OSWAL AGRO MILLS LTD. AND ANR. versus ASSTT. COLLECTOR OF CENTRAL EXCISE DIVISION LUDHIANA AND ORS.

Citation: [1994] 1 S.C.R. 650 · Decided: 04-02-1994 · Supreme Court of India · Bench: YOGESHWAR DAYAL, S.P. BHARUCHA · Disposal: Disposed off
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Judgment (excerpt)

A 
OSWAL AGRO MILLS LTD. AND ANR. 
v. 
ASSTT. COLLECTOR OF CENTRAL EXCISE DIVISION 
LUDHIAN'A AND ORS. 
B 
FEBRUARY 4, 1994 
[YOGESHWAR DAYAL AND S.P. BHARUCHA, JJ.] 
Central Excises and Salt Act, 1944: Section llB-Excise duty-Refund 
• 
of-Furnishing of Bank Guaranto.e on Court's order towards disputed Excise 
c duty-Whether amounts to payment of Excise duty-Meaning and intent of 
Section J JB-Applicability of the provision. 
Pursuant to interim orders passed by this Court in the appeals filed 
by the appellants against a decision of CEGAT, regarding the classification 
D 
of toilet soap for the purposes of excise duty, 50% of the excise duty was 
paid by the appellants to the excise authorities and bank guarantees were 
furnished for the balance 50%. Though the appeals were allowed by this 
~ 
Court, the question of the refund of the money deposited by the appellants 
was left to be dealt with by the authorities concerned in accordance with 
law. 
E 
' On their failure to get a positive response to their refund applica-
tion, the appellants filed a writ petition before the High Court seeking its 
expeditious disposal. The High Court issued a direction to the excise 
authorities to dispose of the claim of the appellants for 'refund/release of 
-4._ 
F 
bank guarantees' within one month, and also directed the appellants to 
have the bank guarantees extended till the final disposal of the claim for 
refund. Against this order, a s'pecial leave petition was filed, and the appeal 
was allowed by this Court and the Respondents No. 1 and 2 were directed 
to refund the monies recovered by them in the meantime from the Bank 
G upon encashment of the bank guarantees. Against this, the present review 
petition was filed in this Court. 
On behalf of the respondents 1 and 2 in the appeal, it was submitted 
-~ 
that the provisions of Section llB of the Central Excises and Salt Act, 1944 
were attracted to the bank guarantees in question; that the bank guaran-
H tees, furnished under the interim orders of this Court as a condition of 
650 
OSW AL AGRO MILLS v. ASSTI. COLLECTOR OF CENfRAL EXCISE DIV. 651 
stay of recovery of excise duty from the appellants, should be deemed to A 
·be equivalent to monies deposited in Court; and, therefore, it was for the 
appellants to establish before the excise authorities that they had not 
passed on the incidence thereof to their customers; and that, since the 
appellants had failed to establish this, the excise authorities were entitled 
to encash the bank guarantees and retain the amounts thereof. 
B 
Disposing of the matters, this Court 
·-" 
HELD: 1. Section llB of the Central Excises and Salt Act, 1944 
applies when an assessee claims refund of excise duty. A claim for refund 
is a claim for repayment. It presupposes that the amount of the excise duty C 
"bas been paid over to the excise authorities. [655-B] 
2.1. The bank guarantee is security for the Revenue that, in the event 
the Revenue succeeds, its dues will be recoverable, being backed by the 
guarantee of a bank. In the event, however unlikely, of the bank refusing 
to honour its guarantee it would be necessary for the Revenue or, where D 
the bank guarantee is in favour of the principal administrative officer of 
the Court, that officer tD file a suit against the bank for the amount due 
upon the bank guarantee. The amount of the disputed tax or duty that is 
secured by a bank guarantee cannot, therefore, be held to be paid to the 
Revenue. There is no question of its refund, and Section llB is not 
attracted. (655-F-H] 
E 
2.2. In the instant case, the bank guarantees given by the appellants 
were not properly the subject matter of the writ petition bl.fore the High 
Conn and the High Court was in error in dir~cting the appellants to renew 
the same. The 1st and 2nd respondents should forthwith re-pay to the 
Bank the amount collected upon the bank guarantees. [656-A, B] 
F 
Union of India v. Jain Spinners Ltd., (1992) 61 E.L.T. 321 S.C., 
distinguished. 
CIVIL APPELLATE JURISDICTION: J.A. No. 3of1993. 
IN 
Civil Appeal No. 7236 of 1993. 
From the Judgment and Order dated 18.10.1993 of the Punjab and 
G 
Haryana High Court in C.W.P. No. 10379 of 1993. 
H 
652 
SUPREME COURT REPORTS . 
[1994] 1 S.C.R. · 
A 
AND 
Review Petition No. 17 in CA No. 7236/1993. 
Harish N. Salve, Rajiv Dutta and Vipin Nari for the Appellants. 
B 
D.S. Mahra for the Respondents. 
c 
A.K. Ganguli, V.K. Verma and V.J. Francis for the Respondent/ 
(U.0.1.)
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