Albright Morarji and Pandit Ltd. vs Union of India and others

The petitioners are a Company engaged in the business of manufacture of chemicals in their factory situated at Ambarnath in Thane District. The petitioners manufacture Phosphoric Acid and the basic raw material for such manufacture is Rock Phosphate. The petitioners import Rock Phosphate from abroad as adequate quantity is not available in the country. From January 1, 1970, the Government of India canalised the import of Rock Phosphate through a Public Sector Agency i.e. Minerals and Metal Trading Corporation of India Limited. The canalizing agency laid down the procedure for import of rock phosphate. On or about April 15, 1972, the Government of India issued notification u/s 25 of the Customs Act to exempt rock phosphate in all forms where imported into India for use in the manufacture of fertilizer, from so much duty of the Customs leviable thereon under the First Schedule of the Indian Tariff Act, 1954 as was in excess of duty leviable on fertilizers falling under Entry 35. The rock phosphate imported by the petitioners through the canalising agency was always in a powder form. The consignment of rock phosphate if assessed under Entry 35, then Customs duty was not leviable, but countervailing duty had to be paid. In case, the rock phosphate was treated as not falling within Entry 35 and was assessed as residuary Entry 87, then countervailing duty was not payable, but only Customs duty was payable.

Sometime in June 1982, the petitioners purchased on the high-seas 11,786 Metric Tonnes of Rock phosphate in powder form from the canalizing Agency. The consignment came to Bombay on a vessel known as s.s. Teak Bank. On June 14, 1972, the petitioners learnt that Customs authorities were proposing to assess the consignment under Entry 87. The petitioners paid duty under protest and cleared the consignment. Another consignment of approximately 9792 Metric Tonnes was allotted to the petitioners on August 16, 1972 and was expected to arrive in Bombay on September 14, 1972. The petitioners apprehending that the Customs authorities would again insist on assessing the consignment under Entry 87, filed Writ Petition being Miscellaneous Petition No. 616 of 1972 in this Court on September 6, 1972 and sought direction to the authorities to permit the clearance pending final determination of the question upon the petitioners paying duty under Entry 35. The petition was not entertained but the petitioners were given liberty to file an appeal before the Appellate Collector of Customs against the order of the Customs authorities assessing the consignment under Entry 87. The appeal was edged by the petitioners on September 18, 1972 and on September 20, 1972 duty was paid under protest under Entry No. 87 and the amount of duty was Rs. 6,10,977.45. The petitioners also filed a refund application on October 4, 1972.

Subsequent consignments of rock phosphate arrived in Bombay Port and in respect of those consignments, the petitioners filed Writ Petition No. 206 of 1976 and Writ Petition No. 41 of 1976 in this Court claiming that the consignment of rock phosphate attracts Entry 35 and not Entry 87. Both the petitions were disposed of by Mr. Justice Lentin by Judgment dated November 6, 1979 in the case of Albright Morarji and Pandit Limited v. Union of India and others reported in 1980 Excise Law Times 550 holding that the consignment is liable to duty under Entry 35 of the Customs Tariff Act, 1934 and the claim of the Customs authorities that the duty is payable under Entry 87 is not correct. The appeal preferred by the Department against the judgment of Mr. Justice Lentin before the Division Bench of this Court was dismissed and SLP filed before the Supreme Court met with the same fate. It is, therefore, clear that the view of the Customs authorities that rock phosphate was liable to duty under Tariff Item 87 cannot be sustained.

After the decision of the Supreme Court, the petitioners moved the Deputy Collector on October 20, 1981 to take up the appeal and refund application filed in respect of consignment of 9792 Metric Tonnes and in respect of which duty was paid by the petitioners under protest. On November 13, 1981, the Deputy Collector of Customs (Refunds) informed the petitioners by letter, copy of which is annexed as Ex. "Z" to the petition, that the claim for refund filed by the petitioners was rejected by the Assistant Collector of Customs and the order was issued on July 27, 1973. It was further mentioned that the record shows that the importers name was M/s Minerals and Metal Trading Corporation of India Limited. The letter further advises the petitioners that as the claim for refund was rejected, the petitioners ought to have resorted to appellate remedies provided u/s 128 of the Customs Act and as no appeal was filed, the Department cannot take any steps in the matter. The petitioners filed the present petition on November 5, 1982 to challenge the action of the Department in refusing refund, in spite of the judgment delivered by this Court. Shri Vahanwati, learned counsel appearing on behalf of the petitioners, submitted, and, in my judgment, with considerable merit that the communication sent by the Deputy Collector conveying that the refund application was rejected in 1973 is totally arbitrary and unsustainable. Shri Vahanwati submits that the petitioners have filed appeals on September 18, 1972 and that appeal was not disposed of, nor any notice of hearing of that appeal was served on the petitioners. The petitioners had also filed refund application on October 4, 1972 and the Assistant Collector did not give any notice of hearing of that refund application, nor did he inform the order passed on July 27, 1973. Shri Vahanwati submits that the Assistant Collector was under mis-apprehension that the importer was the canalizing agency overlooking that the canalizing agency imported the consignment for the petitioners. Apart from the illegal order passed by the Assistant Collector, it is impossible to imagine how the Department can refuse to refund the amount claimed by the petitioners, in face of the judgment delivered by this Court. The Department had recovered the duty under Entry No. 87 which was clearly illegal and the Department is bound to refund the duty which was paid by the petitioners under protest. In these circumstances, the action of the Department communicated to the petitioners by letter dated November 13, 1981 cannot be sustained.

Accordingly, rule is made absolute and the communication dated November 13, 1981 is set aside and the Deputy Collector of Customs (Refund) is directed to refund the amount as claimed by the petitioners within a period of two months from today. In case, the amount is not refunded within two months, then the respondents shall pay the amount along with interest at the rate of 18% per annum calculated from October 20, 1981. In the circumstances of the case, there will be no order as to costs.