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1990 Supreme(Mad) 1019
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE ARUMUGHAM
Indrol Lubricants and Specialities Limited - Appellant
Versus
Union of India - Respondents
C.S. No. 206/1982
Decided On : 15 November 1990
Headnote:
EXCISE DUTY - REFUND - SPECIALITY OIL - MISTAKE OF FACT - LIMITATION - CENTRAL EXCISE ACT, 1944, SEC. 11B, RULE 11 - LIMITATION ACT, 1963, SEC. 14(2) - CONTRACT ACT, 1872, SEC. 72 - TRADE NOTICE NO. 175/75 DATED 3-10-1975 - HELD, THE PAYMENT OF EXCISE DUTY MADE BY THE PLAINTIFF WAS CLEARLY UNDER A MISTAKE AND THAT THE PLAINTIFF IS ENTITLED TO THE REFUND OF THE EXCISE DUTY PAID UNDER MISTAKE AND THE LIMITATION PROVIDED UNDER RULE 11 OR 173J OF CENTRAL EXCISE RULES WILL HAVE NO APPLICATION AND ONLY THE GENERAL LAW OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT WILL APPLY AND THAT AS SUCH THE SUIT IS NOT BARRED BY LIMITATION.
Fact of the Case:
The plaintiff, a manufacturer of lubricating oils and other types of lubricants, filed a suit against the defendants, the Union of India and the Assistant Collector of Central Excise, to recover a sum of Rs. 2, 71, 754.40 with further interest at 12% p.a. from 17-5-1977 till the date of realisation. The plaintiff's claim was based on the allegation that they had paid excise duty on the manufacture of speciality oils under Tariff Item 11-B of the Central Excise Tariff, but later came to know that speciality oils were exempted from excise duty under Trade Notice No. 175/75 dated 3-10-1975 issued by the defendants. The plaintiff filed an application for refund of the excise duty paid, which was rejected by the defendants on the ground that there was no proof of satisfying the condition of the notification. The plaintiff filed an appeal against the order of the defendants, which was remanded back to the defendants for re-examination of the claim. The defendants, after re-examination, sanctioned a refund of Rs. 21, 512.58 for the period from 22-5-1976 to 31-3-1977, but rejected the claim for the period prior to 21-5-1976 on the ground that it was barred under Rule 11 of the Central Excise Rules. The plaintiff filed a suit for the recovery of the balance amount.
Finding of the Court:
The court held that the plaintiff had proved that the products manufactured and cleared by them prior to 21-5-1976 were speciality oils exempted from excise duty as provided under Trade Notice No. 175/75 issued by the defendants and that the payment of excise duty made by the plaintiff for the manufacture and clearance of the speciality oil prior to 21-5-1976 was under a sheer mistake. The court further held that the claim for refund of excise duty paid by the plaintiff during the period from 1-4-1973 to 31-3-1976 was not barred by time as contended by the defendants and that the plaintiff was entitled to the refund of the excise duty paid under mistake and that the limitation provided under Rule 11 or 173J of Central Excise Rules will have no application and only the general law of limitation prescribed under the Limitation Act will apply.
Issues: 1. Whether the products manufactured and cleared by the plaintiffs prior to 21-5-1976 were not speciality oils exempted from excise duty? 2. Whether the payment of excise duty by the plaintiff for the products cleared prior to 21-5-1976 was not a mistake? 3. Whether the claim for refund by the plaintiff is barred by time? 4. To what relief is the plaintiff entitled?
Ratio Decidendi: The court held that the payment of excise duty made by the plaintiff was clearly under a mistake and that the plaintiff is entitled to the refund of the excise duty paid under mistake and that the limitation provided under Rule 11 or 173J of Central Excise Rules will have no application and only the general law of limitation prescribed under the Limitation Act will apply and that as such the suit is not barred by limitation.
Final Decision: The court decreed the suit in favor of the plaintiff against the defendants for the recovery of a sum of Rs. 2, 69, 036.40 with interest at the rate of 12% p.a. from 17-5-1977 onwards till the date of decree and at 6% p.a. from the date of decree till the date of realisation with pro-costs.
This is a suit filed against the defendants to recover a sum of Rs. 2, 71, 754.40 with further interest at 12% p.a. from 17-5-1977 till the date of realisation.
2.The plaint filed proceeds on the allegations that the plaintiff carries on business in the manufacture of lubricating oils and other types of lubricants and that one among the same is a speciality oil manufactured out of duty paid base mineral oil and that this speciality oil was subject to levy of excise duly on the Tariff Item 11-B of the Central Excise Tariff and that during 1-4-1973 to 31-3-1977 the plaintiff removed the speciality oils after payment of requisite excise duty, and that in or about the second week of May 1977 the plaintiff came to know that the speciality oils were exempted from the Central Excise duty on condition that such speciality oils are if manufactured out of duty paid base mineral oil as per the Trade Notice No. 175 of 75 dated 3-10-1975 issued by the defendants and that the said notice provides that the primary function of such product should not be by a lubricant. The plaintiff became aware that the speciality oil manufactured by him is not subject to the levy of excise duty and the payment of excise duty was made under a mistake and that therefore, on 17-5-1977 an application was made by the plaintiff for the refund of the said excise duty on the ground that the duty was paid under a mistake, which was received by the first defendant on 21-5-1977. The said application was rejected by the 2nd defendant by its order C. No. V/11D/18/2/77 T2 dated 26-6-1978 and that the request for the refund was rejected on the ground that there was no proof of satisfying the condition of the notification. Consequently an appeal was filed against the order of the second defendant to the Appellate Collector of the Central Excise and that the appellate authority by his order in A. No. 577/78 dated 9-5-1980 remanded the case to the second defendant for re-examination of the claim of the plaintiff and that consequently, the second defendant after such remand, issued a further show cause notice dated 11-9-1980 asking the plaintiff to show cause why the claim should not be rejected as barred under Rule 11 of the Central Excise Rules and that for which the plaintiff replied on 22-10-1980 stating that no excise duty was payable on the manufacture of speciality oil, and that the payment of duty on manufacture of speciality oil was made clearly under a mistake, and that therefore the general law of limitation alone would apply and not Rule 11 of Central Excise Rules, and that upon which the second defendant granted a personal hearing to the plaintiff and rejected the claim for the period prior to 21-5-1976 on the ground that the claim was barred under Rule 11 of the Central Excise Rules and that it was further held that the contentions of the plaintiff that Rule 11 cannot be applied is not acceptable for the reasons that the amounts were not paid under mistake and that the payment was only due to inadvertent error or misconstruction since the plaintiff was paying duty on the products even after the notification and hence refund arising out of such contingency will attract the time limit under Rule 11 of the Central Excise Rules and that upon the basis of which the second defendant held that the claim of the plaintiff for the period prior to 21-5-1976 has become time barred under Rule 11 read with Rule 173J and that even so, he sanctioned refund of Rs. 21, 512.58 for the period from 22-5-1976 to 31-3-1977 and that the second defendant has found the claim of the plaintiff to the above extent was to be in order and satisfying the conditions of the Notification No. 175/75 dated 3-10-1975.
3.The plaint proceeds further on the allegations that the order of the Assistant Collector namely the second defendant rejecting the claim of refund as time barred, is clearly erroneous and contrary to the well settled principles of law relating to payment under mistake as pa
