Excise, Trichy for thevfiars 1970 to 1978= These refund applications were rejected by theof ders of the Assistant Collector on 16.10.1979, 7.3.1980 and 1.8.1980.Appeals against these orders were also dismissed by the AppellateCoiiector vide orders dated 1.12.1980 and 6.12.1980. Further appealswere filed by the assessee before the CEGAT and these were allowedvide orders dated 1,6.1989 and 6.6.1989. By these two orders theorders of the Assistant Collector and the Appellate Collector were setaside and the refund applications of the assessee were allowed. !t mayIre m.en,tioned that the amounts of excise duty which had been claimedty the department had been paid by the assessee under protest in theyears 1970 to 1978 and subsequently the assessee made applicationsfjr refund under Section IIB of the Central Excise Act, 1944 {hereinafterreferred to as 'the Act'). It may also be mentioned that the orders dated3,6.1989 and 6.6.1989 passed by the CEG.AT were accepted by theRevenue.

4. Section IIB was amended with effect from 20^" September, 1991 bySection 3 of the Central Excise and Customs Laws {Amendment)Act,1991. Section 11B{1) as it stood before the Amendment of 1991was in the following terms:- "Section IIB; Claim for refund of duty {1) Anyperson claiming of any duty of excise rnay make anapplication for refund of such duty to the Assistant Collectorof Centra! Excise before the expiry of six months from theCRAR No.1/2003 Page No. 2 of 16

relevant date.

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Provided that the limitation of six rhonths shall not applywhere any duty has been paid under protest.

(2) If on receipt of any such application, the AssistantCollector of Central Excise is satisfied that the whole or anypart of the duty of excise paid by the applicant should berefunded to hirn, he may make an order accordingly.

(3) Where as a result of any order passed in appeal orrevision under this Act refund of any duty of excise becomesdue to any persons the Assistant Collector of Central Excisemay refund the amount to such person without his having tomake any claim in that behalf.

(4) Save as otherwise provided by or under this Act, no claimfor refund of any duty of excise shall be entertained.

(5) Notwithstanding anything contained in any other law, theprovisions of this section shall also apply to a claim for refundof any amount coliected as duty of excise made on theground that the goods in respect of which such amount wascollected were not excisable or were entitled to exemptionfrom duty and no court shall have any jurisdiction in respectof such claim."

5. After the 1991 amendment, the material part of Section IIB

rerifJs as follows:-

"Section llB" Claim for refund of duty, fl) Anyperson claiming refund of any duty of excise may make anapplication for refund of such duty to the AssistantCommissioner of Central Excise before the expiry of sixmonths from the relevant date in such form and manner asbe and the shall be may prescribed application accompaniedby such documentary or other evidence including thedocuments referred to in Section 12A as the applicant mayfurnish to establish that the amount of duty of excise inrelation to which such relund is claimed was collected from, orpaid by, him and the incidence of such duty had not beenpassed on by him to any other person.

Provided that where an application for refund has been made CE/.R No.1 /2003

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before the commencement of the Central Excise and C^omsLaws (Amendment) Act,1991, such application shall bedeemed to have been made under this sub-section asamended by the said Act and the same shall be dealt with inaccordance with the provisions of sub-section (2) substitutedby the Act.

Provided further that the limitation of six months shall notapply where any duty has been paid under protest.

(2) If, on receipt of any such application, the AssistantCommissioner of Central Excise is satisfied that the whole orany part of the duty of excise paid by the applicant isrefundable, he may make an order accordingly and theamount so determined shall be credited to the Fund.

Provided that the amount of duty of excise as determined bythe Assistant Commissioner of Central Excise under theforegoing provisions of this sub-section shall, instead of beingcredited to the Fund, be paid to the applicant, if such amountis relatable to - (a) rebate of duty of excise on excisable goods exported outof India or on excisable materials used in the manufacture ofgoods which are exported out of India; (b) unspent advance deposits lying in balance in theapplicant's account current maintained with theCommissioner of Central Excise;

(c) refund of credit of duty paid on excisable goods used asinputs in accordance with the rules made, or any notificationissued, under this Act; (d) duty of excise paid by the manufacturer, if he had notpassed on the incidence of such duty to any other person; (e) the duty of excise borne by the buyer, if he had notpassed on the incidence of such duty to any other person; (f) the duty of excise borne by any other such class ofapplicants as the Central Government may, by notification inthe Official Gazette, specify; Provided further that no notification under clause (f) of thefirst proviso shall be issued unless in the opinion of the nHARNo.l/SOOS

Centra! Government the incidence of duty has not beenpassed on by the persons concerned to any other person.

(3) Notwithstanding anything to the contrary contained inany judgment, decree, order or direction of the AppellateTribunal or any Court or in any other provision of this Act orthe rules made thereunder or other law for the time any beingin force, no refund shall be made except as provided in subsection {2)",

6. Al.hough the applications for refund of excise which had beenmade in the years 1972 to 1978 already stood allowed finally bythe orders of the CEGAT dated 1.6-1989 and 6.6.1989 well beforethe 1991 Amendment, the Department took the view that eventhough the appeals of the assessee in the matter of refundapplications had already been allowed by the CEGAT in 1989, butas the amount of refund had not been actually paid to theassessee till 1991, the provisions of Section IIB as amended in1991 were applicable and, therefore, instead of the amount beingrefunded to the assessee, the Assistant Collector directed theassessee to credit the said amounts to the Consumer WelfareFi nd as required by sub-section (2) of Section IIB of the CentralE>:cise Act, 1944 as amended by the Amendment Act of 1991.

7. The Assistant Collector by his two orders passed on 28.3.1996directed that the said amount of Rs. 4,97,101.01 and Rs.2,53,69,322.00 were not to be refunded to the assessee but to becredited to the Consumer Welfare Fund.

8. The aforesaid orders of the Assistant Collector were confirmed: CHAP. No. 1/2003 Pase No. 5 of 16

in appeals preferred by the assessee by the Commissioner(Appeals) vide order dated 20^'' December,1996 when this orderwas carried in appeal by the assessee to the CEGAT. The CEGATby its final order dated 27^'^ January,1998 (as rectified vide R.O.M.Order dated 9^" july,1998) held that provisions of Section IIB asamended with effect from 20^" September 1991 by theAmendment Act were not applicable to the present case in asmuch as the refund applications filed by the assessee in the years1972 to 1978 already stood finally disposed of by the orders of theCEGAT dated 1.6.1989 and 6.6.1989 long before Section IIB wasamended. The appeals of the assessee were accordingly allowedby the CEGAT.

9. In the judgment of the CEGAT dated 27.1.1998, as rectifiedvide R.O.M. Order No. 9.7.1998, it was held that the provisions ofSection IIB of the Central Excise Act as amended with effect from20^*" September 1991 by the 1991 .Amendment were not applicablein the present case since the refund applications had already beenallowed in 1989. It is this decision which has been questioned bythe department in this Reference,

10. On the facts of this case there are no merits in this Referenceas the question involved is clearly settled by the 9 Judge Benchdecision of the Supreme Court in Mafatlal Industries Ltd andOthers v. Union of India and Others (1997) 5 SCC 536. What has CEAT^ No.1/2003

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been laid down therein is that if an application for refund has beendisposed off, and the order had become final before the 1991amendment to Section IIB came into force, the principle of unjustenrichm.ent will not apply,

11. It may be mentioned that the main judgment in the case wasdelivered by Hon'bie Mr. justice B.P. Jeevan Reddy, who held onbehalf of himself and also on behalf of Hon'bie Mr. just ice j.S.Verma, Hon'bie Mr. justice B.C. Agrawal, Hon'bie Mr. justice A.S.Anand and Hon'bie Mr. justice B.N. Kirpal. Since the judgment ofHon'bie Mr. justice B.P. jeevan Reddy amounts to a judgment offive Hon'bie judges in a 9 judge Bench, hence it is the majorityjudgment and anything inconsistent with that judgment in theJudgment of other Hon'bie judges has to be disregarded.

12. Thus in para 57 of his judgment Hon'bie Mr. justice B.P.jeevan Reddy observed "The first decision of this Court to consider theamended Section 11-B is in Union of India v. JainSpinners Ltd._ The validity of the 1991 (Amendment)Act was, however, neither raised nor considered by thecourt. The impugned orders of the High Court, madebefore the coming into force of the 1991 (Amendment)Act, directing refund of the excess duty collected to themanufacturers, this Court held, would defeat theprovisions of amended Section 11-B which had comeinto force during the pendency of the refundproceedings. The Court held that so long as the refundproceedings are pending, the amended provisions getattracted and disentitle the manufacturer-paver fromclaiming anv refund contrary to the said provisions, inother words, the contention of the manufacturers thatthe amended Section 11-B applies only to claims of CHAR No. 1/2003

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refund, arising after the coming into force of the saidAmendment Act was rejected."

13. The same opinion has been expressed by Hon'bie Mr,Justice B.P, Jeevan Reddy in para 108{xi) of the judgmentwherein it is observed:- " Section IIB applies to all pending proceedingsnotwithstanding the fact that the duty may havebeen refunded to the petitioner/plaintiff pendingthe proceedings or under the orders of theCourt/ Trihynal/Authohty or otherwise, !t mustbe held that Union of India v. Jain Spinners andUnion of india v.. ITC have been correctlydecided. It is, of course, obvious that where therefund proceedings have finally terminated - inthe sense' that the appeal period has alsoexpired - before the commencement of the1991 {Amendment) Act {19-9-1991), they cannotbe reopened and/or governed by Section 11-B{3)[as amended by the 1991 {Amendment) Act).This, however, does not mean that the power ofthe appellate authorities to condone delay inappropriate cases is affected in any manner bythis clarification made by us.

14, The view expressed by Hon'bie Mr. justice B.P. Jeevan••

Reddy is also expressed by Hon'bie Mr. justice K.S.Paripoornan in para 342 of the Judgment wherein it isobserved:- "Sections il-B{2) and {3} cannot be madeapplicable to refunds already ordered by the court orthe refund ordered by the statutory authorities whichhave become final. It follows from a plain reading ofSection 11-B, clauses {1), {2) and {3) of the Act Theprovisions contemplate the pendency of theapplication on the date of the coming into force of theAmendment Act or the filing of an application which iscontemplated under law to obtain a refund after theAmendment Act comes into force. I am of the opinion CHAR No.1/2003

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that if the said provisions are held appiicable,- even tomatters concluded by the judgments or final orders ofcourts, it amounts to stating that the decision of thecourt shall not be binding and will result in reversingor nullifying the decision made in exercise of thejudicial power. The legislature does not possess suchpower. The court's decision must always bind partiesunless the condition on which it is passed are sofundamentally altered that the decision could nothave been given in the altered circumstances".

15. The same view has also been expressed by Hon'ble Mr.

justice S.C. Sen in para 255 of the judgment which states:- "1 shall now examine the other provisions of thenewly-added sections. Sub-section (1) of Section 11-Brequires an application for refund to be made. Sub-section {2} requires the Assistant Commissioner topass an order of refund provided the conditions setout therein are fulfilled. Sub-section (3) merely laysdown that no refund shall be made except asprovided in sub-section (2). There is a non obstanteclause that this will operate notwithstanding anythingto the contrary contained in any judgment, decree,order etc. It is obvious that new provisions will applyin cases where applications for refund were madebefore the new provisions came into force and alsosubsequently. Sub-section (3) has no retrospectiveeffect. When a case has been finally heard anddisposed of and no application for refund need bemade, sub-section (3) cannot apply. If there is ajudgment, decree or order which has to be carriedout the iegisiature cannot take away the force andeffect of that judgment, decree or order, except byamending the law retrospectively on the basis ofwhich the judgment was pronounced.

16. Thus, 8 out of 9 Hon'ble judges comprising the Benchhave taken the same view that if the refund application hasbeen fin.aiiy disposed off by an order passed before the 1991

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Amendment came into force, and that order had become final,then the amended Section 11-B will not apply.17. Only Hon'ble Mr. Justice A.M. Ahmadi took a contraryview vide paras 7 to 9 of his judgment, but it is not necessaryto refer to that judgment since it cannot prevail over the viewtaken by 8 out of 9 Hon'ble judges of the Bench in Mafatlal'scase (supra), IB. it may be noted that Section 11-B, after the 1991amendment, stated that the party applying for refund has toestablish that the incidence of such duty had not been passedon by him to any other person. It follows, therefore, thatParliament did not apply the principle of unjust enrichment tocases covered by the unamended Section 11-B, and it was forthis reason that the amendment was made in Section 11-B in1991.

19. ln our opinion, Heydon's mischief rule is applicable to thepresent case. Under that we have to see the mischief in theold law and find out the mischief which the legislaturewanted to remove. Obviously, the mischief was that underthe unamended Section 11-B the principle of unjustenrichment was not applicable and hence an assessee wasentitled to refund even if it had passed on the burden to theconsumers.

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20. In D.R. Fraser & Co. Ltd v. Minister of National Revenue.

AIR 1949 PC 120 (p.l23)Lorc! Macmillan observed:- "When an amending Act alters the language ofthe principal statute, the alteration must be taken tohave been made deliberately",

21. Thus, where the word 'reduce' has been substituted bythe word 'modify' it was held that the word 'modify' has awider connotation so as to include not only reduction butalso other kinds of alteration including enhancement, videWestern India Theatres Ltd v. Municipal Corporation. Poona,AIR 1959 SC 586 (589); State of U P v. Malik Zarid Khalid.AIR 1988 SC 136 (138); and State of Madhva Pradesh v. G.S.Pall and Flour Mills. AIR 1991 SC 772 {783,784).the word 'modify' it was held that the word 'modify' has awider connotation so as to include not only reduction butalso other kinds of alteration including enhancement, videWestern India Theatres Ltd v. Municipal Corporation. Poona,AIR 1959 SC 586 (589); State of U P v. Malik Zarid Khalid.AIR 1988 SC 136 (138); and State of Madhva Pradesh v. G.S.Pall and Flour Mills. AIR 1991 SC 772 {783,784).

22. Similarly when the New Zealand Dairy Board Act,1953,section 11 of which gave the Dairy Board power to appointcommittees and to delegate to a committee with theconsent of the minister any of its powers and functions wasrepealed and replaced by the New Zealand Dairy Productionand Marketing Board Act, 1961, section 13 of which gavethe Board power to appoint committees to advise it, it washeld that the change in language was not accidental andgave rise to the inference that Parliament deliberatelyrefrained from giving the Board power to delegate any of itspowers and functions to a committee with the consent of CFAR No. 1/2003

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the minister, vide leffs v. New Zealand Dairy Production etc.(1966) 3 All ER 863 {PC), (870), An argument that change inlaw by an amending Act was not intended will be readilynegatived if adherence to the law as it was before theamendment would make the words added by the amendingAct otiose, vide State of U,P. v, Radhev Shvam. AIR 1989 SC682 (689,690). It was thus held that after amendment ofsection 17(4) of the Land Acquisition Act, 1894 by theAmendment Act of 1984, a notification under section 6 ofthe Act cannot be issued simultaneously with thenotification under section 4, even in cases of emergency towhich section 17 is applied, for that will make the words'after the publication of the notification under section 4(1)'as added in section 17(4) redundant, vide State of U.P. v.Radhev Shvam (supra). Numerous illustrations caa befound where the legislature is not happy with a particularconstruction placed upon an enactment and has changedthe same by an amending statute, and that is specially trueof tax and welfare legislations. After a statute is amended,the statute thereafter is to be read and Construed withreference to the new provisions and not with reference toprovisions that originally existed, vide Venkata Subamma v.Ramayya, AIR 1932 PC 92; Shamrao V. Parulekar v. District ^

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Magistrate, Thana. AIR. 1952 SC 324 (326); Ramnarain v.Simla Banking & industrial Co. Ltd. AIR 1956 SC 614 (621);Laxmi Devi v. Mukund Kan war. AIR 1965 SC 834 (837);Onkarlal Nandlal v. State of Raiasthan. (1985) 4 SCC 404(^15); M/s Orient Paper Industries Ltd v. State of Orissa. AIR1991 SC 672 (682); and Yadiaoatti Venkateswarlti v. TheState of Andhra Pradesh. AIR 1991 SC 704 (709). Further thewisdom of the warning given by Lord Watson cannot bedoubted that it is an "extremely hazardous proceeding torefer to provisions which have been absolutely repealed inorder to ascertain what the legislature meant to enact intheir room and stead, vide Bradlauah v. Clarke (1883) 8 AC354 (380).

23. Learned counsel for the department submitted that if wetake the view that under the unamended Section 11-B theprinciple of unjust enrichment will not apply, then such aview will be inequitable and unfair to the public as theparty will be unjustly enriched.take the view that under the unamended Section 11-B theprinciple of unjust enrichment will not apply, then such aview will be inequitable and unfair to the public as theparty will be unjustly enriched.

24. In our opinion, there is no equity in a tax andconsiderations of equity are wholly out of place in a taxingstatute. This is because the principle of strictinterpretation applies to taxing statutes.considerations of equity are wholly out of place in a taxingstatute. This is because the principle of strictinterpretation applies to taxing statutes.

25. The principle of strict interpretation of taxing statutes CRARNo.l/2003

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was best enunciated by Rowlatt j in his classic statement:

"In a taxing statute one has to look merely at whatis dearly said. There is no room for any intendment.There is no equity about a tax. There is nopresumption as to a tax. Nothing is to be read in,nothing is to be implied. One can only look fairly at thelanguage used, {vide Cape Bradv Syndicate v. IRC(1921) 1 KB 64 [cited with approval in AIR 1968 SC623]).

26. !n AV Fernandez v. State of Kerala. AIR 1957 SC 657,the Supreme Court of India stated the principle asfollows: "If the Revenue satisfies the Court that the casefalls strictly within the provisions of the law, the subjectcan be taxed. If, on the other hand, the case is notcovered within the four corners of the taxing statute notax can be imposed by inference or by analogy or bytrying to probe into the intentions of the legislature andby considering what was the substance of the matter.

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27. Hence in taxing statutes the language cannot bestrained, vide State of Punjab v. lullunder VegetableSyndicate. AIR 1966 SC 1295. If the words of a taxingstatute fail, so must the tax. The courts cannot, exceptrarely and in clear cases, help the draftsman by afavourable construction,vide jTO v. Nadar. AIR 1968 SC

623.

28. In Innamuri Gopalan v. State of AP, 1964 SCR (2) 888, the exemption was denied to the assessee on the groundCRAR No. 1/2003 PageNo. Uof Ifi that the intention of the notification was to avoid doubletaxation, and as this was not a case of double taxation noexemption could be granted. The Supreme Court heldthat on the plain language of the notification theassessee was entitled to exemption, and since theintention was not reflected in plain words, it could not betaken into consideration.

29, it is said that tax and equity are strangers, videPartinoton v. Attorney General (1869) LR 4 HL 100. This ^

view was best expressed by Lord Carins;

"If the person sought to be taxed comes within theletter of the law he must be taxed, however great thehardship may appear to the judicial mind. On theother hand if the court seeking to recover the taxcannot bring the subject within the letter of the law,the subject is free, however apparently within thespirit of the law the case might otherwise appear tobe", vide Partinaton v. Attomev General (supra).

30. Thus, in interpreting a taxing statute one cannot goby the notion as to what is just and expedient, vide Cjl v,Shahzada Nand. AIR 1966 SC 1342. in IRC v. Hinchv.(1960) AC 748, the House of Lords held that a provisionin the Income Tax Act 1952 for a statutory penalty (formaking an incorrect return of income) of £20 andtrebling 'the tax which he ought to be charged underthis Act' referred not to the tax on the amount which thetaxpayer had failed to declare, but to the whole taxPage No. 15 of 16

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which he ought to be charged for the relevant year,notwithstanding the extravagant consequences whichflowed from giving the words their natural meaning.31. the Supreme Court of India has held that equity isout of place in tax laws, vide CJI v. Firm Muar. AIR 1955SC 1216, In gi V. Madho Prasad latia. {1976) 4 SCC 92,it held that there could be no consideration of equity ifthe language of the provision was plain and clear, butwhere it was not, and two interpretations.were possible,the one in consonance with equity and fairness should bepreferred.

32. In view of the above discussion, we answer thequestion referred in the negative, i.e. in favour of theassessee and against the department. It is, however,clarified that it is only orders of refund which havebecome final to which the amended Section 11-B will notapply, and not orders of refund against whichappeals/revisions are pending, before the higher DECEMBER?, 2005rg CHIEF JUSTICEMADAW B. LOKURJ

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