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PETITIONER:

MAFATALAL INDUSTRIES LTD. ETC. ETC.

Vs.

RESPONDENT:

UNION OF INDIA ETC. ETC.

DATE OF JUDGMENT: 19/12/1996

BENCH:

CJI, A.M. AHMADI

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

Ahmadi, CJI

I have had the benefit of studying the judgments of my

learned brothers Reddy, Sen and Paripoornan, JJ. Pursuant to

the discussions that I have had with them and with all my

other learned brothers on this bench, I find myself to be

broadly in agreement with the conclusions recorded by Reddy,

J., subject to the two aspects on which I have recorded my

views hereunder:

The first of these is the issue regarding the extent to

which the jurisdiction of ordinary courts is ousted in

respect of claims for refund of taxes illegally levied and

collected. In my view, it would be incorrect to hold, as

Reddy, J. has done, that every claim for refund of illegal

or unauthorised levy tax is necessarily required to be made

in accordance with the provisions of the Central Excise Act,

1944 (hereinafter called "the Excise Act"). The leading

authority governing this issue is the decision of this court

in Dhulabhai and others Vs. State of Madhya Pradesh and

Another, [1968] 3 S.C.R. 662. In this case, after analysing

the leading decisions in the field, this Court laid down the

Following propositions with a view to determining the extent

to which the jurisdiction of civil courts can be ousted:

"(1) Where the statute gives a

finality to the orders of the

special tribunals the Civil Courts'

jurisdiction must be held to be

excluded if there is adequate

remedy to do what the civil Courts

would normally do in a suit. Such

provision, however, does not

exclude those cases where the

provisions of the particular Act

have not been complied with or the

statutory tribunal has not acted

in conformity with the fundamental

principles of judicial procedure.

(2) Where there is an express bar

of the jurisdiction of the court,

an examination of the Scheme of the

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particular Act to find the adequacy

or the sufficiency of the remedies

provided may be relevant but is not

decisive to sustain the

jurisdiction of the civil court.

Where there is no express

exclusion the examination of the

remedies and the scheme of the

particular Act to find out the

intendment becomes necessary to see

if the statute creates a special

right or a liability and provides

for the determination of the right

or liability and further lays down

that all questions about the said

right and liability shall be

determined by the tribunals so

constituted, and whether remedies

normally associated with actions in

civil courts are prescribed by the

said statute or not.

(3) Challenge to the provisions of

the particular Act as ultra vires

cannot be brought before Tribunals

constituted under that Act. Even

the High Court cannot go into that

question on a revision or reference

from the decision of the Tribunals.

(4) When a provision is already

declared unconstitutional or the

constitutionality of any provision

is to be challenged, a suit is

open. A writ of certiorari may

include a direction for refund if

the claim is clearly within the

time prescribed by the Limitation

Act but it is not a compulsory

remedy to replace a suit lies.

(5) Where the particular Act

contains no machinery for refund of

tax collected in excess of

constitutional limits or illegally

collected a suit lies.

(6) Questions of the correctness

of the assessment apart from its

constitutionality are for the

decision of the authorities and a

civil suit does not lie if the

orders of the authorities are

declared to be final or there is an

express prohibition in the

particular Act. In either case the

scheme of the particular Act must

be examined because it is a

relevant enquiry.

(7) An exclusion of the

jurisdiction of the Civil Court is

not readily to be inferred unless

the conditions above set down

apply."

In view of these propositions, which have been

reiterated by this court on several occasions and thus

constitute sound law, it is clear that actions by way of

suits of petitions under Article 226 of the Constitution

cannot be completely eliminated. The claims for refund can

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arise under three broad classes and issue of ouster of

jurisdiction of civil courts can be understood by focussing

on the parameters of these classes which are as follows:

Class I: "Unconstitutional Levy"-- where claims for refund

are founded on the ground that the provision of the Excise

Act under which the tax was levied is unconstitutional.

Cases falling within this class are clearly outside the

ambit of the Excise Act. In such cases assessees can either

file a suit under Section 72 of the contract Act, 1872

(hereinafter called "Contract Act") or invoke the writ

jurisdiction of the High Court under Article 226 of the

Constitution.

Class II: "Illegal Levy"-- Where claims for refund are

founded on the grounded that there is

misinterpretation/misapplication/erroneous interpretation of

the Excise Act and the Rules framed thereunder.

Ordinarily, all such claims must be preferred under the

provisions of the Exercise Act and the Rules framed

thereunder by strictly adhering to the stipulated procedure.

However, in cases where the authorities under the Excise Act

arrogate to themselves jurisdiction even in cases where

there is clear want of jurisdiction, the situation poses

some difficulty . Reddy, J. has held that in all cases,

except where unconstitutionality is alleged, the remedy is

to be pursued within the framework of the Excise Act. This

is a dangerous proposition for it will not cater to

situations where the authorities under the Excise Act assume

authority in cases where there is an inherent lack of

jurisdiction. This is because, if one were to follow Reddy,

J.'s reasoning , the authorities under the Act will have the

final say over situations in which they totally lack

inherent jurisdiction in cases which are ultra vires the

Excise Act but intra vires the constitution. To that

extent, I would hold that in cases where the authorities

under the Excise Act initiate action though lacking in

inherent jurisdiction, the remedy by

way of a suit under Section 72 of the Contract Act or a writ

under Article 226 of the Constitution, will lie. Such a

conclusion will not frustrate the exclusion of jurisdiction

of civil courts by the Excise Act because the areas where an

authority acting under a statute is said to lack inherent

jurisdiction have been clearly demarcated by several

decisions of this court.

Class III: "Mistake of Law" -- Where claims for refund

are initiated on the basis of a decision rendered in favour

of another assessee holding the levy to be : (1)

unconstitutional; or (2) without inherent jurisdiction.

Ordinarily, no assessee can be allowed to reopen

proceedings that have been finally concluded against him on

the basis of a favourable decision in the case of another

assessee. This is because an order which has become final in

the case of an assessee will continue to stand until it is

specifically recalled or set aside in his own case.

In Cases where the levy of a tax has been held to be

(1) unconstitutional ; or (2) void for want of inherent

jurisdiction (as explained in Class II), it is open for the

assessees to take advantage of the declaration of the law so

made and claim refunds on the ground that they paid the tax

under a mistake of law. This is because such claims are

outside the ambit of the Excise Act. In such cases, the

limitation period applicable will be that specified in

section 17 (1) (c) of the Limitation Act.

Reddy, J. has moulded an exception to the above stated

principle. He has held that where a person approaches the

High Court or the Supreme Court challenging the

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constitutional Validity of a provision but fails, he cannot

take advantage of the declaration of unconstitutionality

obtained by another person on another ground; this is for

the reason that so far as he is concerned , the decision

has become final and cannot be ignored or put aside as if it

did not exist on the basis of the decision in another

person's case. However, in my opinion, since the levy of tax

has been held to be unconstitutional (which would lead to

the conclusion that it should never have been levied in the

first place) such an interpretation would be unfair to an

assessee who had the foresight to discern the

unconstitutionality of the provision (albeit on a different

ground) but was unfortunate in not being able to convince

the concerned court of the unconstitutionality of the

provision. Considering the gravity of the case, in my

opinion, it should be left open to such an assessee to use

such legal remedy as may be available to him to have the

earlier order reviewed or recalled on the basis of the order

made in the subsequent case. If he succeeds, well and good;

if he fails he must take the consequence of an adverse order

against him.

On the issue of the retrospective application of the

amended provisions of the Excise Act, I wish to emphasise

one practical difficulty that may arise. Reddy, J. has held

that in respect of proceedings that have been finally

culminated, there is no question of reopening proceedings,

and retrospectively applying the amended section 11B.

However, in respect of decrees and orders that have become

final but have not been executed, the non obstante clause,

Section 11B(3), provides as follows:

"(3) Notwithstanding anything to

the contrary contained in any

judgment, decree, order or

direction of the Appellate Tribunal

or any court or in any other

provision of this Act or the Rules

made thereunder or any other law

for the time being in force, no

refund shall be made except as

provided in sub-section (2)."

(Emphasis added)

It is, therefore, clear that in respect of such decrees

and orders, the procedure and conditions prescribed in

Section 11B will have to be complied with. However, under

the scheme of the amended Excise Act, the application for

refund which is a pre-requisite for invoking Section 11B

(2), is required to be made within six months from the

payment of duty. It is obvious that this requirement cannot

be complied with in respect of pending decrees and orders.

But it must at the same time be realised that in such a

case, the assessee was protesting against the recovery of

the excise duty from him for which he had even initiated

legal proceedings. It would therefore be in order to assume

that he had paid the duty even though he was protesting its

recovery. To ensure that such orders and decrees are not

frustrated, its must be deemed that the duties of excise in

such cases were paid "under protest" within the meaning of

the second proviso to clause (1) of Section 11B. this would

enable the assessees in such cases to file fresh

applications under Section 11B(2), thereby complying with

the scheme of the amended Excise Act.

Subject to the above, I agree with the rest of the

conclusions reached by Reddy, J.

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