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High Court Of Calcutta
Anil Kumar Sen, Bhabes Chandra Chakrabarti
KHARDAH COMPANY LTD - Appellant
Versus
UNION OF INDIA - Respondent
C.R. No. 2404 (W) of 1967
Decided On : 10/01/1980
EXCISE - REFUND - LIMITATION - EXCISE DUTY PAID UNDER COMPULSION DUE TO MIS-CLASSIFICATION OF PRODUCTS - CLAIM FOR REFUND NOT BARRED BY LIMITATION PRESCRIBED UNDER RULE 11 OF CENTRAL EXCISE RULES, 1944 - EXCESS DUTY REALISED WITHOUT AUTHORITY OF LAW LIABLE TO BE REFUNDED.
Fact of the Case:
The petitioner, a jute manufacturer, initially classified its products as falling under entry 22a (1) of the Central Excise Tariff, paying excise duty at the rate of Rs. 250 per M.T. However, the assessing authorities later demanded an additional amount, claiming that the products actually fell under entry 22a (2), with a lower excise duty rate of Rs. 125 per M.T. The petitioner paid the additional amount and subsequently got their products cleared by paying duty at the higher rate under entry 22a (1). Meanwhile, the petitioner's association represented to the Central Government, which ultimately decided in favor of the petitioner, classifying the products under entry 22a (2). The petitioner then claimed a refund of the excess excise duty paid between May 1962 and February 1964, but the claim was rejected as time-barred under Rule 11 of the Central Excise Rules, 1944.
Finding of the Court:
The court held that the petitioner's claim for refund was not barred by the limitation prescribed under Rule 11 of the Central Excise Rules, 1944. The court found that the excess excise duty was not paid through inadvertence, error, or misconstruction, but rather under compulsion due to the misclassification of the products by the assessing authorities. The court also noted that the assessing authorities themselves were not sure of the correct classification, as some were classifying the products under entry 22a (1) while others were classifying them under entry 22a (2).
Issues: Whether the petitioner's claim for refund of excess excise duty was barred by the limitation prescribed under Rule 11 of the Central Excise Rules, 1944.
Ratio Decidendi: The court held that Rule 11 of the Central Excise Rules, 1944, which provides for a limitation period of three months for refund claims, was not applicable in the present case because the excess excise duty was not paid through inadvertence, error, or misconstruction. The court reasoned that the petitioner had paid the excess duty under compulsion, as otherwise the goods would not have been cleared. The court also noted that the assessing authorities themselves were not sure of the correct classification of the products, which further supported the petitioner's argument that the excess duty was not paid voluntarily.
Final Decision: The court allowed the petitioner's application and directed the respondents to refund all excess duty realized from the petitioner between May 14, 1962, and February 29, 1964, in respect of the claims made in their applications for refund dated June 4, 1965, and July 25, 1965.
( 1 ) THIS is an old Rule which came up for hearing before us on a specific assignment by the learned Chief Justice. Khardah Company Limited, the petitioner before us obtained the above Rule seeking relief alternatively under Article 226 of the Constitution and Article 227 thereof. Their prayer is that the orders dated November 24, 1965 passed by the Assistant Collector, Central Excise, Calcutta Division, April 16, 1966 passed by the Collector of Central Excise, Calcutta and Orissa and being set aside the respondents should be directed February 28, 1967 passed by the Central Government to refund the excess excise duty realised from them in respect of their products between the period May 1962 to February 1964. The point involved is a short one, namely, though the respondents do not dispute that there had been such excess realisation whether their liability to refund is barred by limitation prescribed by Rule 11 of the Central Excise Rules, 1944. To appreciate and decide the point at issue it would be necessary to refer to certain facts which are set out briefly as follows.
( 2 ) THE petitioner company manufactures D. W. Tarpaulin and D. W. Jute canvas in their jute mills. On and from the midnight of April 23, 1962, Central Excise duty was imposed on the jute manufactures when item 22a of the First Schedule to the Central Excises and Salt Act, 1944 came into effect. The said item reads as follows :"22a. Jute Manufactures (including the manufactures of Bimlipatam jute) or mesta (fibre), all sorts, not elsewhere specified in which jute (including Bimlipatam jute or mesta fibre) pre-dominates in weight- (1) Hessians. . . . Rs. 250 per M. T. (2) All other descriptions of jute manufactures not otherwise specified (including cloth bags, twist, yarn, rope and twine) Rs. 125 per M. T. "
( 3 ) THE petitioner before us who was manufacturing D. W. Tarpaulin and D. W. Jute canvas thereupon submitted applications in Form A. R. I for passing their products, namely D. W. Tarpaulin on payment of excise duty at the rate of Rs. 125 classifying the product as one coming under entry 22a (2) as aforesaid. The excise authorities passed the said goods accordingly on realisation of excise duty at the said rate.
( 4 ) ON May 29, 1962, the authorities, however, demanded of the petitioner a total amount of Rs. 10,914. 50 by way of short excise levy realised from them. The claim so made was based upon the view that the petitioner's products, namely D. W. Tarpaulin and D. W. Jute canvas really answers the category specified in entry 22a (1) and not (2) thereof so that the excise duty payable would be Rs. 250 per M. T. and not Rs. 125 per M. T.
( 5 ) THE petitioner thereupon not only paid the excise duty so demanded but thenceforward got their products of the said category passed on payment of excise duty at the rate of Rs. 250 per M. T. classifying such products in their application in Form A. R. I as falling within the category of item 22a (l ). Obviously it was so done as otherwise the goods would not have been passed by the excise authorities but since the petitioner was a member of the India Jute Mills Association they lodged a protest with the Central Government that D. W. Tarpaulin and D. W. Jute canvas are not really a product which can be said to be hessian. The Jute Mills Association in their representation to the Central Government pointed out :"there is now some difficulty in the jute goods market since some excise inspectors are charging the lower rate while others are charging the higher rate and the buyers are seeking re-imbursement of the duty, paid over and above the lower rates from the mills. The Association would accordingly be grateful for your written confirmation that the lower rate of duty applies to D. W. Tarpaulin and canvas and that any money paid in excess of the amount should be re-imbursed to the mills. "
( 6 ) THE Government in its turn informed the Association "that the matter of classification of (1) J
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