TMI Blog1988 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactures polyurethane foam which is classified under Tariff Item 15A(3) of the Central Excise Tariff as it stood up to 22-8-1966. 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). 3. The Central Government issued a Notification No. 69 of 71 dated 29-5-1971. Tha 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 2-A 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 polyurethane foam. THE SCH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of waste of polyurethane foam should be classified under Tariff Item 15A(3) or 15A(4). The assessee claimed that the articles have to be classified under Tariff Item 15A(4). The Assistant Collector of Central Excise in his order dated 2-1 -1975 held that the articles manufactured out of waste of polyurethane foam fall under Tariff Item 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 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. 7. Against the aforesaid order an appeal was filed before the Appellate Collector of Central Excise, who, by his order dated 5-9-1975, 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 disposed of by order No. 2122/77 dated 14-12-1977. The order was passed by Shri C.P.R. Pillai, Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31 -8-1978. 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 and the duty henceforward on the articles would be paid under protest. This application for refund reached the Office of the Assistant Collector on 3-11-1978. While the claim for refund was receiving attention of the Asstt. Collector, the order dated 16-3-1979 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 items in the classification list as falling under Item 15A(4). After the order dated 16-3-1979 was passed, the Superintendent of Central Excise, Bala Nagar, addressed a communication to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to the application of the assessee dated 26-10-1978, 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 has barred by limitation under Rule 11 of the Central Excise Rules, 1944. 10. 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. 478/79, dated 4-10-1979.'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 were asked through the concerned Superintendent of Central Excise to resubmit the refund claims "on the basis of the orders in C. No. V-15A-17-41-78 VC dated 16-3-1979. 4. In this letter dated 16-3-1979, the then Assistant Collector of the Hyderabad-I Division listed the articles, which according to him, merited to be exempted from duty in the light of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 is adjusted after final determination of the value or the rate of duty, as the case may be. (2) * * * (3) * * * (4) Save as otherwise provided by or under these rules no claim for refund of any duty shall be entertained." The above rule was substituted by Section 11B of the Act with effect from 17-11-1980. From the date Section 11B came into force, Rule 11 was omitted. We may also state that Rule 11, as it stood above, was operative from 6-8-1977 to 16-11-1980. 14. Section 11B inserted with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, whetherthe refund application can be entertained on any other legal principle? 16. We may refer to the decision of the Supreme Court in D.Cawasi and Co. v. State of Mysore (1978 E.L.T. J.154) wherein the scope of Rule 11 of the Excise Rules was considered by the Supreme Court. Referring to the earlier judgment of the Supreme Court in the State of Madhya Pradesh v. Bhailal Bhai (1964) 6 SCR 261 the Supreme Court held that the period of limitation within which the application for securing refund of duty paid under a mistake of law is three years from the date when the mistake is known. It is stated that Rule 11 of the Excise Rules will have no application in a case where money was paid under a mistake of law. The proposition that if recovery of duty is illegal and without jurisdiction, the claim for refund is not governed by satute is clearly well settled and was given effect to in a number of decisions - see the decision in Shalimar Textile Mfg. P. Ltd. v. Union of India [1986 (25) E.L.T. 625 (Bombay)], Maharashtra Vegetable Products. Ltd. v. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a case where duty was paid by mistake by an assessee and collected illegally and unauthorisedly and without the sanctioin of law by the authorities. 18. After referring to the various cases bearing on the point, the Supreme Court held in Salonah Tea Company (supra) case 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 dicovered. It was further observed by the Supreme Court in Salonah Tea Company case that although it is true that in some cases the period of three years is normally taken as a period beyond which the Court should not grant relief, that is not an inflexible rule. 19. Learned Standing Counsel for the Central Government raised a two-fold plea against extending the assessee's claim beyond the period specified in Rule 11. Firstly it is stated that the question of applying the period of limitation under general law may be relevant in a writ proceeding under Article 226 of the Constitution, but not in a reference arising under the Act. Learned Counsel claimed that the present question arose during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 becuase the matter happens to be considered and decided during the course of statutory remedies availed 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. Indeed, the assessee's case was that the application for refund was filed without reference to Rule 11 and it was filed before the limitation had run out under general law. No authority has been cited before us by the learned Standing Counsel for the Central Government in respect of the plea that legal principles to be, applied vary with reference to the nature of the proceeding. In our opinion, whether the assessee was pursuing the remedy by filing a writ petition under Article 226 or was availing the statutory remedies available under the Act by way of appeal and reference to the High Court, the same legal principles would g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correspondence between the assessee and the authorities starting from 197l commencing immediately after the Notification No. 69/71, dated 29-5-1971 was issued. The assessee honestly felt that under the notification dated 29-5-1971, 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. 108/73, dated 28-4-1973, the assessee thought that the claim for refund was more fortified. But then the Department turned the assessee out stating clearly that it is not entitled to claim refund under the two notifications. The officials expressed the view that the articles manufactured out of scrap or waste of polyurethane foam, fell under tariff item 15A(3) itself, and, therefore, duty is leviable. This controversy dragged on without any certainty about the real effect of the notifications until the Government of India disposed of the revision petition by its order No. 2122/77, dated 14-12-1977, to which we have made a reference in para 7. In the revision order, the Government of India settled the controversy and upheld the assessee's claim that in respect of articles manufactured out of scrap or was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in the circumstances of the case, the assessee's application for refund dated 26-10-1978 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 21-8-1971 to 2-5-1978?" 24. As we have already pointed out, in the facts and circumstances, the period of limitation to be applied is three years from the date when the assessee discovered the mistake in the payment of duty, or from the date when it came to the knowledge of the assessee that it is entitled to the refund. In Cawasi Co. case [1978 E.L.T. (J 154)] the Supreme Court observed that the period of limitation prescribed for recovery of money paid under a mistake of law is three years from the date when the mistake is known, be it 100 years after the date of payment. On the facts stated above the entire matter was in a fluid state till the Government of India passed orders on the revision dated 14-12-1977. The mutually contradictory claims of the assessee and the Department were, for the first time, settled when the Government of India allowed the revision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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