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Judgment
Akil Kureshi, J.—Heard learned advocates for the parties for final disposal of the petition. The petitioners have challenged an order dated October 12, 2010 passed by the Prohibition and Excise Superintendent--respondent No. 3 herein. Under such order, the said authority refused to grant refund of a sum of Rs. 2,48,612 to the petitioners. The petition arises in the following factual background:
The petitioners held necessary licence for storing alcohol and for manufacturing the products falling under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (hereinafter to be referred to as, "the Act of 1955"). The respondent-authorities visited the premises of the petitioners and on the basis of inquiries made during such visit, issued a show-cause notice dated October 16, 1998 demanding the differential duty of Rs. 2,48,612. The petitioners replied to the said show-cause notice. The Superintendent of Prohibition and Excise, Valsad however, passed an order in August, 1999 confirming the duty demand. Against such order, the petitioners preferred an appeal before the appellate authority. Such appeal came to be dismissed by the appellate authority on July 13, 2000. The petitioners preferred further appeal, which also came to be dismissed on March 15, 2004. After one round of litigation before this court, the petitioners approached the revisional authority. The revisional authority allowed the revision of the petitioners by an order dated June 3, 2008. In the meantime, the petitioners had under protest deposited the said sum of Rs. 2,48,612 with the respondents.
When the petitioners succeeded before the revisional authorities, they filed an application for refund of the duty paid under protest. Such application was filed before respondent No. 3 on December 5, 2008. On such application, respondent No. 3 did not pass any order initially for a period of two years. The petitioners went on writing letters and reminders seeking refund. Ultimately, respondent No. 3 issued a show-cause notice dated June 14, 2010 calling upon the petitioners why their application for refund be not rejected. In such show-cause notice, the reason indicated was that in the valuation of the preparations manufactured by the petitioners, labour charges and overhead charges were not included, which during the visit of the petitioners factory was noticed and the petitioners could not give satisfactory explanation. It was on this premise that respondent No. 3 proposed to reject the petitioners refund application.
The petitioners have had strong objection to such proposal made under order dated June 26, 2010. They pointed out, inter alia, that they had already succeeded on merits before the revisional authorities. They pointed out that the question of undervaluation was gone into by the revisional authorities and decided in their favour. It was stated as under:
(g) Once the final appellate authority, the namely, the Government of India has set aside the orders of the Government of Gujarat, the charge of undervaluation does not exist. Because the orders regarding undervaluation by you as upheld by the Commissioner (P and E) and the Deputy Secretary, Government of Gujarat has merged in the final orders of the Additional Secretary, Government of India as he is the final authority to decide the dispute of undervaluation under the MTP Act and the Rules framed thereunder.
(h) Therefore, today the objections of AG are no more valid and as per law, those objections even do not exist.
Respondent No. 3 however, passed the impugned order dated October 12, 2010 and rejected the refund claimed by the petitioners on the same ground on which he had issued show-cause notice. In other words, he held that in the valuation of preparations, the petitioners had not included the labour charges and overhead charges with respect to which the petitioners could not render any satisfactory reply. This has resulted into undervaluation of the assessable value in turn resulting into short-levy of duty.
In respect to the notice issued, the respondents appeared and filed reply dated February 12, 2013. In such reply, principally, two objects are raised--Firstly, that the impugned order is appealable. Our attention is drawn to rule 127 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 ("Rules of 1956" for short) in this regard. Another objection of the respondents is that the Act of 1955, or the Rules of 1956 make no provision for paying the interest. The refund therefore, if at all to be granted, would not carry any interest.
To our mind, the stand adopted by the respondents is wholly impermissible under the law. The petitioners have succeeded before the revisional authority, who had by the order dated June 3, 2008, quashed the demand previously raised by the adjudicating authority as confirmed by the appellate authorities. In the meantime, since the petitioners had already under protest, deposited a sum of Rs. 2,48,612 with the respondents, the petitioners were entitled to refund thereof. No rule or provision has been pointed out, under which such amount could have been retained by the respondents. Though our attention was drawn to rule 9 of the Rules of 1956, we are prima facie of the opinion that such rule would apply in cases where refund is sought of the duty which has been paid through inadvertence, error or misconstruction. This may not apply where the duty is paid under the order passed by the adjudicating authority. In any case, only requirement of rule 13 is that such refund must be claimed within six months. It is not even the case of the respondents that refund claim of the petitioners is hit by such requirement.
In that view of the matter, the respondents simply could not have withheld the refund flowing from the revisional order, which had become final. Admittedly, the respondents had not challenged the said order before any court or forum. That being the position, it was simply not open for respondent No. 3 to reject the refund claim of the petitioners. To do so, would amount to ignoring an order of the higher authority which was binding on respondent No. 3. In his show-cause notice as well as under the order rejecting the request for refund, he pressed into service, the very same grounds which were decided by the revisional authority in favour of the petitioners. We may recall that the duty demand was raised on the ground that the petitioners had not included labour charges and overhead charges in the toilet preparations manufactured by them. This, according to the authorities, had resulted into undervaluation of the assessable value of the goods. When such issue was decided in favour of the petitioners, it was simply not open for respondent No. 3 to raise the same question while considering the petitioners'' refund claim. Legal jurisprudence expects certain finality to an issue, once it is judicially decided by the highest authority, or against which no further proceedings are carried. Such decision binds all parties concerned ; including the Governmental authorities. It was simply not open for respondent No. 3 to either choose or not to choose to withhold the refund order. In our view, he has committed a serious error not only of raising a question in his show-cause notice but by way of pressing such an issue in service in passing an order refusing refund to the petitioners. This was despite the petitioners specifically bringing to his notice the reply to the show-cause notice issued by respondent No. 3.
This order could have been much shorter. We were however much perturbed by the stand of respondent No. 3, due to which, we have given our expression in this order. In the ultimate result, we find that the impugned order is totally illegal and must be quashed and set aside forthwith. The contention of the respondents that the petitioners had an alternative remedy is to put it mildly laughable. Respondent No. 3 who has passed an order which is completely illegal and against all canons of law cannot press into service availability of alternative remedy. We would be failing in our duty, if we do not exercise our writ jurisdiction. We are further of the opinion that the petitioners must receive interest, after three months from the date of their application for refund. Respondent No. 3 had the duty to release the refund within a reasonable period. He has not only failed in his duty but he prolonged the litigation by rejecting the refund claim on completely frivolous, untenable and objectionable ground. By doing so, he in fact, drew the petitioners to further litigation, which was wholly avoidable. In the result the petition is allowed. The impugned order dated October 12, 2010 is quashed. The respondents shall release the refund of the petitioners with simple interest at nine per cent. per annum on a sum of Rs. 2,48,612 starring three months from the date of the application for refund, till the actual payment. The entire exercise shall be done latest by February 28, 2013. The respondents shall also pay cost of this petition, which is quantified at Rs. 10,000. It would be open for the Departmental authorities to enquire into the conduct of respondent No. 3 (the officer who had passed the impugned order) and if so advised, seek recovery of interest and costs, if it is found that he was responsible in causing such damage to the Government.