Customs, Excise and Gold Tribunal - Calcutta
Beverages And Food Products Pvt. Ltd. vs Collector Of Central Excise on 18 July, 1986
Equivalent citations: 1986(26)ELT1001(TRI-KOLKATA)
ORDER S.K. Bhatnagar, Member (T)
1. This appeal is directed against the order-in-original no. 309/ASM/83 of 1983 dated 31.12.1983 passed by the Collector of Central Excise (Appeals), Calcutta upholding the order of the Assistant Collector passed in order no. V(18)Ref/ 9/ACG/83 dated 28.7.1983 rejecting the claim of the appellants for refund of duty.
2. Shri S. Sen, the Ld. Advocate, submitted that between March, 1972 to June, '1977, the appellants' company manufactured Coca Cola and Fanta (Orange) by and under a franchise agreement entered into with the Coca Cola Export Corporation Ltd. During this period they had filed classification list under rule 173B of the Central Excise Rules (hereinafter called 'the Rules'), erroneously and/or mistakenly declaring that the aforesaid Coca Cola and Fanta (Orange) fell within the ambit of T.I. ID of the First Schedule whereunder the rate of duty was 20% advalorem. The classification list submitted by the appellants effective from 1972 was approved by the Superintendent of Central Excise, Gauhati. In or about March, 1976, the tariff description under aforesaid item ID of this Schedule was amended. Though under item no. 1D(2) initially the rate of duty was fixed at 20% advalorem, by Notification No. 50/76 dated March, the 16th, 1976, the same was reduced to 10%. In view of the amendment mentioned above the appellants submitted another classification list again under the same erroneous assumption that Coca Cola and Fanta (Orange) contained blended flavouring concentrate falling under T. 1.1 D(1)(a). This classification list was approved by the Assistant Collector on March 26, 1976 without drawing any sample for Coca Cola or Fanta (Orange). Now, it is the case of the appellants before us that as a matter of fact these beverages did not contain blended flavouring concentrate but only essence and that the classification list submitted by them earlier was under the mistaken impression that it contained blended flavouring con-centrater Subsequently, an order passed in Sri Krishna Bottlers (P) Ltd. in order-in-review No. 876 of 1980 dated 26.9.1980 by the Government of India came to the notice of the appellants. According to this order the Coca Cola and Fanta (Orange) did not contain the blended flavouring concentrate and therefore, they did not fall under T.I.1(D)(1)(a). The appellants have contended that in this view of the matter their products fell under the definition of "aerated water" falling under TI 1D(2) and therefore, they were only liable to pay duty at 10% advalorem. It was the further case of the appellants that though the Department tested the sample of Fanta (Soda); for reasons best known to them; no attempt was made to test the sample of Coca Cola or Fanta (Orange) to ascertain their contents. The appellants, however, submitted a report of Dr. K.K. laya, an expert according to whom Fanta (Orange) or Coca Cola did not contain any natural fruit juice or pulp or their concentrates.
When the order passed in this aforesaid case came to the notice of the appellants they preferred their claim on the 13th July, 1983 for the refund of a sum of Rs. 29,60,059.45 before the appropriate authorities. The Assistant Collector rejected their claim as time-barred.... On an appeal, the Collector (Appeals) also rejected the claim of the appellants. Hence this appeal.
Shri Sen, the Ld. Advocate, emphasised that the lower authorities had wrongly rejected their refund claim under Section 11B of the Central Excise Act, inasmuch as the claim was filed with reference to the Common Law or General Law and not under the Central Excise Act.
In any case, during the period when the goods were cleared, the amended rule 11 was in force and not Section 11B which came into existence much later.
It was his submission that in this case the wrong classification and consequential wrong payment of duty resulted from an error of the Department.
It was his contention that the refund in this case was governed by the General Law or Common. Law and not by rule 11 or Section 11B. Citing a number of High Court and Supreme Court judgments Shri Sen, the Ld. Advocate, stressed that basically the following two approaches have developed during the course of evolution of law in this area.
(1) That there was no limitation for claiming refund in case of levy or realisation of tax without the authority of law, as evident from the judgments of the Hon'ble Supreme Court in the case of Aluminium Corporation of India v. Union of India AIR-1975-SC-2279 and Shivshankar Dal-Mills v. State of Haryana (AIR-1980-SC-1037) and the judgment of Calcutta High Court in the case of Khardah v. Union of India (1980-Vol.I-Calcutta-Law Journal-433);
(2) That even if some limitation is to apply, it is the limitation of three years as provided in Common Law or Contract Act read with Limitation Act, that would apply as is evident from the decisions in the cases of Messrs D. Cawasji & Co. v. State of Mysore AIR-1975-SC-813 (SC), Universal Drinks (P) Ltd. v. Union of India (1984-ELT-207 to 15) and Vallabh Glass Works Ltd. v. Union of India 19S4(16)-ELT-171.
In the instant case, the first judgment or order on the correct classification was delivered in the form of the Government of India's order-in-revision in. the case of Krishna Bottlers and the appellants had filed their refund claim within 3 years of the discovery of the mistake in the light of the Govt. of India's order-in-revision passed in the aforesaid case.
It was his contention that in similar cases the Department has already granted refund in identical or similar circumstances as in the case of Tripti Drinks and therefore, it would be a case of hostile discrimination if the refund is not granted to this appellant.
It was also his contention that there is no dispute that the refund was due on merits and the only question was whether the claim was time-barred and whether Departmental authorities could give relief in terms of Common Law.
It was his contention that as the claim was filed within three years from the date of discovery of the error which was not in dispute, the claim was in time. Furthermore, it was his contention that this Tribunal being the apex body created by an Act of Parliament is a Court in the sense that it is competent to give a definitive judgment which is final. It can take cognizance of various decisions of superior courts and apply the principles enunciated therein and the ratio of those decisions may be as relevant to the issues and the facts of the cases before it.
He would, therefore, urge that the various High Court and Supreme Court decisions which he has cited and presented in detail and which have been incorporated in the written submissions prepared by him and submitted may be taken into account and on this basis the order of the Ld. Collector (Appeals) may be set aside and the lower authorities may be directed to grant the refund.
It was also his contention that rule 11 was applicable only in certain circumstances as would be seen from these submissions.
In fact, neither rule 11 nor Section 11B was applicable in the instant case and the same was required to be dealt with only with reference to the Common Law.
Alternatively it was also his contention that since the claim was genuine, the same is required to be granted even if barred by limitation as the Government is neither required nor expected to keep any money belonging to a citizen which was not legally due to it and which was not collected under the authority of law. It was his submission that the relevant provisions of the Constitution and the Common Law should also be borne in mind while deciding the Central Excise or Customs cases.
However, in course of the arguments the Ld. Advocate appearing for the appellants has conceded that he would not press for the proposition that no law of limitation would apply to his case. He would principally seek the benefit of the second proposition of law of limitation namely the theory of the limitation of three years and would submit that the benefit of the same may be extended to him. In this view of the matter we will examine his contentions in the same light.
3. Shri M.C. Thakur, the Ld. S.D.R., speaking for the Department submitted that it is a simple case of a refund claim barred by law of limitation.
He submitted that the refund claim was filed on the 13th July, 1983 and by that time Section 11B had already come into existence. Therefore, Section 11B was the relevant provision and six months time-limit will apply. As the claim was admittedly filed after this period of limitation, therefore, it was correctly rejected as time-barred. In this connection, he would rely on an order of the Tribunal in the case of Collector of Central Excise, Patna v. Cyanides & Pigments Ltd., Jamshedpur 1986 (24) ELT 89 (Tribunal). He would, in particular, draw attention to its para 21 in this regard where it has been held that the period of limitation as permissible on the date of issue of a show cause notice (under rule 10 or 10A) would be that as applicable on the date of issue of a show cause notice and not the period which Was operative when the alleged short levy or non-levy occurred. The same principle would apply to claims for refund under rule 11.
Furthermore, he would like to draw our attention to Section 11B, Sub-section (4) &. (5) in which it has been specifically mentioned that 'Save as otherwise provided by or under this Act, no claim for refund or any duty of excise shall be entertained' and 'Notwithstanding, anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected was not excisable or was entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim."
It was his submission that in the light of this provision the authorities under the Act were required to entertain only such claims which have been filed as per the provisions of this Act and that the provisions of other laws did not apply. Therefore, it was his contention that the Contract Act or the Limitation Act or any other General Law or Common Law provisions were not applicable. In this connection, he would like to rely on the Andhra Pradesh High Court case of Godavari Plywood Ltd. v. Union of India 1984-ELT-732.
He would also refer to the case of Inchek Tyres 1979-ELT (J 236) in which reliance was placed on the case of Messrs Burmah Construction Co. v. State of Orissa (AIR-1962-SC-1320) in this connection.
It was his contention that in view of this judgment of the Andhra Pradesh High Court, the duty paid under mistake of law is also governed by the provisions of Section 11B. In other words, six months time-limit is applicable to the refund claim on this ground also and the Limitation Act did not apply. It was also his submission that this Tribunal is competent to pass orders only in terms of Section 35C of the Central Excise Act.
4. Speaking in reply the Ld. Advocate submitted that with due respect to the Hon'ble Andhra Pradesh High Court, he would submit that that judgment appears to have been passed per-incurium. Apparently, the Court's attention had not been drawn towards Article 265 of the Constitution which is the basic foundation for all taxing statutes, in the sense that it lays down a fundamental principle for levy and realisation of taxes. Perhaps, the point with reference to Article 265 was not urged before the Hon'ble High Court. It also appears that perhaps the Hon'ble High Court's attention had not been drawn to the Supreme Court's judgment in the case of Shiv Shankar Dal Mills (Supra).
It was his submission that he has cited a number of High Court and Supreme Court decisions with reference to the Common Law which laid down the principles which should govern the payment of refund in case of illegal realisation of any amount or excess amount and would earnestly urge this Tribunal to consider the matter in its wider perspective keeping in mind the well-defined principles of law governing collection of taxes and grant of refund of amount not due to the Government. Even otherwise, in cases where conflict of opinion is brought to the notice of the Tribunal, the Tribunal was at liberty to make up its own mind and was bound only by the orders and judgments of the Hon'ble Supreme Court in terms of Article 141 of the Constitution.
He would like to reiterate in this context that the right of refund is a substantive right and it is not a procedural matter. It is a vested right and it occurs with reference to the notional time when incorrect payment took place. In Central Excise cases since notionally Central Excise duty becomes due at the time of clearance from the factory, therefore, the cause of action arises with reference to the period during which the goods were cleared on payment of the disputed sums correctly. Once it was conceded that the realisation was without the authority of law, such realisation was void ab-initio and therefore, the Government had no authority or right to retain it and the date of filing of the refund claim was immaterial.
Therefore, in view of the judgments cited by him including the judgment in the case of Universal Drinks (Supra), he would urge that the appeal may be accepted and allowed.
5. We observe that the whole issue revolves round the question of determination of the relevant date and the law applicable with reference to the said date; and in this respect, there are two view viz. - that (1) the date of discovery of mistake of law is the relevant date, (2) that the date of filing the refund claim is the relevant date.
In this connection, we observe that the doctrine and concept of 'Lis' supports the first proposition inasmuch as the cause of action could be said to arise only when the dispute arose and the dispute did arise in this case only when the correct - proposition of law was laid down by the Government of India in revision in case of Sri Krishna Bottlers (P) Ltd. (Supra). Prior to this pronouncement neither side was aware of the correct position in law with the result that the Department had classified and assessed the goods wrongly and the appellants had made an incorrect declaration and had paid the amount not otherwise due to the Government under mistake of law.
Therefore, 'Lis' arose only when the pronouncement of the order was made by the Government of India in the aforesaid case. The Department has not contradicted or disputed the assertion of the appellants that the payment had been made under a mistake of law and that the earliest the appellants could have discovered their mistake was the date of the order in the case of Sri Krishna Bottlers (P) Ltd. It is this date which is the relevant date; and therefore, it is on this date that the cause of action arose. In accordance with the doctrine of 'Lis' it is, therefore, the law which was prevalent on this date which would apply. Hence it is immaterial on which date the refund claim was actually filed. What is material is the law in force on the date of discovery of mistake.
Admittedly, Section 11B had not come into existence on this date and the only rule governing the refund of duty was rule 11. The entire issue, therefore, boils down to the determination as to whether rule 11 or the Common Law was applicable to the instant case. ' In this connection, we observe that rule 11 was not a complete code and that is why apparently, while introducing Section 11B, the Government thought it fit to introduce a provision like clause 5 under Section 11B.
It is significant to note that whereas rule 11 provides only for claims for refund of duty, Section 11B(5) also covers cases of refund of any amount collected as 'duty'. In other words, the. necessary implication is that the cases in which an amount is realised as 'duty' illegally or without the authority of law or under a mistake of law, were not covered by rule 11 (both before and after its amendment).
This necessarily implies that there was no specific provision in the Central Excise Act and Rule governing such cases at the relevant time. Therefore, the only law available to a citizen during this period was the Common Law or the General Law. Hence the provisions of the Limitation Act and Contract Act come into play and become relevant and could be applied in appropriate cases.
It is by now well-settled that in such cases a citizen could claim the amount within 3 years from the discovery of the mistake.
As in the instant case undisputedly, the refund claim was filed within three years from the date of discovery of the mistake it can only be held that the claim was in time in this view of the: matter.
This view covering the doctrine of 'Lis' and the period of limitation finds support in the Hon'ble Supreme Court's judgment in the case of Hussain Kasam Dada 1983-ELT-1277 (SC) and D; Cawasji & Co. v. State of Mysore AIR-1975-SC-813 (SO the High Court judgment in the case of Universal Drinks (P) Ltd. v. U.O.I. 1984 (18) ELT 215 (Bombay) and Supreme Court judgment in the case of Vallabh Glass Works v. Union of India reported in 1981 (16) ELT 171 (SC).
Now coming to the second viewpoint which has been so nicely advocated by the Ld. S.D.R. that the date of filing of the refund claim should be treated as the relevant date and therefore, Section 11B should be applied, we observe that the orders of the Tribunal cited by the Ld. S.D.R. are on a different footing than the present case. The case of Cyanides & Pigments Ltd., Jamshedpur 1986 (24) ELT 89 is the case in which a notice was issued under Section 36 of the Central Excise Act as it stood at the relevant time. In this case, rule-11 has undoubtedly been discussed. But we find that the Special Bench in this case has basically drawn support from and relied on a decision of the Tribunal in the case of Atma Steel (decided by a Five-Member Bench) reported in 1984 (17) ELT 331. The case of Atma Steel was, however, a case with reference to Section 11A that is, it was a Demand Case and not a Refund Case. The Tribunal had laid down in this case of Atma Steel that in Demand cases, the date of issue of Demand Notice is the relevant date for deciding the appropriate rule which may be considered as applicable. The Special Bench in the case of Cyanides & Pigments following this analogy has held the date of filing of refund claim was the relevant date. However, this case is distinguishable from- the case before us inasmuch as the facts (reported in the Cyanides & Pigments' case) do not disclose a case of mistake of law by the assessee whereas in the instant case, the basic undisputed fact is that the payment was made under mistake of law. Obviously, therefore, neither Atma Steel's case nor the Cyanides & Pigments' case is at par with the present one. As these cases are distinguishable from the present one, both on facts and in law, the propositions laid down therein, cannot be applied to it. The present case, in fact, involves realisation of an amount without the authority of law and/or payment made under mistake of law. This type of situation is more appropriately governed by the case of Universal Drinks (P) Ltd. v. Union of India in which the issues involved are the same. In this case, it was observed, inter-alia, by the Hon'ble High Court of Bombay 1984 ELT (18) - Bom. - 213 to 215 that -
"A bare reading of rule 21, whether old or new, clearly negatives the construction that a substantive right to refund is created thereunder. The right to refund, in our view, is a common law right of the assessee to recover back the amount of excise duty which is either illegally levied upon him or wrongly paid by him or recovered from him by the excise officer. It is worthwhile to notice the provisions of Section 72 of the Contract Act, which casts an obligation upon the person who has received the money under a mistake to repay the same to the person from whom it is received. The claim for refund of the duty arises as soon as -the duty is illegally recovered by the excise officers or is wrongly paid by the assessee"....
"In these petitions, it is clear that the payment of the excise duty, of which refund is claimed, is made and a right to refund thereof, arose prior to 6.8.1977 i.e. the date on which the new rule 11 has come into force. The said right to claim refund is a vested right which has accrued to the petitioner prior to new rule 11, or at any rate is an existing right. It is a settled principle of interpretation of statutes that a vested right or even an existing 'right, including a right of action is not affected or allowed to be taken away unless it is so affected or taken away by the enactment expressly or by necessary implication...."
'In our view the new rule 11 is clearly prospective in its operation in the sense that it will apply to the cases in which the right to claim refund has arisen after it came into force. This view is supported by the language of the new rule 11 itself. The said rule provides a limitation for making an application which is six months from the date of payment of duty.... "
"The question as to the starting point of limitation in the cases relating to discovery of mistake has to be determined in the light of the provisions of Section 17 of the Limitation Act, 1963. It is provided in Section 17(1)(c) of the Limitation Act, that in a suit or an application for relief from the consequence of a mistake, the period of limitation shall not begin to run until the plaintiff or the applicant has discovered the mistake or could with reasonable diligence have discovered it. It is true that in the case of mistake of law normally the mistake can be said to be discovered when the Court has rendered a decision taking a particular view. However, knowledge of the date of decision cannot be attributed to the person concerned, particularly when by proper evidence he satisfies that he could learn about the same only at a later date."....
The judgment of the Hon'ble Court of Andhra Pradesh, "Hyderabad in the case of Godavari Plywoods Ltd. v. Union of India and Ors. 1984 (18)-ELT-732(AP) cited by the Ld. S.D.R. is not relevant and not applicable to the facts of the present case as here the cause of action arose before Section 11B came into existence.
The case of Inchek Tyres 1979 ELT (J 236)] cited by the Ld. S.D.R. is a Single Bench decision of 1979. Thereafter, the Calcutta High Court had occasion to examine the matter again in a Central Excise case and a Divisional bench of Hon'ble Calcutta High Court held in the case of Khardah Company v. Union of India 1980 Vol. I-Calcutta Law Journal-433) that it is a settled principle that the claim for refund of any amount realised without any authority of law; if not barred by any specific statutory provision; is enforceable in law.
In this connection, a reference may also be made to the decision of Supreme Court in the case of Shiv Shankar Dal Mills (AIR-1980-SC-1037) wherein the Hon'ble Supreme Court has stated that there is no law of limitation, especially for public bodies, on the virtue of returning what, was wrongly recovered to whom it belongs. In view of the Division Bench's decision of Calcutta High Court based on the above-mentioned decision of Supreme Court the benefit from the case of Inchek Tyres Ltd. is no longer available to the Department.
Thus, we see that the judgments and orders mentioned and cited by the Ld. S.D.R. are not strictly applicable to the present case. Although at first sight they appear to be so, a close look reveals a different picture. In any eventuality, (1) we have the Supreme Court's judgment in the case of Hoosein Kasam Dada (Supra) clearly laying down the doctrine of 'Lis' and (2) the Bombay High Court's judgment in the case of Universal Drinks (P) Ltd. (Supra) clearly indicating that it is the date of payment of duty which was relevant date and that in the cases of mistake of law the common Jaw was required to be applied.
We, therefore, accept the first view that the date of the discovery of the mistake of law is the relevant date and not the date of filing of the refund, claim. All that we are required how to do is to apply these principles to the present case.
In view of the foregoing discussions based on the case law enunciating the correct position of law, we have no hesitation in holding that a refund claim filed within three years of the discovery of the mistake is very much within time and is not time-barred. We, therefore, hold that the claim is within time.
We accordingly hold that the date of discovery of mistake being 20.6.1980, the only law which was open to or available to the appellants for claiming refund at the relevant date was the common law and, therefore, the Contract Act and Limitation Act would apply.
In the result, the appeal succeeds. It is held that the claim is within time. The lower authorities are directed to consider the matter accordingly and to pass appropriate orders.