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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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