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1980 Supreme(Cal) 393
High Court Of Calcutta
Padma Khastgir
INDIA JUTE CO.LTD. - Appellant
Versus
ASSISTANT COLLECTOR OF CENTRAL EXCISE - Respondent
Matter 79 Of 1978
Decided On : 09/29/1980
Blended yarn was not excisable until the introduction of Item 18e in the First Schedule to the Central Excises and Salt Act, 1944, and therefore the excise duty paid by the petitioner on such yarn was illegal.
Headnote:
CENTRAL EXCISE - Blended Yarn - Classification - Refund of Duty - Limitation - Whether the blended yarn manufactured by the petitioner was subject to excise duty under Item 18a of the First Schedule to the Central Excises and Salt Act, 1944 - Whether the petitioner is entitled to refund of the duty paid under a mistake of law - Whether the limitation period for filing a writ petition for refund of duty paid under a mistake of law is three years from the date of knowledge of the mistake.
Fact of the Case:
The petitioner, a manufacturer of blended yarn containing 60% and above cotton and the balance of staple fibre of cellulosic origin of 1.5 denier and above, paid excise duty under Item 18a of the First Schedule to the Central Excises and Salt Act, 1944, believing that blended yarn was subject to excise duty under that item. In 1972, Item 18e was introduced in the First Schedule, specifically covering 'yarn all sorts' not elsewhere specified. The petitioner then claimed refund of the excise duty paid on the blended yarn manufactured prior to the introduction of Item 18e, on the ground that such yarn was not excisable until 17th March, 1972. The petitioner's claim was rejected by the respondents, and the petitioner filed a writ petition challenging the rejection of its claim.
Finding of the Court:
The Court held that the blended yarn manufactured by the petitioner was not subject to excise duty under Item 18a of the First Schedule to the Central Excises and Salt Act, 1944, as that item was confined to cotton yarns only. The Court further held that the petitioner was entitled to refund of the excise duty paid on the blended yarn manufactured prior to the introduction of Item 18e, as such yarn was not excisable until 17th March, 1972. The Court also held that the limitation period for filing a writ petition for refund of duty paid under a mistake of law is three years from the date of knowledge of the mistake.
Issues: 1. Whether the blended yarn manufactured by the petitioner was subject to excise duty under Item 18a of the First Schedule to the Central Excises and Salt Act, 1944? 2. Whether the petitioner is entitled to refund of the duty paid under a mistake of law? 3. Whether the limitation period for filing a writ petition for refund of duty paid under a mistake of law is three years from the date of knowledge of the mistake?
Ratio Decidendi: 1. The Court held that the blended yarn manufactured by the petitioner was not subject to excise duty under Item 18a of the First Schedule to the Central Excises and Salt Act, 1944, as that item was confined to cotton yarns only. The Court relied on the fact that Item 18e was introduced in the First Schedule in 1972, specifically covering 'yarn all sorts' not elsewhere specified. This showed that the legislature intended to bring blended yarn within the ambit of excise duty only from 17th March, 1972, when Item 18e came into force. 2. The Court held that the petitioner was entitled to refund of the excise duty paid on the blended yarn manufactured prior to the introduction of Item 18e, as such yarn was not excisable until 17th March, 1972. The Court relied on the principle that where a tax is levied without legislative sanction, the collection of such tax cannot be sustained. In the present case, the blended yarn was not excisable until the introduction of Item 18e, and therefore the excise duty paid by the petitioner on such yarn was illegal. 3. The Court held that the limitation period for filing a writ petition for refund of duty paid under a mistake of law is three years from the date of knowledge of the mistake. The Court relied on the principle that the limitation period for filing a suit for recovery of monies paid under a mistake of law is three years. The Court held that the same principle should apply to writ petitions for refund of duty paid under a mistake of law.
Final Decision: The Court made the Rule absolute, quashing the order of the respondents rejecting the petitioner's claim for refund of excise duty. The Court directed the respondents to refund the excise duty paid by the petitioner on the blended yarn manufactured prior to the introduction of Item 18e.
( 1 ) THE petitioner India Jute Company since 9th of November, 1965 carried on and still carries on business inter alia of manufacturing blended yarn containing 60% and above cotton and the balance of staple fibre of cellulosic origin of 1. 5 denier and above. The petitioner's factory is situated at Serampore. The petitioner does not manufacture the staple fibre of celjulosic origin used by the petitioner in the manufacture of blended yarn and the petitioner purchases the same from the market. The staple fibre purchased by the petitioner from the market at all material times was and still are excisable under Item 14 of the first Schedule of the Central Excises and Salt Act, 1944 and at the time such articles were purchased by the petitioner they have already been charged excise duty payable under Item 18 of the First Schedule to the said Act.
( 2 ) THE petitioner has discovered that it has been paying duty under a wrong impression and belief that blended yarn of the kind manufactured by the petitioner was subject to excise duty under Item 18a of the First Schedule to the said Act. In the year 1972 Item No. 18e has been introduced to the First Schedule of the said Act. On 19th of June, 1965 by a notification dated 19th of June, 1965 staple fibre of cellulosic origin of 1. 5 denier and above falling under Item 18 was exempted from such duty of excise leviable under the said Act which was in excess of 10 paise per kilogram provided the procedure as laid down under Rule 56a of the Central Excise Rules was followed while spinning such yarn. By notification dated 10th February, 1968 the effective rate was changed from 10 paise to 50 paise per kilogram. It is only in the year 1968 by notification the goods falling under Item 18a were brought within the purview of Chapter 7a. The respondents at all material times proceeded on the basis that the blended yarn manufactured by the petitioner fell under Item 18a and were covered by the notifications dated 19th June, 1965 and 10th of February, 1968 and the petitioner also was under the same impression and belief and proceeded accordingly. Under Rule 56a as also Rule 173k. provisions have been made for giving credit to duty already paid on materials received in a factory for the purpose of manufacture of finished products. In the accounts maintained in Form R. G. 23 part I and part II the petitioner has credited from time to time amounts of excise duty already paid on staple fibre utilised by the petitioner in the manufacture of its finished products i. e. blended yarn in accordance with Rule 56a of the rules. By notification dated 29th May, 1971 the notification dated 19th of June, 1965 was rescinded. As on 29th of May, 1971 the petitioner had in stock blended yarn manufactured prior to 6th February, 1971 in respect of which there was a credit balance of 4,826. 77 in the R. G. 23 accounts. It is the petitioner's case that the petitioner has a further stock of blended yarn as on 29th May, 1971 manufactured during the period of 6th February, 1971 up to 21st of May, 1971 with the duty paid staple fibre in respect of which the petitioner was entitled to a -credit of 59,221. 72 in the same R. G. 23 accounts. These facts have been duly checked and confirmed by the Excise Officers supervising the petitioner's manufacture and clearances. Although under the Notification No. 115/71-C. E. , dated 29th of May, 1971 all further credit was disallowed, the said notification according to the petitioner cannot in any way effect the amounts which have already been credited in the R. G. 23 accounts in respect of staple fibre which have already been utilised in the manufacture of blended yarn. According to the petitioner a sum of Rs. 64,048. 49 represents the duty paid on the staple fibre used in the manufacture of blended cotton yarn prior to 29th of May, 1971. Hence the same has been utilised before the concession allowed, was withdrawn by the notification. In fact under the earlier proc
