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PETITIONER: UNION OF INDIA & ORS. ETC.

       Vs.

RESPONDENT: BARMALT (INDIA) LIMITED, GURGAON ETC.

DATE OF JUDGMENT:       18/02/1997

BENCH: B.P. JEEVAN REEDY, S.B. MAJMUDAR

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T      B.P.JEEVAN REDDY, J.      Civil Appeal no. 960 of 1986:      In this  appeal preferred  against the  judgment of the Delhi High  Court, two  questions arise,  viz., whether  the malt and  malt extract  produced b  the respondent,  Barmalt (India)  Private   Limited  [Barmalt],   falls  within   the expression "food product" in Exemption Notification No.55 of 1975 dated  March  1,1975  and  whether  the  respondent  is entitled to  refund of  the excess  duty paid by him pending the decision of the High Court. The assistant Collector took the view  that malt  and malt  extract cannot  be treated as food products and, therefore, not entitled to the benefit of the said  Notification. On  a writ petition being filed, the Delhi High  Court upheld the respondent’s plea and also held that it  is entitled  to the  benefit of  the said Exemption Notification. On  the second issue, the Delhi High Court has overruled the  Revenue’s plea  based on the theory of unjust enrichment. when  this appeal  come  up  for  hearing  on  a earlier date,  we held  that the  High Court  was  right  in saying that  malt  and  malt  extract  do  quality  as  food products and, therefore the respondent has been rightly held entitled to  the benefit  of the aforesaid Notification, But then the  question arose  about the  respondent’s  right  to refund. On  this aspect,  we posted  the matter  for further hearing because  of the  peculiar situation  arising in this matter to which we shall not advert.      Consequent upon  the decision  of the  High Court,  Sri Harish Salve,  learned counsel  for the  respondent say, the respondent,  Barmalt,   Became   entitled   to   refund   of Rs.2,67,00,983.16p. which was the amount of duty paid by it. Pursuant to  the impugned  judgment of the High Court, it is stated, an  amount of  Rs.2,41,53,497.92p. has been refunded to it.  The balance  amount of  Rs.25.47,485,24p.  is  still refundable to it. On these facts, in the ordinary course, we would have  disposed of  the matter  in  terms  of  Mafatlal Industries V.  Union of  India [1996  (9) Scale 487] and the format order,  which we  have devised  pursuant to  the said judgment but  Sri Harish Salve brought to our notice certain facts on  the basis  of which  he asks  for certain specific

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directions. The facts stated by him are the following:      The respondent,  Barmalt, is  one of  the  three  major producers of malt and malt extract in the country. The other two  being  Malt  Company  of  India  Limited  and  A.K.Malt [Private] Limited.  The malt  and malt  extract produced  by these units  is purchased  by certain  specified  industries only. The  industries purchasing  malt and malt extract fall under  two   categories,  (i)   industries  engaged  in  the manufacture of  beverages, like  Bournvita and Horlicks etc. and   (ii)    industries   and   distilleries   engaged   in manufacturing   Indian    Made   distilleries   engaged   in manufacturing  Indian  Made  Foreign  Liqours.  One  of  the Category (i)  industries is  H.M.M. Limited,  Now  known  as Smith Kline Beecham Consumer Health Care Limited, respondent in the  connected appeal.  Like other purchasers in category (i), H.M.M. Limited took proforma credit of the duty paid by it  on  the  purchase  of  malt/malt  extract  in  terms  of Notification No.201  of 1979,  which was  in  force  at  the relevant time. Other purchasers in category (i) also did the same.  [So   far  as   category   (ii)   purchasers,   i.e., distilleries and  breweries are  concerned, Sri  salve  says that they  were not  entitled to  and did  not avail  of any proforma  credit  for  the  duty  paid  by  them  when  they purchased   melt/melt extract  from the  respondent  or  the other two  units, as  the case  may be.}  But when the Delhi High Court held, under the judgment impugned herein, that no duty was  payable on  the clearance/removel of malt and malt extract by  virtue of  Exemption Notification  No.55 of 1975 the Revenue was obliged to refund the duty collected back to Barmalt. Having  done that,  the Revenue served notices upon the purchasers  of malt and malt extract [H.M.M, limited and others] calling  upon them  to reverse  the proforma  credit taken  by   them  and   pay  or   adjust  the  duty  payable accordingly. This  put the purchasers like H.M.M. Limited in peril. They  had already paid the duty [to Barmalt and other two producers]  while purchasing  the malt/malt  extract and now they were being asked to pay the same duty over again to the State on the Ground that the state has refunded the Duty to Barmalt  [and the  other two  producers] pursuant  to the judgment of  the High  Court. When  this demand  was  raised against H.M.M.  Limited, it  disputed the  same  on  several grounds including  limitation and  the Tribunal  appears  to have accepted its claim only on the ground of limitation [As already stated,  there are  other  purchasers,  like  H.M.M. Limited, falling in the first category mentioned above.]      Sri Salve  suggests that  this problem can be solved in the following  manner: Barmalt will pay over the entire duty to H.M.M.  Limited and  other similar  purchases  [who  have availed  of  the  proforma  credit]  There  are  only  three purchasers in  the first  category. As a matter of fact, out of the  sum of  Rs. 2.41,53,497.92p.,  Barmalt  has  already refunded an  amount of  Rs.1,28,87,580.34p to H.M.M. Limited and other similar purchasers. {The payment to H.M.M. Limited is stated  to be  in the  sum of Rupees eight Lakhs] Barmalt will pay  over the  rest of  the amount [received by them by way of refund] to the respective purchasers. Even the amount of  Rs.  25,47,485.24p.  will  also  be  paid  over  to  the respective purchasers  as soon  as it  is received  from the Revenue. In  this manner,  Barmalt would  have paid over the entire amount  received by  them by  way of  refund to their purchasers in  which case  no question  of unjust enrichment would arise in the case of Barmalt. So far as purchasers are concerned they  would also  not stand to lose in any manner. They would  get the  money from  Barmalt and  would then pay over/adjust the  amount to  Revenue. If  these two steps are

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completed, neither  the Revenue stands to lose not would the purchasers stand  to lose  and Barmalt  would  also  not  be unjustly enriched.  The  solution  suggested  by  Sri  Salve sounded attractive  when suggested  and accordingly  notices were directed  to the  other two  producers of malt and malt extract, viz.,  Malt company  of India  Limited and A.K.Malt (Private) Limited  - and  then  we  discovered  the  several difficulties in  the way  of accepting the suggestion of Sri Salve. They  are: (a) while the Revenue has filed the appeal against the  decision of  the Delhi  High Court in favour of Barmalt [against the order impugned herein], no appeals have been preferred  by the  Revenue against  similar  orders  in favour of other two producers aforesaid. Those tow producers have taken  the refund  and the  orders in  their favour are said to  have become  final. Their  Counsel stated that they are not willing to abide by or implement the said suggestion - or   formula, if we can call it one - and that there is no reason why  they should pay over the amounts which they have received by way of refund when the orders of refund in their favour have  become final.  (b) The  purchasers like  H.M.M. Limited is  before us.  It is  the respondent  in  connected appeal,  viz.,   Civil  Appeal  Nos.  3387-88  of  1992.  An undertaking has  been filed  on  behalf  of  H.M.M.  Limited stating that they are agreeable to the said formula provided the formula  is applied  uniformly to  other  two  producers viz., Malt  Company of  India Limited and A.K.Malt (Private) Limited also.  Sri Lakshmi  Kumaran, learned counsel for the H.M.M. Limited,  no doubt  stated that  if this  formula  is applied and  implemented uniformly,  H.M.M. Limited would be prepared to  reverse the  proforma credit equal t the amount received   by   them   from   the   said   three   producers notwithstanding the  fact that  H.M.M. Limited  has  already succeeded before  the Tribunal  on the ground of limitation. Counsel stated  that though according to law, H.M.M. Limited is not  obliged to  reverse the  credit  by  virtue  of  the decision of  the Tribunal  in their  favour,  they  are  yet prepared to  reverse the  credit if the formula suggested by Sri Salve is applied uniformly in case of all the purchasers in category  (i), There  are a  large number of purchaser in category (ii), who are also not before us.      Faced with  these difficulties, it was suggested by Sri Lakshmi Kumaran  and by  Sri Salve  that if  the  other  two producers, [Malt  Company  of  India  Limited  and  A.K.Malt (Private) Limited  refuse to abide by the said formula, this court should,  in the interest of justice, invoke its powers under Article  142 of  the Constitution  and direct  them to abide by  and implement the said formula. we have considered the said  suggestion but  we think  that  it  would  not  be feasible or  possible to  work out  the said  formula in the facts and  circumstances brought to over notice. Neither the other two producers are before us not are all the purchasers before us.  It would  be an endless and a highly complicated exercise which  we do  not think  advisable to undertake. In the circumstances,  we have  no alternative by to dispose of the appeal  as they  stand. So far as Civil Appeal No.960 of 1986 [Barmalt]  is concerned,  we direct  - in  view of  the admitted fact  that it  has passed  on the burden of duty to its purchasers - that barmalt should refund to the state the amount received  by them  by way  of refund [pursuant to the impugned judgment  of the  Delhi High Court] Except a sum of Rupees eight  lakhs. In view of the Fact that H.M.M. Limited is now before us and it has admittedly received the said sum of Rupees  eight Lakhs  from Barmalt,  the H.M.M. Limited is directed to  reverse the credit taken by it to the extent of Rs.8,00,000/- [Rupees  eight Lakhs  only and  pay it over to

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the State.      Civil Appeal  No 960  of 1986  is allowed  in the above terms. No order as to costs.      C.A.NOS.2447/89,3387-88/92 AND 9947/95:      No separate  arguments were  addressed in these appeals in view  of the  debate regarding  the formula  suggested in Civil Appeal No. 960 of 1986. List these appeals accordingly for disposal on merits next week.