TMI Blog1988 (4) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and manufactures polyurethane foam which is classified under tariff item No. 15A(3) of the central excise tariff as it stood up to August 22, 1966. The assessee further processes the foam so obtained and manufactures articles of polyurethane foam and such articles are liable to central excise duty under tariff item 15A(4). The Central Government issued a Notification No. 69 of 1971, dated May 29, 1971. The notification is extracted below "GSR : In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts articles made of polyurethane foam, falling under sub-item (4) of item No. 15A of the First Schedule to the Central Excises and Salt Act, 1944 ( 1 of 1944), other than those specified in the schedule hereto annexed, from the whole of the duty of excise leviable thereon Provided that : (a) such articles are produced out of polyurethane foam falling under sub-item (3) of the said item on which the duty of excise or the additional duty under section 2A of the Indian Tariff Act, 1934 (32 of 1934), as the case may be, had already been paid ; or (b) such articles are produced out of scrap of poly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disputes also arose as to whether the articles manufactured out of waste of polyurethane foam should be classified under tariff item No. 15A(3) or 15A(4). The assessee claimed that the articles have to be classified under tariff item No. 15A(4). The Assistant Collector of Central Excise, in his order dated January 2, 1975, held that the articles manufactured out of waste of polyurethane foam fall under tariff item No. 15A(3). Regarding the value for the purposes of assessment, the Assistant Collector held that it would be the value of the polyurethane foam blocks which are classified under item No. 15A(3) from which the goods in question were manufactured. The Assistant Collector declined to accept that the value of articles manufactured would be anything less than the value of the foam blocks themselves. Against the aforesaid order, an appeal was filed before the Appellate Collector of Central Excise who, by his order dated September 5, 1975, affirmed the order of the Assistant Collector and rejected the appeal. Against that order, the assessee filed a revision application before the Ministry of Finance, Department of Revenue, Government of India. This revision petition was dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ane foam, pursuant to the two notifications above referred to. The assessee claimed refund of an aggregate duty of Rs. 53,16,683.74 paid during the period August 21, 1971, to August 31, 1978. This is classified as under: From 21-8-1971 to 30-8-1975 : Rs. 21,28,358.78 From 1-9-1975 to 31-8-1977 : Rs. 21,98,384.64 From 1-9-1977 to 28-2-1978 : Rs. 5,69,812.07 From 1-3-1978 to 31-8-1978 : Rs. 4,20,128.25 -------------------------------- Rs. 53,16,683.74 -------------------------------- The assessee also stated in the application that the claim for refund is based on the notifications above referred to and the duty henceforward on the articles would be paid under protest. This application for refund reached the office of the Assistant Collector on November 3, 1978. While the claim for refund was receiving the attention of the Assistant Collector, the order dated March 16, 1979, to which a reference has been made above was passed by the Assistant Collector determining the classification of each one of the items specified in the classification list filed by the assessee in December, 1978. We have already pointed out that the Assistant Collector admitted some of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for refund was made for the period commencing from August 21, 1971 onwards, the order of the Assistant Collector does not refer to the claim for refund of duty paid during the period August 21, 1971, to February 28, 1978. That apart, the refund of duty claimed for the period March 1, 1978, to August 31, 1978, was shown at Rs. 3,13,081.09 whereas, according to the application of the assessee dated October 26, 1978, the claim for refund of duty was shown at Rs. 4,20,128.25. Apart from these shortcomings, it would be seen that the Assistant Collector rejected the claim for refund on the ground that it was barred by limitation under rule 11 of the Central Excise Rules, 1944. The assessee filed an appeal against the aforesaid order of the Assistant Collector. The Appellate Collector of Customs disposed of the appeal by his order No. 478 of 1979, dated October 4, 1979. The following extracts from the order of the Appellate Collector may be referred to : "2. The Assistant Collector rejected the claim on the ground that it suffered from time-bar in the light of the provisions of rule 11 of the Central Excise Rules, 1944. 3. Prior to the rejection of the claim, the appellants wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. Against the order of the Appellate Collector, the assessee carried the matter on further appeal to the Customs, Excise and Gold Control Appellate Tribunal. The Tribunal disposed of the appeal on May 25, 1983. The Tribunal upheld the order of the Appellate Collector and dismissed the appeal. On an application made by the assessee for reference under section 35G of the Act, the Tribunal referred the question of law already mentioned in para 1 (at p. 328) for consideration of this court. Confining first our attention to the question referred by the Tribunal, we may notice the provisions of rule 11 of the Central Excise Rules, 1944 : "Rule 11. Claim for refund of duty.-(1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the date of payment of duty: Provided that the limitation of six months shall not apply where any duty has been paid under protest. Explanation.-Where any duty is paid provisionally under these rules on the basis of the value or the rate of duty, the period of six months shall be computed from the date on which the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case has been that rule 11 can have application only in respect of the duty paid in accordance with the provisions of the Act which became refundable subsequently for any reason whatsoever. It was urged that the time-limit of six months specified in rule 11 did not apply to cases where the duty was unauthorisedly collected without the sanction of law. It was for that reason that the assessee's claim for refund, it is urged, must be considered without applying the time-limit under rule 11. We shall, therefore, address ourselves to this question, namely, whether the time-limit specified in old rule 11 is applicable in the facts and circumstances of the assessee's case and, if not, whether the refund application can be entertained on any other legal principle ? We may refer to the decision of the Supreme Court in D. Cawasji and Co. v. State of Mysore [1978] ELT (J. 154), wherein the scope of rule I 1 of the Excise Rules was considered by the Supreme Court. Referring to the earlier judgment of the Supreme Court in State of Madhya Pradesh v. Bhailal Bhai [1964] 6 SCR 261, the Supreme Court held that the period of limitation within which the application is to be made for securing re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 23 would not apply. The same principle, in our opinion, holds good for rule 11 of the Central Excise Rules. The time-limit specified in rule 11 for securing refund of duty paid applies only to a case where duty was paid in accordance with the provisions of the Act and that duty becomes refundable subsequently for one reason or the other. If the duty is paid under a mistake of law and without the sanction of law, it cannot be said that the duty was paid in accordance with law. Therefore, the time-limit specified in rule 11 for the grant of refund can have no application to a case where duty was paid by mistake by an assessee and collected illegally and unauthorisedly and without the sanction of law by the authorities. After referring to the various cases bearing on the point, the Supreme Court held in Salonah Tea Co. Ltd.'s case [1988] 33 ELT 249, that the assessee was entitled to seek refund of the tax or duty paid under a mistake by preferring a claim within three years from the date when it came to the knowledge of the assessee or when the mistake was discovered. It was further observed by the Supreme Court in Salonah Tea Co. Ltd.'s case [1988] 33 ELT 249, that although ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made. The question considered by the appellate authorities was whether the time limit specified in rule 11 was or was not applicable in the facts and circumstances of the case. If the settled legal principle is that when money is paid by an assessee under a mistake of law, the limitation according to the general law is applicable, we do not see how that legal principle undergoes a change if the matter fell to be considered in the course of statutory remedies availed of by the assessee. We are unable to accept the proposition that legal principles could differ with reference to the nature of proceedings. Learned standing counsel for the Central Government does not deny that if a writ petition is filed invoking article 226 of the Constitution, then, the period of limitation could be determined in accordance with the settled judicial pronouncements without reference to rule 11. We do not see how that principle undergoes a change because the matter happens to be considered and decided during the course of statutory remedies availed of by the assessee. It should be clearly borne in mind that the assessee never purported to make an application for refund under rule 11 of the Rules. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Excise Rules. In our opinion, therefore, the principle emerging from the decision of the Supreme Court in Burmah Construction Co.'s case [1961] 12 STC 816, is not applicable to the present case. We may also point out that this principle has not been applied by the Supreme Court while dealing with a host of other cases, because of the essential difference in facts. We are astonished at the plea of learned standing counsel that the application for refund in this case should have been made within the period of six months specified in rule 11 and because of the assessee's failure to do so, the refund application could not be entertained. We have referred to the correspondence between the assessee and the authorities starting from 1971 commencing immediately after Notification No. 69 of 1971 dated May 29, 1971 was issued. The assessee honestly felt that under the notification dated May 29, 1971, the goods manufactured out of scrap or waste of polyurethane foam are exempt from the levy of duty. After the exemption was enlarged by Notification No. 108 of 1973, dated April 28, 1973, the assessee thought that the claim for refund was more fortified. But then the Department turned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d standing counsel. Our discussion till now would show that, in the facts and circumstances of this case, it is neither rule 11 nor section 11B of the Act that is applicable. If that is so, the question to be asked is whether, on the facts and in the circumstances, the application for refund filed by the assessee on October 26, 1978, is within the period of limitation under the general law. Indeed, this is the real controversy between the parties and the Tribunal should have referred this question to this court for consideration. We, therefore, consider that the question referred for consideration by the Tribunal in this case should be reframed as under in order to bring out the real controversy between the parties "Whether, on the facts and in the circumstances of the case, the assessee's application for refund dated October 26, 1978, of duty paid in respect of the goods manufactured from out of the scrap or waste of polyurethane foam, is in accordance with law, and, if so, whether the assessee is entitled to the refund of the duty paid during the period August 21, 1971, to May 2, 1978 ?" As we have already pointed out that, in the facts and circumstances, the period of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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