JUDGMENT Om Prakash, J.
1. By this petition the petitioner, engaged in the business of manufacture of torches of brass, seeks a mandamus directing the respondents to pay interest on a sum of Rs. 65,53,508.86 at the rate of 15% from 11-4-1983 to 26-8-1986.
2. The facts as succinctly stated, are that the petitioner while manufacturing torches, also manufacture intermediary product, commonly known as brass barrel, which product according to the petitioner is not excisable under the Central Excise and Salt Act, 1944 (briefly 'the Act, 1944'). The Central Excise Department, however, took the stand that brass barrels manufactured by the petitioner, were excisable and realised the excise duty aggregating to Rs. 65,53,508.86 from the petitioner during the period from 1-7-1974 to 31-4-1983, which the petitioner paid under protest.
3. The petitioner then filed appeal before the Customs, Excise and Gold Control Appellate Tribunal (for short the "Tribunal"), New Delhi, against the order of the Excise Authority. The Tribunal by order dated 11-4-1983 (Annexure "1" to the writ petition)held that brass barrels manufactured by the petitioner being intermediary product for being used in torches, were not excisable. Therefore, the Department filed Special Leave Petition before the Supreme Court, which too was dismissed.
4. The aforesaid sum realised from the petitioner was then refunded to it on 26-8-1986 by the respondents. It is averred by the petitioner that the Excise Department retained the sum of Rs. 65,53,508.86 illegally and arbitrarily after the judgment of the Tribunal dated 11-4-1983 till 26-8-1986, and as the petitioner was deprived of the use of that amount during the period from 11-4-1983 to 26-8-1986, it became entitled to receive interest on the said amount from the respondents.
5. In the Counter-affidavit filed on behalf of the respondents, it is contended that the petitioner was called upon to furnish the refund application in proper form giving all the details, copies of the treasury challans, gate passes, extract of P.L. As for the identification and verification of the amount paid by them and to ascertain whether the same was paid under protest and since the requisite information was not furnished by the petitioner for quite sometime, the refund of the amount was delayed. In paragraph 33 of the Counter-affidavit, the respondents have denied the liability of interest.
6. The short question for consideration in this petition is whether or not the petitioner is entitled to interest on Rs. 65,53,508.86 from 11-4-1983, the date of the Judgment of the Tribunal up to 26-8-1986, when the said amount was refunded to the petitioner. Though it is contended in the counter-affidavit by the respondents that the petitioner was called upon to furnish several documents to enable the respondents to expedite the refund and that the refund was delayed because the petitioner failed to furnish the requisite documents, but this plea has not at all been substantiated by any material. There is nothing on record to show that the refund of the excise duty, recovered from the petitioner without authority of law, was considerably delayed due to laches on the part of the petitioner. Rather, in paragraph 15 of the counter-affidavit, it is averred by the respondents that a show cause notice was issued to the petitioner on 12-9-1984 informing it that the Tribunal had passed orders on the basis of barrels, which were closed on one side and the samples of which were produced and further asking the petitioner why the refund claim should not be rejected being time barred under Section 11B of the Act. It shows that the respondents did not make serious efforts for making refund of the excise duty, which was illegally collected from the petitioner, but went on making further probe into the matter even after the judgment of the Tribunal, which clearly adjudicated upon that the brass barrels manufactured by the petitioner, were not excisable. After the judgment of the Tribunal there was no good reason to make any further enquiry and the respondents could have started processing of refund immediately. It is, therefore, clear that the respondents retained the amount of excise duty from 1983 to 1986 arbitrarily, illegally and unjustly. The matter would have been different, if delay in refund could be ascribed to non performance on the part of the petitioner.
7. Sri D.P. Singh, learned Standing Counsel, vehemently argued before us that there is no provision under the Act, 1944 to recover the interest and, therefore, there being no failure of statutory duty or violation of any legal right on the part of the respondents, no writ petition can lie under Article 226 of the Constitution of India for mandamus directing the payment of interest.
8. The question whether or not interest can be ordered for a sum arbitrarily retained by the public bodies under colour of public laws is not resintegra, as in Life Insurance Corporation of India and Anr. v. Gangadhar Vishwanath Ranade (dead) by L. Rs. 1989 (4) Supreme Court Cases 297, the Supreme Court took the view that the Life Insurance Corporation (for short, the L.I.C.) was liable to pay interest on the amount of policy, which was belatedly paid by it to the assignee of the policy after the date of maturity. The facts of this case are somewhat complicated, but they are stated in as simplest manner as possible herein. The deceased, husband of Smt. Kamla Bai, took as many as four policies from the L.I.C., which matured on varying dates during the period from September 1972 to December 1975. In April 1969, the deceased assigned absolutely all the four policies in favour of his wife and the assignment made was duly registered by the L.I.C. There were some income tax dues against the deceased for the recovery of which Incometax Officer served a garnishee order on the L.I.C. No statement was made by L.I.C. under Section 226(3)(vi) of the Income Tax Act, 1961, that no amount was due to the deceased, original policy holder, inasmuch as all the four policies were assigned absolutely by the deceased in favour of his wife. Unless such statement was made, the Incometax Officer was within his right calling upon the L.I.C. to pass on the amount of policies for satisfaction of the dues, outstanding against the original policy holder. Denying the liability of interest claimed by the assignee on delayed payment of matured policies the L.I.C. took the plea that the amount could not be paid to the wife of the deceased in whose favour all the policies were assigned, because the garnishee order remained in force. On these facts, the Supreme Court in para 34 at page 312 summed up the position of liability of interest thus:
"Obviously the assignee of the policies who had become entitled to receive the amounts due thereunder on the dates of their maturity, must be compensated by the L.I.C. for its failure to perform its statutory obligation under Section 226(3)(vi) of the Income Tax Act, 1961 within a reasonable time...performance of this statutory obligation by the L.I.C., in the present case, being after inordinate delay, award of interest to the assignee of the policies to whom the payment thereunder had to be made even according to the stand of the L.I.C. is, therefore, clearly justified."
9. After this judgment, there is no virgin field for the liability on interest, but the legal proposition is fully settled that where the public bodies retained the amount, belonging to individuals, arbitrarily or unjustly they render themselves liable to pay interest. The decision rendered in L.I.C. case is squarely applicable to the facts of the instant case, inasmuch as, Sub-section (3) of Section 11B of the Act, 1944, cast a statutory duty on the Assistant Collector to refund the amount becoming due to a person as a result of any order passed in appeal, without his having to make any claim in that behalf, and the said authority failed to perform such statutory duty after the appellate order, passed by the Tribunal. The same obligation was reiterated by the Department in the Instruction No. 156/1986 (Judl.) 15/86 dated 20-8-1986 issued in this behalf. It would have been better had the Department owned interest liability in the said instructions whenever there was delay in refund solely on the part of the Department. In view of the above authority, the contention of the Standing Counsel that no writ petition can lie under Article 226 for mandamus with regard to interest, in the absence of statutory provision for the same, cannot be sustained. Article 226 grant an extraordinary remedy, which is essentially discretionary although founded on legal injury. It is perfectly open for the Court exercising this flexible power to pass such order as public interest dictates and equity projects.
10. The judgment of Life Insurance Corporation should be considered a landmark in injecting a sense of accountability in the functionaries of Government Departments, public sector Undertakings etc., who by refusing to act on some pretext or the other fail in their statutory duty and withhold the rightful claims of the public.
11. The next question is for which period the interest can be awarded to the petitioner. The petitioners demand interest right from 11-4-1983, when the Tribunal held that the brass barrels were not excisable. The question is whether the Department could have refunded the excise duty immediately after the judgment of the Tribunal. It is a matter of common knowledge that the processing in the Government Departments does take some time and, therefore, the refund could have been made only after a reasonable time from the date of the judgment of the Tribunal. What is reasonable time? On the facts and circumstances of the case, we think that the respondents would have taken at least three months for processing. We are, therefore, of the view that the petitioner is entitled to get interest for the period from 11-7-1983 upto 26-8-1986. The next question is at what rate? In Redihot Electricals v. Union of India -1989 (43) E.L.T. 253 the Delhi High Court and in Metal Distributors Ltd., Bombay and Anr. v. Union of India and Ors. -1988 (33) E.L.T. 321 the Bombay High Court awarded the interest at the rate of 12% per annum. In our view, the rate of 12% per annum is quite reasonable.
12. Before concluding we hasten to add that we should not be taken to have laid down as an inflexible rule that whenever there is a failure on the part of the taxing authorities to refund the duty held not to be leviable interest would automatically accrue from such failure without more. Circumstances of each case shall have to be examined carefully before awarding interest.
13. In the result, the writ petition succeeds and is allowed. The respondents are directed to pay interest to the petitioner at the rate of 12% per annum on the sum of Rs. 65,53,508.86 for the period : 11-7-1983 to 26-8-1986. The petitioner is entitled to costs assessed at Rs. 400/-.