1987 (12) TMI 46 - HC - Central Excise

Repair of Transformers - Set-off of duty - Captive consumption - Refund - Duty paid under mistake of law - Limitation

Summary

Issues:
Leviability of duty on goods manufactured and used for captive consumption.

Analysis:
The petitioner, a factory engaged in manufacturing electric transformers, started repairing defective transformers in 1975. The dispute arose over the duty payment on parts produced in the factory and replaced during the repair process. The Government of India's decision in a similar case stated that repair is distinguishable from manufacture, exempting repaired transformers from duty. The petitioner applied for a refund of duty paid on repair of transformers from April 1983 to September 1983 based on this decision. Despite repeated requests and court intervention, no order was passed on the refund application. The Assistant Collector later issued notices demanding duty payment on certain parts used in repairs, including coils. The Assistant Collector rejected the refund claim in May 1986, citing that parts such as magnetic steel core and electric coils were manufactured in the factory and replaced during repairs, making them liable for duty. However, the order was found to be erroneous and lacking a factual basis.

The Assistant Collector's decision was found to be flawed as it introduced facts without a proper foundation. The finding that magnetic steel core was used in repairs lacked supporting evidence. The petitioner's claim that parts used in repairs were purchased and exempt from duty under a government notification was disregarded. The controversy centered on whether duty was payable on parts manufactured in the factory and used for repairs. The government notification exempted goods manufactured for captive consumption from duty, including the coils or parts used in repairs. Therefore, the duty collected on parts used in repairs, even if exempt, was not exigible.

The Assistant Collector's finding that the refund claim was time-barred was upheld, but for different reasons. The petitioner's delay in filing the refund application beyond the prescribed period led to the rejection of the claim. However, the petitioner's approach to the court in October 1985 was deemed reasonable given the circumstances. The court noted that the petitioner's claim for a refund of excise duty paid between April 1979 to September 1983 was valid and directed the authorities to refund the amount. The court emphasized that the petitioner's delay in approaching the court was reasonable, considering the circumstances and the statutory limitations for seeking relief.