1997 (7) TMI 186 - AT - Central Excise

Summary

The principal legal question considered by the Tribunal was whether, for refund claims invoking Notifications granting exemption based upon total value or quantity of clearances during a financial year, the relevant date for the purpose of limitation under Section 11B of the Central Excise Act, 1944 is the date of payment of duty or the close of the financial year.

Two appeals were consolidated for this determination. Both involved manufacturers who paid excise duty on clearances during a financial year, believing they would exceed prescribed exemption limits, but later found their total clearances were within the exemption ceiling, prompting refund claims. The claims were rejected by authorities on limitation grounds, as the claims were filed beyond six months from the date of payment of duty. The appellants contended that limitation should run from the close of the financial year, when the total clearance value became ascertainable.

The Tribunal noted conflicting decisions of various High Courts and the Tribunal itself on this issue, necessitating a Larger Bench reference.

Issue-wise detailed analysis:

1. Relevant Legal Framework and Precedents

The governing provision is Section 11B of the Central Excise Act, 1944, which stipulates a six-month limitation period for refund claims. Explanation (f) to Section 11B states that, in any case not otherwise specified, the relevant date for limitation is the date of payment of duty.

Several High Court decisions were examined:

• Kerala High Court (Single Judge) - T.T. Pylunny Royal Smiths: Held that limitation commences from the end of the financial year since the entitlement to exemption depends on total clearances during that year, which can only be known at year-end.
• Kerala High Court (Division Bench) - Reversal of above: Held that limitation runs from the date of payment or adjustment of duty, emphasizing strict application of limitation rules despite potential hardship, reasoning that claims can be filed periodically up to the exempted limit.
• Andhra Pradesh High Court - Auric Engineering: Supported the Single Judge Kerala view, recognizing that entitlement accrues only at the financial year's end.
• Bombay High Court (Single Judge) - BTX Chemicals: Distinguished the facts and held that where exemption is for first clearances up to a certain value, limitation runs from date of payment of duty, not year-end.
• Bombay High Court (Division Bench) - Weikfield Products: Favored the view that entitlement accrues at the end of the financial year, allowing refund claims filed within six months thereafter.

Tribunal decisions also conflicted:

• Asian Bearing Ltd.: By majority, held limitation runs from date of payment of duty.
• Collector of Central Excise, Kanpur v. Tin Can Manufacturers: Held limitation runs from the close of the financial year.

2. Court's Interpretation and Reasoning

The Tribunal undertook a detailed examination of the statutory language of Section 11B and its Explanation (f), which specifies that in any other case, the relevant date for limitation is the date of payment of duty. The Tribunal found no express provision stating that for claims based on Notifications granting exemption subject to annual clearance value ceilings, the relevant date would be the end of the financial year.

The Tribunal emphasized the principle from the Supreme Court in Siraj-ul-Haq Khan v. Sunni Central Board of Waqf that limitation provisions must be construed strictly according to the plain language, without importing equitable considerations or hardship. The Tribunal also relied on the Supreme Court's ruling in J.K. Cotton Spinning and Weaving Mills, which held that retrospective amendments to rules do not override limitation provisions unless explicitly stated.

The Tribunal reasoned that the "cause of action" accrues at the time of payment of duty and that the limitation period for refund claims must be reckoned from that date, as per Explanation (f). The fact that entitlement to exemption depends on total clearances during the financial year does not affect the statutory limitation period.

The Tribunal rejected the argument that assessees cannot know their entitlement until year-end, noting that manufacturers can file refund claims periodically for clearances within the exemption limit and that the department can disallow claims if the overall ceiling is exceeded. Thus, the assessees are not disabled from filing timely claims.

3. Treatment of Conflicting Authorities

The Tribunal addressed the conflict among High Courts and its own decisions by referring to its earlier Larger Bench ruling in Atma Steels, which held that the Tribunal is not bound by any single High Court decision but may adopt the view most appropriate to the facts. However, the Tribunal must follow the decision of the jurisdictional High Court where applicable.

In the present appeals, the assessees were outside the jurisdiction of the Andhra Pradesh and Bombay High Courts, whose decisions supported the view that limitation runs from the date of payment of duty. Therefore, the Tribunal was free to adopt that view as the authoritative position.

4. Application of Law to Facts

Since the refund claims were filed beyond six months from the date of payment of duty but within six months from the end of the financial year, the Tribunal held that the claims were barred by limitation under Section 11B. The lower appellate authorities' decisions allowing claims based on limitation running from the financial year end were set aside.

5. Conclusions

The Tribunal concluded that the limitation period for refund claims invoking Notifications granting exemption based on total value or quantity of clearances during a financial year commences from the date of payment of duty. Explanation (f) to Section 11B governs such claims, and there is no statutory provision to treat the close of the financial year as the relevant date.

Significant holdings:

"The time limit for refund claims filed on the basis of the Notifications granting exemption based upon the value of clearances during a particular financial year will commence from the date of payment of duty and that such refund claims are covered by Explanation (f) to Section 11B of the CESA, 1944."

"It is true that rules of limitation are to some extent arbitrary and may frequently lead to hardship; but there can be no doubt that, in construing provisions of limitation, equitable considerations are immaterial and irrelevant, and in applying them effect must be given to the strict grammatical meaning of the words used by them."

"The argument of the assessees that they may not know at the beginning of the year about their entitlement to the benefit of Notifications contingent upon the value of clearances being below the specified limits cannot be a ground for upholding their claim."

"A manufacturer is under no disability to file a refund claim in respect of payment of duty for goods within the exempted limit where he cleared the goods on payment of duty. In the event of the value of goods cleared exceeding the overall maximum laid down in the Notification, it would be open to the Department to disallow such a refund claim."

"The Tribunal cannot be held bound to the view of any one of the High Courts, but has the judicial freedom to consider the conflicting views, reflected by different High Courts, and adopt the one considered more appropriate to the facts of a given case before the Tribunal."

"In the present case, the decisions of the High Courts of Andhra Pradesh and Bombay in regard to reckoning of relevant date in cases where refund claims are filed invoking Notifications granting exemption based upon total value/quantity of clearances during a financial year have to be implemented by the authorities within their jurisdiction with reference to assessees within such jurisdiction."

"Accordingly, the impugned orders of the lower appellate authority are set aside and the appeals of the Revenue are allowed."