2025 (7) TMI 937 - AT - Customs

100% EOU - refund of duty-paid towards Domestic Clearance Area (DTA) during the period from 2004-2005 to 2008 - Period of limitation - cutting sewing granite marble blocks into slabs amounts to manufacture or not - principles of unjust enrichment - HELD THAT - The question of refund without challenging the assessment is ruled-out as settled by the Hon ble Supreme court in the case of ITC LTD. vs. Commissioner Of Central Excise Kolkata-IV 2019 (9) TMI 802 - SUPREME COURT (LB) . However considering the fact that the Commissioner (Appeals) did not deal with the aspect of classification even accepting that the goods were classifiable under Chapter Heading 25 the question of refund was to be necessarily dealt with the provisions of Section 27 of the Customs Act 1962. As seen from the above decision it clearly establishes that the process of manufacture was entirely different as the products therein were classified under Chapter Heading 25 even after cutting and sawing the marble slabs; while in the present case the process of manufacture is entirely different wherein the finished goods were classified under Chapter Heading 68 while clearing the same into DTA. Moreover since the assessments were final and that has not been challenged therefore the question of refund based on the classification dispute in some other assessee s case cannot be applied to the present facts of the case. Secondly all refund claims are to be dealt with as per the provisions of Section 11B as is held in the case of Mafatlal Industries Ltd. vs. Union of India 1996 (12) TMI 50 - SUPREME COURT wherein the Hon ble Supreme Court has observed that Section 11B(1) the proviso(I) thereto Section 11B(2) and Section 11B(3) read together will apply only to (1) refund applications made under the statute and filed before the Amendment of the Act and still pending on the date of commencement of Amendment Act 1991 and (2) applications contemplated under law to obtain refund and filed after the commencement of the Amendment Act 1991. In a similar set of facts the Hon ble Supreme Court in the case of Union of India vs. Saraswati Marble Granite Industries Pvt. Ltd. 2015 (12) TMI 1156 - SUPREME COURT observed The order of refund of this amount merely because this Court took different view thereafter in some other case would not be permissible. Thus insofar as direction contained in the impugned judgments to refund the amount of duty interest and penalty is concerned the same is set aside. However once this Court has settled the position of law holding that the aforesaid process would not amount to manufacture from the date of the judgment of this Court the Excise Department is not entitled to recover any such excise duty from the respondents. The above decision is aptly applicable to the present set of facts; and hence the claim for refund had to be filed necessarily within six months from the date of dispute and as rightly held by the Commissioner (Appeals) the claim is clearly time barred as it was filed on 19.02.2008 for the duty paid for the period from 2004-2005 to February 2006. Appeal dismissed.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the process of cutting, sawing, polishing, and other treatment of granite/marble blocks into slabs or tiles amounts to "manufacture" under the Central Excise Act and the Customs Tariff Act, particularly in light of the Supreme Court decision in Aman Marble Industries.

2. Whether the appellant is entitled to a refund of excise duty paid on domestic clearances during the period 2004-2005 to February 2006, given that the refund claim was filed after the prescribed limitation period.

3. Whether the limitation period for refund claims can be computed from the date of discovery of a "mistake of law" as argued by the appellant, relying on judicial precedents permitting such claims beyond the normal statutory period.

4. Whether the classification of goods under Chapter Heading (CTH) 68 for DTA clearances, as opposed to CTH 25 under which rough blocks were imported, affects the entitlement to refund and the applicability of the Supreme Court's decision.

5. Whether the appellant's failure to challenge the classification or levy at the time of payment, and their withdrawal of appeals, precludes them from claiming refunds subsequently.

6. The scope and applicability of the statutory provisions governing refund claims, particularly Section 11B of the Central Excise Act and Section 27 of the Customs Act, and the principle of finality of assessments.

Issue-wise Detailed Analysis:

1. Whether the process of cutting and polishing granite/marble blocks amounts to manufacture:

The Supreme Court in Aman Marble Industries held that cutting and polishing marble blocks into slabs does not amount to manufacture under Section 2(f) of the Central Excise Act, as no new and distinct commercial product comes into existence; the identity of the stone remains unchanged. The Court emphasized that manufacture implies transformation resulting in a new product with a distinctive name, character, or use.

The appellant relied on this decision to claim that their activity did not amount to manufacture for the period prior to 01.03.2006. However, the Tribunal noted that after the Finance Act, 2006 amended the tariff by inserting Note 6 to Chapter 25 effective from 01.03.2006, such processes were explicitly considered manufacture, making the appellant liable for duty from that date onwards.

The Revenue pointed out that the appellant cleared goods under CTH 68 for domestic sales, which relates to finished products, whereas the raw blocks were under CTH 25. The classification under CTH 68 indicated that the process resulted in a product distinct enough to be treated differently, supporting the view that the process amounted to manufacture for the period after 01.03.2006.

The Tribunal distinguished the present case from Aman Marble Industries on the basis that the latter involved goods classified under Chapter 25 even after processing, whereas here the goods were cleared under Chapter 68, reflecting a different manufacturing process and classification.

2. Entitlement to refund for the period 2004-2005 to 28.02.2006 and limitation:

The appellant sought refund of duty paid for this period, relying on the Supreme Court's decision in Aman Marble Industries delivered in 2007, arguing that the limitation period should be counted from the date of discovery of the mistake of law.

The Commissioner (Appeals) and the original authority rejected the refund claim on the ground of limitation, holding that the claim was barred as it was filed on 19.02.2008, well beyond the statutory period. The authorities emphasized that the appellant had paid duty without protest and had not challenged the assessments or classification at the time of payment, which had attained finality.

The Tribunal referred to the settled legal position that refund claims must be made within the statutory limitation period prescribed under the Central Excise Act and Customs Act, and that the general law of limitation based on discovery of mistake of law does not apply to such claims. The Tribunal relied heavily on the Supreme Court's decision in Mafatlal Industries Ltd. vs. Union of India, which held that once an assessment or adjudication has attained finality, no refund claim can be entertained based on a subsequent judicial decision in another case.

The Tribunal further noted that the appellant's withdrawal of the appeal before the Commissioner (Appeals) and failure to challenge the levy at the time of payment precluded reopening the matter via refund claims or writ petitions.

3. Applicability of the "mistake of law" doctrine and reliance on other judicial precedents:

The appellant contended that the refund claim was filed promptly after the Supreme Court decision in Aman Marble Industries, and relied on precedents allowing refund claims beyond the normal limitation period where duty was paid under a mistake of law.

The Tribunal rejected this contention, emphasizing the Supreme Court's clear stance in Mafatlal Industries that the doctrine of mistake of law and the three-year limitation period from discovery of such mistake do not apply to excise duty refund claims once the assessment has become final. The Tribunal held that allowing refund claims on the basis of decisions in other cases would undermine the finality of assessments and lead to unending litigation, contrary to public policy.

The Tribunal also cited subsequent Supreme Court decisions reaffirming this principle, including the recent ruling in Commissioner of CGST and Central Excise, J & K vs. Saraswati Agro Chemicals Pvt. Ltd., which underscored the importance of finality and rejected reopening settled matters on the basis of later judicial decisions in other cases.

4. Effect of classification under CTH 68 versus CTH 25:

The appellant's goods were cleared under CTH 68 for domestic sales, whereas the imported rough blocks fell under CTH 25. The Revenue argued that this classification difference was critical and that the Supreme Court decision in Aman Marble Industries, which involved classification under Chapter 25, was not applicable.

The Tribunal agreed with the Revenue, observing that the classification of goods under CTH 68 indicated a different product and process, and that the appellant had accepted this classification without challenge. As the assessments and classification had attained finality, the appellant could not claim refund based on a classification dispute in another case.

5. Effect of failure to challenge levy or classification and withdrawal of appeals:

The appellant did not dispute the classification or levy at the time of payment and withdrew the appeal filed before the Commissioner (Appeals). The Hon'ble High Court of Karnataka observed that it was too late for the appellant to raise such issues via refund claims or writ petitions after accepting the levy without protest.

The Tribunal held that the appellant's failure to challenge the levy or classification at the appropriate time barred them from reopening the matter through refund claims. The principle of finality of assessments was stressed, and the appellant was directed to pursue statutory remedies within the prescribed limitation period.

6. Legal framework governing refund claims and finality of assessments:

The Tribunal extensively analyzed the provisions of Section 11B of the Central Excise Act and Section 27 of the Customs Act, which govern refund claims and prescribe limitation periods. It underscored that refund claims must be filed within the statutory period and that assessments which have attained finality cannot be reopened on the basis of judicial decisions in other cases.

The Tribunal cited authoritative Supreme Court rulings emphasizing that the Central Excise Act and Customs Act constitute "law" under Article 265 of the Constitution, and collections made under these statutes are lawful unless set aside by competent authority. This principle bars refund claims arising solely from a subsequent change in judicial interpretation in unrelated cases.

The Tribunal further noted that allowing refund claims based on decisions in other cases would cause chaos and undermine the revenue system, as highlighted in the Mafatlal judgment and subsequent decisions.

Conclusions on each issue:

- The process of cutting and polishing granite/marble blocks into slabs amounts to manufacture only from 01.03.2006 onwards, following the tariff amendment; prior to that, the process did not amount to manufacture as per the Supreme Court decision in Aman Marble Industries.

- The refund claim for the period after 01.03.2006 is not maintainable, as conceded by the appellant and confirmed by the Tribunal.

- The refund claim for the period 2004-2005 to 28.02.2006 is barred by limitation, as it was filed beyond the statutory period and the appellant failed to challenge the levy or classification at the relevant time.

- The doctrine of mistake of law and the three-year limitation period from discovery of such mistake do not apply to refund claims once assessments have attained finality, as held in Mafatlal Industries and subsequent Supreme Court rulings.

- The classification of goods under CTH 68 for DTA clearances, accepted by the appellant without challenge, distinguishes the present case from Aman Marble Industries and precludes refund claims based on that decision.

- The appellant's withdrawal of appeals and failure to challenge the levy at the time of payment bars reopening the issue through refund claims or writ petitions.

Significant Holdings:

"The law stands well settled that authorities constituted under Central Excise and Customs Act are bound by the period of limitation provided in the Act itself. Any period being stretched under limitation is only subjective to the case arising out of an appeal or writ, and general law of limitation is inapplicable."

"Once an assessment or adjudication has become final, the refund of that duty cannot be claimed unless the order is set aside according to law. No claim for refund is permissible except under and in accordance with Rule 11 and Section 11B."

"It is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person. A person must fight his own battle and succeed or fail in such proceedings. Once the assessment of levy has become final in his case, he cannot seek to reopen it nor claim refund without re-opening such assessment/order on the ground of a decision in another person's case."

"The doctrine of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case."

"The classification of goods under Chapter Heading 68 for DTA clearances, accepted without challenge, is determinative of the applicability of excise duty and the entitlement to refund, distinguishing the present case from the facts of Aman Marble Industries."

"The appellant's withdrawal of appeal and failure to challenge the levy at the time of payment precludes reopening the matter through refund claims or writ petitions."

"Allowing refund claims on the basis of decisions in other cases would lead to unending litigation and is contrary to public policy and the sanctity of the provisions of the Central Excise and Customs Acts."