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2018 Supreme(Mad) 683
IN THE HIGH COURT OF JUDICATURE AT MADRAS
T. RAVINDRAN, J.
Collector of Central Excise - Appellant
Versus
M/s. Textool Company Ltd., & Others - Respondents
S.A. No. 627 of 2003
Decided On : 12-02-2018
For the Appellant : A.P. Srinivas, Standing Counsel for Customs & Central Excise.
For the Respondents:M. Rekha for M/s. Rahul Balaji, Advocates, Given up.
The plaintiff's Civil action seeking the refund of the duty paid by it on a mistaken assessment of the goods manufactured by the defendant is not maintainable and barred by limitation.
Headnote:
Excise Duty - Recovery of Money - Central Excise and Salt Act, 1944 - T.I.52, T.I.68, T.I.50 - The suit was laid by the plaintiff seeking for the refund of the duty paid by it on a mistaken assessment of the goods manufactured by the defendant. The plaintiff's Civil action is not maintainable and barred by limitation. The plaintiff's action before the authorities constituted under the Act was not rejected on the question of defect of jurisdiction or other cause of a like nature and on the other hand, it is found that the same had been come to be rejected by the authorities on merits. The plaintiff is disentitled to invoke the provisions of Section 14 (1) of the Limitation Act to save its suit on the point of limitation. The plaintiff has failed to establish the essential ingredients in the present suit for obtaining the amount claimed and when the plaintiff has failed to establish that it had not gained any unjust enrichment and particularly, it is found that the plaintiff will be shifting the burden of the payment of taxes to the consumers and when with reference to the above position, there is nil material on the part of the plaintiff and when it is further seen that the Courts below had erroneously shifted the burden on the defendants as regards the said issue, it has to be determined that there is failure on the part of the plaintiff to prove that it is not attempting to seek unjust enrichment by way of seeking refund of the duty claimed in the lis.
Fact of the Case:
The plaintiff laid a suit seeking the refund of the duty paid by it on a mistaken assessment of the goods manufactured by the defendant. The defendant contended that the suit is not maintainable either in law or on facts and is barred by limitation. The plaintiff's remedy for refund of tax will be in Civil Court is false and denied and the plaintiff's suit is misconceived and without any basis. The plaintiff's remedy for refund of tax wrongfully collected and paid will be in the Civil Court and accordingly, the plaintiff has made the claim for refund and the time taken by the plaintiff to go before the authorities concerned for seeking its remedy should be excluded as provided under Section 14 of the Limitation Act and thus, no part of the suit is barred by limitation.
Finding of the Court:
The plaintiff's Civil action is not maintainable and barred by limitation. The plaintiff's action before the authorities constituted under the Act was not rejected on the question of defect of jurisdiction or other cause of a like nature and on the other hand, it is found that the same had been come to be rejected by the authorities on merits. The plaintiff is disentitled to invoke the provisions of Section 14 (1) of the Limitation Act to save its suit on the point of limitation. The plaintiff has failed to establish the essential ingredients in the present suit for obtaining the amount claimed and when the plaintiff has failed to establish that it had not gained any unjust enrichment and particularly, it is found that the plaintiff will be shifting the burden of the payment of taxes to the consumers and when with reference to the above position, there is nil material on the part of the plaintiff and when it is further seen that the Courts below had erroneously shifted the burden on the defendants as regards the said issue, it has to be determined that there is failure on the part of the plaintiff to prove that it is not attempting to seek unjust enrichment by way of seeking refund of the duty claimed in the lis.
Issues: The main issue was whether the plaintiff's Civil action seeking the refund of the duty paid by it on a mistaken assessment of the goods manufactured by the defendant is maintainable and barred by limitation.
Ratio Decidendi: The plaintiff's Civil action is not maintainable and barred by limitation. The plaintiff's action before the authorities constituted under the Act was not rejected on the question of defect of jurisdiction or other cause of a like nature and on the other hand, it is found that the same had been come to be rejected by the authorities on merits. The plaintiff is disentitled to invoke the provisions of Section 14 (1) of the Limitation Act to save its suit on the point of limitation. The plaintiff has failed to establish the essential ingredients in the present suit for obtaining the amount claimed and when the plaintiff has failed to establish that it had not gained any unjust enrichment and particularly, it is found that the plaintiff will be shifting the burden of the payment of taxes to the consumers and when with reference to the above position, there is nil material on the part of the plaintiff and when it is further seen that the Courts below had erroneously shifted the burden on the defendants as regards the said issue, it has to be determined that there is failure on the part of the plaintiff to prove that it is not attempting to seek unjust enrichment by way of seeking refund of the duty claimed in the lis.
Final Decision: The Courts below erred in not properly considering the judgment of the Supreme Court in 1997 (89) E.L.T. 247 (S.C.) (Mafatlal Industries Ltd Vs. Union of India) aforestated that where the duty has been collected under a particular order which has become final and when the same had not been declared to be unconstitutional, it is found that the Courts below had erroneously determined that the suit laid by the plaintiff is maintainable and it is further found that in the light of the above said Apex Court decision, the Civil remedy initiated by the plaintiff for seeking refund is not legally sustainable and accordingly, it is held that the civil action laid by the plaintiff is barred. The substantial questions of law formulated in the second appeal are accordingly answered in favour of the defendants and against the plaintiff. The judgment and decree made in A.S.No.168 of 1998, on the file of the Principal District Court, Coimbatore, dated 17.12.99, confirming the judgment and decree made in O.S. No.335 of 1990, on the file of the III Additional Sub Court, Coimbatore, dated 29.06.1998 are set-aside and resultantly, the suit laid by the plaintiff is dismissed with costs. Accordingly, the second appeal is allowed with costs. Consequently connected miscellaneous petition, if any, is closed.
1. Challenge in this second appeal is made to the judgment and decree passed in A.S.No.168/98 dated 17.12.99 on the file of the Principal District Court, Coimbatore, confirming the judgment and decree passed in O.S. No.335 of 1990 dated 29.6.1998 on the file of the III Additional Sub Court, Coimbatore.
2. Parties are referred to as per their rankings in the trial Court.
3. Suit for recovery of money.
4. The case of the plaintiff, in brief, is that the plaintiff is engaged in the manufacture of textile machineries, accessories and spare parts and are manufacturing 63 items of threaded parts, used as components in the manufacture of textile machineries. In 1979, the Excise department proceeded to classify the above 63 items under T.I.52, at an intermediary stage of manufacture erroneously and assessed them to excise duty on cost recovery basis for captive consumption and the plaintiff had also paid the duty so demanded on the mistaken impression that the aforestated components were assessable to duty under the above mentioned classification. The above said components have to be further processed like machining, cutting, grinding, drilling, tempering, colouring and polishing etc., and then converted the spares to a designed shape and size suitable to the textile machineries and after the completion of the processing, the aforesaid spares were classified under the classification of T.I.68 and on 05.05.1984, the Central Excise department issued a show cause notice that the aforesaid threaded items even after the completion of all further processes ought to be again classified and assessed under T.I.50 and raised a further demand for deferential duty on higher value basis during the period 01.04.1982 to 29.02.1984 and then only the plaintiff came to know of the wrong assessment under T.I.52 basis and the plaintiff therefore sent their objection contending that the aforestated components ought to have been classified and assessed only after the completion of all the process and the assessment at the intermediary stage was superfluous and the same only led to double taxation and after several protests, representations and series of proceedings, the Central Excise Department conceded that out of 63 items, 42 items are only to be classified and assessed under T.I.68 and that the remaining 21 items of spares alone ought to be classified and assessed under T.I.52, for assessment at an intermediary stage and the revised classification list connecting the erroneous classification was issued and approved by the department on 23.09.1985 and the plaintiff is not therefore liable for the duty under T.I.52 classification for 42 items of components and the mistake came to the knowledge of the defendant only on 05.05.1984, when the show cause notice was issued by the department and after the same was conceded by the department on 23.03.1985 and thereafter, the plaintiff submitted its claim on 18.07.1985 for refund of duty wrongfully collected without jurisdiction as regards the 42 items and the plaintiff preferred the refund of claim collected by the department from the year 1979 to 1985 and the plaintiff was accordingly honestly pursuing its demand in good faith before the appropriate excise authorities, the Appellate Tribunal for the Custom and Excise until December 1988 and by order dated 16.12.1988, the Appellate Tribunal held that it being a creature of statute cannot traverse beyond the confines of law which enables them only to order refund for a period of six months as held by the judgment of the Supreme Court of the year 1988 and as the said judgment also laid down that the duty which has been levied without authority or jurisdiction will be subject to general law and the date of limitation will operate only when the mistake or error comes to light, the plaintiff's remedy for refund of tax wrongfully collected and paid will be in the Civil Court and accordingly, the plaintiff has made the claim for refund and the time taken by the
