Meaning of payment under protest explained.

Markandey Katju, C.J.: This is a reference application on behalf of the revenue under Sec.35-11(1) of the Central Excise Act, 1944, by which the following questions have been sought to be referred to us for our opinion.

“1. Is the Hon’ble Tribunal right in holding that the payment of duty vide PLA No.580 dated 27.10.1992 has not been paid voluntarily’?

2. Can the letter OC.No. 1124/97 dated 2.9.1992 of the Superintendent of Central Excise asking the assessees to reverse and amount of Rs.5,98,000 being irregular Modvat credit availed, and other correspondences in continuation, be considered to have raised a dispute since it is not a SCN issued under Sec.11-A? Can the Action of the assessee debiting the said amount vide PLA No.580 dated 27.10.1992 be considered payment under protest since no letter was filed on that date giving any grounds for payment under protest and subsequently also filed no representation for payment made under protest as per Sub-rule 5 of Rule 233-B? 3. Can the letter of protest dated 31.10.1992 tiled by the assessee can have the retrospective effect of filing protest under Rule 233-B?”

2. Heard the learned counsel for the parties.

3. The facts of the case have been given in the judgment of CEGAT dated 26.04.2002, by which the CEGAT set aside the order of the Commissioner (Appeals), who had rejected the assessee’s claim for refund. The CEGAT by its order directed that the refund be given to the assessee, unless the duty has been passed on to the consumer.

4. The assessee is engaged inter alia in the manufacture of Printed Cartons at its factory at Thiruvottiyur, Chennai. It avails Modvat credit on various inputs used in the manufacture of printed cartons. Some of the printed cartons were exported without payment of duty under Rule 191 - BB of the Central Excise Rules. 1944. The revenue was of the opinion that the assessee was not entitled to Modvat credit on inputs used in the manufacture of printed cartons, which were removed without payment of duty under Rule 191 -BB. On repeated request of the department, the assessee expunged the credit so taken on 27.10.1992, even though it contended that the credit availed by it was in accordance with law. Within three days thereafter, i.e., on 30.10.1992. the assessee intimated the department that this payment was made “under protest”. Subsequently, the department took a view that the inputs used by the assessee for manufacture of goods cleared under Rule 191-BB for exports were entitled to Modvat credit. Accordingly, the assessee filed a refund claim for Rs.5,98.944 on 25.7.1995, which had been expunged on 27.10.1992. The refund claim was rejected on the ground that the same was time barred under Sec.11-B of the Central Excise Act. 1944.

5. Sec.11-B of the Central Excise Act, 1944, as it stood at the relevant time, provided for a period of limitation of 6 months for filing refund claims. However, the proviso to Sec.11-B (1) states that the above limitation shall not apply where any duty has been paid under protest.

6. The stand taken by the Department was that since the assessee expunged the credit on 27.10.1992 without any protest on that date, the refund claim made by it was barred by limitation and the proviso to Sec.11-B(1) does not apply.

7. The Tribunal reversed the judgment of the Commissioner (Appeals), and held that the payment made by the assessee was under protest, and hence there was no limitation to the claim for refund.

8. The Tribunal on a consideration of the facts observed that the question whether the payment vide PLA.No. 580 dated 27.10.1992 was under protest or not has to be determined after taking into account all the facts and circumstances. From the records it appeared that the amount had not been paid voluntarily, but only after several correspondences between the assessee and the revenue in which the assessee had been urging that they are entitled to the benefit of the notification No.33/90 (NT), and that they were also entitled to Modvat credit aga

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