JUDGMENT B.P. Jeevan Reddy, C.J.
1. This writ petition raises a question whether this Court should award interest on excise duty found refundable as a result of proceedings under the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act').
2. Petitioner, Prestige Engineering (India) Private Ltd., is engaged in the business of repairing old, defective and unserviceable cops. For the period 17-3-1981 to 7-6-1986 with which period we are concerned herein - excise duty was levied on repair work undertaken by the petitioner, treating it as a manufacturing activity. The petitioner protested against the same. In pursuance of the insistence of the departmental authorities, however, he filed a classification list under Rule 173-B of the Central Excise Rules, 1944, under protest, with respect to repairing of cops. The Assistant Collector treated the "repairing of cops" as "assembling of cops" and held it dutiable under Tariff Item 68 of the First Schedule to the Act. While it is not necessary to trace the course of proceedings, it is sufficient to state that on 1-8-1984 the Collector of Central Excise passed an order upholding the levy of duty on the said activity. The petitioner preferred an appeal before the CEGAT, which was allowed on 21-5-1986 and the matter remanded to Collector for fresh adjudication. The order dated 21-5-1986, was clarified by the Tribunal on 30-3-1987, which, according to the petitioner, clearly held the levy of duty on the aforesaid activity as impermissible and illegal. The petitioner says that in pursuance of the order of the CEGAT dated 21-5-1986 no further proceedings were taken by the Collector.
3. Be that as it may, the petitioner stopped paying duty with effect from 7-6-1986, the date on which he received the order of the Tribunal dated 21-5-1986. He also filed applications for refunding the amount of duty collected during the period 17-3-1981 to 7-6-1986. On 21-12-1987 the Assistant Collector issued a notice calling upon the petitioner to show cause why the refund claims filed by him be not rejected. On 28-1-1988 the Assistant Collector rejected the petitioner's claims for refund mainly on the ground that he had not complied with the requirements of Rule 173-B of C.E. Rules while paying the disputed duty. Contending that the order of the Assistant Collector is contrary to the orders of the Tribunal dated 21-5-1986 (as clarified on 30-3-1987), and that the reason assigned by him for rejecting the refund claims is not sustainable in law, the petitioner approached this Court by way of this writ petition. The prayer in the writ petition is for issuance of a writ of mandamus "directing the respondents to refund the amount of excise duty realized from the petitioner in respect of the repaired cops from 17-3-1981 to 7-6-1986 (aggregating to Rs. 15,34,858.93 ) along with interest at such fair and reasonable rate as may be fixed by this Hon'ble Court..." A further declaration is sought to the effect that Rule 233-B (1) of C.E. Rules, 1944, is ultra vires the provisions of the Act.
4. Before proceeding further it may be stated that having filed this writ petition, the petitioner filed appeals as well before the Collector (Appeals) against the orders of the Assistant Collector dated 28-1-1988, which appeals were allowed on 12-5-1988. Against the appellate orders dated 12-5-1988 the department filed appeals before the CEGAT, which were dismissed on 29-3-1989. All this while, the petitioner has been requesting the department to refund the duly collected from him illegally, but to no effect. Only after the decision of the Tribunal did the department refund the duty so collected, i.e., a sum of Rs. 15,34,858.93 by means of a cheque, to the petitioner. The refund was made on 9-11-1989.
5. The writ petition came up for hearing before us in May, 1990. Having regard to the fact that the amount of duty has already been refunded, the only question urged by the learned counsel for the petitioner related to interest on the said amount. Mr. S.P. Gupta, learned Senior Advocate appearing for the petitioner, contended that the petitioner is entitled to interest on the aforesaid amount inasmuch the said amount was collected from him contrary to law and because the petitioner had been deprived of the use of the said money. He brought to our notice several decisions supporting his contention. Although the prayer in the writ petition (extracted hereinabove) does not specify the date from which interest is claimed, the learned counsel contended that the petitioner must be awarded interest from the date illegal collection was made.
6. The learned Standing Counsel for the Central Government disputed the petitioner's claim for interest. He submitted that the main relief sought for in the writ petition was the refund of excise duty, which no longer survives in view of the fact that refund has been effected pending the writ petition. He submitted further that the writ petition itself is not maintainable since it was filed without availing the alternative remedy of appeal provided by the Act. Indeed, after filing the writ petition, the petitioner did file such appeals, and succeeded there. The further appeal filed by the department against the appellate orders was dismissed, soon whereafter the department effected the refund. He therefore, submitted that the writ petition cannot survive merely for the sake of recovering interest. According to him, the writ petition must be dismissed as having become infructuous.
7. At the outset, we must clarify that this is not a case where refund is being asked for as a result of any decision of this Court, or the Supreme Court, declaring a provision in the Act, or the rules as unconstitutional or ultra vires. The refund is asked for in pursuance of, and on the basis of orders passed by authorities under the Act, in proceedings taken under the Act. The controversy related to the question whether the activity carried on by the petitioner did, or did not amount to 'manufacturing activity'. It was ultimately held that it did not. Thereupon, the petitioner filed refund claims. But, on the ground that the petitioner did not comply with Rule 173-B, the refund claims were rejected by the Assistant Collector. The appellate authority, however, allowed the refund claims holding that the petitioner had indeed complied with the requirements of the said Rule. The discussion in this decision must, therefore, be understood in this factual context.
8. The Act provides for levy, assessment, collection and refund of excise duty. Prior to the present Act, there were as many as ten separate Excise Acts and eleven sets of statutory rules. There were besides five Acts relating to excise duty on salt. It was accordingly proposed to consolidate these Acts into a single enactment relating to Central Duties of Excise and tax on salt. It is evident that the Act and the Rules form a complete Central Excise Code. Section 11B of the Act- which was inserted by the Amendment Act 1978 with effect from 17-11-1980 in place of Rule 11- provides for refund of duty. Sub-section (1) says, "any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date, provided that the limitation of six months shall not apply where any duty has been paid under protest." The expression "refund" and "relevant time" are defined in the Explanation appended to the Section. Sub-section (2) provides that, where the Assistant Collector is satisfied, on receipt of any such application, that whole or any part of the duty of excise paid by the applicant should be refunded to him, he may make an order accordingly. Sub-section (3) provides that where refund becomes due to any person as a result of any order passed in appeal or revision under the said Act, the Assistant Collector may refund the same even though no claim is preferred in that behalf. Sub-section (4) then declares that "save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained". The validity of this Section, and in particular of Sub-section (4), is not in question before us. The question how to reconcile the provision of this Section, in particular the provisions contained in Sub-section (4), with the mandate of Article 265 of the Constitution of lndia also does not arise for consideration in this case. Indeed, the claims for refund were filed within the period prescribed by Section 11B, and the only ground upon which they were rejected by the Assistant Collector was that the petitioner had not complied with the requirements of Rule 173-B while paying the duty.
9. The Act and the Rules made thereunder do not provide for payment of interest in case of refund of duty. We must presume that Parliament advisedly did not provide for the same, while enacting Section 11B in 1978. The fact that Section 243 and 244 of the Income-tax Act provide for payment of interest by the Government on tax refunded shows that where the Parliament wanted to provide for such interest, it did provide therefor expressly. The omission to provide for interest under this Act must, therefore, be held to be deliberate. This legislative intention, in our opinion, is equally relevant in examining whether interest should be awarded on general principles of equity - of which more later. The authorities under the Act- it goes without saying - have to operate within the four corners of the Act and the Rules made thereunder (Of course, if any other enactment or Rule is made applicable by the Act- Rules - or if any other statutory provision applies proprio vigore to the proceedings under the Act, same have to be followed ). Since the Act or the Rules do not provide for grant of any interest, the authorities under the Act, including the CEGAT, have no power to award interest. This position was not initially contested before us, though at a later stage of arguments the Counsel for the petitioner urged that even the authorities under the Act must be held to possess the power to award such interest. We cannot, however, agree with this proposition. The authorities under the Act are not Civil courts, nor is the proceeding for refund before them a suit. They have no inherent power to award interest. They have to act within the four corners of the Act and the Rules. In the absence of any guidance in the Act or the Rules in that behalf, with respect to the period, rate and other matters, the matter cannot be left to the pleasure of the authorities. Accordingly, it must be held that the authorities under the Act have no power to award interest on any principle what: soever. The question is whether this Court in a writ petition should award such interest more so in the light of - what we have called- the deliberate omission Parliament to provide for such interest.
10. This discussion is premises on the assumption that this Court does possess The power to award such interest, on equitable grounds- for the reason that the petitioner was deprived of the use of his money for the period concerned. The discussion is confined to the question whether this Court should exercise that power in this case. The question of existence of power may be gone into in an appropriate case.
11. A person who invokes the equitable power of this Court ought to establish the circumstances which call for the exercise of that power. Merely saying that he was deprived of the use of his money is not enough. In Halsbury's Laws of England Vol. 32 (4th edition) Para 109 (at page 55), the following statement of law occurs, under the caption "equitable right to interest", "In equity interest may be recovered in certain cases where a particular relationship exists between the creditor and the debtor, such as mortgagor and mortgagee, obligor and obligee on a bond, personal representative and beneficiary, principal and surety, vendor and purchaser, principal and agent, solicitor and client, trustee and beneficiary, or where the debtor is in a fiduciary position to the creditor. Interest is also allowed on pecuniary legacies not paid within a certain time, on the dissolution of a partnership, on the arrears of an annuity where there has been misconduct or improper delay in payment, or in the case of money obtained or retained by fraud. It may also be allowed where the defendant ought to have done something which would have entitled the plaintiff to interest at common law, or has wrongfully prevented the plaintiff from doing something which would have so entitled him."
In U.S.A., there does not appear to be any decision of the Supreme Court. Among the State Courts, there appears to be a conflict of opinion. In 72 American Jurisprudence (2nd) para 1068 (1974 edition), the following statement occurs:-
"There is a decided split of authority as to whether, in the absence of specific statutory provision therefor, a taxpayer is entitled to interest on taxes illegally assessed or charged. In some cases a taxpayer has been awarded interest in a separate action brought after the refund has been made. Courts which have approved the awarding of interest for illegal assessments or charges have sometimes stated that when a sovereign submits itself to suit it should come into court on the same basis, in the event of adverse decision, as any other suitor, or that a sovereign, in dealing with its citizens, should apply the same rules of abstract justice as it applies in actions between citizens. Where the state, municipal corporation, or other government is liable for interest on a refund or credit of taxes in the absence of a statute expressly imposing a liability for interest on refunds or credits, it is held in some; jurisdictions that a court may deny interest, in whole or in part, in accordance with notions of fairness and justice, where the taxpayer or his representative has been guilty of a long and inexcusable delay in demanding or suing for a refund. On the other hand, in jurisdictions in which the contrary position is taken, that is, that no interest is allowable, the courts have asserted that under the doctrine of sovereign immunity the plaintiff can recover interest only if the legislature has provided for it by statute, that the rule denying interest on a tax refund has its antecedent in the rule that interest, being a creature of statute, is recoverable only by statute or contract, or that interest is allowed only where there is a delay or default of the debtor, but that delay or default cannot be attributed to the state, since the state is presumed to be always ready to pay what it owes. Where a jurisdiction supports the rule that a state or local government is not liable for interest on a tax refund on credit, such protection extends to a state treasurer or tax commission.
In a few jurisdictions a distinction is made between the state, on one hand, and counties and municipal corporations, on the other hand, in determining whether interest may be allowed on a tax refund or credit. In these jurisdictions it is held that the state itself is not liable for such interest in the absence of a statute imposing such a liability, but a county or municipal corporation is so liable."
12 Assuming that the situations stated in Halsbury are not exhaustive, we do not see any equity in favour of the petitioner, which should impel us to grant him interest. The levy on repairing of cops was held to be untenable by the order of the CEGAT dated 21-5-1986 as clarified on 30-3-1987. But his right to refund was subject to compliance with Rule 173-B. On that aspect, there was a controversy, which was settled by the Appellate Collector's order dated 12-5-1988 as affirmed by CEGAT on 29-3-1989. Within about 7 months, refund was made. It cannot be said in the circumstances that there was any unreasonable delay. It should also be seen that the petitioner has not set out any circumstances, much less established them, attracting the equitable jurisdiction of this Court. Indeed, we must presume that he has passed on the burden to the consumer-customer. He has not stated that he has not done so. If so, it must be held that he has not suffered any loss himself. Merely to say that because he was deprived of money does not per se entitle him to interest. On such a plea simpliciter, even a civil court would not be able to award interest for the period prior to institution of suit. See the decision of the Privy Council in Bengal Nagpur Railway Co. v. Ruttanji Ramji and Ors. (A.I.R. 1938 P.C. 67), which has been consistently followed by the Supreme Court in its several decisions, the last of which is in Executive Engineer, Balimela v. Abheduta Jena (A.I.R. 1988 S.C. 1520). On this aspect, one can usefully notice the decision of Sir John Beaumont in Municipal Borough, Ahmedabad v. Vadilal (A.I.R. 1944 Bom. 233) and of a Division Bench of Andhra Pradesh High Court in M. Gangaraju & Sons v. State of A.P. (A.I.R. 1965 A.P. 60). Another important circumstance to be noticed in this behalf is that the power of this Court under Article 226 of the Constitution is discretionary and would be exercised only in the aid or furtherance of justice. This Court is not bound to exercise this power on proof of any and every illegality. A mechanical exercise of this power may well prove, in some cases, to be contrary to interests of justice. See Sangram Singh v. Election Tribunal (A.I.R. 1955 S.C. 425). As between the State, in whose hands the money will be available for public purposes, and the petitioner, who has himself suffered no injury, it is just and consistent with public interest and justice that interest is not awarded.
13. Counsel for the petitioner has brought to our notice a good number of decisions of several High Courts awarding interest on excise duty illegally collected. They are:
i.Redihot Electricals v. Union of India -1989 (43) E.L.T. 253 (Delhi);
ii. Nerol Abendaly v. Union of India -1979 (4) E.L.T. 181;
iii. Jyoti Limited, Baroda v. Union of India -1979 (4) E.L.T. 546 (Gujarat);
iv. Calcutta Paper v. Tribunal -1986 (25) E.L.T. 939;
v. Dulichand Shree Lal v. Collector C.E. -1986 (26) E.L.T. 298 (Calcutta);
vi. Metal Distributors Ltd. v. Union of India -1988 (33) E.L.T. 321 (Bombay);
vii. Sang Fasteners (Pvt.) Ltd. v. Union of India -1988 (36) E.L.T. 591 (Bombay);
viii. U. Foam Pvt. Ltd. v. Asst. Collector, CE. -1988 (36) E.L.T. 537 (A.P.).
But, in all these cases the only ground upon which interest has been awarded is that it is just and proper to do so, since the petitioners therein had been deprived of the use of money which had been collected from them by the State illegally. There is no discussion as to the principle upon which interest can be awarded, nor with respect to the nature of power of this Court under Article 226 of the Constitution. With great respect, we are unable to accept the principle of the said decisions. It is too widely stated. The grant of interest is not an automatic or necessary consequence of order of refund. It depends upon the facts of each case. It lies within the discretion of this Court in a petition under Article 226 of the Constitution.
14. Now coming to the decisions of this Court, three of them are brought to our notice. In C.M.W.P. No. 1293 of 1988, disposed of on 24-2-1989 by a Bench comprising Om Prakash J. and one of us (R.K. Gulati, J.) it was held, applying the principle of the decisions of other High Courts, that "where the collection made by the Revenue is unauthorised, without an authority of law, on the refund thereof the payment of interest is a necessary consequence to the person entitled to the refund. The principle underlying such decision is that the payment of interest is a compensation for the use or retention of another's money. To put it differently, interest is a sort of compensation, which is paid to the other party because the latter has deprived of the legitimate use of the amount which rightly belonged to him..." On the said principle interest was granted at the rate of 10% per annum simple, for the period for which it was held there was unjustifiable delay in effecting the refund. A reading of this decision shows that interest was granted not automatically but only for the period for which it was held there was unreasonable and unjustifiable delay. Moreover, the discretionary nature of this Court's power under Article 226 was not raised or argued in that case and hence that aspect was not considered or gone into. Hence, it cannot be said that there is any conflict between that judgment and the present one.
15. The next decision is in C.M.W.P. No. 17861 of 1989 disposed of on 20-3-1990 by a Bench comprising S.D. Agarwal and R.S. Dhava, JJ. This, however, was not a case arising under the Central Excise Act. Indeed, there was a stipulation in the agreement with respect to payment of interest, and on that basis interest was awarded. The matter arose in respect of a forest contract. We do not see any relevance of this decision herein. The other decision is in C.M.W.P. No. 792 of 1987 disposed of on 18-1-1990 by a Bench comprising A.N. Verma and Om Prakash JJ. This case, however, arose under the Central Excise Act, and the only prayer in the writ petition was to direct the respondents to pay interest on the excise duty refunded. It was urged for the department that there is no provision in the Act providing for interest in such cases and, therefore, a writ petition does not lie therefore. The Bench, however, applied the principle of decision of the Supreme Court in Life Insurance Corporation of India. v. Gangadhar Vishwanath Ranade (1989-4, S.C. Cases 297), and on that basis observed :
"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 amounts belonging to individuals arbitrarily or unjustly, they rendered themselves liable to pay interest. The decision rendered in LIC case is squarely applicable to the facts of the instant case inasmuch as Sub-section (3) of Section 11B of the Act 1944 casts a statutory duty on the Asstt. 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 Instruction No. 156/1986 (Judl.), 15/86 dated 20-8-1981 issued in that 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 a statutory provision for the same, cannot be sustained....The judgment in Life Insurance Corporation should be considered a land mark 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 other fail in their statutory duty and withhold the rightful claims of the public...."
The Bench, however, took care to qualify and clarify the above statements thus :-
"Before concluding we hasten to add that we should not be taken to have laid down as an inflexible rule that whether 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".
17. Before we deal with the principle of this judgment it would be appropriate to deal with the decision of the Supreme Court in LIC (Supra) which forms practically the sole basis of the said decision. In that case, the Life Insurance Corporation was found guilty of unexplained delay in making the requisite statement on oath under Clause (vi) of Sub-section (3) of Section 226 of the Income-tax Act, raising an objection to attachment. On account of this delay, the person entitled to receive the amount in question could not receive the same on the due date. The question was whether, in those circumstances, the LIC was bound to pay interest. The High Court had awarded interest. A reading of the judgment shows that the main contention urged before the Supreme Court, viz., the liability of the LIC to pay interest, was dealt with towards the end, in paragraph 34 of the Report. The main portion of the judgment deals with five contentions raised by the Corporation before the Supreme Court relating to other questions, including the rate of interest. The main contention relating to the liability of the Corporation to pay interest was dealt with in paragraph 34 in the following words - and it is this paragraph which constitutes the main basis of the judgment of the Division Bench of this Court :-
"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 LIC for its failure to perform its statutory obligation under Section 226(3)(vi) of the Income-tax Act, 1961 within reasonable lime. We have no doubt that this is the proper construction of Section 226(3) of the Income-tax Act, 1961 and the consequential liability resulting from the failure of the noticee to raise the objection in the prescribed manner under Clause (vi) thereof within a reasonable time. Performance of this statutory obligation by the LIC, 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 LIC is, therefore, clearly justified. This contention which is really the main contention urged on behalf of the appellant therefore, fails and is rejected."
This decision must, however, be understood in the context of the facts of that case. Life Insurance Corporation is a commercial corporation, and it levies interest on delayed payments. For that reason, it was held, it must be made liable to pay interest itself in case of delayed payment by it. In para 23 of the Report the Supreme Court observed thus:-
"The High Court relied on the fact that interest @ 15% per cent per annum is reasonable, in the present case, particularly in view of the fact that the LIC it-self charges interest at that rate...."
It is well known that LIC charges interest not only on delayed payment of premiums by the policy holders, but that it is engaged in advancing loans upon which it charges interest. The same cannot be said about the Central Excise authorities. Collection of tax/duty is not a commercial venture, and there is no provision in the Central Excise Act, or the Rules, providing for interest on delayed payment of duty. No doubt penalty is leviable, but not interest. In such a situation, it would not ordinarily be just or equitable to make the department liable to pay interest for delayed refund. We are, therefore, of the opinion that the decision of the Supreme Court cannot be understood as laying that in every case of refund of excise duty, interest ought to be awarded. Nor has it been understood by this Court in that manner. Indeed, in our opinion, the said decision may not be said to be relevant at all in cases arising under the Central Excise Act.
18. We repeat that the decision in CMW.P. 792/87 cannot be understood as laying down that in every case interest follows as a matter of course. It makes the matter clear in its penultimate para, extracted hereinbefore and which we quote again :-
"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..."
It is clear that the decision merely recognizes a power in the Court to grant such interest where something more is established in addition to showing that money was collected or retained illegally. The decision must, therefore, be understood as confined to the facts of that particular case. In this case too, the discretionary nature of the jurisdiction of this Court under Article 226 of the Constitution was not raised and hence not considered. We have not held that there is no power; we have proceeded on the assumption that it does; we have mainly based our judgment on the ground that there is no equity in favour of the petitioner entitling him to invoke the equitable and discretionary jurisdiction of this Court. There is thus no conflict between the two decisions.
19. For the above reasons, the writ petition fails and is dismissed. We may record that no argument has been addressed before us on the validity of Rule 233-B of C.E. Rules.
No costs.