1990 (9) TMI 74 - HC - Central Excise

Summary

Issues:
Challenge to legality of order rejecting refund claim based on limitation under Rule 11 of Central Excise Rules in a petition under Article 226 of the Constitution.

Analysis:
The petitioners, a joint stock company manufacturing synthetic resins, filed refund claims for duty paid under mistake of law after realizing their products were wrongly classified under Tariff Item No. 15A(1) instead of Tariff Item No. 68. The Asstt. Collector rejected the refund claim citing limitation under Rule 11 of the Central Excise Rules. The Asstt. Collector acknowledged the mistake of law but refused the refund solely on the ground of limitation. The petitioners argued that the limitation prescribed under Rule 11 cannot restrict the Court's power under Article 226 to direct the department to grant refund for the entire period. It was highlighted that the defense of limitation is not a valid reason to deny a refund in a petition under Article 226.

The Court referenced previous decisions to support the position that the department cannot decline a refund based on limitation when approached under Article 226. The department's argument of unjust enrichment was countered by the burden placed on them to establish such enrichment, which they failed to do. The Court noted that the delay in approaching the Court did not prejudice the department, especially considering the ambiguity surrounding refund procedures at the time. Ultimately, the Court held that the refund could not be declined on the grounds of delay or laches.

Consequently, the petition succeeded, and the order declining refund based on limitation under Rule 11 was set aside. The matter was remitted back to the Asstt. Collector for the appropriate determination and payment of the refund amount. The Asstt. Collector was directed to calculate and pay the refund by a specified date, failing which interest would be payable. No costs were awarded in this case.