Legal principle

Duty collected without authority of law is a payment under mistake under Section 72 of the Contract Act carrying a binding Article 265 duty of restitution, and the Department cannot defeat a refund already due under an appellate order before the unjust-enrichment amendments commenced by invoking its own failure to refund suo moto, as that would discriminate contrary to Article 14.

Court decision

The petition was accepted: the respondents were directed to refund the excise duty which became refundable to the petitioner as a result of the Collector (Appeals) order Ex. 1 dated 22-1-1986, with interest at 12% per annum from the date of actual payment to the date of refund, payment to be made within two months of the order.

Facts

Adarsh Metal Corporation, a partnership re-rolling firm manufacturing stainless steel 'Patta', claimed its product was classifiable under Sub-item (ia) of erstwhile Tariff Item 26AA of the Central Excises and Salt Act, 1944 tariff schedule rather than as 'sheets/strips' under Sub-item (ii), relying on Tribunal decisions. The Assistant Collector, Central Excise, Jodhpur rejected the claim, but the Collector (Appeals) by order dated 22-1-1986 allowed the appeal along with 14 similar appeals, entitling the petitioner to refund of duty paid 'under protest'. The Assistant Collector granted refunds to 8 assessees but rejected the claims of 7, including the petitioner; on further appeal, the Collector (Appeals) on 27-9-1988 set aside the rejection and directed refund, and the Department's appeal to CEGAT was dismissed on 31-8-1989. Despite this, no refund was made, leading to a writ petition for mandamus, this Court having already allowed identical petitions (Swastik Metals, Salawas Metals, Mehta Metals) on 6-12-1989 with 12% per annum interest.

Key provisions

• Section 28C, Customs Act, 1962 — Price of goods to indicate the amount of duty paid thereon
• Section 28A(2), Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice
• Section 28D, Customs Act, 1962 — Presumption that incidence of duty has been passed on to the buyer
• Section 27(2), Customs Act, 1962 — Claim of refund duty