STATE OF U.P. AND ORS. versus VAM ORGANIC CHEMICALS LTD. AND ORS.

Citation: [2006] SUPP. 7 S.C.R. 293 · Decided: 18-10-2006 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Disposed off
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Judgment (excerpt)

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STATE OF U.P. AND ORS. 
v. 
VAM ORGANIC CHEMICALS LTD. AND ORS. 
OCTOBER 18, 2006 
[ARIJIT PASA YAT AND S.H. KAPADIA, JJ.] 
Taxation-Unjust enrichment-Supreme Court while dismissing appeals 
by the State, declined refund to assessee on ground that they made no 
payments-However certain payments were actually made-Citing such factual 
inaccuracy, assessee filed interlocutory applications claiming entitlement to 
rejimd-State contested the claim by relying upon principles of "Unjust 
Enrichment"-Disposing of the applications, Supreme Court directed assessee 
A 
B 
c 
to move appropriate authority for refund of the amount deposited by them-
While examining the claim, concerned authority directed to keep in view the 
principles of "Unjust Enrichment" in respect of all amounts which have been D 
passed on to any customer. 
Certain appeals tiled by the State were dismissed by this Court wherein 
it was noted that no payment had been made by the Respondents-assessee in 
view of various orders of stay passed by the High Court and this Court, but 
certain Bank Guarantees were furnished pursuant to the directions of the E 
High Court and this Court. In that background this Court noted that there 
was no question of any refund as there was no levy permitted in law, and the 
question of realization of the amount did not arise. 
Respondents have filed the present interlocutory applications stating F 
that certain factual inaccuracies have crept in, viz. that in fact certain payments 
were made and, therefore, they were entitled to refund. 
Appellant-State though admitting that certain payments were actually 
made, nevertheless contended that the Respondents were not entitled to any 
refund in view of the concept of unjust enrichment. It contended that for the G 
amounts covered by the bank guarantees also, the Respondents had collected 
various amounts from the customers and by seeking a correction in respect 
of the cash payments, Respondents want to avoid the application of the unjust 
enrichment policy. 
293 
H 
294 
SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R. 
A 
Disposing of the applications, the Court 
HELD: I. Unjust enrichment is the retention of a benefit conferred by 
another, without offering compensation, in circumstances where compensation 
is reasonably expected. It is a benefit obtained from another, not intended as 
a gift and not legally justifiable, for which the beneficiary must make 
B restitution or recompense. Keeping in view the principles of Unjust Enrichment 
as highlighted in Mafatlal's case and Solar Pesticides' case the inevitable 
conclusion is that whatever has been passed on to the customer by the 
respondents has to be tested on the touchstone of the principle of unjust 
enrichment. (296-D-F) 
c 
Mafat/al Industries Ltd and Ors. v. Union of India and Ors., (1997) 5 
SCC 536 and Union of India v. Solar Pesticide Private Ltd, (2000) 116 ELT 
401 (SC), relied on. 
State of U.P. & Ors. v. Vam Orgunic Chemicals Ltd. and Ors., (2004) 1 
D sec 225, referred to. 
2. The l.A.s are therefore disposed of with the following directions: 
a. Within a period of four weeks, respondents shall file an application 
before the appropriate authority praying for refund of the amount deposited 
E by them. (296-G) 
F 
b. While examining the claim the concerned authority shall keep in view 
the principles of "Unjust Enrichment" in respect of all amounts which have 
been passed on to any customer in essence that it has been collected from 
him. (296-GI 
c. Exemption shall not be extracted only in respect of cash payments 
and it shall also extend to the period for which the bank guarantees were 
furnished. If during the relevant period any collection has been made the 
authority shall examine whether by retention of the amount so collected by 
the respondent will there· be unjust enrichment so fa_r as the respondents are 
G concerned. (296-H; 297-A) 
CIVIL APPELLATE JUR1SDICTION : I.A. Nos. 4-12. 
IN 
H 
Civil Appeal Nos. 5416-5424 of2000. 
STATEOFU.P. v. VAMORGANICCHEMICALSLTD. (PASAYAT . .I.] 295 
From the Final Judgment and Order dated 3.4.2000 of the High Court A 
of Judicature at Allahabad in C.M.W.P. Nos. 297/2000, 331/1982, 625/1993, 
696/1994, 537/1995, 299/1996, 198/1997, 221/1998 and 428/1999. 
WITH 
I.A. Nos. 2, 13-21 in C.A. No. 5425/2000, I.A. Nos. 29-46 in C.A. Nos. B 
5427-5435/2000 and I.A. No. 2 in C.A. No. 8382/2003. 
Dinesh Dwivedi, R.N. Trivedi, S.W.A. Qadri, Rajeev Dubey, Kamlendra 
Mishra, Ashok K
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