Holding

Malt and malt extract are food products, Barmalt is entitled to the refund, but the proposed formula is not feasible; Barmalt must refund the amount received except Rs 8 lakhs and HMM Limited must reverse that credit to the State.

Summary

The Supreme Court considered whether malt and malt extract manufactured by Barmalt (India) Ltd. qualify as "food products" under Excise Notification No. 55 of 1975 and whether the company was entitled to a refund of excise duty on the basis of unjust enrichment. The Court affirmed the Delhi High Court's view that malt is a food product and that Barmalt could claim a refund of the duty it had paid. The Revenue, after refunding Barmalt, issued notices to purchasers (e.g., HMM Limited) to reverse the pro‑forma credit they had taken, creating a risk of double payment. Barmalt proposed that it pay the refund amount to the purchasers, who would then adjust it with the Revenue, but the Court found this scheme impracticable because the other two producers and many purchasers were not before the Court. Consequently, the Court directed Barmalt to refund to the State the amount it had received, except Rs 8,00,000 already paid to HMM Limited, and ordered HMM Limited to reverse that credit to the State. The appeal was allowed with these specific directions.

Issues considered

Whether malt and malt extract fall within the expression "food products" under Excise‑Central Excises and Salt Act, 1944, Notification No. 55 of 1975.
Whether Barmalt is entitled to a refund of excess excise duty on the ground of unjust enrichment.
Whether the suggested formula of passing the refund to purchasers and having them reverse pro‑forma credit can be mandated under Article 142 of the Constitution.
What specific relief should be granted regarding the refund and reversal of credit.

Legislation cited

Constitution of Indias. Article 142

Subjects

Excise dutyExemption notificationFood product definitionUnjust enrichmentPro‑forma creditRefundArticle 142Civil appeal

Judgment

UNION OF INDIA AND ORS. A
v.

- BARMALT (INDIA) LTD., GURGAON

FEBRUARY 18, 1997

[B.P. JEEVAN REDDY AND S.B. MAJMUDAR, JJ.) B

Excise-Central Excises and Salt Act 1944---Exemption Notification
No. 55 of 1975 dated !st March 1975-Malt and malt products-Finding of
High Court to the effect that benefit of exemption available to the assessee,
as Malt and Malt Products fall within the expression 'Food Products'. C
Excise-Unjust Enrichment-Refund of Excess duty paid-Respondent,
one of the producers of malt and malt extracts-Respondent seeking certain
specific directions instead of disposal in tem1s of Ma[atlal Industries cas~
Suggestions put forth by Respondent, held not f easible--On peculiar facts of
the case, Respondent directed to refund to State the amount of refund received D
by it excepting the specified amount already returned earlier to a pur-
chase~Also, since the purchaser had taken profom1a credit of duty paid by
it on purchase of the products, direction issued to reverse the credit entry and
pay it over to State.
E
Respondent is one of the three major producers of malt and malt
extract in the country. The purchase of malt and malt extracts is by certain
specified industries only • (A) industries engaged in the manufacture of
beverages like Bournvita, Horlicks Etc. and (b) breweries and distilleries
engaged in manufacture of Indian made foreign liquors.
F
One of the purchasers of category (a), HMM Limited like the other
purchasers, took proforma credit of the duty paid by it on the purchase of
malt/malt extract in terms of Notification No. 201 of 1979, which was in
... force at the relevant time. The purchasers of category (b) were however
not entitled to and did not avail of any proforma credit from the respon- G
dent.

The Assistant Collector took the view that malt and malt extract
produced could not he treated as food products and therefore the benefit
of notification No. 55 of 1975 was not available. On the writ petition
preferred, the High Court accepted the case of the Respondent and held_ H
125
126 SUPREME COURT REPORTS f1997) 2 S.C.R.
A that the benefit of the said exemption notification could be availed of. The
High Court thus held that the Respondent was entitled to refund of excess
duty paid, on the basis of unjust enrichment. \
'
Pursuant to the judgment of the High Court, Revenue was under an
obligation to refund the duty collected to Respondent Barmalt. Sub-
B sequently, notices were issued to the purchasers .including HMM Limited
calling upon them to reverse the proforma fredit taken by them and pay
the purchasers like HMM Limited. This put them in peril as in addition
to the duty already paid by them while purchasing the produce, they were
now once again asked to pay the same duty over again to the State on the
C ground that the State had refunded the duty to Barmalt, the Respondent
and other two producers pursuant to the High Court Judgment.

· On the demand raised against it, HMM Limited, disputed the same
on several grounds including on limitation and the Tribunal accepted its
Claim only on the ground of limitation. Hence these appeals.
D
A solution to the problem was envisaged by the counsel for the
Respondents. It was suggested that Barmalt, the Respondent would pay
over the entire amount received by it by way of refund to HMM Limited '
and other similar purchasers who have availed of proforma credit and that
'the purchasers would then pay or adjust the amount to the Revenue. It
E was thus contended that on completion of these two steps, neither the
Revenue nor the purchaser would stand to lose and that there would be
no question of unjust enrichment.

Though this Court felt that the solution put forth by the Respondent
-
sounded attractive, it found that there were difficulties in the way of
F
implementation of the same.

Disposing of the appeals, this Court
-
HELD : 1.1. The suggestion put forth by the counsel for the Respon-
G dents would not be feasible, nor would it be possible to work out a formula
in the present case, in view of the fact that no appeals had been preferred
against the other two producers who had also taken refunds and because
of the fact that the other two producers and all the purchases were. not
before this Court. [130-G] l
H 1.2. In view of the admitted fact that the respondent had passed on
1
J
U.0.1. v. BARMALT (I) LTD. [B.P.JEEVAN REDDY, J.] 127

the burden of duty to its purchasers, the respondent should refund to the A
State the amount received by it by way of refund (pursuant to the judgment

- of the High Court) except the sum of Rupees Eight Lakbs, which was
admittedly received by HMM Limited from the respondent. HMM Limited
is directed to reverse the credit taken by it to the e.<tent of Rupees Eight
Lakbs. [130-H, 131-A]
B
Ma/atla/.1111iustries v. Union of India, (1996) 9 Scale 457, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 960 of
1986 Etc.

-- From the Judgment and Order dated 11.7.85 of the Delhi High Court
in C.W.P. No. 36 of 1981.

R. Mohan, D.A. Dave, Harish N. Salve, V.K Verma, Ms. Kamaksh~
C

S: Mehlwal C.V.S. Rao, P. Parmeshwaran, N.K. Bajpai, V. Lakshmi
Killnaran, B.B. Sawhney, Mohd. Jamal Nasir, Ms. Indra Sawhney, R.N.
·Kaninjawala, (Ms. Ruby Ahuja) for Ms. M. Karanjawala, P.H. Parekh and D
KJ. John for the appearing parties.

The Judgment of the Court was delivered by

RP. JEEVAN REDDY, J. Civil Appeal No. 960of1986:
E
In this appeal preferred against the judgment of the Delhi High
Court, two questions arise, viz., whether the malt and malt exfract
produced by the respondent, Barmalt (India) Private Limited (Barmalt},
falls within the expression "food product" in Exemption Notification No. 55
of 1975 dated March 1, 1975 and whether the respondent is entitled to p
refund of the excess duty paid by him pending the decision of the High
Court. The Assistant Collector took the view that malt and malt extract
cannot be treated as food products and, therefore, not entitled to the

- benefit of the said Notification. On a writ petition being filed, the Delhi
High Court upheld the respondent's plea and also held that it is entitled G
to the benefit to the said Exemption Notification. On the second issue, the
Delhi High Court has overruled the Revenue's plea based on the theory of
unjust enrichment. When this appeal came up from hearing on an eartier
date, we held that the High Court was right in saying that malt and malt
extract to qualify as food products and, there.fore, the respondent has been
rightly held entitled to the benefit of the .aforesaid Notification. Bui then H
y
/

128 SUPREME COURT REPORTS [1997] 2 S.C.R.

· A the question arose about the respondent's right to refund. On this aspect,
we posted the matter for further hearing because of the peculiar situation
arising in this matter, to which we shall now advert.

Consequent upon the decision of the High, Sri Harish Salve, learned
B counsel for the respondent says, the respondent, Barmalt, became entitled
to refund of Rs. 2,67,00,983.16p. which was the amount of duty paid by it.
Pursuant to the impugned judgment of the High Court it is stated, an
amount of Rs. 2,41,53,497.92p. has been ·refunded to it. The balance
amount of Rs. 25,47,485.24p. is still refundable to it. On these facts, in the
ordinary course, we would have disposed of the matter in terms of Mafat/al
C Industries v. Union of India, [1996) 9 SCALE 457 and the format order,
which we have devised pursuant to the said judgment but Sri Harish Salve
brought to our notice certain facts on the ba~is of which he asks for certain
specific directions. The facts stated by him are the following :
--
D The respondent, Barmalt, is one of the three major producers of malt
and malt extract in the country. The other two Malt Company of India
Limited and AK. Malt (Private) Limited. The malt and malt extract
produced by these units is purchased by certain specified industries only.
The industries purchasing malt and malt extract fall under two categories,
(i) industries engaged in the manufacture of beverages, like Bournvita and
E Horlicks etc. and (ii) the breweries and distilleries engaged in manufactur-
ing Indian Made Foreign Liquors. One of the category (i) industries is
H.M.M. Limited, now known as Smith Kline Beecham Consumer Health ...,-'-
Care Limited, respondent in the connected appeai Like other purchasers
in category (i), H.M.M. Limited took proforma credit of the duty paid by
p it on the purchase of malt/malt extract in terms of Notification No. 201 of
1979, \l"!rich was in force at the relevant time. Other purchasers in category
(i) also did the same. (So far as category (ii) purchasers, i.e., distilleries
and breweries are concerned, Sri Salve says that they were not entitled to
and did not avail of any proforma credit for the duty paid by them when
G "they. purchased malt/malt extract from the respondent or the other two
units, as the case may be.) But when the Delhi High Court, under the
judgment impugned herein, that no duty was payable on the
-
clearance/removal of malt and malt .extract by virtue of Exemption
Notification No. 55 of 1975, the Revenue was obliged to refund the duty
-
collected back' to barmalt. Ha.Ying done that, the Revenue served notices
H upon the purchasers of malt and malt extract (H.M.M. Limited and others)
U.0.1. v. BARMALT (I) LTD. [B.P. JEEVAN REDDY, J.] 129

calling upon them to reverse the proforma credit taken by them and pay A
or adjust the duty payable accordingly. This put the purchasers like
H.M.M. Limited in peril. They had already paid the duty (to Barmalt and
other two produces) while purchasing the malt/malt extract and now they
were being asked to pay the same duty over again to the State on the
ground that the State has refunded the duty to Barmalt (and the other two B
producers) pursuant to the Judgment of the High Court. When this
demand was raised against H.M.M. Limited, it disputed the same on
several grounds including limitation and the Tribunal appears to have
accepted its claim only on the ground of limitation. (As already stated,
there are other purchasers, like H.M.M. Limited falling in the first category
mentioned above.) C

Sri Salve suggests that this problem can be solved in the following
manner : Barmalt will pay over the entire duty to H.M.M. Limited and
other similar purchasers (who have availed of the proforma credit). There
are only three purchasers in the first category. As a matter of fact, out of D
the sum of Rs. 2,41,53,497.92p., Barmalt has already refunded an amount
of Rs. 1,28,87,580.34p. to H.M.M. Limited and other similar purchases.
(The: payment to H.M.M. Limited is stated to be in the sum of Rupees
eight lakhs.) Barmalt will pay over that rest of the amount (received by
them by way of refund) to the respective purchasers. Even the amount of
Rs. 25,47,485.24p. will also be paid over to the respective purchasers as E
soon as it is received from the Revenue. In this manner, Barmalt would
have paid over the entire amount received by them by way of refund to
their purchasers in which case no question of unjust enrichment would
arise in the case of Barmalt. So far as purchasers are concerned, they would
also not stand to lose in any manner. They would get the money from F
Barmalt and would then pay over/adjust the amount to Revenue. If these
two steps are completed, neither the Revenue stands to lose nor would the
purchasers stand to lose and Barmalt would also not be unjustly enriched.
The solution suggested by Sri Salve sounded attractive when suggested and .
accordingly notices were directed to the other two producers of malt and
malt extract, viz., Malt Company of India Limited and A.K. Malt·(Private) G
Limited · and then we discovered the several difficulties in the way of
accepting the suggestion of Sri Salve. they are : (a) While the Revenue has
filed the appeal against the decision of the Delhi High Court in favour of
Barmalt (against the order impugned herein), no appeals have been
preferred by the Revenue against similar orders in favour of other two H
j
y
130 SUPREME COURT REPORTS [1997] 2 S.C.R.

A producers aforesaid. Those two producers have taken the refund and the
orders in their favour are said to have become final. Their counsel stated
that they are not willing to abide by or implement the said suggestion - or
formula, if we can call it one - and that there is no reason why they should
pay over the amounts which they have received by way of refund when the
B orders of refund in their favour have become final. (b) The purchasers like
H.M.M. Limited have not purchased exclusively from Barmalt. They have
purchased from all the three producers. The other purchasers are not
before us. Only the H.M.M. Limited is before us. It is the respondent in
connected appeal, viz., Civil Appeal Nos. 3387- 88 of 1992. An undertaking
has been filed on behalf of H.M.M. Limited stating that they are agreeable
C to the said formula provided the formula is applied uniformly to other two
producers viz., Malt Company of India Limited and A.K. Malt (Private)
Limited also. Sri Lakshmi Kumaran, learned. counsel for the H.M.M.
Limited, no doubt stated that if this formula is applied and implemented
uniformly, H.M.M. Limited would be prepared to reverse the proforma
D credit equal to the amount received by them from the said three producers
notwithstanding the fact that H.M.M. Limited has already succeeded
before the Tribunal on the ground oflimitation. Counsel stated that though '
according to law, H.M.M. Limited is not obliged to reverse the credit by
virtue of the decision of the Tribunal in their favour, they are yet prepared
to reverse the credit if the formula suggested by Sri Salve is applied
E uniformly in case of all the purchasers of malt and malt extract. Besides
the purchasers in category (i), there are a large number of purchasers in
category (ii), who are also not before us.

Faced with these difficulties, it was suggested by Sri Lakshmi
F Kumaran and by Sri Salve that if the other two producers, (Malt Company
of India Limited and AK. Malt (Private) Limited) refuse to abide by the
said formula, this Court should, in the interest of justice, invoke its powers
under Article 142 of the Constitution direct them to ahide by and imple-
ment the said formula, we have considered the said suggestion but we think
that it would not be feasible or possible to work out the said formula in
G the facts and .circumstance brought to our notice. Neither the other two
producers are before us nor are all the purchasers before us. It would be
an endless and a highly complicated exercise which we do not think
advisable to undertake. In the circumstances, we have no alternative but to
dispose of the appeal as they stand. So far as Civil Appeal No. 960 of 1986
H (Barmalt) is concerned, we direct - in view of the admitted fact that it has
U.O.I. v. BARW.ALT(I) LTD. [B.P.JEEVAN REDDY,J.] 131

passed on the burden of duty to its purchasers - that Barmalt should refund A
to the State the amount received by them by way of refund (pursuant to
the impugned judgment of the Delhi High Court except a sum of Rupees
eight lakhs. In view of the fact that H.M.M. Limited is now before us and
it has admittedly received the said sum of Rupees eight lakhs from Barmalt,
the H.M.M. Limited is directed to reverse the credit taken by it to the
extent of Rs. 8,00,000 (Rupees eight lakhs only} and pay it over to the State. B
Civil Appeal No. 960 of 1986 is allowed in the above terms. No order
as to costs.

CA. Nos. 2447/89, 3387-88/92 wul 9947/95 :
c
No separate arguments were addressed in these appeals in view of
the debate regarding ·the formula suggested in Civil Appeal No. 960 of
1986. List these appeals accordingly for disposal on merits next week.

R.D. Appeals partly allowed.