Pending cases not to get excise duty refund, says HC

Does the amended Section 11B of the Central Excise Act apply to cases where refund has been directed but not implemented?

Clarifying the question posed by the Customs Excise and Gold (Control) Appellate Tribunal (CEGAT), the Delhi High Court has held that the 1991 amendment to Section 11B will only apply to the orders of refund which have become final and not to the cases which are still pending.

While making an observation in favour of Dalmia Cement (Bharat) Ltd seeking a refund of Rs 2.68 crore excise duty and action against the Commissioner of Central Excise, Trichy, a Division Bench comprising Chief Justice Markendeya Katju and Justice Madan B Lokur clarified that "it is only orders of refund which have become final to which amended Section 11-B will not apply, and not orders of refund against which appeals/revisions are pending, before the higher authorities."

The court relied on the nine-judge Bench judgement of the Supreme Court in Mafatlal Industries Ltd and others vs Union of India (1997), where it was held that if any refund application was disposed of and the order had become final before the 1991 amendment to Section 11B came into force, the principle of unjust enrichment will not apply.

The collector, central excise, Trichy and the assistant collector had dismissed Dalmia Cement's applications seeking refund of excise duty of Rs 2.68 crore paid by it under protest between 1970 to 1978.

CEGAT in its final order had held that provisions of Section 11B as amended with effect from September 1991 were not applicable in the case as the refund applications already stood disposed of by its orders in 1989, long before the 1991 amendment.

However, the excise department had refused to refund the duty and instead directed the company to credit it to the Consumer Welfare Fund as the refund had not been actually paid till 1991 when the amended provisions of Section 11 B were made applicable.

According to the department, if it took a view that under the unamended Section 11-B the principle of unjust enrichment will not apply, then such a view will be inequitable and unfair to the public as the party will be unjustly enriched.

However, the court said, "There is no equity in tax and considerations of equity are wholly out of place in a taxing statute. This is because the principle of strict interpretation applies to taxing statutes."