LAW FOR ALL

Tuesday, August 30, 2016

refund of paid excess excise duty= in the claim for refund of excess duty paid can be allowed only in case where the burden of duty has not been passed on to any other person, which includes the ultimate consumer as well = The respondent-Assessee is a 100 per cent Export Oriented Unit (EOU) manufacturing cotton yarn. The respondent filed an application for refund of an amount of Rs. 2,00,827/- on 14.08.2002 on the ground that it had paid excess excise duty at the rate of 18.11 per cent instead of 9.20 per cent. The Assessee initially passed on the duty incidence to its customers. Later the Assessee returned the excess duty amount to its buyers which was evidenced by a certificate issued by the Chartered Accountant on 02.08.2002. The refund claim was rejected by the Deputy Commissioner of Central Excise, Kolhapur Division vide an order dated 24.09.2002 on the ground that the Assessee did not submit either the credit notes or the Chartered Accountant’s certificate at the time of filing the refund application. Not satisfied with the genuineness of the documents the Deputy Commissioner rejected the refund claim. The Commissioner (Appeals) Central Excise, Pune allowed the appeal filed by the Assessee by taking note of the certificate issued by the Chartered Accountant and the credit notes dated 29.07.2002. The Appellate Authority accepted the Assessee’s contentions and held that there was no reason to doubt the genuineness of the documents produced. The Appellate Authority allowed the appeal of the Assessee and the said order was confirmed by the Central Excise and Service Tax Appellate Tribunal vide judgment and order dated 06.10.2005. The said order of Central Excise and Service Tax Appellate Tribunal was further confirmed by the High Court of Judicature at Bombay in Central Excise Appeal No. 100 of 2008 filed by the Revenue. The Revenue has filed the above Civil Appeal challenging the validity of the judgment of the High Court in Central Excise Appeal No. 100 of 2008. Except for a factual dispute about the genuineness of the certificate issued by the Chartered Accountant and the credit notes raised by the Assessee regarding the return of the excess duty paid by the Assessee, there is no dispute in this case of the duty being passed on to any other person by the buyer. As it is clear that the Assessee has borne the burden of duty, it cannot be said that it is not entitled for the refund of the excess duty paid. In view of the facts of this case being different from Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is dismissed.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 7906 of 2002

Commissioner of Central Excise, Madras
.... Appellant(s)
Versus
M/s Addison & Co. Ltd.
… Respondent(s)
WITH

CIVIL APPEAL No. 8488 of 2009

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 25055 of 2009)

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18426 of 2015)

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18423 of 2015)

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18425 of 2015)

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 23722 of 2015)

CIVIL APPEAL No. 14689 of 2015

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 12282 of 2016)

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 16142 of 2016)

CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 16141 of 2016)

J U D G M E N T
L. NAGESWARA RAO, J.
The above Appeals have been listed before us because of an order
dated 16.07.2008, by which there was a reference to a Larger Bench in view
of the importance of the questions involved.
2. Civil Appeal No. 7906 of 2002 arises from the judgment dated
23.11.2000 passed by the Madras High Court in R.C. No. 01 of 1999. Civil
Appeal No. 14689 of 2015 was filed by the Revenue against the judgment
dated 26.11.2014 in Central Excise Appeal No. 21 of 2009. Special Leave
Petition (C) Nos. 18426 of 2015, 18423 of 2015, 18425 of 2015, 23722 of
2015, 12282 of 2016, 16142 of 2016 and 16141 of 2016 are filed against the
judgment of the Andhra Pradesh High Court in Central Excise Appeal Nos. 21
of 2005, 9 of 2005, 51 of 2004, 10 of 2005, 44 of 2004, 38 of 2004 and 18
of 2005 respectively.
3. Civil Appeal No. 8488 of 2009 is filed against the judgment dated
20.08.2008 passed by the Bombay High Court in Central Excise Appeal No. 100
of 2008 and Special Leave Petition (C) No. 25055 of 2009 is filed by the
Union of India against the judgment dated 26.11.2008 of the High Court of
Rajasthan at Jodhpur in D.B. Central Excise Appeal No. 34 of 2007.
4. Civil Appeal No. 7906 of 2002 will be taken as the lead matter as SLP
(C) Nos. 18426, 23722, 18425, 18423 of 2015 and 12282, 16141 and 16142 of
2016 and Civil Appeal No. 14689 of 2015 were disposed of by the Andhra
Pradesh High Court by following the Madras High Court’s impugned judgment
in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009 and SLP
No. 25055 of 2009 will be dealt with separately as the facts and the point
involved are slightly different.
Civil Appeal No. 7906 of 2002
5. The respondent in the above appeal is a manufacturer of cutting
tools. The respondent-Assessee filed a refund claim for Rs. 40,22,133/- on
19.07.1988 and a supplementary refund claim for Rs. 5,44,688/- on
15.06.1989 towards excise duty paid on various taxes and discounts such as
turnover tax, surcharge, additional sales discounts, transitory insurance,
excise discounts, additional discounts and turnover discounts. The said
claim was later on revised to Rs. 40,37,938/- on 17.08.1988. The claim of
the Assessee was that the said amount was deductable from the excise duty.
The Department was of the opinion that the refund towards turnover discount
and additional discount was to be rejected as the Assessee was not eligible
for deduction from the wholesale price for determination of value under
Section 4 of the Central Excises & Salt Act, 1944. On 23.08.1989 a notice
was issued to the respondent to show cause as to why the refund claim
involving turnover discount and additional discount should not be rejected.
After hearing the Assessee, the Assistant Collector by an order dated
06.12.1989 rejected the refund claim amounting to Rs.26,37,462/- and
Rs.17,17,808/- in respect of turnover discount and additional discount
respectively on the ground that the quantum of discount become known only
at the year end. The Collector of Central Excise Appeals set aside the
said order dated 06.12.1989 of the Assistant Collector by his order in
appeal dated 21.02.1990 and held that the Assessee was entitled to refund.
6. As per the amendment made to Section 11-B of the Central Excise Act,
1944, (hereinafter referred to as “the Act”) an application filed for
refund prior to the Central Excises & Customs Laws (Amendment) Act 1991
shall be deemed to have been made under the Amendment Act and considered
accordingly. The Assistant Collector of Excise issued a show cause notice
dated 13.02.1992, directing the Assessee to produce evidence in support of
the refund claim. It was mentioned in the said notice that the burden of
proof to show that the full incidence of duty has not passed on to the
buyers is on the Assessee as per Section 12-B of the Act.
7. The Assistant Collector passed an Order-in-Original dated 27.10.1992
holding that the Assessee is entitled for the refund claimed by him. The
Collector of Central Excise by Order-in-Appeal dated 20.10.1993 rejected
the appeal filed by the Revenue and upheld the order dated 27.10.1992 of
the Assistant Collector of Central Excise, Madras Vth Division. The
Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), South Zone
Bench of Madras allowed the appeal filed by the Revenue against the order
dated 20.10.1993 of the Collector of Central Excise. The Tribunal held
that the Assessee would be entitled to grant of refund only if he had not
passed on the duty burden to his buyers. It was also held that the buyer
in turn, would be entitled to claim refund only if he has not passed on the
incidence of duty to any other person. It was further held by the Tribunal
that the event which gives rise to cause of action for refund is payment of
duty made in respect of goods cleared from the factory and once the duty
burden has been passed on to the buyer at the time of clearance, issuance
of credit note at a later point of time would not entitle the Assessee to
claim any refund. The Tribunal also held that burden of duty is normally
passed by the manufacturer and the dealer to the ultimate consumer.
8. The Assessee filed an application for reference of questions arising
out of the final order dated 07.12.1996. The Tribunal referred the
following questions for consideration of the High Court by its order dated
28.08.1998, taking note of the fact of the existence of divergent views on
the point.
“1. Whether by passing on the duty element on the discount to its dealers
the applicant had satisfied the requirements of proviso ‘d’ to sub Section
11-B (2) of the Central Excise Act, 1944 and was therefore, entitled to be
paid the amount claimed as refund?
2. Whether the Tribunal after finding that the burden of duty was passed
on by the applicant to its various dealers by issue of credit notes was
right in concluding that the ingredients of Section 11-B were not
satisfied.”
9. The High Court of Madras answered the reference in favour of the
Assessee by its judgment dated 23.11.2000. The High Court held that the
refund towards deduction of turnover discount cannot be denied on the
ground that there was no evidence to show who is the ultimate consumer of
the product and as to whether the ultimate consumer had borne the burden of
the duty. According to the High Court, Section 11-B of the Act cannot be
construed as having reference to the ultimate Consumer and it would be
sufficient for the claimant to show that he did not pass on the burden of
duty to any other person. It was further held by the High Court that the
claim for refund made by the manufacturer is not dependent on the
identification of the ultimate consumer. The word ‘buyer’ used in Section
12-B of the Act does not refer to ultimate consumer and has reference only
to the person who buys the goods from the person who has paid duty i.e. the
manufacturer. The High Court concluded that the Tribunal committed an
error in holding that the Assessee was not entitled for refund despite the
Assessee proving that the duty was not passed on to its buyers.
Challenging the legality and validity of the said judgment of the High
Court, the Commissioner of Central Excise, Madras has filed Civil Appeal
No. 7906 of 2002.
10. We have heard Mr. Atmaram N. S. Nadkarni, Additional Solicitor
General and Mr. K. Radhakrishnan, Senior Advocate for the appellant and Mr.
N. Venkatraman, Senior Advocate for the respondent. The learned Additional
Solicitor General submitted that a claim for refund can be entertained only
when the claimant has not passed on the duty to any other person. By
referring to the statement of objects and reasons for the amendment made to
the Central Excises & Customs Laws (Amendment) Act 1991, the learned
Additional Solicitor General submitted that the Act had given effect to the
recommendations of the Public Accounts Committee whereby the refund of any
duty was proposed to be made only to the person who ultimately bears the
incidence of such duty. He submitted that it would be necessary for a
verification to be done to find out as to who actually bore the burden of
duty. According to him such verification would not stop with the
manufacturer and his buyer but would extend to the ultimate buyer i.e. the
consumer. He submitted that there can be no claim for refund on the basis
of post clearance transactions. He further submitted that there is a
presumption, though rebuttable, that the full incidence of the duty has
passed on to the buyer of the goods. The learned Additional Solicitor
General has strongly relied upon Mafatlal Industries Ltd. and Others Vs.
Union of India And Ors., reported in (1997) 5 SCC 536 to support his
contentions on unjust enrichment.
11. Mr. N. Venkatraman, Senior Advocate appearing for the Assessee
contended that turnover discount is an admissible deduction, the scheme of
turnover discount was known to the buyer even at the time of sale, discount
was given on the basis of the turnover of sales made by the buyer and that
the credit notes issued to the buyer contains the discounts and the duty
element. Though there is a confusion from the pleadings and the order
passed by the High Court regarding the passing of the incidence of duty,
Mr. N. Venkatraman had fairly submitted that the incidence of duty was
originally passed on to the buyer. He submitted that the turnover discount
should be allowed to be deducted from the sale price as held in Union of
India and Others Vs. Bombay Tyre International Pvt. Ltd. reported in (1984)
1 SCC 467 and (2005) 3 SCC 787. He contends that in the said judgments it
was held that trade discounts should not be disallowed only because they
are not payable at the time of each invoice or deducted from the invoice
price. He also placed reliance on IFB Industries Ltd. Vs. State of Kerala
reported in (2012) 4 SCC 618 to support his submission that to qualify for
exemption, discounts need not be shown in the invoice itself.
12. Mr.Venkatraman further submitted that the eligibility of the Assessee
for refund of amounts towards turnover discounts is no longer in doubt as
this Court by its judgment dated 11.03.1997 in Addison & Company Ltd.,
Madras Vs. Collector of Central Excise, Madras reported in (1997) 5 SCC 763
had held that turnover discount is an admissible deduction. He stated that
Section 4 read with Section 11-B of the Act permits the respondent to claim
for refund of turnover discount given after the sale, provided the scheme
of discount has been agreed upon prior to the removal of the goods. The
Assessee while issuing a credit note for the turnover discount has returned
the duty component forming part of the said discount. As the Assessee has
not retained the duty component of the turnover discount, he does not stand
to benefit from both ends and hence he is entitled for claiming a refund of
the excess duty paid. The refund to which the Assessee is entitled to
would not result in any unjust enrichment. While referring to the relevant
provisions of Section 11-B, 12-A and 12-B of the Act, Mr. Venkatraman
submitted that the buyer mentioned in the said provisions would be the
buyer of the goods from the manufacturer Assessee. He stressed upon
Clauses ‘a’ to ‘f’ of the Proviso to Section 11-B (2) in support of his
submission that the only persons eligible to make a claim for refund would
be the manufacturer, his buyer and a class of persons as notified by the
Central Government. On the basis of the above submission, he states that
there is absolutely no necessity for any verification to be made as to who
is the ultimate consumer and as to whether he had borne the burden of the
duty. According to him, if the manufacturer is entitled for a refund
towards an admissible deduction, such refund has to be given to him if he
did not retain the benefit. He also stated that the judgment of this
Court in Mafatlal Industries Ltd. & Ors. Vs. Union of India (supra) which
was relied upon by the learned Additional Solicitor General would, in fact,
support his case. He further submitted that the identity of the Excise
duty is lost at the sales conducted downstream as the duty becomes part of
the price.
13. In reply to the submissions of Mr. Venkatraman, Sr. Advocate, the Ld.
Additional Solicitor General stated that the verification to be done by the
Department to enquire about the ultimate buyer who has actually paid the
duty is not a futile exercise. He stated that the refund can be granted
only to the person who has paid the duty and not to anyone else. If the
ultimate consumer cannot be identified, the amount would be retained in the
Fund and utilized for the benefit of Consumers.
14. We have considered the submissions made by the Counsel carefully and
examined the material on record. The questions that arise for consideration
in this case are whether the Assessee is entitled for a refund and whether
there would be unjust enrichment if the said refund is allowed. It was
held by the Special Bench of CEGAT, New Delhi by its judgment dated
17.03.1994 in Collector of Central Excise, Madras Vs. Addison & Co. Ltd.
that the turnover discount is not an admissible abatement on the ground
that the quantum of discount was not known prior to the removable of the
goods. In an appeal filed by the respondent-Assessee, this Court by its
judgment dated 11.03.1997 in Addison & Co. Ltd. Vs. Collector of Central
Excise, Madras (supra) held that the turnover discount is an admissible
deduction. This Court approved the normal practice under which discounts
are given and held that the discount is known to the dealer at the time of
purchase. The Additional Solicitor General submitted that any credit note
that was raised post clearance will not be taken into account for the
purpose of a refund by the Department. We do not agree with the said
submission as it was held by this Court in Union of India Vs Bombay Tyre
International (supra) that trade discounts shall not be disallowed only
because they are not payable at the time of each invoice or deducted from
the invoice price. It is the submission of the Assessee that the turnover
discount is known to the dealer even at the time of clearance which has
also been upheld by this Court. It is clear from the above that the
Assessee is entitled for filing a claim for refund on the basis of credit
notes raised by him towards turnover discount.
15. The following provisions of Central Excise Act, 1944 are relevant for
appreciating the point of unjust enrichment:-
SECTION 11B. Claim for refund of duty. —
“(1) Any person claiming refund of any duty of excise may make an
application for refund of such duty to the [Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise] before the expiry
of [one year] [from the relevant date] [[in such form and manner] as may be
prescribed and the application shall be accompanied by such documentary or
other evidence (including the documents referred to in section 12A) as the
applicant may furnish to establish that the amount of duty of excise in
relation to which such refund is claimed was collected from, or paid by,
him and the incidence of such duty had not been passed on by him to any
other person :
Provided that where an application for refund has been made before the
commencement of the Central Excises and Customs Laws (Amendment) Act, 1991,
(40 of 1991), such application shall be deemed to have been made under this
sub-section as amended by the said Act and the same shall be dealt with in
accordance with the provisions of sub-section (2) as substituted by that
Act :]
[Provided further that] the limitation of [one year] shall not apply where
any duty has been paid under protest.
* * * *
(2) If, on receipt of any such application, the [Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise] is satisfied that
the whole or any part of the duty of excise paid by the applicant is
refundable, he may make an order accordingly and the amount so determined
shall be credited to the Fund :
Provided that the amount of duty of excise as determined by the [Assistant
Commissioner of Central Excise or Deputy Commissioner of Central Excise]
under the foregoing provisions of this sub-section shall, instead of being
credited to the Fund, be paid to the applicant, if such amount is relatable
to-
(a) rebate of duty of excise on excisable goods exported out of India
or on excisable materials used in the manufacture of goods which are
exported out of India;
(b) unspent advance deposits lying in balance in the applicant’s account
current maintained with the [Commissioner of Central Excise];
(c) refund of credit of duty paid on excisable goods used as inputs in
accordance with the rules made, or any notification issued, under this Act;

(d) the duty of excise paid by the manufacturer, if he had not passed on
the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the
incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of applicants as the
Central Government may, by notification in the Official Gazette, specify :
Provided further that no notification under clause (f) of the first proviso
shall be issued unless in the opinion of the Central Government, the
incidence of duty has not been passed on by the persons concerned to any
other person.
(3) Notwithstanding anything to the contrary contained in any judgment,
decree, order or direction of the Appellate Tribunal of any Court in any
other provision of this Act or the rules made thereunder or any other law
for the time being in force, no refund shall be made except as provided in
sub-section (2).
(4) Every notification under proviso to sub-section (2) shall be laid
before each House of Parliament, if it is sitting, as soon as may be after
the issue of the notification, and, if it is not sitting, within seven days
of its re-assembly, and the Central Government shall seek the approval of
Parliament to the notification by a resolution moved within a period of
fifteen days beginning with the day on which the notification is so laid
before the House of the People and if Parliament makes any modification in
the notification or directs that the notification should cease to have
effect, the notification shall thereafter have effect only in such modified
form or be of no effect, as the case may be, but without prejudice to the
validity of anything previously done thereunder.
(5) For the removal of doubts, it is hereby declared that any notification
issued under clause f of the first proviso to sub-section (2), including
any such notification approved or modified under sub-section (4), may be
rescinded by the Central Government at any time by notification in the
Official Gazette.]
[Explanation. — For the purposes of this section, -
(A) “refund” includes rebate of duty of excise on excisable goods exported
out of India or on excisable materials used in the manufacture of goods
which are exported out of India;
(B) “relevant date” means, -
(a) in the case of goods exported out of India where a refund of excise
duty paid is available in respect of the goods themselves or, as the case
may be, the excisable materials used in the manufacture of such goods, -
(i) if the goods are exported by sea or air, the date on which
the ship or the aircraft in which such goods are loaded, leaves
India,
or
(ii) if the goods are exported by land, the date on which
such goods pass the frontier,
Or
(iii) if the goods are exported by post, the date of
dispatch of goods by the Post Office concerned to a place outside
India;
(b) in the case of goods returned for being remade, refined,
reconditioned, or subjected to any other similar process, in any factory,
the date of entry into the factory for the purposes aforesaid;
(c) in the case of goods to which banderols are required to be affixed if
removed for home consumption but not so required when exported outside
India, if returned to a factory after having been removed from such factory
for export out of India, the date of entry into the factory;
(d) in a case where a manufacturer is required to pay a sum, for a certain
period, on the basis of the rate fixed by the Central Government by
notification in the Official Gazette in full discharge of his liability for
the duty leviable on his production of certain goods, if after the
manufacturer has made the payment on the basis of such rate for any period
but before the expiry of that period such rate is reduced, the date of such
reduction;
[(e) in the case of a person, other than the manufacturer, the date of
purchase of the goods by such person;]
(ea) in the case of goods which are exempt from payment of duty by a
special order issued under sub-section (2) of section 5A, the date of issue
of such order;]
(eb) in case where duty of excise is paid provisionally under this Act or
the rules made thereunder, the date of adjustment of duty after the final
assessment thereof;]
(f) in any other case, the date of payment of duty.]

SECTION 12A. Price of goods to indicate the amount of duty paid thereon. —
Notwithstanding anything contained in this Act or any other law for the
time being in force, every person who is liable to pay duty of excise on
any goods shall, at the time of clearance of the goods, prominently
indicate in all the documents relating to assessment, sales invoice, and
other like documents, the amount of such duty which will form part of the
price at which such goods are to be sold.
SECTION 12B. Presumption that the incidence of duty has been passed on to
the buyer. —
Every person who has paid the duty of excise on any goods under this Act
shall, unless the contrary is proved by him, be deemed to have passed on
the full incidence of such duty to the buyer of such goods.
SECTION 12C. Consumer Welfare Fund. —
(1) There shall be established by the Central Government a fund, to be
called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may be
prescribed, -
(a) the amount of duty of excise referred to in sub-section (2) of section
11B or sub-section (2) of section 11C or sub-section (2) of section 11D;
(b) the amount of duty of customs referred to in sub-section (2) of section
27 or sub-section (2) of section 28A, or sub-section (2) of section 28B of
the Customs Act, 1962 (52 of 1962);
(c) any income from investment of the amount credited to the Fund and any
other monies received by the Central Government for the purposes of this
Fund.
SECTION 12D. Utilisation of the Fund. —
(1) Any money credited to the Fund shall be utilised by the Central
Government for the welfare of the consumers in accordance with such rules
as that Government may make in this behalf.
(2) The Central Government shall maintain or, if it thinks fit, specify the
authority which shall maintain, proper and separate account and other
relevant records in relation to the Fund in such form as may be prescribed
in consultation with the Comptroller and Auditor-General of India”.

16. In the instant case, the Assessee has admitted that the incidence of
duty was originally passed on to the buyer. There is no material brought
on record to show that the buyer to whom the incidence of duty was passed
on by the Assessee did not pass it on to any other person. There is a
statutory presumption under Section 12-B of the Act that the duty has been
passed on to the ultimate consumer. It is clear from the facts of the
instant case that the duty which was originally paid by the Assessee was
passed on. The refund claimed by the Assessee is for an amount which is
part of the excise duty paid earlier and passed on. The Assessee who did
not bear the burden of the duty, though entitled to claim deduction, is not
entitled for a refund as he would be unjustly enriched.
It will be useful to refer to the relevant para of Mafatlal
Industries Vs. Union of India (supra) in this connection.
“108. (iii) A claim for refund, whether made under the provisions of the
Act as contemplated in Proposition (i) above or in a suit or writ petition
in the situations contemplated by Proposition (ii) above, can succeed only
if the petitioner/plaintiff alleges and establishes that he has not passed
on the burden of duty to another person/other persons. His refund claim
shall be allowed/decreed only when he establishes that he has not passed on
the burden of the duty or to the extent he has not so passed on, as the
case may be. Whether the claim for restitution is treated as a
constitutional imperative or as a statutory requirement, it is neither an
absolute right nor an unconditional obligation but is subject to the above
requirement, as explained in the body of the judgment. Where the burden of
the duty has been passed on, the claimant cannot say that he has suffered
any real loss or prejudice. The real loss or prejudice is suffered in such
a case by the person who has ultimately borne the burden and it is only
that person who can legitimately claim its refund. But where such person
does not come forward or where it is not possible to refund the amount to
him for one or the other reason, it is just and appropriate that that
amount is retained by the State, i.e., by the people. There is no
immorality or impropriety involved in such a proposition.
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”.

17. Section 11-B (2) of the Act contemplates that the amount of refund
determined by the Authorities shall be credited to the fund. The Proviso to
Section 11-B (2) permits the refund to be paid to the applicant instead of
being credited to the fund if such amount is relatable to the manufacturer,
the buyer or any other such class of applicants as notified by the Central
Government.
18. Mr. Venkatraman interpreted the said provision to mean that the only
persons who were entitled for claim of refund are the manufacturer, his
buyer and any other class of persons as notified by the Central Government.
There is no dispute about the fact that no notification has been issued by
the Central Government as contemplated in Clause (f) to proviso to Section
11-B (2) of the Act. He contested that the claim for refund can be made
only by the manufacturer or his buyer and any enquiry pertaining to unjust
enrichment should be restricted only to the manufacturer and his buyer. The
ultimate buyer/ consumer will not figure in the scheme of Sections 11-B, 12-
A, 12-B and 12-C of the Act. This submission was accepted by the High
Court in the impugned judgment. We do not approve the findings of the High
Court in this regard.
19. The sine qua non for a claim for refund as contemplated in Section 11-
B of the Act is that the claimant has to establish that the amount of duty
of excise in relation to which such refund is claimed was paid by him and
that the incidence of such duty has not been passed on by him to any other
person. Section 11-B (2) provides that, in case it is found that a part of
duty of excise paid is refundable, the amount shall be credited to the
fund. Section 2 (ee) defines Fund to mean the Consumer Welfare Fund
established under Section 12-C. There is a proviso to Section 11-B (2)
which postulates that the amount of excise duty which is refundable may be
paid to the applicant instead of being credited to the fund, if such amount
is relatable to the duty of excise paid by the manufacturer and he had not
passed on the incidence of such duty to any other person. Clause (e) to
proviso of Section 11-B (2) also enables the buyer to receive the refund if
he had borne the duty of excise, provided he did not pass on the incidence
of such duty to any other person. There is a third category of a class of
applicants who may be specified by the Central Government by a notification
in the official gazette who are also entitled for refund of the duty of
excise. A plain reading of Clauses (d), (e) and (f) of the proviso to
Section 11-B (2) shows that refund to be made to an applicant should be
relatable only to the duty of excise paid by the three categories of
persons mentioned therein i.e. the manufacturer, the buyer and a class of
applicants notified by the Central Government. Clause (e) refers to the
buyer which is not restricted to the first buyer from the manufacturer.
The buyer mentioned in the above Clause can be a buyer downstream as well.
While dealing with the absence of a provision for refund to the consumer in
the rules this Court in Mafatlal Industries Vs. Union of India (supra) held
as follows:-
“98. A major attack is mounted by the learned counsel for petitioners-
appellants on Section 11-B and its allied provisions on the ground that
real purpose behind them was not to benefit the consumers by refusing
refund to manufacturers (on the ground of passing on the burden) but only
to enable the Government to retain the illegally collected taxes. It is
suggested that the creation of the Consumer Welfare Fund is a mere pretence
and not an honest exercise. By reading the Rules framed under Section 12-D,
it is pointed out, even a consumer, who has really borne the burden of tax
and is in a position to establish that fact, is yet not entitled to apply
for refund of the duty since the Rules do not provide for such a situation.
The Rules contemplate only grants being made to Consumer Welfare Societies.
Even in the matter of making grants, it is submitted, the Rules are so
framed as to make it highly difficult for any consumer organisation to get
the grant. There is no provision in the Act, Shri Nariman submitted, to
locate the person really entitled to refund and to make over the money to
him. “We expect a sensitive Government not to bluff but to hand back the
amounts to those entitled thereto”, intoned Shri Nariman. It is a
colourable device — declaimed Shri Sorabjee — “a dirty trick” and “a shabby
thing”. The reply of Shri Parasaran to this criticism runs thus: It ill-
becomes the manufacturers/Assessees to espouse the cause of consumers, when
all the while they had been making a killing at their expense. No
consumers' organisation had come forward to voice any grievance against the
said provisions. Clause (e) of the proviso to sub-section (2) of Section 11-
B does provide for the buyer of the goods, to whom the burden of duty has
been passed on, to apply for refund of duty to him, provided that he has
not in his turn passed on the duty to others. It is, therefore, not correct
to suggest that the Act does not provide for refund of duty to the person
who has actually borne the burden. There is no vice in the relevant
provisions of the Act. Rules cannot be relied upon to impugn the validity
of an enactment, which must stand or fall on its own strength. The defect
in the Rules, assuming that there is any, can always be corrected if the
experience warrants it. The Court too may indicate the modifications needed
in the Rules. The Government is always prepared to make the appropriate
changes in the Rules since it views the process as a “trial and error”
method — says Shri Parasaran”.
20. There was a further submission which was considered in the said
judgment about the convenience/difficulty for the ultimate consumer to make
applications for refund. In that connection it was held as follows:-
“99. We agree with Shri Parasaran that so far as the provisions of the Act
go, they are unexceptionable. Section 12-C which creates the Consumer
Welfare Fund and Section 12-D which provides for making the Rules
specifying the manner in which the money credited to the Fund shall be
utilised cannot be faulted on any ground. Now, coming to the Rules, it is
true that these Rules by themselves do not contemplate refund of any amount
credited to the Fund to the consumers who may have borne the burden; the
Rules only provide for “grants” being made in favour of consumer
organisations for being spent on welfare of consumers. But, this is perhaps
for the reason that clause (e) of the proviso to sub-section (2) of Section
11-B does provide for the purchaser of goods applying for and obtaining the
refund where he can satisfy that the burden of the duty has been borne by
him alone. Such a person can apply within six months of his purchase as
provided in clause (e) of Explanation B appended to Section 11-B. It is,
therefore, not correct to contend that the impugned provisions do not
provide for refunding the tax collected contrary to law to the person
really entitled thereto. A practical difficulty is pointed out in this
behalf by the learned counsel for appellants-petitioners: It is pointed out
that the manufacturer would have paid the duty at the place of “removal” or
“clearance” of the said goods but the sale may have taken place elsewhere;
if the purchaser wants to apply for refund — it is submitted — he has to go
to the place where the duty has been paid by the manufacturer and apply
there. It is also pointed out that purchasers may be spread all over India
and it is not convenient or practicable for all of them to go to the place
of “removal” of goods and apply for refund. True it is that there is this
practical inconvenience but it must also be remembered that such claims
will be filed only by purchasers of high-priced goods where the duty
component is large and not by all and sundry/small purchasers. This
practical inconvenience or hardship, as it is called, cannot be a ground
for holding that the provisions introduced by the 1991 (Amendment) Act are
a “device” or a “ruse” to retain the taxes collected illegally and to
invalidate them on that ground — assuming that such an argument is
permissible in the case of a taxing enactment made by Parliament. (See R.K.
Garg [(1981) 4 SCC 675 : 1982 SCC (Tax) 30 : AIR 1981 SC 2138] and other
decisions cited in paras 87 and 88.)”
21. That a consumer can make an application for refund is clear from
paras 98 and 99 of the judgment of this Court in Mafatlal Industries
(supra). We are bound by the said findings of a Larger Bench of this
Court. The word ‘buyer’ in Clause (e) to proviso to Section 11-B (2) of
the Act cannot be restricted to the first buyer from the manufacturer.
Another submission which remains to be considered is the requirement of
verification to be done for the purpose of finding out who ultimately bore
the burden of excise duty. It might be difficult to identify who had
actually borne the burden but such verification would definitely assist the
Revenue in finding out whether the manufacturer or buyer who makes an
application for refund are being unjustly enriched. If it is not possible
to identify the person/persons who have borne the duty, the amount of
excise duty collected in excess will remain in the fund which will be
utilized for the benefit of the consumers as provided in Section 12-D.
22. The High Court proceeded on an erroneous assumption of fact as well.
It was held by the High Court that there is no unjust enrichment as the
burden has not been passed on. The High Court’s interpretation of Section
11-B is also not correct.
23. In view of the above findings, the judgment of the High Court is
liable to be set aside. The Assessee is not entitled to refund as it would
result in unjust enrichment. The Appeal is allowed and the judgment of the
High Court is set aside.

Special Leave Petition (C) Nos. 18426, 23722, 18423, 18425 of 2015 and
12282, 16141 and 16142 of 2016.

Leave granted.

24. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426,
23722, 18423 and 18425 of 2015 are filed by Commissioner of Central Excise,
Vishakapatnam, challenging the legality of judgment dated 19.02.2014 of a
Division Bench of the High Court of Andhra Pradesh in Central Excise Appeal
Nos. 51 of 2004 and 10, 9 and 21 of 2005. Civil Appeals arising out of SLP
(C) Nos. 12282, 16141 and 16142 of 2016 are filed by the Commissioner of
Central Excise, Vishakapatnam against the judgment dated 01.07.2015 of a
Division Bench of the High Court of Andhra Pradesh in Central Excise Appeal
Nos. 44 and 38 of 2004 and 18 of 2005. These three appeals were disposed of
by the High Court in terms of its earlier judgment dated 19.02.2014.
25. The Assessee i.e. Andhra Pradesh Paper Mills Ltd. manufactures Paper
and Paper boards. There is no dispute that excise duty is paid by the
Assessee and the same is passed on to its buyers. Applications were filed
by the Assessee for refund of amounts towards trade discounts that were
given to its buyers. The refund claim is on the basis of credit notes
raised by the Assessee subsequent to the sale/removal of goods. The credit
notes that were raised by the Assessee were towards trade discounts which
included the component of excise duty. The refund claims of the Assessees
were rejected by the Assistant Commissioner of Central Excise, Rajahmundry
Division. The Commissioner Customs, Central Excise (Appeals) Hyderabad
confirmed the said orders in the appeals filed by the Assessee. The
Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division,
Bangalore dismissed the appeals filed by the Assessee.
26. The Assessee approached the High Court of Andhra Pradesh by filing
Central Excise Appeals. By a judgment dated 19.02.2014, the High Court of
Andhra Pradesh allowed the Central Excise Appeal Nos. 9, 10 and 51 of 2004
and 21 of 2005. The appeals were allowed, as being squarely covered by the
judgment of the Madras High Court in Addison and Company Ltd., Madras Vs.
Collector of Central Excise, Madras reported in (1997) 5 SCC 763.
27. The Revenue has filed Special Leave Petitions against the said
judgment dated 19.02.2014. Special Leave Petition (C) Nos. 12282, 16141 and
16142 of 2016 were filed by the Revenue against the judgment dated
01.07.2015 of the Division Bench of the Andhra Pradesh High Court which
followed its earlier judgment dated 19.02.2014. The issues involved in the
above Civil Appeals are similar to that of Civil Appeal No. 7906 of 2002.
28. The Appeals filed by the Revenue are allowed, in terms of the
judgment in Civil Appeal No. 7906 of 2002.

Civil Appeal No. 14689 of 2015

29. The above Civil Appeal is filed by the Commissioner of Central Excise
and Customs challenging the judgment of the Andhra Pradesh High Court in
Central Excise Appeal No. 21 of 2004. The Respondent-Assessee manufactures
Pesticide formulations which are used as pesticides in agricultural farms.
The Pesticides are sold at the factory gate and also through depots. The
Assessee submitted an application for refund towards allowable discounts
after the removal of goods from the factory. Credit notes were issued by
the Assessee in favour of the buyers towards trade discounts which also
contained a component of the excise duty. There is no dispute regarding
the fact of payment of the excise duty originally by the manufacturer being
passed on to his buyers. The refund claim of the Assessee was rejected by
the Deputy Commissioner vide Order-in-Original No. 58 of 2002 dated
30.12.2002. The above said order was reversed by the Commissioner of
Customs and Central Excise by his order dated 12.03.2003.
30. The Revenue filed an appeal before the Customs, Excise and Service
Tax Appellate Tribunal, South Zonal Division, Bangalore which was allowed.
The Assessee preferred an appeal to the High Court aggrieved by the order
of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal
Division, Bangalore. The High Court following its own judgment in Andhra
Pradesh Paper Mills Vs. Commissioner of Central Excise allowed the appeal.
The point in this appeal is identical to the issue in Civil Appeal No. 7906
of 2002. The Appeal filed by the Revenue is allowed in terms of the
judgment in Civil Appeal No. 7906 of 2002.
Special Leave Petition (C) No. 25055 of 2009

Leave granted.

31. The Assessee is engaged in the processing of man-made fibre. Prior to
11.06.2001 the CENVAT credit admissible on the declared inputs used in the
manufacture of process of man-made fibre was 45 per cent. The net duty
payable on the fibre was 55 per cent of the effective duty. On 11.06.2001,
a notification was issued increasing CENVAT credit from 45 per cent to 50
per cent which resulted in the net duty payable being 50 per cent. The
Assessee continued to pay the effective duty at 55 per cent for a short
period between 11.06.2001 to 13.06.2001. The effective duty of excise is
16 per cent and the duty payable from the personal ledger account prior to
the notification dated 11.06.2001 was 8.8 per cent and after 11.06.2001 the
duty payable is 8 per cent. The Assessee made an application for refund of
Rs. 61,146/- paid in excess on 31.07.2001. The said application for refund
was rejected by an Order-in-Original dated 12.08.2002 by the Assistant
Commissioner, Bhilwara on the ground that the Assessee was a job worker
engaged in the processing of grey fabric and that the said fabric was
returned to the owners of the fabric who sold the processed fabric in the
market. It was also held that the incidence of the duty was passed on to
the ultimate customers/consumers before the debit notes were raised by the
owners of the fabric. As the duty paid at 8.8 per cent was passed on by
the owner of the fabric to the ultimate consumer the processor was not
entitled for a refund.
32. The Assessee approached the Commissioner Appeals, II Customs &
Central Excise, Jaipur by filing an appeal which was rejected by an order
dated 27.02.2003. The Central Excise and Service Tax Appellate Tribunal by
its order dated 11.05.2005 allowed the appeal filed by the Assessee on the
ground that the incidence of duty was not passed on by the Assessee to the
customers. The customers protested to the charging of the net duty payable
at 8.8 per cent instead of 8 per cent in spite of the notification issued
on 11.06.2001. This protest was made without any delay so the question of
passing the incidence of duty by the owners of the fabric to their
customers does not arise.
33. In Central Excise Appeal No. 34 of 2005 filed by the Union of India
through Commissioner of Central Excise, Jaipur, the High Court of
Judicature for Rajasthan at Jodhpur confirmed the order of the Central
Excise and Service Tax Appellate Tribunal. Challenging the said judgment of
the High Court dated 26.11.2008, the Union of India has filed the above
Appeal. The contention raised by the Revenue before the High Court
regarding the presumption under Section 12-B of the Act was rejected by the
High Court by holding that once the Assessee shows that he has not passed
on the duty to his buyer, then the burden shifts to the Revenue. The
submission that there is a presumption of the duty being passed on to the
ultimate consumer was not accepted by the High Court. The High Court held
that the claim for refund should be accepted once the Assessee shows that
he has raised a credit note regarding the excess duty. The High Court had
further held that passing on the burden of excise duty to the ultimate
buyer cannot be left in the realm of presumption.
34. In Civil Appeal No. 7906 of 2002, we have already held that in the
claim for refund of excess duty paid can be allowed only in case where the
burden of duty has not been passed on to any other person, which includes
the ultimate consumer as well. The findings in the Order-in-Original and
the Order-in-Appeal are that the excise duty paid originally at the rate of
8.8 per cent was passed on from the Assessee-processor to the owner of the
fabric and later to the customers. The point in this Appeal is also
identical to that of Civil Appeal No. 7906 of 2002. The above appeal of
the Revenue is allowed.

Civil Appeal No. 8488 of 2009

35. The respondent-Assessee is a 100 per cent Export Oriented Unit (EOU)
manufacturing cotton yarn. The respondent filed an application for refund
of an amount of Rs. 2,00,827/- on 14.08.2002 on the ground that it had paid
excess excise duty at the rate of 18.11 per cent instead of 9.20 per cent.
The Assessee initially passed on the duty incidence to its customers.
Later the Assessee returned the excess duty amount to its buyers which was
evidenced by a certificate issued by the Chartered Accountant on
02.08.2002. The refund claim was rejected by the Deputy Commissioner of
Central Excise, Kolhapur Division vide an order dated 24.09.2002 on the
ground that the Assessee did not submit either the credit notes or the
Chartered Accountant’s certificate at the time of filing the refund
application. Not satisfied with the genuineness of the documents the Deputy
Commissioner rejected the refund claim. The Commissioner (Appeals) Central
Excise, Pune allowed the appeal filed by the Assessee by taking note of the
certificate issued by the Chartered Accountant and the credit notes dated
29.07.2002. The Appellate Authority accepted the Assessee’s contentions and
held that there was no reason to doubt the genuineness of the documents
produced. The Appellate Authority allowed the appeal of the Assessee and
the said order was confirmed by the Central Excise and Service Tax
Appellate Tribunal vide judgment and order dated 06.10.2005. The said
order of Central Excise and Service Tax Appellate Tribunal was further
confirmed by the High Court of Judicature at Bombay in Central Excise
Appeal No. 100 of 2008 filed by the Revenue. The Revenue has filed the
above Civil Appeal challenging the validity of the judgment of the High
Court in Central Excise Appeal No. 100 of 2008.
36. Except for a factual dispute about the genuineness of the certificate
issued by the Chartered Accountant and the credit notes raised by the
Assessee regarding the return of the excess duty paid by the Assessee,
there is no dispute in this case of the duty being passed on to any other
person by the buyer. As it is clear that the Assessee has borne the burden
of duty, it cannot be said that it is not entitled for the refund of the
excess duty paid. In view of the facts of this case being different from
Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is
dismissed.
37. As held above, Civil Appeal Nos. 7906 of 2002 and 14689 of 2015 are
allowed. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426
of 2015, 18423 of 2015, 18425 of 2015, 23722 of 2015, 12282 of 2016, 16142
of 2016, 16141 of 2016 and 25055 of 2009 are also allowed in terms of the
judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009
is dismissed. No order as to costs.
................................J.
[ANIL R. DAVE]

................................J.
[AMITAVA ROY]

................................J.
[L. NAGESWARA RAO]
New Delhi,
August 29, 2016

Sunday, August 28, 2016

Constitutional validity of the provisions of Rule 3 and Rule 3A of Chapter XXIV of the Allahabad High Court Rules, 1952=right to practice as an Advocate is not an absolute right and it was only a statutory right which is controlled by the provisions of the Act.- The High Court has power to formulate rules for regulating proceedings inside the court. Such power should not be confused with the right to practice law. The court has supervisory power over the right of an Advocate to appear and conduct cases in the court.-the right to practice in the right to appear in courts are not synonymous. Under Section 34 of the Act, the High Court has power to make rules for regulating proceedings inside the court.We, thus, are of the opinion that Rules 3 and 3A of the Allahabad High Court Rules, 1952 and perfectly valid, legal and do not violate the right of the appellant under Article 19(1)(g) of the Constitution of India. The appeal, therefore, fails and is hereby dismissed. There shall, however, be no order as to cost.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6120 OF 2016

|JAMSHED ANSARI |.....APPELLANT(S) |
|VERSUS | |
|HIGH COURT OF JUDICATURE AT ALLAHABAD & |.....RESPONDENT(S) |
|ORS. | |

J U D G M E N T

A.K. SIKRI, J.

The appellant has challenged the judgment dated 28.04.2015
passed by the High Court of Judicature at Allahabad whereby writ petition
filed by the appellant has been dismissed. In the said writ petition, the
appellant had challenged the Constitutional validity of the provisions of
Rule 3 and Rule 3A of Chapter XXIV of the Allahabad High Court Rules, 1952
(hereinafter referred to as the 'Rules'). The short order of the High
Court repelling the said challenge states that a similar challenge had
already been rejected by the same Court in Shashi Kant Upadhyay, Advocate
v. High Court of Judicature at Allahabad (Writ – C. No. 65298 of 2014)
decided on 26.03.2015.

2. Appellant's challenge to the aforesaid Rules is mainly on the ground
that these Rules put an unreasonable restriction on his right to practice
as an Advocate and are also ultra vires the provisions of Section 30 of the
Advocates Act, 1961 (hereinafter referred to as the 'Act'). The High Court
of Allahabad has framed the Rules in question which came into force on
15.09.1952. Chapter XXIV thereof relates to “Rules Framed under Section
34(1) read with Section 16(2) of the Advocates Act, 1961”. As we are
concerned with the validity of Rule 3 and Rule 3A of the said Chapter, the
same are reproduced below:
“3. Advocate who is not on the Roll of Advocates : An advocate who is not
on the Roll of Advocate or the Bar Council of the State in which the Court
is situated, shall not appear, act or plead in such Court, unless he files
an appointment along with an advocate who is on the Roll of such State Bar
Council and who is ordinarily practicing in such Court.

In cases in which a party is represented by more than one advocate, it
shall be necessary for all of them to file a joint appointment or for each
of them to file a separate one.

3-A. (i) Unless the Court grants leave, an Advocate who is not on the Roll
of Advocates in the High Court at Allahabad or Lucknow shall not be allowed
to appear, act or plead in the High Court at Allahabad or Lucknow as the
case might be unless he files appointment along with an Advocate who is on
such roll for Allahabad Cases at Allahabad and for Lucknow Cases at
Lucknow.

The High Court shall prepare a Roll of Advocates in Parts 'A' and 'B' of
those who ordinarily practice in the High Court, Part 'A' for Allahabad and
Part 'B' for Lucknow.

The Roll of Advocates shall bear in regard to each advocate entered, his
full name, father's name, passport size coloured photograph, enrolment
number, date of enrolment, complete postal address both of residence and
office which shall be in the municipal limits of the city of Allahabad or
Lucknow as the case might be.

The Rolls shall be prepared and revised periodically in the manner and
under the authority as may be prescribed by the Chief Justice.

(v) This Rule 3-A shall come into force after notification by the Chief
Justice that both the Rolls for Allahabad and Lucknow in Parts 'A' and 'B'
are complete.

It is clear that as per Rule 3, an Advocate who is not on the Roll of
Advocate or the Bar Council of the State is not allowed to appear, act or
plead in the said Court unless he files an appointment along with the
advocate who is on the Roll of such State Bar Council and is ordinarily
practicing in that Court. The impact of this Rule is that for appearance
in Allahabad High Court, an Advocate who is registered with the Bar Council
of the State of Uttar Pradesh is allowed to appear, act or plead in the
said Court only when he files his Vakalatnama along with an Advocate who is
enrolled with Bar Council of Uttar Pradesh and is ordinarily practicing in
the Allahabad High Court (hereinafter referred to as the 'local Advocate').
Roll of Advocate is to be prepared by the High Court in terms of Rule 3-
A(ii), both for Allahabad (which is the main seat of the High Court) and
Lucknow (which is the Bench of the Allahabad High Court). Rule 3A puts a
further rider for appearance of an Advocate in the High Court at Allahabad
or Lucknow inasmuch as an Advocate who is not on the Roll of Advocates for
Allahabad cases at Allahabad and for Lucknow cases at Lucknow is allowed to
appear, act or plead at Allahabad or Lucknow, as the case may be, unless
appearance is put in along with a local Advocate. Notwithstanding the
above, he can still be allowed to appear after obtaining the leave of the
Court.

Appellant, as an Advocate, had filed a writ petition in the High Court at
Allahabad but the Registry of the High Court refused to accept his petition
as the appellant is not enrolled with the Bar Council of U.P. and he had
not fulfilled the requirement of the aforesaid Rules by filing appointment
along with a local Advocate. Accordingly, he engaged a local Advocate for
Allahabad cases at Allahabad. At the same time, he filed the writ petition
in question challenging the validity of the Rules which has been dismissed
by the impugned judgment, as pointed out above.

It is the contention of the appellant, who appeared in person, that the
right to practice of advocates in any Court in India has been recognized
and granted by Section 30 of the Act and right to practice is also a
fundamental right guaranteed under Article 19(1)(g) of the Constitution of
India. He submitted that the impugned Rules are made by the High Court in
exercise of powers under Section 34 of the Act which provision confers the
power on the High Court to only lay down conditions subject to which an
Advocate shall be permitted to practice in the High Court and the Courts
subordinate thereto, but it does not empower the High Court to frame the
Rules laying down prohibition from appearance and the Rules in question
amount to prohibition or unreasonable restrictions. It is further argued
that as per the provisions of Article 22 of the Constitution of India read
with Section 303 of the Code of Criminal Procedure, citizens of this
country are given a right to defend themselves by legal
practitioner/pleader of their choice. According to him, the impugned Rules
have the effect of denying this choice to the citizens as well.
In support of aforesaid submissions, the appellant has referred
to the judgment of the High Court of Patna in the case of Anju Mishra and
Ors. v. The High Court of Judicature at Patna and Ors. rendered on
17.07.2015 in Civil Writ Jurisdiction Case Nos.10185 and 19862 of 2010 and
connected matters by the Full Bench of the Patna High Court. He submitted
that the said High Court has declared similar Rules enacted by the High
Court of Patna as unconstitutional and ultra vires Section 30 of the Act.

This appeal is contested by the respondents/High Court of Allahabad. Bar
Council of India was allowed to intervene in the matter. It has also
supported the respondents and taken the position that the Rules in question
are valid and does not suffer from the vice of unconstitutionality. This
Court had also appointed Mr. P. Vishwanathan Shetty, Senior Advocate as the
Amicus Curiae who has filed the written submissions, wherein he has stated
that after examining the legal position, according to him, the Rules in
question are valid and proper.

Mr. Rakesh Dwivedi, Senior Advocate, who appeared on behalf of the
respondent/High Court submitted that Rules have been made under Article
225 of the Constitution of India and Section 34 of the Act. He argued that
no doubt Article 19(1)(g) of the Constitution of India gives a fundamental
right to practice any profession or to carry on any occupation, trade or
business, nevertheless, that right is subject to the limitations contained
under Article 19(6) of the Constitution of India which empowers the State
to make any law imposing reasonable restrictions on the exercise of such
rights in the interest of general public. He submitted that right to
practice law or right to appear, act or plead in a court of law is not an
absolute right but is subject to reasonable restrictions and the Rules in
question requiring Advocates to be enrolled with the State Bar Council and
the role of the High Court is nothing but a reasonable restriction on the
right to practice. Mr. Dwivedi argued that the rationale behind the Rule
is to fix accountability on the Advocates practicing before the High Court.
The Rules also help in regulating the functioning of the Court. The
strength of the Bar in the State is enormous and a large number of law
graduate pass out every year in the State of U.P. and enter active legal
practice. It is important for the orderly functioning of the Allahabad
High Court that Rolls are maintained in Order to effect service of notices
and copies of pleadings and ensure regular procedural compliances. The
same will not be possible if proper records of Advocates practicing in the
High Court are not maintained in the High Court. He also argued that Rule
3 and Rule 3A of the Rules are merely regulatory provisions and there is no
absolute restriction or prohibition on the right to practice. Any person
who is not on the Roll of Advocates maintained by the High Court, may still
appear, act and plead by filing appointment of a local Advocate or he may
take leave of the court to appear, even though he may not be on the Roll of
the High Court. These provisions are in the interest of the general
public, especially the litigants before the High Court and also for the
administration of Justice in the State. Mr. Dwivedi further submitted that
right to practice conferred under Section 30 of the Act is subject to rule
making power of the High Court under Section 34 of the Act and while making
Rules, High Court has a right and duty to regulate the conduct of its own
proceedings. Therefore, the impugned Rules are not ultra vires Section 30
of the Act. Learned Senior Counsel also pointed out the Full Bench
judgment of Patna High Court relied upon by the appellant had already been
recalled by the said High Court in the review petition that was filed
seeking review of the judgment and, therefore, no sustenance can be taken
from the said judgment. Mr. Dwivedi also referred to certain judgments of
this Court to support his submission that Rules in question were only in
the nature of regulatory provisions.

Almost on the same lines, written submissions are filed by the learned
Amicus Curiae and the oral arguments were advanced by the learned counsel
appearing for the Bar Council of India.

We have given due consideration to the respective submissions.

Article 19 of the Constitution of India guarantees certain freedoms to the
citizens of this country which includes right to practice any profession,
or to carry on any occupation, trade or business. It, therefore, naturally
follows that right to practice law, which is a profession, is a fundamental
right that is conferred upon all citizens of this country. Therefore, it
can be said that the appellant has right to appear in any Court in India
which would include right to appear and argue the matters even in High
Court of Allahabad.

The respondents, however, contend that right of the appellant to appear in
the High Court of Allahabad has not been taken away by the impugned Rules.
As per them, these Rules are only regulatory in nature and the main purpose
is to impose reasonable restrictions in the interest of general public. On
this basis, the attempt of the respondents is to save the aforesaid Rules
by invoking clause (6) of Article 19. Article 19(6) is worded as under:
“Article 19(6) : Nothing in sub clause (g) of the said clause shall affect
the operation of any existing law in so far as it imposes, or prevent the
State from making any law imposing, in the interests of the general public,
reasonable restrictions on the exercise of the right conferred by the said
sub clause, and, in particular, nothing in the said sub clause shall affect
the operation of any existing law in so far as it relates to, or prevent
the State from making any law relating to,
(i) the professional or technical qualifications necessary for practising
any profession or carrying on any occupation, trade or business, or
(ii) the carrying on by the State, or by a corporation owned or
controlled by the State, of any trade, business, industry or service,
whether to the exclusion, complete or partial, of citizens or otherwise.”

The appellant, on the other hand, has submitted that the Rules
do not amount to reasonable restrictions but are in the nature of
prohibition inasmuch as a lawyer who is not enrolled with U.P. Bar Council
or on the rolls of Allahabad High Court is not allowed to appear in the
said Court.

In the first instance, therefore, it needs to be determined as to whether
the Rules in question are in the nature of restrictions or they are
prohibitory in nature. Our answer to this question is that Rules 3 and 3A
of the Rules are regulatory provisions and do not impose a prohibition on
practice of law. These Rules prescribe that an Advocate who is not on
rolls of Advocate in the High Court is obligated to file an appointment
along with a local Advocate. There is no absolute bar to appear. In fact,
with the leave of the Court, an Advocate is still permitted to appear even
without a local Advocate. In essence, an Advocate who is not on the roll
of Advocates in the High Court can appear along with a local Advocate.
Alternatively, even without fulfilling this requirement, an Advocate who is
not on the rolls of Advocates in the High Court can move an application
before the Court seeking leave to appear without even a local Advocate and
in appropriate cases, such a permission can be granted.

In N.K. Bajpai v. Union of India[1], this Court made it clear that right to
practice can be regulated and is not an absolute right which is free from
restriction or without any limitation. Following observations from the
said judgment are pertinent and relevant for the present case:
“24. A bare reading of these three provisions clearly shows that this is a
statutory right given to an advocate to practise and an advocate alone is
the person who can practise before the courts, tribunals, authorities and
persons. But this right is statutorily regulated by two conditions – one,
that a person's name should be on the State rolls and second, that he
should be permitted by the law for the time being in force, to practise
before any authority or person. Where the advocate has a right to appear
before an authority or a person, that right can be denied by a law that may
be framed by the competent legislature.

Thus, the right to practise is not an absolute right which is free from
restrictions and is without any limitation. There are persons like
Mukhtars and others, who were earlier entitled to practise before the
courts, but the Advocates Act itself took away the right to practise which
was available to them prior to its coming into force. Thus, the Advocates
Act placed a complete prohibition upon the right to practise of those
persons who were not advocates enrolled with the State Bar Council.
Therefore, the right to practise, which is not only a statutory right under
the provisions of the Advocates Act but would also be a fundamental right
under Article 19(1)(g) of the Constitution is subject to reasonable
restrictions.

An argument could be raised that a person who has obtained a degree of law
is entitled to practise anywhere in India, his right, as enshrined in the
Constitution and under the Advocates Act cannot be restricted or regulated
and also that it is not necessary for him to enrol himself on any of the
State rolls. This argument would be fallacious in the face of the
provisions of the Advocates Act as well as the restrictions contemplated in
Article 19(6) of the Constitution. The legislature is entitled to make a
law relating to the professional or technical qualifications necessary for
carrying on of that profession.

xxx xxx xxx

As already noticed by us above, the right to practise law is a statutory
right. The statutory right itself is restricted one. It is controlled by
the provisions of the Advocates Act, 1961 as well as the Rules framed by
the Bar Council under that Act. A statutory right cannot be placed at a
higher pedestal to a fundamental right. Even a fundamental right is
subject to restriction and control. At the cost of repetition, we may
notice that it is not possible to imagine a right without restriction and
control in the present society. When the appellants were enrolled as
advocates as well as when they started practising as advocates, their right
was subject to the limitations under any applicable Act or under the
Constitutional limitations, as the case may be”.

At this juncture, we may also take note of the rationale behind the
impugned Rules which would not only be an answer to the question which we
are addressing at the moment, namely, the Rules are in the nature of
regulations/restrictions and not prohibition, it will even answer related
aspect as well viz. the restrictions are reasonable in nature as they are
in public interest.

The administration of justice is a sacrosanct function of the judicial
institutions or the persons entrusted with that onerous responsibility and
principle of judicial review has now been declared as a part of the basic
structure of the Constitution. Therefore, if anything has the effect of
impairing or hampering the quality of administration of justice either due
to lack of knowledge or proper qualification on the part of the persons
involved in the process of justice dispensation or they being not properly
certified by the Bar Council as provided under the Act and the Rules made
there under, it will surely affect the administration of justice and
thereby affecting the rights of litigants who are before the Courts seeking
justice. The whole object of the Rules in question is furtherance of the
administration of justice and to ensure that the advocates who can be
easily located or accountable to the Courts are allowed to practice before
the Court. Therefore, the Rules provide that the name of such advocates
whose names are not on the roll of the Advocates in the High Court should
appear with a local Advocate of the High Court. The easy identification of
the person who appears before the Court when he is the enrolled advocate of
another Bar Council or is not on the rolls of Advocates of the High Court
is to ensure his presence whenever the cases are listed and to minimise the
cases being dismissed for default which may result in serious consequences
to the litigants and multiplicity and inordinate delay in proceedings
whether it be a criminal case or civil dispute is the objective of Rule 3
or 3A of the Rules. That objective is achieved when he is permitted to
appear along with the local Advocate of the High Court.

In applying the test of reasonableness (which is the most crucial
consideration), the broad criterion is whether the law strikes a proper
balance between social control on the one hand and the rights of the
individual on the other hand. The court must take into account the
following aspects:-
(a) nature of the right infringed;
(b) underlying purpose of the restriction imposed;
(c) evils sought to be remedied by the law, its extent and urgency;
(d) how far the restriction is or is not proportionate to the evil; and
(e) prevailing conditions at the time.
The impugned Rules passed the aforesaid test of reasonableness.
The respondents have given appropriate justification and rationale behind
the Rules viz. to fix accountability on the advocates practicing before the
High Court. Such Rules are also aimed at helping in regulating the
functioning of the Court. It is important for the orderly functioning of
the Allahabad High Court that Rolls are maintained in Order to effect
service of notices and copies of pleadings and ensure regular procedural
compliances. The same will not be possible if proper records of Advocates
practicing in the High Court are not maintained in the High Court. The
administration of justice will suffer if no person is held accountable for
non-compliance of office reports etc. There may be occasions when
Advocates may be called upon by the Court in pending matters and the
dispensation of justice will suffer if there is no record of Advocates who
do not generally practice in the High Court, may not attend matters in
which they may have filed their vakalatnama before the High Court. It is
imperative for the smooth and effective functioning of the court that the
court is able to fix responsibility on Advocates, which is not possible if
Roll of Advocates is not maintained in the High Court. Moreover, an
advocate is permitted to file vakalat on behalf of a client even though his
appearance inside the court is not permitted. Conduct in court is a matter
concerning the Court. But the right to appear and conduct cases in the
court is a matter on which the court must and does have major supervisory
and controlling power. Hence courts cannot be and are not divested of
control or supervision of conduct in court merely because it may involve
the right of an Advocate.
We, thus, conclude that the Rules in question amount to
reasonable restrictions which are imposed in public interest.

No doubt, the Indian Advocates Act, 1961 confers statutory right to
practice under Section 30 which is brought into force only from 15.06.2011.
However, this right is subject to the rule making power of the High Court
under Section 34 of the Act. Article 225 of the Constitution of India also
confers jurisdiction and powers in the High Court to make rules of Court
subject to law made by appropriate Legislature and states that such a power
of the High Court to make rules of Court shall be the same as immediately
before the commencement of the Constitution. Before this provision in the
Constitution, similar provision existed in the form of Section 223 of the
Government of India Act, 1935 and before that, it was Section 106 of the
Government of India Act, 1915 which vested power in the High Court to make
rules for regulating the practice of the Court as was vested by Letters
Patent. It is a known fact that the Allahabad High Court was constituted
under a letters patent issued by her majesty on 17.03.1866.
Clause 7 of Letters Patent of Allahabad High Court is extracted
below:
The Civil Court Manual Vol. 31 Pg.4
“7. Powers of High Court in admitting Advocates, Vakils and
Attorneys-

And we do hereby authorize and empower the said High Court of
Judicature for the North-Western Provinces to approve, admit and enroll
such and so many Advocates, Vakils and Attorneys as to the said High Court
shall seem meet; and such Advocates, Vakils and Attorneys shall be and are
hereby authorized to appear for the suitors, of the said High Court, and to
plead or to act, or to plead and act, for the said suitors, according as
the said High Court may by its rules and directions determine and subject
to such rules and directions.”

A perusal of Clause 7 shows that the High Court of Judicature
for the North-Western provinces (now known as Allahabad High Court) was
empowered to “approve, admit and enroll advocates” and to authorize them
“to appear, to plead or to act, or to plead and act” for the suitors in
accordance with the rules and directions. This power of the High Court
continues by virtue of Section 223 of the Government of India Act, 1935 and
Article 225 of the Constitution of India.

That apart, Section 34 of the Act empowers the High Court to make Rules
laying down the conditions subject to which an Advocate shall be permitted
to practice in the High Court and courts subordinate thereto. It reads as
under:
“34. Power of High Courts to make rules.—
(1) The High Court may make rules laying down the conditions subject to
which an advocate shall be permitted to practise in the High Court and the
courts subordinate thereto.

[(1A) The High Court shall make rules for fixing and regulating by taxation
or otherwise the fees payable as costs by any party in respect of the fees
of his adversary’s advocate upon all proceedings in the High Court or in
any Court subordinate thereto.]

[(2) Without prejudice to the provisions contained in sub-section (1), the
High Court at Calcutta may make rules providing for the holding of the
Intermediate and the Final examinations for articled clerks to be passed by
the persons referred to in section 58AG for the purpose of being admitted
as advocates on the State roll and any other matter connected therewith.]

Section 30 of the Act which confers a right to practice has been expressly
made “subject to the provisions of this Act”. We reproduce Section 30 of
the Act hereinbelow:
“30. Right of advocates to practise.—Subject to provisions of this Act,
every advocate whose name is entered in the [State roll] shall be entitled
as of right to practise throughout the territories to which this Act
extends,—
(i) in all courts including the Supreme Court;
(ii) before any tribunal or person legally authorised to take evidence; and
(iii) before any other authority or person before whom such advocate is by
or under any law for the time being in force entitled to practise.”

Therefore, Section 30 is also subject to Section 34. The Act
does not confer any absolute right to practice. The right can be regulated
by the High Courts by prescribing conditions.

From the above discussion, it becomes clear that High Court is duly
empowered to make rules and Rules in question are not ultra vires Section
30 of the Act. It is more so when power under Section 34 of the Act is
given to the High Courts, which are Constitutional Courts.

We have already pointed out above that the restriction stipulated in the
impugned Rules is reasonable and in public interest. It would be necessary
to clarify at this stage that the disciplinary jurisdiction conferred on
the Bar Councils under Section 36 of the Act for misconduct committed by
the advocates stand on a different footing than the powers conferred on the
High Courts to frame rules to practice before the High Court or subordinate
Courts. It may be the intention of the Parliament to confer the
jurisdiction on the lawyers' body like Bar Councils regarding misconduct by
advocates to maintain the independence of the Bar. However, again keeping
in mind the administration of justice and regulating the Court proceedings
and right to practice and right to appear before the high Courts and
Subordinate Courts, power is conferred on the High Courts, to frame rules.
If High Court keeping in mind, several relevant factors like the purity in
a administration of justice, the interest of the litigant public and easy
availability of the advocate to assist the court for proper adjudication of
the dispute pending before it or expeditious disposal of such proceedings
or for any other valid or good reasons which High Court considered just and
proper frames such rules, we find no fault in Rule 3 or Rule 3A of the
Rules.

The aforesaid conclusion of ours flow from the dicta laid down by this
Court in the various judgments and we would like to refer to some of these
cases. In the case of Bar Council of India v. High Court of Kerala[2]
wherein para 38, this Court held as follows:
“38. Holding that the right of appearance in courts is still within the
control and jurisdiction of courts, this Court noticed: (SCC pp. 72-73,
para 34)

“34. … Section 30 of the Advocates Act has not been brought into force and
rightly so. Control of conduct in court can only be within the domain of
courts. Thus Article 145 of the Constitution of India gives to the Supreme
Court and Section 34 of the Advocates Act gives to the High Courts power to
frame rules including rules regarding condition on which a person
(including an advocate) can practise in the Supreme Court and/or in the
High Court and courts subordinate thereto. Many courts have framed rules in
this behalf. Such a rule would be valid and binding on all. Let the Bar
take note that unless self-restraint is exercised, courts may now have to
consider framing specific rules debarring advocates, guilty of contempt
and/or unprofessional or unbecoming conduct, from appearing before the
courts. Such a rule if framed would not have anything to do with the
disciplinary jurisdiction of the Bar Councils. It would be concerning the
dignity and orderly functioning of the courts. The right of the advocate to
practise envelops a lot of acts to be performed by him in discharge of his
professional duties. Apart from appearing in the courts he can be consulted
by his clients, he can give his legal opinion whenever sought for, he can
draft instruments, pleadings, affidavits or any other documents, he can
participate in any conference involving legal discussions, he can work in
any office or firm as a legal officer, he can appear for clients before an
arbitrator or arbitrators, etc. Such a rule would have nothing to do with
all the acts done by an advocate during his practice. He may even file
vakalat on behalf of a client even though his appearance inside the court
is not permitted. Conduct in court is a matter concerning the court and
hence the Bar Council cannot claim that what should happen inside the court
could also be regulated by them in exercise of their disciplinary powers.
The right to practise, no doubt, is the genus of which the right to appear
and conduct cases in the court may be a specie. But the right to appear and
conduct cases in the court is a matter on which the court must and does
have major supervisory and controlling power. Hence courts cannot be and
are not divested of control or supervision of conduct in court merely
because it may involve the right of an advocate. A rule can stipulate that
a person who has committed contempt of court or has behaved
unprofessionally and in an unbecoming manner will not have the right to
continue to appear and plead and conduct cases in courts. The Bar Councils
cannot overrule such a regulation concerning the orderly conduct of court
proceedings. On the contrary, it will be their duty to see that such a rule
is strictly abided by. Courts of law are structured in such a design as to
evoke respect and reverence to the majesty of law and justice. The
machinery for dispensation of justice according to law is operated by the
court. Proceedings inside the courts are always expected to be held in a
dignified and orderly manner. The very sight of an advocate, who is guilty
of contempt of court or of unbecoming or unprofessional conduct, standing
in the court would erode the dignity of the court and even corrode its
majesty besides impairing the confidence of the public in the efficacy of
the institution of the courts. The power to frame such rules should not be
confused with the right to practise law. While the Bar Council can exercise
control over the latter, the courts are in control of the former. This
distinction is clearly brought out by the difference in language in Section
49 of the Advocates Act on the one hand and Article 145 of the Constitution
of India and Section 34(1) of the Advocates Act on the other. Section 49
merely empowers the Bar Council to frame rules laying down conditions
subject to which an advocate shall have a right to practise i.e. do all the
other acts set out above. However, Article 145 of the Constitution of India
empowers the Supreme Court to make rules for regulating this practice and
procedure of the court including inter alia rules as to persons practising
before this Court. Similarly Section 34 of the Advocates Act empowers High
Courts to frame rules, inter alia to lay down conditions on which an
advocate shall be permitted to practise in courts. Article 145 of the
Constitution of India and Section 34 of the Advocates Act clearly show that
there is no absolute right to an advocate to appear in a court. An advocate
appears in a court subject to such conditions as are laid down by the
court. It must be remembered that Section 30 has not been brought into
force and this also shows that there is no absolute right to appear in a
court. Even if Section 30 were to be brought into force control of
proceedings in court will always remain with the court. Thus even then the
right to appear in court will be subject to complying with conditions laid
down by courts just as practice outside courts would be subject to
conditions laid down by the Bar Council of India. There is thus no conflict
or clash between other provisions of the Advocates Act on the one hand and
Section 34 or Article 145 of the Constitution of India on the other.”

We have already referred to the judgment in the case of N.K. Bajpai wherein
it was held that right to practice as an Advocate is not an absolute right
and it was only a statutory right which is controlled by the provisions of
the Act.

The principle that the High Court has right to regulate the conduct of its
own proceedings can also be found in Pravin C. Shah v. K.A. Mohd. Ali &
Anr.[3]. In that case, it was held that the High Court cannot be divested
of the control or supervision of the court merely because it may involve
the right of an advocate. The High Court has power to formulate rules for
regulating proceedings inside the court. Such power should not be confused
with the right to practice law. The court has supervisory power over the
right of an Advocate to appear and conduct cases in the court. This court
also cited with approval the judgment of the Allahabad High Court in the
case of Prayag Das v. Civil Judge, Bulandshahr[4], wherein the High Court
held that the High Court has power to regulate the appearance of Advocates
in courts. The High Court further held that the right to practice in the
right to appear in courts are not synonymous. Under Section 34 of the Act,
the High Court has power to make rules for regulating proceedings inside
the court.

Same sentiments are echoed in R.K. Anand & Anr. v. Registrar, Delhi High
Court and Anr.[5] and Ex-Capt. Harish Uppal v. Union of India & Anr.[6].

We, thus, are of the opinion that Rules 3 and 3A of the Allahabad High
Court Rules, 1952 and perfectly valid, legal and do not violate the right
of the appellant under Article 19(1)(g) of the Constitution of India. The
appeal, therefore, fails and is hereby dismissed. There shall, however, be
no order as to cost.

.............................................J.
(A.K. SIKRI)

.............................................J.
(N.V. RAMANA)

NEW DELHI;
AUGUST 26, 2016.

-----------------------
[1] (2012) 4 SCC 653
[2] (2004) 6 SCC 311
[3] (2001) 8 SCC 650
[4] AIR 1974 All. 133
[5] (2009) 8 SCC 106
[6] (2003) 2 SCC 45

LAW FOR ALL

LawforAll

advocatemmmohan

Just for legal information but not form as legal opinion

Tuesday, August 30, 2016

Sunday, August 28, 2016