TMI Blog1980 (3) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... bag and then put in a carton and finally packed in a wooden case lined with a polythene bag. In series packing a number of bearings are first put in a plastic container and the containers are then packed in a wooden box lined with a polythene bag. According to the petitioners, excise duty was charged on the value of the bearings determined after including the cost of the packing material viz. polythene bags, paper cartons, cylindrical rolls and wooden cases. The period relevant for this petition is 1st September, 1974 to 31st August, 1975. During this period, according to the petitioners, the total cost of packing material used for packing the goods in respect of which excise duty was collected came to Rs. 19,44,473/-. According to the petitioner, no excise duty could be levied and collected on the cost or value of packing material and the petitioners, therefore, by letter dated 31st October, 1975 addressed to the Assistant Collector of Central Excise, Poona I Division, Poona, invited the attention of the Assistant Collector to the fact that post-manufacturing costs should not be taken into account for the purpose of determining the value of the article for the purpose of excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration with the result that a part of the amount recovered by the Department has been recovered without any authority of law and, therefore, the company is entitled to the refund of that amount. The total amount of packing costs between September, 1974 to August, 1975 is stated to be Rs. 19,44,475/- and any excise duty levied on this amount was, according to the petitioner, refundable to the company. The Writ which the petitioner company has prayed for in this petition is one of quashing the order of the Assistant Collector dated 17th November, 1975 and to direct the respondents to forthwith refund Rs. 2,91,670/- being the excise duty collected on packing charges and materials. 4. Now, in the course of oral arguments Mr. Govilkar appearing on behalf of the respondents wanted to contend that no duty was levied on the post-manufacturing expenses but if we read the return, it is clear that the fact that packing charges were shown as a part of the price of the excisable goods by the petitioner has been admitted on behalf of the Department. It is no doubt stated in the affidavit that the petitioner/company has itself submitted the price list without showing any separate cost or ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded for the purpose of levy and collection of excise duty. It is therefore, now too late in the day to dispute the proposition that for the purpose of Section 4 of the Central Excise Act the post-manufacturing cost consisting of packing cost or the cost of packing material will have to be excluded before excise duty is levied. As already pointed out, this proposition has not now been disputed on behalf of the respondents. 6. The objection raised on behalf of the respondents is mainly founded on Rule 11 of the Central Excise Rules. Rule 11 as it was in force at the material time reads as follows :- "No refund of duties or charges erroneously paid unless claim within three months for any duties or charges which have been paid or have been adjusted in an account-current maintained with the Collector under Rule 9 and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error or misunderstanding shall be refunded unless the claimant makes an application for such refund under his signature and lodges it with the proper officer within three months of such payment or adjustment as the case may be." 7. It is not in dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be from the point of time when the mistake was discovered and the claim can well be made within three years therefrom. There was, therefore, no question of limitation as prescribed by Section 11 coming in the way of the petitioner company, according to the learned Counsel for the petitioner. 8. These contentions which are advanced both on behalf of the petitioner and the department do not need to be considered in detail because in our view the matter has been exhaustively dealt with by the decision of this Court in Mansingka's case. The Division Bench which decided Mansingka's case was dealing with the question as to whether railway freight charges can be taken as a part of the value of the excisable drug. That decision no doubt was given in an appeal which arose out of the civil suit which was filed by the company against the Union of India alleging that certain amounts had been illegally recovered from the company purporting to recover excise duty under the Central Excise Act but that will not make any difference to principle laid down therein. The company in that case was manufacturing vegetable oil which was packed in tin containers. The grievance of the company was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be illegal." The Division Bench also pointed out that Section 40 was not attracted in a case where the question was one of collection of illegal duty and/or its recovery or refund. 9. The effect of the decision in Mansingka's case, therefore, appears to be that excess duty recovered on the basis of price which included an element of post-manufacturing cost has been held to be not merely an error in exercise of jurisdiction but it has been held to be an illegal recovery. The jurisdiction of the authorities under the Central Excise Act is to recover duty according to law. If any duty is recovered in such a manner that duty comes to be levied on price which is not permissible to law as in the case of including post-manufacturing expenses in the price of the dutiable article, the levy of duty clearly amounts either to acting in excess of jurisdiction or acting without jurisdiction. Such an act on the part of the departmental authorities cannot be considered as resulting from any error or misconstruction as contemplated by Rule 11 of the Act. In such a case there is also no question of any inadvertent demand. The very basis of computation of duty becomes wrong and to that extent th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the proper officer within six months from the date of such payment or adjustment, as the case may be." (Underlining is ours) Holding that the plaintiffs' suit was really and in substance a suit for recovery of tax illegally collected from them, it was pointed out by the Division Bench that the Act did not contain any provision for refund of tax illegally collected. Dealing with Rule 13 quoted above, the Division Bench observed that it refers to a claim for refund of duty or charges paid under very limited circumstances only that is, when such duty has been paid through inadvertence, error or misconstruction and it was, therefore, held that the plaintiffs' case did not and could not fall under Rule 13. In that case the Collector and the Director of Excise and Prohibition had proceeded to levy excise duty on the basis that the plaintiffs had committed a breach of the provisions of Rule 96 of the Drugs Rules, 1945, under which the plaintiffs were required to give on the labels of the containers, in as conspicuous a manner as the trade name of the drug, the name of that particular drug which was mentioned in the.relevant pharmacopoeia. It was found that there was no provision e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it petition the argument was that the collection of duty was without the authority of law and that the High Court was not inhibited by the period provided under Section 27. Reference was made to Article 265 of the Constitution which provided that, "No tax shall be levied or collected except by the authority of law." The Division Bench while delivering the judgment in that Writ petition pointed out that there was no justification either to impose a tax or collect the amount, the refund of which was claimed and the order directing the refund was upheld. The decision highlights the fact that a recovery which was unauthorised by law was treated as being outside the statutory provisions of Section 27 which prescribed the period of limitation for refund. 14. We may also usefully refer to the observations of the Supreme Court in the case of D. Cawasji Company v. State of Mysore - AIR 1975 S.C. 83—1978 E.L.T. (J 154) in which the Supreme Court has clearly observed that the period of limitation within which a writ petition should be filed for recovery of moneys paid under a mistake of law is three years from the date when the mistake is known and that may ordinarily be taken to be a rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has denied the correctness of the figures given by the petitioner company. An inquiry will, therefore, have to be made by the departmental authorities as to what was the amount of excess duty levied on what has been described as packing charges inclusive of the cost of packing material. Unless these figures are ascertained, it would not be possible to reach any decision on the quantum of duty recovered in excess of what was legally recoverable. The petitioner will, therefore, have to satisfy the Department about the correctness of the figures on the basis of which the claim has been made in this petition. The proper order in this petition would, therefore, be that the petitioner is held entitled to claim refund on the finding that no excess duty was leviable on the cost of packing inclusive of the cost of packing material and the Assistant Collector of Central Excise is directed to enquire into the question as to what is the exact amount to which the petitioner will be entitled by way of refund in respect of excise duty paid during September, 1974 to August, 1975. The petitioner will be entitled to produce the necessary material and account books and such other information which t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
