Full Judgment
R. Gururajan, J.
1. Commissioner of Central Excise is before us seeking an order to set aside the final order No. 1076 of 2005 dated 4.7.2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, Southern Zonal Bench, Bangalore. Revenue also wants the questions of law as referred to in paragraph-3 to be answered in the case on hand.
(a) In the facts and circumstances of the case, whether the CESTAT is legally justified in coming to the conclusion that the Respondent has not 'unduly enriched itself' in spite of Section 12-B of the Central Excise Act, 1944, and in the absence of sufficient evidence by the Respondent to rebut the presumption under the said Section?
(b) Whether it is permissible for the CESTAT to totally ignore the effect of Section 12B of the Central Excise Act, 1944?
(c) Whether the CESTAT is right in coming to the conclusion that the assessee is eligible for the refund when they have charged the duty on the State Government of Karnataka who have absorbed/ suffered by the burden of duty?
(d) Whether the State Government and the Respondent Government Company are one and the same and therefore whether refund granted to the Respondent amounts to grant of refund to Govt. of Karnataka?
2. The Karnataka State Agro Corn Products Limited, Chitradurga is fully owner by the State Government They manufacture food products. Food products manufactured by the assessee are supplied to various Departments of Government like Child Development project office, Juvenile Service Bureau, etc. However, at the time of clearing the goods to various Departments of the State Government, the assessee had raised invoices and collected Central Government duty from them to be made over to the Central Government. Thereafter, it noticed that the assessee was not liable to pay central excise duty. Assessee filed a refund claim for the period from 1.3.1985 to 30.6.1986. The Assistant Commissioner sanctioned refund of Rs. 12,58,570/- and rejected the refund claim for Rs. 29,00,612/-. An appeal was filed. Appeal was rejected. Aggrieved by the said order, an appeal was filed before the CEGAT, Chennai. Appeal stood allowed in the matter. Thereafter, the Assistant Commissioner examined the issue on the ground of unjust enrichment and thereafter it rejected the claim in terms of the order. Aggrieved by the said order, an appeal was filed. Appellate authority rejected the appeal. Thereafter, a second appeal was filed before the Tribunal. Tribunal ordered refund in favour of the assessee. It is in these circumstances, revenue is before us by raising questions of law as stated above.
3. Sri C. Shashikantha, learned Counsel for the revenue would say that the Tribunal is wrong in allowing the appeal on the ground of no unjust enrichment. According to him, the Company stands on a different footing than the State Government. He says that they are two independent entities, and that therefore, the order of the Tribunal requires interference.
4. After hearing, we have carefully perused the material placed on record.
5. The Tribunal has noticed materialfacts and circumstances and thereafter rejected the reason of 'unjust enrichment' in the case on hand. Tribunal was of the view that if refund is granted, it goes to the State's exchequer, and that the refund goes to the person who has borne it and hence there is no unjust enrichment at all. Let us see as to whether this finding is acceptable or not.
6. 'Unjust enrichment' has been considered by courts of law. Leading case is Mafatlal Industries Limited v. Union of India and Ors. (1998) 111 STC 467. This is what the apex court has to say at page 547 reading as follows:
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
The apex court has categorically ruled that there cannot be any unjust enrichment by the State Government.
7. The argument is that the State is different from State undertakings. It cannot be forgotten that the State Government controls the Government undertakings in the matter of management, finance, administration, etc. of those governmental undertakings. Policies or programmes are also, to a certain extent, evolved by the State Government. State Government has an effective control over these undertakings and there is pervasive control by the State over them. Unless the Department is able to show that the Government undertakings are totally different from all angles, it is not possible to accept the argument of 'unjust enrichment' on the part of the State undertakings. State and the State undertakings represent the people of the country. The judgment of the Supreme Court referred to above would definitely apply in the matter 'unjust enrichment' even to governmental undertakings as has been rightly ruled by the Tribunal.
8. We reject this appeal by answering the questions of law against the Department.