If Burden Of Excess Duty Passed On To Customers, Granting Refund Would Result In 'Unjust Enrichment': Bombay High Court
The Bombay High Court has observed failure to protest the imposition of alleged excess octroi duty by the Municipal Corporation is a relevant circumstance in deciding against ordering any refunds. Further, the Court stated that if the petitioner cannot establish that the burden of any excess duty was not passed on to its customers, granting refund in such a case would result in 'unjust enrichment'.
Justice M. S. Sonak and Justice Kamal Khata were considering the petitioner-company's (Colgate) challenge to the levy of octroi duty by the respondent-corporation, Bombay Municipal Corporation (BMC) between April 1995 and March 2001. Colgate had paid the octroi duty during this period and is claiming a refund for the amount paid.
The High Court noted that Colgate never protested paying the octroi duties between 1995 and 2001 to the BMC. It stated “...the Petitioner has nowhere pleaded that they paid the octroi duties between 1995 and 2001 to the BMC “under protest” or “without prejudice” to their right to contest the same.”
It noted that if Colgate had protested before the Deputy Assessor and Collector (Octroi) about the levy of duties, the Assessor would be obliged to assess the precise rate of levying duty. Further, it noted that under the Mumbai Municipal Corporation Act, 1988 and Bombay Municipal Corporation (Levy) of Octroi Rules, 1965, if Colgate was aggrieved by determination of the Assessor, it could have challenged it before the Appellate Authority i.e. Small Causes Court.
The Court stated that granting relief to Colgate would result in its 'unjust enrichment' as it can be reasonably assumed that Colgate would have passed on the burden of any excess octroi duties to its customers.
It remarked “It is reasonable to infer that the Petitioner has already passed on the burden of such octroi duties to its millions of consumers. Therefore, if the BMC, a public authority, is directed to refund the alleged excess octroi duty collected by it to the Petitioner, then the Petitioner would certainly be unjustly enriched. It is impossible to direct or enforce the direction for the Petitioner to return this amount to millions of its consumers.”
It referred to the Supreme Court case of Mafatlal Industries Ltd. & ors. vs. UOI & ors., 1997 (AIR ONLINE 1996 SC 1268), where the Constitutional Bench held that in claims tax refunds based on allegations of excess tax collection due to the misinterpretation or misapplication of relevant provisions, the petitioner must demonstrate that the burden of the tax has not been passed to others. It had stated that the doctrine of unjust enrichment is a just doctrine and if the burden of excess tax was passed on, the petitioner could not have claimed to have suffered any real loss or prejudice.
Here, the Court noted that Colgate did not establish that it has not passed on the burden to its consumers. It stated that allowing any refund to Colgate would only unjustly enrich as it did not establish that it had suffered any real loss or prejudice.
The Court therefore dismissed the petition.
Case title: M/s. Colgate Palmolive (India) Ltd. vs. Mumbai Mahanagar Palika & anr. (WRIT PETITION NO. 2302 OF 2001)