Tata Iron & Steel Company Limited V. The Union of India & Ors.

CWJC/2516/1998

AI Insights

The case revolves around a dispute concerning the classification and duty levied on corrugated sheets by Tata Iron & Steel Company Limited, which led to a series of legal battles over the correct tariff item and the consequent duties. Initially, the company was required to deposit a sum as part of an interim order to stay further actions against it. The Supreme Court eventually ruled in favor of the petitioner, leading to a demand for a refund of the deposited amount with interest. The core legal issue was whether the petitioner was entitled to interest on the deposited amount and from which date such interest should be calculated.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 802128 (HC-RANCHI)
• Appeal Type: Others
• Pronouncement Date: 11-10-2012
• Assessment Year: misc
• Other Referred Cases: Tata Refractories Ltd. & Ano. Vs. Sales Tax officer & Ors., Commissioner Of Central Excise, Hyderabad Vs. ITC LTD., Sandvik Asia Ltd. Vs. Commissioner of Income Tax I, Pune & Ors., O.N.G.C Ltd. Vs. Commissioner of Customs, Mumbai, Alembic Glass Industries Ltd. Vs. Union of India, Redihot Electricals Vs. Union of India, Sheel Thermoplastics Limited & Ano. Vs. Union of India and Ano., Jyoti Limited, Baroda Vs. Union of India & Ano.
• Laws Referred To: Central Excise Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: D ROSHAN
• Assessee Lawyers: M S MITTAL
• Keywords: Central Excise; Interest on Refund; Judicial precedents; Tariff Item Classification
• Section: 68; 25; 226; 11BB; 26-A; 227; 26(A)(A)

Judgement Text

"1 CWJC No. 2516 of 1998R ­­­­­­­­ In the matter of an application under Article 226 & 227 of the Constitution of India ­­­­­­­­­ Tata Iron & Steel Company Limited Petitioner Vs. The Union of India & Ors. Respondents ­­­­­ For the Appellant/Petitioner : M/s. M.S.Mittal, Snr.Adv., A.R.Choudhary For the Respondents : M/s. D.Roshan, Sr.S.C(Central Ex.) A.Kumar, R.Kumari ­­­­­­ PRESENT HON'BLE THE CHIEF JUSTICE HON'BLE MRS. JUSTICE JAYA ROY Reportable Dated 11 th October, 2012 By Court Heard learned counsel for the parties. 2. Though the issue involved in this writ petition is very short, it would be appropriate to mention the facts in brief. Prior to amendment dated 1st August, 1983, Tariff Item No.25, corrugated sheet, was being classified and levied to duty in Tariff Item No.26(a) (a) of the First Schedule to Central Excise Act. After amendment of Tariff Item No.25 from 1st August, 1983, it was transferred to Tariff Item No.26(A)(A) and the petitioner submitted a fresh classification list no.06/83 from 1st August, 1983 for approval and the Assistant Collector, Central Excise, vide order dated 31.7.1984, approved the classification list effecting from 1st August, 1983. On 28th May, 1985, the Collector of Central Excise, Patna, directed Assistant Collector to file an appeal against the order passed by the said Collector of Central Excise dated 30.7.1984 approving the classification before 2 the Collector (Appeals), Central Excise. In view of the direction of the Collector of Central Excise, the appeal filed by the Department was allowed by the Collector (Appeals), Kolkata, who set aside the classification list dated 31.7.1984 and held that corrugated sheet should be classified under erstwhile Tariff Item No.68 for the period from 4th August, 1983 to 16th March, 1985 and directed the petitioner to pay duty on plain sheet during the period 1st August, 1983 and thereafter corrugated sheet under Tariff Item No.68 and the authorities raised demand on differential duties under Tariff Item No.68. 3. The petitioner being aggrieved against the order dated 31st October, 1985 preferred a writ petition being CWJC No.219/1986R and a Division Bench of Patna High Court passed an interim order on 30th April, 1986, which is as under:­ “Without going into this question, we direct that no further steps in pursuance of annexure 8 shall be taken during the pendency of this writ petition against the petitioner, if the petitioner deposits a sum of Rs.1,00,00,000/­ (Rs.one crore) within four months from today.” 4. Aggrieved against the said interim order, the petitioner preferred Special Leave to Appeal which was converted into Civil Appeal No.2796/1986, wherein, vide order dated 12th August, 1986, Hon'ble Supreme Court modified the order and directed the petitioner to deposit Rs.25 lacs on or before 14th September, 1986 and another sum of Rs.25 lacs on or before 14th October, 1986 and to furnish bank guarantee for Rs.50 lacs within eight weeks from the 3 date of the order. In pursuance of the order of the Hon'ble Supreme Court dated 12th August, 1986, the petitioner deposited Rs.25 lacs on 12th September, 1986 through cheque no.067889 dated 13th September, 1986 and another sum of Rs.25 lacs on 7th October, 1986 through cheque no.068479 dated 8th October, 1986. 5. The petitioner's writ petition was allowed, vide order dated 19th August, 1988. At this juncture, we may mention here that in the order dated 30th April, 1986 and in the order passed by the Hon'ble Supreme Court on 12th August, 1986, there was no condition for payment of interest over this amount by the respondent­Revenue, but in the appeal, being L.P .A No.71/1988R, filed by the Union of India, Revenue, a Division Bench of Patna High Court, on 7th February, 1989, passed an interim order, staying the operation of the impugned judgment dated 19th August,1988 passed in the petitioner's writ petition and because of that reason, the Department was not supposed to repay the amount and therefore, to safeguard the interest of the writ petitioner, in the order dated 7th February, 1989 itself, it was ordered that the Department will refund the amount with interest at the rate of 15 (fifteen) per cent per annum, if it loses the appeal. However, L.P .A No.71/1988R of the Union of India was allowed on 15.4.1989 and the respondent Revenue was not supposed to refund the deposited amount to the writ petitioner in the light of the decision of the Division Bench of this Court. However, the petitioner preferred Special Leave to Appeal, which 4 was granted by Hon'ble Supreme Court and the petitioner's Civil Appeal No.1460/1990 was allowed, vide order dated 22nd January, 1997 and the impugned judgment passed by the Division Bench of this Court as well as the order of the Collector (Appeals) dated 31st October, 1985 and 24th December, 1985 respectively and the show cause­cum­demand notices dated 14th May, 1985 and 11th September,1986 respectively were quashed. It will be made clear that Hon'ble Supreme Court quashed two orders and two demand notices as two appeals were decided by the judgment rendered in Civil Appeal No.1461/1990, which was preferred by Tinplate Co. of India Ltd. and another preferred by the writ petitioner being Civil Appeal No.1460/1990. In view of the ultimate decision deciding the controversy finally by the Hon'ble Supreme Court dated 22nd January, 1997, the petitioner sought refund of the deposited amount of Rs.50 lacs with interest @ 15% per annum in the light of the interim order dated 7th February, 1989 passed in L.P .A No.71/1988R. The respondent­ Union of India, Revenue, refused to make payment of interest and hence, writ petition has been filed by the petitioner. On 26th November, 2010, this Court observed that the amount, which was deposited with the Revenue, was deposited under the orders of the Court for grant of stay and it was associated with the condition of payment of interest and the amount has been refunded but interest has not been paid. Therefore, this Court further observed that there is catena of judicial decisions that if for a long time the 5 Department retains tax, then the Department should pay interest on it. However, instead of passing any final order, the Division Bench of this Court asked the petitioner to sit for negotiation and take decision. 6. After order dated 26th November, 2010, the parties negotiated and in negotiation, the petitioner pressed its demand for payment of interest @ 15% from the date of deposit till its refund to the writ petitioner on 12.1.1999 and the respondents took the stand that firstly interest is not provided in any statutory provision, in case of recovery of any amount; however, subsequently a provision was inserted in section 11BB of the Central Excise Act with effect from 26.5.1995 and therefore, prior to this period, no interest can be claimed by the writ petitioner; secondly if the petitioner is found to be entitled to interest, then the interest can only be paid from the date of decision of Hon'ble Supreme Court, i.e. from 12.1.1997 because of the reason that the interim order passed by this Court in L.P .A No.71/1988R providing the award of payment of interest @ 15% per annum merged in the final judgment passed by the Division Bench of this Court dismissing the writ petition of the writ petitioner and therefore, the writ petitioner could have claimed interest from the date of the decision of Hon'ble Supreme Court, if the petitioner is entitled to interest. 7. Learned counsel for the petitioner submitted that there are catena of authorities wherein it has clearly been said by various 6 High Courts and also by Hon'ble Supreme Court that whenever any amount is recovered illegally and retained even by the Union of India or Revenue, then they are liable to pay interest. In this case, the petitioner was not liable to pay principal amount as claimed by the Revenue and ultimately in the petitioner's Civil Appeal, final decision was given by Hon'ble Supreme Court in continuation of the proceeding of writ petition of the petitioner itself and therefore, the petitioner, who has paid the amount in the proceedings of the writ petition, is entitled to interest over the amount which it paid to the respondent­Revenue by virtue of the order passed by this Court in the writ proceedings itself. It is also submitted that the Division Bench of this Court has quantified the rate of interest @ 15% per annum, which has not been challenged by the Revenue and therefore, they cannot dispute the rate of interest now after the decision of Hon'ble Supreme Court. 8. Learned counsel for the petitioner also submitted that the respondents' contention that there was no statutory provision for payment of interest and therefore, they are not liable to pay interest, has been answered by Hon'ble Supreme Court in the case of Tata Refractories Ltd. & Ano. Vs. Sales Tax officer & Ors. reported in (2003) 1 SCC 65, wherein it has been held that even when there is statutory provision of payment of interest on the amount withheld by the Department/Revenue, rate of interest will be as ordered by the Court, may it be in the interim order and not according to statutory 7 provision. Learned counsel for the petitioner also relied upon judgment of Hon'ble Supreme Court delivered in the case of Commissioner Of Central Excise, Hyderabad Vs. ITC LTD. reported in (2005) 13 SCC 689. However, it was a case wherein issue under consideration was whether the interest is payable in a case where payment is required to be made in compliance of statutory condition of pre­deposit contained in section 35­F of the Central Excise Act, 1944, which provides condition of pre­deposit for maintaining appeal and whether such amount is required to be refunded with interest in the light of circular issued by the Department itself. Hon'ble Supreme Court held that rate of such interest on delayed refunds are to be governed by the circular and rate of interest was reduced according to the circular to 12% in certain cases. Learned counsel for the petitioner further relied upon the judgment of Hon'ble Supreme Court rendered in the case of Sandvik Asia Ltd. Vs. Commissioner of Income Tax I, Pune & Ors. reported in (2006) 2 SCC 508 wherein issue of award of interest in various contingencies have been considered in detail including the issue when there is no provision in the Act for payment of compensation or interest on delayed payment by the statutory authority as well as also considered the issue of general principle of law by which aggrieved ought to have been compensated in case of inordinate delay in refunding money due to it. Yet another judgment of Hon'ble Supreme Court relied upon by the learned counsel for the petitioner 8 is the judgment delivered in the case of O.N.G.C Ltd. Vs. Commissioner of Customs, Mumbai reported in 2007 (215) E.L.T 166 (SC) wherein from the facts it appears that the deposit was not with the condition of refund of the amount with interest, yet Hon'ble Supreme Court allowed interest and that too, to the tune of Rs.9,51,21,999.50 relying upon earlier judgments of Supreme Court merely on the ground of delay in refund by the Department. 9. Learned counsel for the petitioner also relied upon judgment of the Division Bench of Karnataka High Court delivered in the case of Alembic Glass Industries Ltd. Vs. Union of India reported in 1990 (48) E.L.T 232 (Kar.), wherein it has been held that authority is liable to pay interest on the amount of refund, since the same, which was legitimately due to the assessee, was withheld by the Department for no justifiable reason. In the case of Redihot Electricals Vs. Union of India, (1989 (43) E.L.T 252 (Del.), learned Single Judge of Delhi High Court, in the case of Sheel Thermoplastics Limited & Ano. Vs. Union of India and Ano. (1988 (36) E.L.T 106 (Bom.), learned Single Judge of Bombay High Court and in the case of Jyoti Limited, Baroda Vs. Union of India & Ano. (1979 (4) E.L.T (J.546) (Guj.), learned Single Judge of Gujarat High Court have allowed interest on account of delayed refund of money by the Departments. 10. Learned counsel for the Revenue relied upon the decision taken in the meeting with the petitioner, wherein the respondents 9 took the stand that firstly there is no statutory provision of payment of interest over the amount deposited by the petitioner in this case, secondly interest can be awarded according to the rate prescribed under section 11BB of the Central Excise Act, 1944 and thirdly it can be at the most from the date of order passed by Hon'ble Supreme Court, if the petitioner is entitled to interest. 11. We considered the submissions of the learned counsel for the parties and perused the facts of the case as well as judgment relied upon by the parties. 12. Interest can be awarded on the money withheld by a party on the basis of either statutory provision of law or by virtue of contractual liability of payment of interest. In other case, the Court may award interest as damages to the aggrieved party on account of illegal retention of money by the party withholding the money. So far as rate of interest is concerned, it is governed by the statutory provision in civil suits when interest claimed is neither as per statutory provision for interest, nor is a contractual interest. In the third category, i.e. when interest is awarded as damages for illegal retention of money, rate of interest is fixed by the courts. When one party is directed to pay the amount to other party by the order of the court, which may or may not contain conditions of payment of interest. If the order contains condition of payment of interest, then irrespective of whether there is statutory provision for payment of interest or any statutory restriction of rate of interest, interest 10 beyond that can be awarded in terms of the order, because of which one party has deposited the amount with the other. This has been laid down by Hon'ble Supreme Court in the case of Tata Refractories Ltd. & Ano. (supra). 13. Here in this case, the petitioner approached this Court and in the petitioner's own writ petition, this Court passed an order that no further steps in pursuance of annexure – 8 creating liability and demand against the petitioner shall be taken during the pendency of the writ petition, if the petitioner deposits a sum of Rs.one crore within four months from the date of the order. The petitioner not satisfied with the order dated 30th April, 1986 passed in CWJC No.219/1986R approached Hon'ble Supreme Court by filing Civil Appeal No.2796/1986, wherein Hon'ble Supreme Court modified the order and permitted the petitioner to deposit Rs.50 lacs in two installments on or before given dates and permitted the petitioner to furnish bank guarantee of Rs.50 lacs. In the above orders of the High Court and of Hon'ble Supreme Court, there is no condition of payment of interest over Rs.50 lacs which was deposited by the writ petitioner. Therefore, in case in hand the Department did not recover the amount of Rs.50 lacs from the petitioner but it was deposited by the petitioner in terms of the order passed by the Court and the Department accepted the said amount because of the order passed by this Court and Supreme Court. Thereafter the writ petition of the petitioner was allowed, vide judgment dated 19th August, 1988. 11 Union of India, Revenue, challenged the judgment of the learned Single Judge dated 19th August, 1988, in L.P .A No.71/1988R, wherein interim order dated 7th February, 1989, was passed, which we have already referred above and the Division Bench stayed the judgment of the learned Single Judge dated 19th August, 1988, with the condition that the Department will refund the deposited amount to the petitioner with interest @ 15% per annum, if the Department fails in L.P .A. So the condition of award of interest for the first time came into operation by the order dated 7th February, 1989. Ultimately L.P .A No.71/1988R was allowed by the Division Bench of this Court and therefore, Revenue was not supposed to repay the deposited amount and the interest over it in terms of the interim order and was entitled to recover more amount as the amount of Rs.1 crore was not the total liability of the writ petitioner as has been admitted by the learned counsel for the petitioner that the amount of Rs.1 crore was not the total liability. Hon'ble Supreme Court allowed Civil Appeal No.1460/1990 preferred by the writ petitioner on 22.1.1997. Therefore, after 22.1.1997 there is no justification for the respondents to retain the money which they got by virtue of the order passed by this Court in the writ petition on 30th April, 1986. 14. The facts have been referred in detail because of the peculiar reason, which shows that the respondent­Revenue either did not or could not recover the demanded amount from the petitioner and the petitioner approached this Court by filing writ petition, being CWJC 12 No.219/1986R. The petitioner, to get the benefit of the interim order dated 30th April, 1986 passed in the petitioner's writ petition, CWJC No.219/1986R, was supposed to deposit Rs.1 crore, but since the order of this Court dated 30th April, 1986 was modified by Hon'ble Supreme Court, vide order dated 12th August, 1986, the petitioner deposited Rs.50 lacs in two installments. Therefore, the amount, which was deposited by the writ petitioner, was not illegally recovered by the Department in any manner but it was the petitioner, who deposited the amount obviously to take the benefit of the interim order, may it be under the threat of recovery of the amount by the respondents. In the present facts, the petitioner deposited Rs.50 lacs to take the benefit of the interim order and it is not the case of illegal recovery of the amount by the respondents. 15. The petitioner's writ petition, CWJC No.219/1986R, was allowed by this Court but on 7th February, 1989, operation of the judgment dated 19th August, 1988 passed in CWJC No.219/1986R was stayed by the Division Bench of this Court. Therefore, the respondents were not liable to refund the amount in view of the interim order. However, the interim order dated 7th February, 1989 has put a condition upon the Department that in case appellant, Union of India/Department, fails in appeal, then they will refund the amount with 15% interest. However, the Department succeeded in L.P .A No.71/1988R and the writ petition of the petitioner was dismissed. Therefore, after dismissal of the writ petition of the 13 petitioner by the judgment passed in L.P .A No.71/1988R, the Department was not supposed to refund the amount as well as was not liable to pay interest over that amount. 16. Hon'ble Supreme Court, in writ petitioner's Civil Appeal No.1460/1990, set aside the judgment of the Division Bench of this Court dated 15.4.1989, vide judgment dated 22nd January, 1997. Therefore, after 22.1.1997, the respondents were under legal obligation to repay the deposited amount forthwith, which the respondents did not do and therefore, retained the money illegally from 22.1.1997. So far as interest from 22.1.1997 is concerned, the petitioner is certainly entitled to interest over the deposited amount. 17. However, in the above facts of the case, when the petitioner deposited the amount in compliance of the order of this Court and to take benefit of the interim order, it cannot be said that the respondents recovered the amount illegally. This situation is peculiar in the facts of this case and may not be applied in all cases, where there may be absolutely illegal demand raised by the Department without any authority of law, which is found to be absolutely illegal by the court of law when challenged in the court of law. Here in this case, the petitioner succeeded in the first round of litigation before the learned Single Judge, but lost the battle in the second round before the Division Bench and ultimately succeeded in third round before the Supreme Court. Therefore, it cannot be said that the respondents had no legal right to raise the demand at the time when 14 the position of law was not very clear because of the reason that ultimately the view taken by the respondent­Department was found to be erroneous. Not only this, the Department succeeded before the Division Bench of this Court. Therefore, there was some merit in the Department's contention at the time of taking decision of raising demand, which was though ultimately found not legal, but cannot be said to be a forceful recovery from the writ petitioner in the peculiar facts of this case. 18. The judgments, which have been relied upon by the parties, especially the judgment rendered in the case of Tata Refractories Ltd. & Ano. (supra), have already answered one issue that award of interest cannot be confined to the statutory limit of interest and it can be the interest at the rate as ordered by the Court, which may be in excess of the statutory limit and for this, there is no dispute, which can be raised by the Department. However, in the judgments of O.N.G.C Ltd., Redihot Electricals and Jyoti Limited, Baroda (supra), it has been held that when Department recovers the amount for no justifiable reason or illegally or without authority of law, then in that situation, the Court can award interest. For this legal position also, there is no dispute but the condition precedent is that there must be totally unjustifiable recovery of the amount or it should be illegal recovery including recovery of the amount from the citizen in colourable exercise of power, interest can be awarded by the Court. This interest is awarded following the general principle of law that 15 one, who deprives other from his property(money), is liable to refund the property/money with reasonable compensation. When it is a matter of illegal recovery and consequent retention of money, which is not governed by the statutory award of interest and is not be governed by contractual obligation of interest, then in that situation the Court determines the rate of interest, which can be just and equitable compensation for the person who has been deprived of his property/money and in that situation, it is called damages for illegal retention of money. Such legal damages on account of illegal retention of money is normally quantified by adopting the reasonable rate of levy of interest, which ordinarily one would have got, had he retained the money and invested the same for his own use. Such type of award of damages equal to the interest is well recognized as an award of compensation to the aggrieved. However, we are of the considered opinion that such general principles blanketly cannot be applied to the cases where Government or Revenue authority without any mala fide or oblique motive raises demand and recovers money from the citizens, which is not found to be by colourable exercise of power. In that situation, it is difficult to apply the above referred principle of law because of the presumption that the lawful authority acted fairly and legally and for the reason that the Revenue have no discretion in the matter of using the money recovered by it, which is available with any private persons/firm, company or any legal entity. The amount recovered by 16 the Revenue and the Government authorities etc. may not be utilized by them because of the restriction imposed by the statutory provisions as well as in view of limited power vested in those authorities, such amount are utilized for various welfare purposes also in the best public interest. The Government and such other authorities even, and normally cannot earn interest from the recovered amount. In that situation, the Court may look into the facts of each case for award of interest. At this juncture, we may make it clear that such compensation is quantified upon finding that the Department is liable to pay interest and the date from which the Department is liable to pay interest is also required to be determined first and thereafter interest can be awarded according to the best judgment of the Court, after hearing the parties. Here in this case, the petitioner has made out a case for award of interest from 22.1.1997 and not prior to that because of the reason which we have already mentioned, which we may recapitulate that the respondents themselves have not recovered the amount and the petitioner deposited the amount to take benefit of the interim order. Initially, in the order dated 30th April, 1986, the Court did not put any condition of payment of interest and Hon'ble Supreme Court, in the order dated 12th August, 1986 modifying the order dated 30th April, 1986, did not put any condition for payment of interest over the deposited amount and the condition of payment of interest was put in the order dated 7th February, 1989 in L.P .A filed by the Union 17 of India against the judgment of learned Single Judge dated 19th August, 1988, quantifying the rate of interest @ 15% and thus, the benefit of that order is not available to the writ petitioner because of the reason that L.P .A was allowed and the condition of payment of interest @ 15% was subject to failure of the appellant, Union of India, in succeeding L.P .A and Union of India/Department not failed but succeeded in L.P .A. In Civil Appeal No.1460/1990 before the Hon'ble Supreme Court, no prayer was made by the petitioner for award of interest over the deposited amount and therefore, no such relief was granted by Hon'ble Supreme Court in the petitioner's Civil Appeal No.1460/1990. Therefore, claim of the writ petitioner for interest over the amount deposited by it from the date of its deposit cannot be justified in the facts of this case referred above, nor the petitioner can claim the benefit of the condition imposed by the Division Bench of this Court in L.P .A because that order has merged in the final order passed by the Division Bench and the respondent­ Union of India did not fail in the appeal. Therefore, it was for the writ petitioner to seek relief of award of interest from the Supreme Court in Civil Appeal from the date of deposit or from the date of judgment of Single Bench, i.e. prior to decision by Supreme Court, and that has not been prayed by the writ petitioner, which may be for obvious reason that the deposits were made to take benefit of the interim order by the petitioner. 19. In view of the above reasons, we are of the considered opinion 18 that the writ petitioner is entitled to interest from the date of the judgment of Hon'ble Supreme Court dated 22.1.1997 till the refund of the amount of Rs.50 lacs on 12.1.1999. So far as quantification is concerned, we are of the considered view that some help we may take from the interim order, wherein 15% interest has been allowed by the Division Bench of this Court over the deposited amount and therefore, for quantification it is ordered that the petitioner is entitled to interest @ 15% over Rs.50 lacs from 22.1.1997 to 12.1.1999. 20. The writ petition of the petitioner is accordingly allowed in the terms referred above. Therefore, the respondents are directed to pay complete amount of interest @ 15% per annum from 22.1.1997 to 12.1.1999 to the writ petitioner within four weeks from the date of receipt/production of a copy of this order. (Prakash Tatia, C.J.) (Jaya Roy, J.) Jharkhand High Court, Ranchi The 11th October, 2012 NAFR/Dey "