Supreme Court of India
SHREE DIGVIJA Y CEMENT CO. LTD. AND ANR.versusUNION OF INDIA AND ANR.
- Citation
- 2002 INSC 552
- Decided
- 17 December 2002
- Disposal
- Appeal(s) allowed
- Bench
- Y K SABHARWAL
Holding
Clause 9A is ultra vires as it imposes a tax without statutory sanction, and consequently the levy is invalid and no refund is payable.
Summary
The cement manufacturers challenged Clause 9A of the Cement Control Order, 1967, which required a payment of Rs 9 per metric tonne on non‑levy cement, arguing that it was a tax imposed without statutory authority. The issue before the Supreme Court was whether the clause was ultra vires Section 18G of the Industries (Development and Regulation) Act, 1951 and whether the manufacturers could claim a refund of amounts already paid. The Court held that the payment under Clause 9A was a compulsory exaction amounting to a tax, and the Act did not empower the government to levy such a tax, rendering the clause ultra vires. Applying the doctrine of unjust enrichment, the Court found that the burden of the levy had been passed on to customers, so the manufacturers were not entitled to a refund. Consequently, the High Court’s judgment upholding Clause 9A was set aside and the appeals were allowed, but no restitution was ordered.
Issues considered
- Whether Clause 9A of the Cement Control Order, 1967 constitutes a tax levied without authority of law and is ultra vires Section 18G of the Industries (Development and Regulation) Act, 1951.
- Whether the levy under Clause 9A is valid under the statutory framework governing schedule industries.
- Whether the appellants are entitled to a refund of amounts paid under Clause 9A on the basis of the doctrine of unjust enrichment.
Legislation cited
- Industries (Development and Regulation) Act, 1951s. 18G, s. 25
Subjects
taxationultra viresIndustries (Development and Regulation) ActCement Control Orderunjust enrichmentrefundconstitutional lawArticle 265subordinate legislationlevy
Judgment
A SHREE DIGVIJA Y CEMENT CO. LTD. AND ANR.
v.
UNION OF INDIA AND ANR.
DECEMBER 17, 2002
B [Y.K. SABHARWAL AND H.K. SEMA, JJ.]
Cement Control Order, 1967/lndustries (Development and Regulation)
Ac/, 1951-Clause 9A I Section 18-G-Contribution by cement manufacturer
C to Cement Regulation Account in respect of non-levy cement-Validity of-
Held, invalid and ultra vires Section 18-G-Levy amounts to tax without
authority of law-Non-levy cement not covered by the Order-Subordinate
legislation has no power to impose levy on cement not covered by the Order-
However, manufacturers not entitled lo claim refund as the burden was passed
on to the customers-Doctrine of unjust enrichment.
D
The operation of Cement Control Order, 1967 brought certain
problems affecting the cement industries. Hence, cement was partially
decontrolled and cement manufacturers were required to pay certain
amount to Cement Regulation Account on production of levy as well as
non-levy cement. Appellant-manufacturers of Cement filed writ petitions
E in High Court challenging validity of Clause 9A of Control Order, which
required payment on non-levy cement, on the ground that amount payable
under the Clause was in the nature of tax and there was no authority of
law to impose that tax. The Writ petitions were dismissed.
In appeal to this Court appellant contended that the payment under
F Clause 9A constitutes levy and collection of tax without authority of law;
that Clause 9A is ultra vires Section 18G of Industries (Development and
Regulation) Act, 1951; that no tax could be imposed by any subordinate
legislation unless principal statute specifically authorized such imposition;
and that the Act did not authorize levy and recovery of any such tax and,
G therefore clause 9A was ultra 1·ires the Act. Appellants also claimed refund
of the amount paid.
Allowing the appeals, the Court
HELD: I.I. The impugned levy under Clause 9A of Cement Control
H 268
SHREE DIGVIJA Y CEMENT CO. LTD. v. U.0.1. 269
Order, 1967 is a compulsory exaction. The amount paid by the customers A
of non-levy cement belongs to the appellants. Such a levy amounts to levy
of tax and, therefore, invalid for want of sanction to levy such a tax. Clause
9A is, therefore, ultra vires Section 18G of Industries (Development and
Regulation) Act, 1951. To this extent the impugned judgment of the High
Court is set aside. (284-DI
B
1.2. There is no control on price of sale of the non-levy cement.
Except Clause 9A, no other clause of the Control Order, is applicable to
non-levy cement. There is no sale price, there is no retention price and
the manufacturers are free to sell the non-levy cement at whatever price
they like. There is no power in the subordinate legislation to impose levy C
on that cement which is not covered by the Control Order. (284-A-BI
1.3. Though it is true that in taxing legislation, legislature deserves
greater latitude and greater play in joints, this principle, however, cannot
be extended so as to validate a levy which has no sanction of law, however,
laudable may have been the object to introduce it and howsoever laudable D
may have been the purpose for which the amount so collected may have
been spent. (284-B-q
Union of India and Ors. v. Hindustan Aluminium Corporation limited
and Anr., AIR (198,3) Cal. 307 and R.D. Aggarwala and Anr. v. The Union
of India and Anr. ILR 1974 2 Delhi 520, distinguished. E
A Venkata Subba Rao v. State of Andhra Pradesh, (19651 2 SCR 577,
referred to.
Attorney General v. Wilts United Dairies, (1922 (91) Law Journal
Reports (Kings Bench) 897; Attorney General for New South Wales v. F
Hoimebush Flour Mills Ltd, 56 C.L.R. 390 at 400; lower Mainland Dairy
Products Sales Adjustment Committee v. Crystal Dairy ltd., 1933 AC 168,
referred to.
2.1. The principles of unjust enrichment are applicable in claim of
refund. The claimant has to allege and establish that he has not passed
I
G
on the burden to another person. Where the burden of duty has been
passed on, the claimant cannot say that he has suffered any real loss or
prejudice. 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 H
270 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.
A 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. The doctrine of unjust enrichment is a just
and salutary doctrine. 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 for the State rerpresents the people·of
B the country. No one can speak of the people being unjustly enriched.
(284-E-H; 285-AI
Ma/at/al Industries Ltd and Ors. v. Union of India and Ors., (19971 5
sec 536, relied on.
c 2.2. In the present case, it is clear that the burden of payment under
Clause 9A was passed on to the customers. Further, that the levy under
Clause 9A was accepted by the entire cement industry except the challenge
made by the four appellants by filing the writ petitions; one just before
and the other three after the contribution under Clause 9A was withdrawn.
D Besides the principles of unjust enrichment on equitable principles which
squarely apply here, the applicants are not entitled to claim refund of
amount paid into Cement Control Account under Clause 9A. It is evident
that the amount so deposited was expanded for the purpose under the
Control Order. Pursuant to declaration of invalidity of Clause 9A of the
Control Order, the amount of contribution already paid under Clause 9A
E will not be liable to be refunded to the appellants. (285-B-D(
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 46 of 1993.
From the Judgment and Order dated 29.5.1992 of the Delhi High
Court in W.P. No. 846 of 1992.
F
WITH
C.A. Nos. 45, 47 and 48 of 1993.
Shanti Bhushan, Raju Ramachandran and S. Ganesh, Prashant Bhushan,
G Vishal Gupta, Sanjai Pathak, T.K. Naveen, M.L. Lahoty, Paban K. Sharma,
Dipak Mundra, Himanshu Shekhar, Krishnan Venugopal, K.V. Mohan, U.N.
Tiwari, P. \i'ijaya Kumar, U.A. Rana, Rajesh Nair, Sanjay Hegde, Ajay Sharma,
R.N. Poddar, B.V. Bairam Das, Arvind Kumar Sharma, Shail Kumar Dwivedi
for the appearing parties.
H The Judgment of the Court was delivered by
SHREE DIGVIJAY CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL, J.)271
Y.K. SABHARWAL, J. The appellants are cement manufacturers. They A
challenged the legality and validity of Clause 9A of the Cement Control
Order 1967 (for short, 'the Control Order'). Clause 9A and some other clauses
were incorporated by amendments made in the Control Order in the year
1982. Clause 9A requires every producer to pay to the Cement Regulation
Account (for short, 'CRA') an amount at the rate of Rs.9 per metric tonne
of production of non-levy cement. This payment to be made by the producer B
on production of non-levy cement was withdrawn on 15th December, 1986.
One of the manufacturers (Andhra Cements) filed the writ petition in the
High Court challenging the validity of the clause in September 1986; two of
them (Mysore cement and Raymond Woolen) filed writ petitions in 1987 and
Digvijay Cement in the year 1992. Their principal contention before the High C
Court was that the amount payable under Clause 9A was in the nature of tax
and there was no authority of law to impose that tax. Undoubtedly, no tax
can be levied or collected except by authority of law. The contention of the
writ petitioners did not find favour with the High Court and, therefore, these
appeals were filed on grant of leave.
D
Cement is a schedule industry under the provisions of the Industries
(Development and Regulation) Act, 1951 (for short, the 'Act'). Section 18G
of the Act, inter alia, empowers the Central Government to provide for
regulating the supply and distribution of any article relatable to any schedule
industry. The acute shortage of cement in the country resulted in the making E
of the Control Order in exercise of powers conferred by Sections 18G and 25
of the Act. The cement manufacturing units in India were located in diffe;ent
places. Some of the units manufacturing cement were located at a long distance
from consumption centres. A huge amount on freight had to be incurred in
transporting the cement from various .factories to the market. The
manufacturing cost varied depending upon the age of the unit, manufacturing F
process and technology utilized etc. The transportation cost varied considerably
depending upon the location of the unit. In the Control Order a mechanism
was devised for equalizing the freight cost on the cement. An equalization
account was provided for in the Control Order. Different ex-factory retention
prices were provided in respect of various cement manufacturing units keeping G
their varying cost of production. It provided for the manufacturer to get a
retention "price to cover his cost and yield a reasonable return to the
manufacturer. A uniform FOR (free-on-rail) destination price for cement was
fixed in respect of the whole of India irrespective of the distance over which
the cement had to be transported. The excess of FOR destination price realized
by a cement manufacturer over his retention price, subject to certain H
272 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A adjustments, had to be paid by the cement manufacturers into the Cement
Regulation Account (CRA). Jn cases where freight actually incurred was in
excess of the specified amount, the differential amount was paid to the
manufacturer out of the CRA.
The operation of the Control Order brought out certain serious problems
B affecting the cement industry. The control resulted in the fall of the fresh
investments in the cement industry. Further, there were consistent demands
for revision of the retention prices on the basis that the cost of manufacture
had increased considerably. The burden of CRA increased rapidly because of
the rapid increase in fuel and transport cost. The CRA went into deficit. It
C was unable to meet its commitments.
Considering the problems, the Government on 23rd March, 1981
constituted a high level Committee to review the developments of the cement
industry and recommend measures to accelerate its progress including
incentives and fair prices. The terms of reference of that Committee were :
D "(i) To review the present.system of pricing in the cement industry
(consisting of existing factories, new factories and mini cement
factories), including the merits of establishing uniform prices for
different varieties of cement, suggest modifications to ensure the
healthy growth of this industry including the achievement of
E production at optimal levels and recommend fair prices payable
to producers for the next pricing period commencing from April
1982;
(ii) To review the incentives (including rebates and concessions)
available to cement factories and suggest what change in these
F should be made to rapidly augment the domestic production of
cement. In this connection, also review the incentives available
for the erection of cement factories in remote, difficult and deficit
areas and recommend what alternatives should be made in these
to accelerate the production of cement in these areas in a cost-
effective manner;
G
(iii) To review the progress of modernization and introduction of
technological improvements (including efficiency in the use of
energy; research and development and quality control) in domestic
cement factories and recommend measures (including system.of
incentives to accelerate these in order to reduce costs and effect
H economies in domestic production; and
SHREE DIGVIJA Y CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL, J..J 273
(iv) To consider any other matter relating to rational development of A
the cement industry."
After detailed and exhaustive study of all aspects in relation to cement
industry, a large number of recommendations were made by the aforesaid
Committee including recommendation for a partial decontrol so that the cement
manufacturers are allowed to sell a certain specified percentage of their B
production in the open market without any price control. It was expected that
I
the cement prices in the open market would be far higher than the controlled
prices and this would create incentives for the fresh investment in the cement
industry. The Committee felt that the need for freight subsidy by payment,
out of the CRA would have to be continued otherwise serious problems C
would arise in remote and far-flung areas. It was noticed that there is already
sizeable deficit in the CRA which would make it unable to make its past
payment commitments. The Committee, therefore, recommended, as an integral
part of the package of amendments, that an amount of Rs.10 per MT should
be recovered from the cement manufacturers for payment into the CRA on D
every tonne of cement produce9, irrespective of whether it was levy cement
or non-levy cement.
With some modifications, the recommendations of the Committee were
accepted by the Central Government. The Central Government allowed partial
decontrol. It allowed sale of non-levy cement to the extent of 33.34% and not E
25% as recommended by the Committee. Further, instead of recommended
payment of Rs. I 0 per MT, the Central Government reduced the payment to
the CRA at the rate of Rs.9 per MT. It was felt that the payment into CRA
on decontrolled quantity of cement was necessary because to the extent of
decontrol, there will be no contribution into the CRA of the differential
amount between FOR destination price and the manufacturer's retention price. F
It was felt that the Government's duty and obligation to pay freight subsidy
on the controlled output of levy cement which accounted for 66.66% of the
total production continued and was expected that this burden would increase
sharply because of substantial increases in the transport cost. The CRA would,
therefore, balance in this situation of decontrol only if the said contribution G
of Rs.9 per MT was received into CRA on the non-levy cement. It was also
contemplated that the sale price of the non-levy cement would .be far higher
than the price of the levy cement and, therefore, there will be no unnecessary
burden on the cement manufacturers inasmuch as this will be passed on to
the customers in the shape of higher prices. It seems that by and large, the
cement industry welcomed the new package pricing policy. It complemented H
274 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.
A the High Level Committee for departing from the conventional approach to ·
the problems of pricing and distribution and submitted report to the
Government which will stimulate the cement industry and ensure its healthy
growth.
It appears that out of a large number of cement manufacturers in India,
B only four manufacturers, namely the appellants, challenged clause 9A and
consequent payment under the said clause, three of them filing the writ petitions
after the liability to pay had been withdrawn and one manufacturer in
September 1986. The High Court by the impugned judgment did not accept
the contention that the payment under Clause 9A amounted to tax and, thus,
C upheld the validity of the impugned clause. The High Court held that the
partial decontrol and the impugned contribution was one single integrated
and inseverable package. The contention urged on behalf of the appellants is
that the payment under Clause 9A constitutes levy and collection of tax
without authority of law. It is contended that Clause 9A is ultra vires Section
l SG of the Act. The impugned clause requires the manufacturers to
D compulsorily pay Rs.9 per MT on the non-levy cement produced by them.
There is no authority under the Act to levy or recover such a payment. It was
contended that no tax can be imposed by any subordinate legislation unless
the principal statute specifically authorises such imposition. The submission
is that the Act does not authorise levy and recovery of any such tax and,
E therefore, Clause 9A is ultra vires the Act.
Clause 3 of the Control Order contains prohibition to remove the cement
from the precincts or premises of the manufacturer. Clause 4 empowers the
Central Government to direct sale or transport of cement to any person or
class of persons and on such terms and conditions, as may be specified in the
F Order. The obligation on the producer to maintain and produce the accounts
as the Central Government may require is provided in Clause 6. Clause 7
provides that the ex-factory prices admissible to the producer for the different
varieties of cement shall be as specified in the Schedule, namely, the retention
price. Clause 8 provides the price at which the producer can sell the cement.
G Clause 9 provides for payment by the producer of the cement into the
CRA. Clause 9 reads as under :
.. Payment to cement regulation account. 9. (I) Every producer shall,
in respect of each transaction by way of sale of cement effected by
H him or in respect of every'removal of cement made by him, under
clause 3 pay within one month of the close of the month in which
SHREE DIGVIJAY CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL,J.]275
such sales or removals take place, to the Development Commissioner A
for Cement Industry, an amount equivalent to the amount, if any, by
which the free on rail destination price of such cement exceeds the
aggregate of the following amounts, namely :-
(i) the ex-factory price of such cement calculated in accordance
with the rates specified in the Schedule; B
(ii) selling and distribution expenses calculated at the rate of Rs.4.00
per tonne;
(iii) the excise duty paid thereon; and
(iv) in the case of packed cement, the charges fixed by the Central C
Government in respect of packing under the first proviso to clause
8 and where a producer uses second hand jute bags in excess of
the limit, if any, specified under the second proviso to that clause
such charges as proportionately reduced :
provided that the expenditure incurred by the producer on freight by D
the cheapest mode of transport or where any other mode of transport
has been specified by the Central Government under clause 4, by
such mode of transport in respect of such transaction shall be
reimbursed to the producer by the Development Commissioner for
Cement Industry from out of the Cement Regulation Account referred
to in clause 11." E
Clause I 0 provides for the maximum price at which, cement could be
sold.
Clause 11 stipulates the maintenance ofCRA and the purpose for which
the amount credited into CRA could be spent. Clause 11 reads as under : F
"Cement regulation account.
11. (I) The Development Commissioner for Cement Industry shall
maintain an account to be known as the Cement Regulation Account
to which shall be credited the amounts paid by the producer under G
clauses 9 and 9A and such other sums of money as the Central
Government may, after due appropriation made by Parliament by law
in this behalf, grant from time to time.
(2) The amount credited under sub-clause (I) shall be spent only for
H
-
276 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A the following purposes, namely :-
(i) paying or equalizing the expenditure incurred by the producer
on freight in accordance with the provisions of this Order;
(ii) equalizing concession, if any, granted in the matter of price,
freight supplies to Government or public or for purposes ofexport
B
under the second proviso to clause 8 or for import;
(iii) expenses incurred by the development Commissioner for Cement
Industry in discharging the functions under this Order subject to
such limits, if any, as may be laid down by the Central
Government in this behalf.
c
(iv) such reimbursement of expenses by the Development
Commissioner for Cement Industry as may be incurred by the
producers of cement for the purpose of increasing the production
for securing the equitable distribution and availability at fair
prices of cement.
D
(3) The Development Commissioner for Cement Industry shall cause
accounts to be kept of all moneys received and expended by him
from out of the Cement Regulation Account and he shall prepare and
submit such report and returns relating to the said account as may be
required by the Central Government from time to time.
E
(4) The balance, if any, remaining unspent in the Cement Regulation
Account shall be disbursed in accordance with such directions as may
be given by the Central Government in this behalf."
The amendments made to the Control Order on 28th February 1982,
F that are relevant for appreciation of respective contentions are as under :
"Applicability.
IA. The provisions of the said Order except clause 9A thereof shall
apply only in relation to levy cement.
G
Definitions.
2. In this Order, unless the context otherwise requires,-
(a) to (oo) ...
H · (d) "levy cement" means that part of production of cement with
'
'
SHREE DIGVIJAY CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL,J.) 277
reference to the installed capacity of a cement plant as may be A
determined by the Central Government, from time to time, not being
more than per cent of the installed capacity of the cement plant;
(e) "non-levy cement" means that part of production of a cement
plant which is in excess of the production mentioned in sub-clause
(d). 13
9A. Every producer shall, in respect of the production of non-levy
cement pay to the Cement Regulation Account an amount at the rate
of rupees nine per metric tonne of such production, within one month
of the close of the month in which such production _takes place."
.. c
It is apparent that except Clause 9A, no other clause of the Control
Order applies to non-levy cement. There is no control on supply, distribution
or price of the non-levy cement. The non-levy cement is free from price and
distribution control in contrast to levy cement. Whereas in respect of levy
cement, under Clause 9, the cement producers were required to pay into CRA
the difference between FOR destination price charged by them and the D
retention price admissible to them, in respect of non-levy cement under Clause
9A, they were required to pay in CRA Rs. 9 per metric tonne. According to
the appellants, in respect of non-levy cement whatever money is paid by the
buyer of the cement to them becomes their money and thereafter the
requirement of payment as provided in Clause 9A is a compulsive payment E
and hence a tax. For such a tax, it is contended, there is no sanction of law.
The contention is that the impugned clause is a compulsion on manufacturers
of non-levy cement to pay Rs.9 per metric tonne as above, which constitutes
levy and recovery oftax·t]i,at cannot be imposed by any subordinate legislation
unless the principal statute specifically authroises such imposition. There is
no such authorization in the Act. Therefore, it is contended that Clause 9A F
is ultra vires the Act.
In support of the submission that the impugned levy under Clause 9A,
in fact, is a tax, learned counsel for the appellants has placed reliance on the
decision of the House of Lords. in Allorney-General v. Wilts United Dairies, G
[1922 (91) Law Journal Reports (Kings Bench) 897]. In that case, the Food
Controller was empowered by the Defence of the ReallJ!. Regulations to make
orders regulating or giving directions with respect to the production,
manufacture, treatment, use, consumption, transport, storage, distribution,
supply, sale or purchase of or other dealing in or measures to be taken in
· relation to any article as appear to him necessary or expedient for the purpose H
278 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A of encouraging or maintaining the food supply of the country. It was found
that there was disparity in the prices of milk prevailing in different areas and
in order to equalize these prices, the Food Controller purporting to exercise
powers conferred on him by the Defence of the Realm Regulations, entered
into agreements with the defendant-company by which the latter were permitted "
B to purchase milk within certain defined areas on terms that they should pay
him a sum of two pence per gallon for this privilege. The defendant-company
which was required to make this payment, refused to do so and to the
information laid against it raised the contention that the charge amounted in
effect to a tax levied in an unconstitutional manner. The company succeeded
in the Court of appeal and the Attorney General brought the matter in appeal
C before the House of Lords. In dismissing the appeal, Lord Buckmaster after
accepting the argument based upon the extreme difficulty of the situation in
which the country found itself owing to the war, and the importance of
securing and maintaining vital supplies essential for the life of the community,
proceeded to consider the question whether a power to make such a levy was
granted. The statute had confined the duties of the Food Controller to regulating
D the supply and consumption of food and taking the necessary steps for
maintaining proper supplies. It was observed that :
"The question before this House is not whether or not that was a wise
and necessary step to take having regard to the difficulties by which
the whole question of the milk supply was surrounded; the only
E
question which we have to decide is whether there was any power
conferred upon the Food Controller to do what he did. The Attorney-
Geneml has urged your Lordships to consider the extreme difficulty
of the' situation in which the country found itself owing to the war,
and the importance of all the officials who had charge of our vital
F supplies being enabled to act under the powers conferred upon them
without fear of technical and vexatious objections being taken to the
powers which they used. All that may be readily accepted but it
cannot possibly give to any official a right to act outside the law; nor
can the law be unreasonably strained in order to legalise that which
it might be perfectly reasonable should be done if, in fact it was
G unauthorized. The real answer to such an argument is to be found in
this, that in times of great national crisis Parliament should be, and
generally is, in continuous session, and the powers which are required
for the purpose of maintaining the integrity of the country, both
economic and military, ought always to be obtained readily from
H loyal Houses of Parliament. The only question here is, were such
SHREEDIGVIJAYCEMENTCO. LTD. v. U.0.1. [Y.K. SABHARWAL,J.)279
powers granted? A
There are only two sources from which those powers can possibly
be derived. One is the Act creating the Ministry, and the other the
Regulations under the Defence of the Realm Act. Neither of these
either directly or, in my opinion, by inference, enabled the Food
Controller to levy the payment of any sums of money from any of B
His Majesty's subjects. The statute of 1916 confines his duties to
regulating the supply and consumption of food and taking the necessary
steps for maintaining a proper supply of food. The powers so given
are no doubt very extensive and very drastic, but they do not include
the power of levying upon any man payment of money which the C
Food Controller must receive as part of a national fund an~ can only
apply under proper sanction for national purposes. However, the
character of this payment may be clothed, by asking your Lordships
to consider the necessity for its imposition, in the end it must remain
a payment which certain classes of people were called upon to make
for the purpose of exercising certain privileges, and the result is that D
the money so raised can only be described as a tax the levying of
which can never imposed upon subjects of this country by anything
except plain and direct statutory means." (emphasis supplied by us)
In Attorney General for New South Wales v. Homebush Flour Mills
Ltd., [56 C.L.R. 390 at 400] the High Court of Australia held that when the E
exaction of money by a Government in obedience to what is really a
compulsive demand, the money paid is paid as a tax.
Reliance was also placed on the decision of Privy Council in Lower
Mainland Dairy Products Sales Aqjustment Committee v. Crystal Dairy Ltd.,
[1933 AC 168]. The case was concerned with the legality of certain adjustment F
levies imposed on farmers by an adjustment ·Committee created by an
enactment of British Columbia by which the disparity in the production of
fluid milk as compared with milk products was sought to be countered. It was
contended on behalf of the State that the levies were not taxes but merely a
scheme for pooling profits in a provincial trade. Lord Thankerton speaking G
for the Board said :
"The main issue of this appeal is whether the adjustment levies are
taxes,. ... In the opinion of their Lordships, the adjustment levies are
taxes. They are compulsorily imposed by a statutory committee ...
They are enforceable by law. Compulsion is an essential feature of H
280 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A taxation. The Committee is a public authority, and the imposition of
these levies is for a public purpose. The fact that moneys so recovered
or distributed as bonus among the traders in the manufactured products
market does not affect the taxing character of the levies made."
Reliance was also placed on A. Venkata Subba Rao v. State of Andhra
B Pradesh, [1965] 2 SCR 577. In this case the Government of Madras passed
various orders for procurement and distribution of paddy and rice. Persons
were appointed as procuring agents and wholesalers and their duty was to
procure rice from specified areas at prices specified by the Government from
time to time and to deliver it at prices so specified to the Government or to
C the persons nominated by it or to other licensed purchasers. The purchasing
agents were to get the difference between the purchase price and the sale
price. During the year 1947-48 the Government increased the price and this
resulted in excess profits to procuring agents. The Government insisted that
this excess sum so earned by the procuring agents should be paid to the
Government and this sum was directed to be collected as surcharge. It was
D held by the Supreme Court that recovery of this money amounted to a tax
imposed by an executive fiat without any legislative sanction on the capital
value of the stocks of foodgrains held on a particular date.
This Court observing that if there is no legal basis for these demands
by the Government, it is not possible to characterize them anything else than
E as taxes; they were imposed compulsorily by the executive and are sought to
be collected by the State by the exercise, inter alia, of coercive statutory
powers, though these powers are vested in Government for very different
purposes. This Court has approved the statement of law and the essential
characteristics of tax as contained in the aforequoted observations of Lord
F Thankerton.
For deciding the validity of Clause 9A, in view of the aforesaid legal
position , it is to be determined whether the contribution payable amounts to
compulsory exaction of money and hence has an essential feature of taxation.
The core question that has to be decided is as to whom the money paid by
G the buyers of non-levy cement belongs. The real question, therefore, is: are
the appellants merely holders of the money paid to them by their customers
for purchase of non-levy cement and are not, in fact, entitled to it or the
money, in fact, belongs to them ? In support of the contention that the
money, in fact, does not belong to the appellants and they are merely holders
H thereof, learned counsel for the respondents, besides placing reliance on two
SHREE DIGVIJA Y CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL, J.]281
decisions, one of the Calcutta High Court upholding the validity of Clauses A
4A and 48 of the Aluminium Control Order, 1970 and the other of Delhi
High Court upholding validity of Clause 9 of the Control Order, has placed,
rather emphatically, strong reliance on the background, scheme and the
circumstances under which Clause 9A was inserted in the Control Order by
1982 amendment. We have already noticed that Clause 9A was inserted
while simultaneously introducing partial decontrol of cement. No fault can be B
found with the object behind the levy in question. As a result of partial
decontrol, the cement manufacturers were expected to earn huge profits by
sale of non-levy cement in open market. There was no limitation or restriction
on sale price. The effect of Clause 9A was to make them contribute, out of
those profits, Rs.9 per metric tonne into the CRA. Howsoever laudable the C
object behind the levy and collection of any sum of money may be, but if it
does not have sanction of law, it has to be struck down. The contention that
-...
the partial decontrol and contribution under Clause 9 are inseparable and part
of the same scheme, though looks attractive at the first brush but closer
examination thereof shows that it has no substance. The question before this
Court is only about the validity of Clause 9A for .want of legal sanction to D
... impose the levy and collect that amount and not about the validity of the
partial decontrol. From the affidavit of the respondents filed in this Court as
well, it appears that on payment of the sale price of the non-levy cement by
the buyers to the sellers, i.e., the cement manufacturers, the amount so paid
becomes their property - amount belongs to them, though they may have E
passed on the burden to the customers, it cannot be held that the appellants
are merely holders of that amount. It would be useful in this connection to
quote from the affidavit filed on behalf of the Ministry of Commerce and
Industry, Department of Industrial Policy and Promotion which itself shows
that the money received by sale of non-levy cement becomes the money of
the sellers. The affidavit states : F
"Further, it was contemplated that the non-levy open market cement
price would be far higher than the levy price or the controlled price
by much more than the required contribution of Rs.9 per MT and, as
a result, the said contribution of Rs.9 on the non-levy cement would G
be easily and effortlessly passed on by the cement manufacturers to
their customers in the shape of higher prices. In fact, this is exactly
what happened. Thereafter, the non-levy cement price was at all points
of time far higher than the levy cement price. For example, in June
1985, the levy price of cement was Rs.532 per MT whereas, on the
other hand, the non-levy price of cement per MT was as much as H
282 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.
A Rs.1660, i.e., three times the levy price. Even earlier, right from
February 1982 onwards, when the Cement Control Order, 1967 was
amended, the non-levy cement price was at least double the levy
cement price and the manufacturers, therefore, realized a sale price
for his 33.34% non-levy production a total sale price which was
much more than the retention price in respect of the 66.66% production
B of levy cement. The said contribution of Rs.9 per MT of non-levy
cement was, therefore, passed on by the cement manufacturers and
was wholly recovered from their customers. This factual position was
made abundantly clear by the letter dated March 12, 1982 addressed
to the Government of India by the Cement Manufacturers Association
c . which showed that the contribution to the Cement Regulation Account
at Rs.9 per MT of non-levy cement was b~ilt into the price of non-
levy cement and recovered from the customers."
The decisions relied upon by learned counsel for the respondents have
no relevance. In Union ofIndia and Ors. v. Hindustan A/11111ini11111 C01poration
D Limited and Anr., [AIR 1983 Cal. 307] while examining the validity of the
aforenoticed provisions of Aluminium Control Order, 1970, it was held that
the person challenging the validity of the clause which related to the fixation
. '
of retention price of indigenous aluminium (Clause 4A) and fair price of
aluminium (Clause 48) is merely the holder of the money. In that case, the
E Government had fixed the sale price of indigenous aluminium which was
considered to be fair and within the pecuniary .limits of the consumers. The
Government, finding that mere fixation of sale price would serve no purpose
of the consumers and consequently the objectives under Section 3 of the
Essential Commodities Act, 1955 cannot be achieved, introduced the concept
of retention price in order to obviate the difficulties of the consumer. The
F Calcutta High· Court held that as the retention price fixed for HINDALCO
was lower than the sale price, HINDALCO has to pay to the Aluminium
Regulation Account, the sum which is the difference between the sale price
an.d the retention price. Under these circumstances, it was held that the steps
taken by the Government by fixation of the retention price for each producer
G and the sale price and the provision for payment to.the Aluminium Regulation
Account were necessary in the interests of the consumers so as to maintain
supply of aluminium consistent with the demand thereof and to make it
available to the consumer at a fair price.
Likewise, in R.D. Aggarwala and Anr. v. The Union of India andAnr.,
H [!LR 1974 (2) Delhi 520], the Delhi High Court was concerned with the
SHREE DIGVJJAY CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL, J.] 283
validity of Clause 9. In that case, the contention that was urged was : A
"the requirement in clause 9 that every producer should pay to the
Controller the balance that remains from out of the f.o,r. destination
price, and the provision in clause 11 (4) enabling the Government to
disburse the unspent amount in the Cement Regulation Ac~ount in
any manner it likes, amount to a colourable exercise of the taxing B
power of the State, and beyond the legislative competence of the
executive under Section I 8G of the Act, in-as-much as the out-right
deprivation of the balance of the freight in the hands of producer and
the power of the Government to disburse the same as it likes, amount
to a direct and variable levy of tax without any authority of law under C
Article 265 of the Constitution."
The High Court held that the contention was based on the assumption
that the producer was deprived of the balance of the freight in his hands. It
was clear that the producer was not entitled tci the said balance of freight
according to the scheme of the Control Order. The Court said : D
"Coming now to the contention urged by the learned counsel, it was
based on the assumption that the producer was deprived of the balance
of the freight in his hands. It is clear from what has been stated above
that the producer was not entitled to the said balance of the freight
according to the scheme of the Control Order. Once it is held, as we E
did, that the fixation of the ex-factory or retention price is valid, it
would follow that the balance of the f.o.r. destination price that remains
after deducting the said retention price and the other items allowed to
be deducted by the producer under clause 9 of the Control Order,
does not belong to the producer and, therefore, he cannot be said to
be deprived of the same when he pays to the same to the Controller F
under clause 9. In that view, the payment of the balance to the
Controller cannot be described as levy of tax qua the producer. Nor
can it be a tax qua the consumer, as the amount of freight is paid by
the consumer as part of the f.o.r. destination price."
The High Court, therefore, held that the balance of FOR destination
G
price does not belong to the purchaser under the scheme of the Control Order
and cannot, therefore, be regarded as tax qua the producer.
Factual matrix of the two cases relied upon by learned counsel for the
respondents and of the present case is entirely different. As already noticed, H
284 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.
A there is no control on price of sale of the non-levy cement. Except Clause
9A, no other clause of the Control Order is applicable to non-levy cement.
There is no sale price, there is no retention price and the manufacturers are
free to sell the non-levy cement at whatever price they like. There is no
power in the subordinate legislation to impose levy on that cement which is
B not covered by the Control Order.
It is no doubt true that in taxing legislation, legislature deserves greater
latitude and greater play in joints. This principle, however, cannot be extended
so as to validate a levy which has no sanction of law, however, laudable may
have been the object to introduce it and howsoever laudable may have been
C the purpose for which the amount so collected may have been spent.
It is clear from the above discussion that the impugned levy under
Clause 9A is a compulsory exaction. The amount paid by the customers of
non-levy cement belongs to the appellants. Such a levy amounts to levy of
tax and, therefore, invalid for want of sanction to levy such a tax. _clause 9A
D is, therefore, ultra vires Section l SG of the Act. To ihis extent we set aside
the impugned judgment of the High Court.
The next question is: whether the appellants are entitled to refund of
the contribution made by them under Clause 9A of the Control Order? There
E is no automatic right ofrefund. In Ma/at/al Industries Ltd and Ors. v. Union,
of India and Ors., [1997] 5 SCC 536, the Constitution Bench has held that
the right to refund of tax paid under an unconstitutional provision of law is
not an absolute or an unconditional right. Similar is the position, even if
Article 265 can be invoked. The principles of unjust enrichment are applicable
in claim of refund. The claimant has to allege and establish that he has not
F passed on the burden to another person. The Constitution Bench has held
whether the claim for restitution is treated as a constitutional imperative or
as a statutory requirement, it is neither an absalute right nor an unconditional
obligation but is subject to the requirement as explained in the judgment.
Where the burden of duty has been passed on, the claimant cannot say that
he has suffered any real loss or prejudice. Real loss or prejudice is suffered
G 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. The doctrine of unjust enrichment
H is a just and salutary doctrine. The power of the Court is not meant to be
SHREE DIGVIJA Y CEMENT CO. LTD. v. U.0.1. [Y.K. SABHARWAL, J.] 285
exercised for unjustly enriching a person. The doctrine of unjust enrichment A
is, however, inapplicable to the State for the State represents the people of
the country. No one can speak of the people being unjustly enriched.
In the present case, it is clear that the burden of payment under Clause
9A was passed on to the customers. The President of the Cement Manufacturer
Association, soon after the insertion of the amendment in February 1982, in B
a communication dated 12th March, 1982 sent to the Secretary of Ministry
of Commerce, Department of Industrial Development, Government while
giving break-up of th{ price of non-levy cement added in the said price, a
sum of Rs.9 p,er·MT payable under Clause 9A on production of the non-levy
cement. Further, it appears that the levy under Clause 9A was accepted by C
the entire cement industry except the challenge made by the four appellants
by filing the writ petitions; one just before the contribution under Clause 9A
was withdrawn and three after it was withdrawn. Besides the principles of
unjust enrichment on equitable principles which squarely apply here, the
applicants are not entitled to -claim refund of amount paid into CRA under
Clause 9A. It is evident that the amount so deposited was expanded for the D
purpose under the Control Order. Under these circumstances, we direct that
pursuant to declaration of invalidity of Clause 9A of the Control Order, the
amount of contribution already paid under Clause 9A will not be liable to be
refunded to the appellants.
The appeals are accordingly allowed to the above limited extent. In the E
facts and circumstances of the case, parties are left to bear their own costs.
K.K.T. Appeals allowed.
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