Legal principle

Nothing can be collected or retained under a taxing Act beyond what the charging section read with the machinery provisions authorises; amounts collected in excess are not duty at all, and their retention offends Article 265 of the Constitution.

Court decision

The extract does not contain the Court's operative majority order; it records one opinion (expressing respectful concurrence with Paripoornan, J. that suits or writ petitions are maintainable depending on the facts) holding that Section 11B is a device for denying refund and must be struck down as violative of Article 265, that Section 11D imposes an unreasonable restriction violating Article 19(1)(g) and is struck down, and that Sections 11C(2)/12C and 12D are also violative of Article 265; it concludes the appeal should be allowed and the writ petitions should succeed, with illegally collected duties returned to the person from whom they were collected.

Facts

Mafatlal Industries Ltd. and other manufacturers brought appeals and writ petitions concerning, 'in all its shades', the refund of excise and customs duties collected contrary to law; the matters reached a nine-Judge Bench after a reference doubting the correctness of Sales Tax Officer, Benaras v. Kanhaiyalal Mukundlal Saraf. In 1991 Parliament enacted the Central Excises and Customs Law (Amendment) Act, 1991 (Act 40 of 1991), substantially amending the refund provisions of the Central Excises and Salt Act, 1944 and the Customs Act (Sections 11A, 11B, 11C, 11D, 12 etc.) and introducing the concept of unjust enrichment; writ petitions challenging its validity were also before the Court. The Department had collected duties in excess of what the charging provisions authorised and, under the new scheme, sought to withhold refunds, crediting amounts to a Fund or returning them to buyers rather than to the manufacturers. The extract does not identify the specific goods or consignments involved.

Key provisions

• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 28A(2), Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice
• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 28B(2), Customs Act, 1962 — Duties collected from the buyer to be deposited with the Central Government