2025 INSC 733

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 3833-3835 OF 2025

(ARISING OUT OF SLP(C) NOS. 22572 -22574 OF 2016)

M/S PATANJALI FOODS LIMITED

(FORMERLY KNOWN AS M/S RUCHI

SOYA INDUSTRIES LTD.) APPELLANT(S)

VERSUS

UNION OF INDIA & ORS. RESPONDENT(S)

J U D G M E N T

UJJAL BHUYAN, J.

The present civil appeals by special leave are directed

against the judgment and order dated 28.04.2016 passed by the

Division Bench of the High Court of Gujarat at Ahmedabad

(briefly ‘the High Court’ hereinafter) in Special Civil Application

2

Nos. 14540, 14541 and 14542 of 2015 (Ruchi Soya Industries

Limited Vs. Union of India & Ors.).

2. Subject-matter of all the three appeals is identical

and parties to the proceedings are common. Therefore, all the

appeals were heard together and are being disposed of by this

common judgment and order. In fact, facts in all the appeals

are similar except the quantity of refund involved.

3. For a proper perspective, relevant facts may be noted.

4. M/s M.P. Glychem Industries Limited (‘M.P. Glychem’

for short) imported certain quantity of crude degummed

soyabean oil of edible grade in bulk at Jamnagar and filed bill

of entry on 02.09.2002 seeking clearance of the imported goods

for home consumption. Customs department (department) did

not clear the goods on the ground that appellant was required

to pay higher customs duty on the basis of tariff value fixed for

the imported goods in terms of Section 14(2) of the Customs Act,

1962 (referred to hereinafter as ‘the Customs Act’). Contention

of the appellant was that at the time of the import of the goods

the concerned notification issued by Government of India fixing

3

tariff value under Section 14(2) of the Customs Act had not

come into effect. Therefore, appellant was liable to pay duty only

in terms of the provisions contained in Section 14(1) of the

Customs Act.

5. Since there was an impasse with the imported goods

being held up, appellant filed Special Civil Application No. 9308

of 2002 before the High Court challenging the validity of the

notification issued by the Government of India fixing the tariff

value of the imported goods i.e. crude degummed soyabean oil

(also referred to hereinafter as the ‘subject goods’) as also the

date of coming into effect of the said notification. One of the

grounds of challenge was that the notification was not available

for sale and was, therefore, not in the public domain. High

Court passed an order dated 07.10.2002 admitting the writ

petition and granted interim relief to the effect that for clearance

of the goods in question, appellant should furnish a bank

guarantee for the difference of duty of customs under Sections

14(1) and 14(2) of the Customs Act, clarifying that this

arrangement would be subject to order of final assessment.

4

6. On 09.10.2002, appellant had furnished bank

guarantee for the differential amount of Rs. 9,19,801.00

through its banker in favour of the department. In two other

writ petitions, on the same issue, bank guarantees to the extent

of Rs. 45,99,006.00 and Rs. 22,25,052.00 being the differential

amounts of duty were furnished. Upon furnishing the bank

guarantees as above by the appellant, the subject goods were

allowed to be cleared by paying customs duty payable under

Section 14(1) of the Customs Act.

7. In the meanwhile, M/s M.P. Glychem Industries

Limited stood merged with M/s Ruchi Soya Industries Limited

in terms of the order of the Bombay High Court dated

30.06.2006 and thereafter came to be known as M/s. Ruchi

Soya Industries Limited.

8. Special Civil Application No. 9308 of 2002 alongwith

the other two writ petitions were finally decided by the High

Court vide the judgment and order dated 13.09.2012. All the

three writ petitions were dismissed. Consequently, the interim

relief granted earlier stood vacated.

5

9. Against the aforesaid judgment and order dated

13.09.2012, appellant approached this Court in Civil Appeal

Nos. 1808-1813 of 2013.

10. While the civil appeals were pending before this

Court, the department on 28.01.2013 encashed the bank

guarantees and appropriated the sums covered by the bank

guarantees.

11. Civil Appeal Nos. 1808-1813 of 2013 were heard

alongwith other similar civil appeals by this Court and were

disposed of by the common order dated 05.05.2015. This order

has since been reported in (2016) 16 SCC 692 (Union of India

Vs. Param Industries Limited). This Court held that though the

notification might have been published on the date when the

goods were cleared, it was not offered for sale by the Central

Board of Excise and Customs (briefly ‘the Board’ hereinafter),

which event took place much thereafter. Therefore, it was not

justified and lawful on the part of the department to claim the

differential amount of duty on the basis of the said notification.

6

The appeals were accordingly allowed only on this point without

going into the other issues.

12. On 04.06.2016, appellant filed three similar refund

applications before the department seeking refund of the

differential duty amounts which were secured by means of the

bank guarantees. Quantum of differential duty amounts

collected by the department by encashing the bank guarantees

are as under:

(i) first writ petition: Rs. 9,19,801.00;

(ii) second writ petition: Rs.45,99,006.00; and

(iii) third writ petition: Rs. 22,25,052.00.

13. Department issued letter dated 17.06.2015 to the

appellant raising two issues: first was regarding non-filing of

refund application in proper format and the second was with

regard to non-submission of documents like balance sheet,

profit and loss account etc. for the relevant period to show that

the claim of refund is not hit by the principle of unjust

enrichment.

7

14. According to the appellant, in the facts of the present

case, question of unjust enrichment did not rise and the said

principle is certainly not applicable. Contention of the

appellant is that the details sought for were in consequence of

the requirements of Section 27 of the Customs Act but Section

27 which encapsulates the unjust enrichment principle has no

applicability in the present case. No additional or differential

duty was paid by it; the bank guarantees were furnished as

security to secure the amounts of differential duty on orders of

the High Court. Be that as it may, appellant submitted reply

letter dated 30.06.2015 pointing out that though it had

complied with the requirements of the letter dated 17.06.2015,

the amounts covered by the bank guarantees encashed by the

department had become refundable in terms of the judgment

of this Court dated 05.05.2015 in Param Industries Limited

(supra). Section 27 is not applicable in the facts of the case. It

was, therefore, contended that the department should not

insist on filing of the documents sought for to prove that the

incidence of the differential duty had not been passed on to the

8

customers and, therefore, there was no unjust enrichment by

the appellant.

15. However, department ignored the above contention of

the appellant and instead issued another letter dated

30.07.2015 again insisting upon submission of the same set of

documents. According to the appellant, despite several

personal meetings and oral requests, department remained

adamant that appellant should discharge the burden that it

had not unjustly enriched itself and, therefore, would be

entitled to the refund.

16. At that stage, appellant filed Special Civil Application

No. 14540 of 2015 before the High Court. Two other writ

petitions were also filed being Special Civil Application Nos.

14541 and 14542 of 2015. Prayer made was for quashing of

letters dated 17.06.2015 and 30.07.2015 and for a direction to

the department to refund the amounts covered by the bank

guarantees forcibly encashed by the department without

insisting on compliance with Section 27 of the Customs Act.

9

17. By the common judgment and order dated

28.04.2016, High Court dismissed all the three writ petitions.

However, it was observed that despite dismissal of the writ

petitions, it would be open to the appellant to produce

necessary documents before the department as demanded in

the context of the question of unjust enrichment. High Court

directed that if such documents were produced by 31.07.2016,

department should process the refund applications in

accordance with law.

18. Aggrieved thereby, the related special leave petitions

were filed. By order dated 22.08.2016, this Court had issued

notice and directed that no coercive steps be taken in the

meantime. Finally, while hearing the special leave petitions on

04.03.2025, leave was granted. In the hearing held on

04.03.2015, I.A. No. 41371 of 2024 was allowed, by which the

name of the appellant was changed from M/s. Ruchi Soya

Industries Limited to M/s. Patanjali Foods Limited.

19. Mr. Balbir Singh, learned senior counsel for the

appellant, assailing the impugned judgment submits that High

10

Court misdirected itself by holding that the doctrine of unjust

enrichment is applicable to the facts of this case and thereby

dismissing the writ petitions. Learned senior counsel submits

that the real substantive issue is whether forcible encashment

of bank guarantees by the department which were offered as

security by the appellant in terms of the interim order of the

High Court, following dismissal of the writ petitions can be said

to be the duty or the differential duty ‘paid’ by the appellant.

19.1. Learned senior counsel submits that provisions

contained in Section 27 of the Customs Act is pari materia to

Section 11B of the Central Excise Act, 1944 (‘Central Excise Act’

hereinafter). Encashment of bank guarantee cannot be equated

with payment of duty as per language employed in Section 27

of the Customs Act or for that matter Section 11B of the Central

Excise Act.

19.2. This issue has already been set at rest by this Court

in Oswal Agro Mills Ltd. Vs. Asstt. Collector of Central Excise,

11

Division Ludhiana

1which decision has been endorsed by a

Constitution Bench of this Court in Somaiya Organics (India)

Ltd. Vs. State of U.P.

2. This Court has held that the doctrine of

unjust enrichment will not come into play when bank guarantee

is offered as security and the same is encashed by the revenue

after the case is lost by the assessee. It has been held that it

cannot be said that assessee had paid the amount as duty;

therefore, such encashment would be out of the scope of unjust

enrichment.

19.3. Learned senior counsel submits that after this Court

had allowed the appeals of the appellant in Param Industries

Limited (supra) by holding that it was not justified and lawful

on the part of the department to claim the differential amount

of duty on the basis of the notification which was not offered for

sale by the Board at the time when the goods were cleared,

action of the respondents in retaining the money after forcibly

encashing the bank guarantees offered by the appellant as

1

(1994) 2 SCC 546

2

(2001) 5 SCC 519

12

security for the differential amount of duty has become

completely untenable. In fact, respondents had acted in extreme

haste while encashing the bank guarantees knowing fully well

that the judgment of the High Court was under active

consideration of this Court. Respondents could have, rather

ought to have, awaited the decision of this Court. Now that this

Court has upheld the contention of the appellant, on one pretext

or the other, respondents are trying to frustrate the refund by

raising the untenable plea of unjust enrichment. Stricto sensu,

he submits, it is not a case of refund because no duty was ‘paid’

by the appellant. Section 27 of the Customs Act therefore would

not be attracted. Appellant is thus not required to follow the

procedure in terms of Section 27 of the Customs Act.

19.4. He submits that withholding of the amounts after

unilaterally and arbitrarily encashing the bank guarantees

though this Court has upheld the contention of the appellant

that no differential duty was required to be paid for the imported

goods, has become totally unsustainable in law. In the

circumstances, respondents should be directed to forthwith

13

release the amounts illegally retained to the appellant.

Therefore, impugned judgment and order is liable to be set aside.

20. Per contra, Ms. Nisha Bagchi, learned senior counsel

appearing for the respondents submits that appellant had

furnished bank guarantees, in all total three bank guarantees,

covering the differential amounts of duty, the details of which

are as under:

Date Amount

09.10.2002 Rs.9,19,801.00

10.10.2002 Rs.45,99,006.00

24.10.2001 Rs.22,25,052.00

20.1. After the writ petitions were dismissed by the High

Court on 13.09.2012, respondents encashed the bank

guarantee for Rs.9,19,801.00 on 22.01.2013 and the other two

bank guarantees on 28.01.2013. Respondents were under no

legal injunction not to encash the bank guarantees after

dismissal of the writ petitions.

20.2. She submits that though the appellant had filed

three refund applications on 04.06.2015, it did not attach any

relevant document in support of the refund claims as required

14

under Section 27 of the Customs Act. Therefore, respondent

No. 3 had informed the appellant vide letter dated 17.06.2015

that the claims of refund were not filed in proper format and

necessary documents were not attached. Though the claims

were subsequently filed in proper format but still necessary

documents were not annexed. Therefore, respondent No. 3

again wrote to the appellant on 30.07.2015 to submit the

requisite documents. Instead of complying with such lawful

request of respondent No. 3, appellant approached the High

Court by filing writ petitions. High Court rightly dismissed the

writ petitions but still gave liberty to the appellant to claim

refund by submitting the requisite documents.

20.3. She further submits that in compliance to the

impugned order appellant had submitted documents pertaining

to the financial year 2015-16 only vide letter dated 25.07.2016

instead of submitting relevant documents in entirety certified

by a chartered accountant which could duly establish how the

differential amounts of duty have been accounted for in the

books of account for the corresponding financial years 2001-02

15

and 2002-03. Despite non-cooperation of the appellant,

respondent No. 3 sanctioned the refund in terms of Section 27

of the Customs Act but ordered for crediting the refund

amounts to the Consumer Welfare Fund in terms of Section 28C

read with Section 28D of the Customs Act for non-compliance

with the obligations under the doctrine of unjust enrichment.

20.4. Learned senior counsel submits that in the facts and

circumstances of the case contention raised by the appellant is

wholly misconceived. It is a case where appellant would be

entitled to refund provided it satisfies the requirements under

Section 27 of the Customs Act which it has failed to do. There

is no merit in the appeals. Accordingly, the appeals are liable to

be dismissed.

21. Submissions made by learned counsel for the parties

have received the due consideration of the Court.

22. Since the respondent as well as the High Court has

held that the doctrine of unjust enrichment would be applicable

to the facts of the present case, and therefore, the appellant

would be required to comply with the procedure and

16

requirements under the said principle, let us briefly deal with

this doctrine. Section 27 of the Customs Act and Section 11B of

the Central Excise Act deal with the question of refund. Refund

can be denied either in part or wholly by applying the doctrine

of unjust enrichment. Before we examine the above concept, it

would be apposite to refer to Section 27 of the Customs Act.

Section 27(1) of the Customs Act as it stood at the relevant time

reads thus:

(1) Any person claiming refund of any duty-

(i) paid by him in pursuance of an order of

assessment; or

(ii) borne by him,

may make an application for refund of such duty and

interest, if any, paid on such duty to the Assistant

Commissioner of Customs or Deputy Commissioner

of Customs-

(a) in the case of any import made by any individual

for his personal use or by Government or by any

educational, research or charitable institution or

hospital, before the expiry of one year;

(b) in any other case, before the expiry of six months,

17

from the date of payment of duty and interest, if any,

paid on such duty in such form and manner as may

be specified in the regulations made in this behalf and

the application shall be accompanied by such

documentary or other evidence (including the

documents referred to in section 28C) as the

applicant may furnish to establish that the amount of

duty and interest, if any, paid on such duty in relation

to which such refund is claimed was collected from,

or paid by, him and the incidence of such duty and

interest, if any, paid on such duty had not been

passed on by him to any other person:

Provided that where an application for refund has

been made before the commencement of the Central

Excises and Customs Laws (Amendment) Act, 1991,

such application shall be deemed to have been made

under this sub-section and the same shall be dealt

with in accordance with the provisions of sub-section

(2):

Provided further that the limitation of one year or

six months, as the case may be, shall not apply where

any duty and interest, if any, paid on such duty has

been paid under protest:

Provided also that in the case of goods which are

exempt from payment of duty by a special order

issued under sub-section (2) of section 25, the

18

limitation of one year or six months, as the case may

be, shall be computed from the date of issue of such

order:

Provided also that where the duty becomes

refundable as a consequence of judgment, decree,

order or direction of the appellate authority, appellate

tribunal or any court, the limitation of one year or six

months, as the case may be, shall be computed from

the date of such judgment, decree, order or direction.

Explanation I. —For the purposes of this sub-section,

“the date of payment of duty and interest, if any, paid

on such duty, in relation to a person, other than the

importer, shall be construed as “the date of purchase

of goods” by such person.

Explanation II.—Where any duty is paid provisionally

under section 18, the limitation of one year or six

months, as the case may be, shall be computed from

the date of adjustment of duty after the final

assessment thereof.

23. Basic thrust of the aforesaid provision is that any

person claiming refund of any duty may make an application

for refund of such duty and interest, if any, paid on such duty

to the Assistant Commissioner of Customs or Deputy

Commissioner of Customs if he had paid the duty in pursuance

19

of an order of assessment or borne by him. Such application

besides being required to be filed within the stipulated period

should also be accompanied by such documentary and other

evidence to establish that the amount of duty and interest

which is claimed by way of refund was collected from or paid by

him and that the incidence of such duty and interest had not

been passed on by him to any other person.

24. This doctrine was examined by a nine-Judge Bench

of this Court in Mafatlal Industries Ltd. Vs. Union of India

3. This

Court considered various questions concerning refund of excise

and customs duty collected contrary to law, in all its shades,

and also examined the concept of unjust enrichment. Thereafter,

the following propositions were culled out with the disclaimer

that those are not exhaustive:

i. Where a refund of tax/duty is claimed on the ground

that it has been collected from the petitioner/plaintiff by

misinterpreting or misapplying the provisions of the Central

Excise Act or the Customs Act or by misinterpreting or

3

(1997) 5 SCC 536

20

misapplying any of the rules, regulations or notifications

issued under the said enactments, such a claim has

necessarily to be preferred under and in accordance with the

provisions of the respective enactments before the

authorities specified thereunder and within the period of

limitation prescribed therein. While no suit is maintainable

in that behalf, writ jurisdiction under Article 32 or under

Article 226 would be available.

ii. All refund claims will have to be filed and adjudicated

under the provisions of the Central Excise Act or the

Customs Act, as the case may be.

iii. Where, however, a refund is claimed on the ground

that the provisions of the concerned Act under which it was

levied has been held to be unconstitutional, such a claim

being a claim outside the purview of the enactment, can be

made either by way of a suit or by way of a writ petition. This

principle is, however, subject to an exception. Where a

person approaches the High Court or the Supreme Court

challenging the constitutional validity of a provision but is

21

unsuccessful, he cannot take advantage of the declaration of

unconstitutionality obtained by another person on another

ground. This is because insofar he is concerned, the decision

has become final and cannot be reopened on the basis of a

decision on another person’s case. A refund claim in such a

situation cannot be governed by the provisions of the Central

Excise Act or the Customs Act.

iv. A claim for refund can succeed only if the petitioner/

plaintiff establishes that he has not passed on the burden of

duty to another person/other persons. His refund claim

shall be allowed/decreed only when he establishes that he

has not passed on the burden of the duty or to the extent he

has not so passed on, as the case may be. This is because

where the burden of the duty has been passed on, the

claimant cannot say that he has suffered any real loss or

prejudice. In such a case, the real loss or prejudice is

suffered by the person who has ultimately borne the burden.

If such a person does not come forward or where it is not

possible to refund the amount to him for one or the other

22

reason, it is just and appropriate that such amount is

retained by the State. The amount is retained by the State

on behalf of the people. There is no immorality or impropriety

involved in such a proposition.

v. The doctrine of unjust enrichment is a just and

salutary doctrine. It is based on the principle that no person

can seek to collect duty from both ends. Power of the court

is not meant to be exercised for unjustly enriching a person.

This doctrine is, however, inapplicable to the State as the

State represents the people and no one can speak of the

people being unjustly enriched.

vi. It is not open to any person to make a refund claim

on the basis of a decision of the court or tribunal rendered

in the case of another person.

vii. In case of indirect taxes like central excise and

customs duty, the tax collected without the authority of law

shall not be refunded to the claimant unless he alleges and

establishes that he had not passed on the burden of duty to

23

a third party and that he has himself borne the burden of

the said duty.

viii. Both Section 11B of the Central Excise Act and

Section 27 of the Customs Act provide for the purchaser

making the claim for refund provided he is able to establish

that he has not passed on the burden to another person.

Section 11B of the Central Excise Act and Section 27 of the

Customs Act therefore cannot be said to be a device to retain

illegally collected taxes by the State.

25. In Oswal Agro Mills Ltd. Vs. Asstt. Collector of Central

Excise, Division Ludhiana

4 (Oswal Agro Mills Ltd.1), this Court

noted that there was a dispute between Oswal Agro Mills and

the excise department as to whether the goods under dispute

were liable to excise duty under tariff item No. 15(1) or 15(2).

This Court upheld the contention of Oswal that the appellant

was liable to pay excise duty under tariff item No. 15(1). Appeal

before this Court was filed against the decision of the tribunal

4

1995 Supp. (3) SCC 65

24

which had taken a contrary view. This Court had passed an

interim order that 50 percent of the dues be paid in cash and

for the remaining 50 percent of the dues, equivalent amount of

bank guarantee be furnished with further direction to keep alive

the bank guarantee till the decision in appeal. After Oswal

succeeded before this Court, it moved the authorities for refund

of the excess amount deposited in pursuance of the interim

order of this Court. Since no decision was being taken, Oswal

moved the High Court. A direction was issued to the revenue by

the High Court to decide the application for refund on merit

while directing Oswal to get the bank guarantee extended till

disposal of the claim for refund. Notwithstanding the same,

revenue encashed the bank guarantee to meet the duty demand.

This Court found the behaviour of the excise department highly

improper and held that bank guarantees were furnished to

secure the interest of the parties till determination of matters

pending before the Court. No bank guarantee could be encashed

till the decision of the Court. Revenue had no power by using

its executive fiat to get the bank guarantee encashed. Allowing

25

the appeal, this Court directed the revenue to refund the money

so collected by encashing the bank guarantee forthwith.

26. It appears that revenue filed review petition for review

of the aforesaid order in Oswal Agro Mills 1. In review it was

contended by the revenue that refund was not permissible

having regard to the provisions of Section 11B of the Central

Excise Act. In Oswal Agro Mills Ltd. Vs. Assistant Commissioner

of Central Excise, Division Ludhiana

5, (Oswal Agro Mills Ltd. 2),

this Court referred to Section 11B of the Central Excise Act and

held that the said provision applies when an assessee claims

refund of excise duty. A claim for refund is a claim for

repayment. It presupposes that the amount of excise duty has

been paid over to the excise authorities. It is then that the excise

authorities would be required to repay or refund the excise duty.

It is in this factual backdrop that this Court posed the question

for consideration as to whether it could be said that furnishing

of a bank guarantee for all or part of the disputed excise duty

pursuant to an order of the court is equivalent to payment of

5

(1994) 2 SCC 546

26

the amount of excise duty. This Court answered the above

question in the negative and held as follows:

10. The question, therefore, is whether it can be said that

the furnishing of a bank guarantee for all or part of the

disputed excise duty pursuant to an order of the court is

equivalent to payment of the amount of the excise duty. In

our view, the answer is in the negative. For the purposes

of securing the revenue in the event of the revenue

succeeding in proceedings before a court, the court, as a

condition of staying the demand for the disputed tax or

duty, imposes a condition that the assessee shall provide

a bank guarantee for the full amount of such tax or duty

or part thereof. The bank guarantee is required to be given

either in favour of the principal administrative officer of the

court or in favour of the revenue authority concerned. In

the event that the revenue fails in the proceedings before

the court the question of payment of the tax or duty, the

amount of which is covered by the bank guarantee, does

not arise and, ordinarily, the court, at the conclusion of its

order, directs that the bank guarant ee shall stand

discharged. Where the revenue succeeds the amount of the

tax or duty becomes payable by the assessee to the

revenue and it is open to the revenue to invoke the bank

guarantee and demand payment thereon. The bank

guarantee is security for the revenue, that in the event the

revenue succeeds its dues will be recoverable, being

backed by the guarantee of a bank. In the event, however

27

unlikely, of the bank refusing to honour its guarantee it

would be necessary for the revenue or, where the bank

guarantee is in favour of the principal administrative

officer of the court, that officer to file a suit against the

bank for the amount due upon the bank guarantee. The

amount of the disputed tax or duty that is secured by a

bank guarantee cannot, therefore, be held to be paid to the

revenue. There is no question of its refund and Section 11-

B is not attracted.

26.1. Having held so this Court found no merit in the

review petition and reiterated the direction it had issued in

Oswal Agro Mills 1 to repay the amount collected upon

encashment of the bank guarantee.

27. In Somaiya Organics (India) Ltd. (supra), a

Constitution Bench of this Court was adjudicating a batch of

appeals filed as a sequel to a judgment of this Court in

Synthetics and Chemicals Ltd. Vs. State of U.P. wherein it was

held that in respect of industrial alcohol, the States were not

authorized to impose the impost they had purported to do. By

that decision, this Court had overruled its earlier decision in

State of U.P. Vs. Synthetics and Chemicals Ltd. wherein the

28

validity of such an impost was upheld. In the second Synthetics

case, it was declared that the impugned provisions were illegal

prospectively. The question which arose for consideration in the

batch of appeals was whether the vend fee which had been

levied by the appropriate state enactments but not collected

either by reason of orders of the court or otherwise could be

collected then when the said provisions had been held to

be invalid prospectively. In the course of this decision,

Constitution Bench referred to Article 265 of the Constitution

of India and observed that the words used therein are ‘levy’ and

‘collect’. In a taxing statute the words ‘levy’ and ‘collect’ are not

synonymous words; while levy would mean assessement or

charging or imposing tax, collect would be physical realisation

of the tax which is levied or imposed. Collection of tax is

normally a stage subsequent to levy of the same. Constitution

Bench approved the decision in Oswal Agro Mills 2 and held as

follows:

35. Furthermore, in view of the enunciation of the law by

this Court in Oswal Agro Mills 2, a bank guarantee which

is furnished cannot be regarded as payment of excise levy

29

which the Government is entitled to retain. The furnishing

of a bank guarantee is ordered normally in order to ensure

collection of dues. Where, however, the State, as in the

present case, has been held not to be entitled to collect or

realise vend fee after 25-10-1989 it cannot be allowed to

invoke the bank guarantee and realise the amount of vend

fee. What cannot be done directly cannot be done indirectly

either. Furnishing of bank guarantee is only a promise by

the bank to pay to the beneficiary the amou nt under

certain circumstances contained in the bank guarantee.

Furnishing of bank guarantee cannot tantamount to

making of payment as it was to avoid making payment of

the vend fee that bank guarantees were issued. The

respondents, in other words, are not entitled to encash the

bank guarantees and realise vend fee in respect of the

period prior to 25-10-1989.

28. On the other hand, we find that the High Court had

placed reliance on a two-Judge Bench decision of this Court in

DCW Limited Vs. Union of India

6 and held that the doctrine of

unjust enrichment would be clearly applicable. Therefore,

burden would be on the appellant to establish that it had not

passed on the duty to third parties. We are afraid High Court

6

(2016) 15 SCC 789

30

erred in placing reliance on the said decision. In that case, the

dispute was as regards classification of the imported goods. As

per the classification of revenue, applicant was required to pay

higher duty which the applicant disputed. This dispute was

ultimately settled by the tribunal as per which a certain sum of

money became refundable to the applicant, being the difference

between the duty payable and the duty actually paid. When the

applicant filed application for refund, the same was rejected by

the proper officer relying on the doctrine of unjust enrichment.

It was held that applicant could not satisfy the authorities that

the burden was not passed on to the ultimate consumers.

Therefore, applicant was not entitled to refund. When this was

challenged before the High Court, the prayer for refund was

partially allowed. Regarding the partial rejection High Court

held that the amount covered by the partial rejection were not

paid by the applicant pursuant to order passed by the High

Court; In fact, High Court had issued positive direction to the

applicant for deposit of the said amount. In spite of order of the

High Court applicant defaulted in payment, whereafter the

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interim protection was vacated. Following the same, revenue

encashed the bank guarantee. It was in that factual backdrop

this Court held that the authority had rightly applied the

doctrine of unjust enrichment. Applicant had defaulted in

making the payment despite order of the court as a result of

which the stay order was vacated. Thereafter, revenue recovered

the amount of duty on encashment of the bank guarantee. This

Court noted that High Court had after vacating the stay order

permitted the revenue to encash the bank guarantee. It was in

this context this Court opined that as far as refund was

concerned it had to be decided in the light of the doctrine of

unjust enrichment which was clearly applicable to the facts of

that case.

29. We fail to understand as to how this decision would

be applicable to the facts of the present case. In DCW Limited

(supra), it was the court which had permitted the revenue to

encash the bank guarantee after vacating the stay order

because of persistent default on the part of the applicant in

paying the duty. Insofar the present case is concerned, it is true

32

that in the initial round of litigation, High Court had dismissed

the claim of the appellant that it was not required to pay higher

customs duty in terms of Section 14(2) of the Customs Act but

liable to pay duty only in terms of Section 14(1). After the High

Court had dismissed the writ petitions, appellant had filed

special leave petitions before this Court which upon leave being

granted were registered as Civil Appeal Nos. 1808-1813 of 2013.

It is also true that there was no interim order in those batch of

civil appeals. But there was no direction either or leave granted

by the High Court to the respondents to encash the bank

guarantees furnished by the appellant on orders of the High

Court covering the differential amount of duty. Without waiting

for this Court to take a decision in Civil Appeal Nos. 1808-1813

of 2013, revenue displayed extreme haste and encashed the

bank guarantees on 22.01.2013 and 28.01.2013 respectively.

Ultimately, those civil appeals were allowed by this Court in

Param Industries Limited (supra) holding that the concerned

notification was not offered for sale by the Board when the

imported goods were cleared; therefore, it was not justified and

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lawful on the part of the department to claim the differential

amount of duty on the basis of the said notification.

30. It is thus evident that respondents had recovered the

differential duty amount by adopting coercive method i.e.

encashment of the bank guarantees which were offered as

security for the differential amount of duty on orders of the High

Court. Under the scheme of the Customs Act, duty is assessed

provisionally or finally whereafter an assessment order or order-

in-original is passed. Post assessment order or order-in-original,

the concerned importer is required to pay the assessed duty. If

the importer does not pay the duty , revenue can enforce

recovery under Section 142 of the Customs Act as recovery of

sums due to the Government. The key word in Section 27 of the

Customs Act is ‘paid’. Refund thereunder is permissible only if

any duty is ‘paid’ by the claimant which subsequently becomes

refundable either fully or in part. In the facts of the present case

encashment of bank guarantees offered as security cannot be

treated as payment of customs duty. Respondents could have

either awaited the decision of this Court or could have directed

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the appellant to renew the bank guarantees. This they did not

do. Instead they resorted to arbitrary encashment of the bank

guarantees. Such encashment of bank guarantees cannot be

treated as payment of duty or duty paid by a claimant. In such

circumstances, the doctrine of unjust enrichment or Section 27

of the Customs Act would not be applicable. It is evidently clear

that respondents are holding on to money of the appellant

which they are not authorized to do so as per judgment of this

Court in Param Industries Limited (supra). They have no

authority in law to hold on to such money and, therefore, the

same has become totally untenable.

31. In the circumstances, we set aside the impugned

judgment and order of the High Court dated 28.04.2016 and

direct the respondents to immediately refund the amounts

covered by the bank guarantees to the appellant. Since

retention of such amounts is unjust and unlawful, the same

would carry interest at the rate of 6 percent from the dates of

encashment till repayment. Let the repayments with applicable

35

interest be released to the appellant within a period of four

months from today.

32. Appeals are allowed. However, there shall be no order

as to cost.

……………………………J.

[ABHAY S. OKA]

……………………………J.

[UJJAL BHUYAN]

NEW DELHI;

MAY 19, 2025.