1981 Supreme(Mad) 14

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE PADMANABHAN
Madras Rubber Factory - Appellant
Versus
Assistant Collector of Central Excise, Madras - Respondent
Case No : W.P. No. 1109 of 1978
Decided On : 12 January 1981

The Assistant Collector of Central Excise has no jurisdiction to issue a show cause notice for revocation of an order of refund passed by him on the ground that the earlier order was erroneous.

Headnote:

CENTRAL EXCISE - REFUND - JURISDICTION OF ASSISTANT COLLECTOR OF CENTRAL EXCISE TO ISSUE SHOW CAUSE NOTICE FOR REVOCATION OF ORDER OF REFUND - PERIOD OF LIMITATION - WHETHER RULE 11 OF THE CENTRAL EXCISE RULES, 1944 IS APPLICABLE - WHETHER RULE 11 IS ULTRA VIRES OF THE CENTRAL EXCISES AND SALT ACT, 1944.

Fact of the Case:

The petitioner, a manufacturer of tread rubber, had been paying excise duty on the value of the metal containers in which the tread rubber was packed. In 1970, the petitioner took the stand that the value of the metal container should be excluded from the assessable value of tread rubber for the purpose of excise duty. The Appellate Collector of Central Excise upheld the contention of the petitioner by his order dated 8-6-1973. The petitioner claimed a refund of the duty paid on the value of the metal containers for the period from 1-6-1968 to 2-4-1970. The Assistant Collector of Central Excise, Madras, passed an order on 21-1-1978, refunding an amount of Rs. 8, 28, 021.43. The petitioner collected the amount of refund. Thereafter, the petitioner received a show cause notice dated 28-2-1978, stating that the Appellate Collector of Central Excise had no jurisdiction under Section 35 of the Act to order refund for the period from 1-6-1968 to 2-4-1970. The show cause notice further stated that the petitioner had not stated in the price list that the price list included packing charges and that the refund should have been claimed within the time limit prescribed under Rule 11 of the Central Excise Rules, 1944 (hereinafter called the Rules) read with Rule 173-J of the Rules. Hence, this writ petition for the issue of a writ of prohibition restraining the first respondent from proceeding further with the show cause notice.

Finding of the Court:

1. The Assistant Collector of Central Excise has no jurisdiction to issue a show cause notice for revocation of an order of refund passed by him on the ground that the earlier order was erroneous. 2. Rule 10 of the Rules is not applicable to a case where the amount refunded is not 'duty' and the refund has not been made erroneously. 3. The period of limitation for claiming refund of an amount paid by mistake is three years under Article 113 of the Limitation Act, 1963. 4. Rule 11 of the Rules is not applicable to a case where the amount paid is not 'duty' and the refund has not been made erroneously. 5. Rule 11 of the Rules is not ultra vires of the Central Excises and Salt Act, 1944.

Issues: 1. Whether the Assistant Collector of Central Excise has jurisdiction to issue a show cause notice for revocation of an order of refund passed by him on the ground that the earlier order was erroneous? 2. Whether Rule 10 of the Rules is applicable to a case where the amount refunded is not 'duty' and the refund has not been made erroneously? 3. Whether the period of limitation for claiming refund of an amount paid by mistake is three years under Article 113 of the Limitation Act, 1963? 4. Whether Rule 11 of the Rules is applicable to a case where the amount paid is not 'duty' and the refund has not been made erroneously? 5. Whether Rule 11 of the Rules is ultra vires of the Central Excises and Salt Act, 1944?

Ratio Decidendi: 1. There is no inherent power of review in an authority while acting judicially or quasi-judicially. The power of review must be conferred expressly or by necessary implication by the provisions of the statute. 2. The word 'duty' has been defined in Rule 2 of the Rules. It states that 'duty' means the duty payable under Section 3 of the Act. Section 3 reads thus- "3. Duties specified in the first schedule to be levied.-(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in or imported by land into, any part of India as, and at the rates, set forth in the first Schedule..." According to Section 3 of the Act duties could be levied and collected only as excisable goods produced or manufactured in India. Therefore, any amount that had been paid by the petitioner on the value of the tin containers could not be treated as duty but must be deemed to be an amount paid outside the provisions of the Act. 3. A refund in order to constitute 'erroneous refund' must have been made by reason of inadvertence, error or misconstruction as will be seen from the discussion in the following paragraph. 4. The scope of Rule 11 of the Rules came up for consideration before the Patna High Court in Bata Shoe Co.v.Collector of Central Excise, 1972-Tax. L.R. 1833. The Court observed as follows :-"So far as Rule 11 is concerned, it is manifest that it cannot stand in the way of the petitioner. That Rule is designed to deal with cases of payment of adjustment made through inadvertence, error or misconstruction. When tax is paid where it is not payable under the law, it is regarded as payment made under a mistake as that word is understood in the Contract Act. See for instance theSales tax Officer, Banarasv.Koshivas Lal Mukund Lal Saraf, and State of Madhya Pradeshv.Dhailal Bhai, The action of 'mistake' is materially different from that of inadvertence, error or misconstruction. Error is not synonymous with mistake. In Rule 11, it obviously means some electrical or arithmetical error. The word 'misconstruction' also is not to be understood in the technical sense of misconstruction or misinterpretation of a provision of law or notification. Occurring as it does in Rule 11 in the context of inadvertence or error, it obviously connotes an erroneous building up or compiling and calculating in the arithmetical sense only. It is merely intended to resolve or finalise disputes as to accounting." 5. Rule 11 of the Rules is designed to deal with cases of payment of adjustment made through inadvertence, error or misconstruction.

Final Decision: Writ of prohibition issued restraining the Assistant Collector of Central Excise from taking further proceedings in pursuance of his show cause notice dated 21-2-1978.