Madras High Court
The Secretary Ministry Of Finance, ... vs Prabhakar Match Industries, ... on 19 September, 1988
Equivalent citations: (1989)2MLJ485
JUDGMENT T. Sathiadev, J.
1. Defendants in O.S.No.339 of 1977 on the file of the Sub Court, Dharmapuri, are the appellants. The plaintiff-respondent filed a suit to recover Rs. 13,839.60. It was claimed in the plaint that the plaintiff firm was manufacturing matches and for the period from 22-7-1967 to 31-12-1974, it paid excise duty at the rate of Rs. 3.75 per gross of matches of 50 boxes. Third defendant issued a demand notice dated 4-6-1975 claiming that the Supreme Court of India by judgment dated 4-11-1974 had held that the duty leviable was Rs. 4.30 per gross of matches of 50 boxes and hence called upon plaintiff to pay the differential duty of Rs. 33,152.62. Later on, it was asked to pay one third of the amount, viz., Rs. 11,839.20 and it was paid under protest. There was no short levy or non-payment of duty under Rr.9,10 and 10-A of the Central Excise Rules, hereinafter referred to as the 'Rules'. Rule 10 had been struck down by this Court. Rule 10 governs the case of non-payment of short levy. Under the law, the authorities have no power to collect any duty beyond the period of three months prior to the date of demand notice, and this has been finally decided in W.P.No. 4145 of 1975 and which applies to the facts and circum stances of this case. Hence, the suit had been filed to recover the illegally collected amount with interest at 12 per cent from date of payment.
2. Third defendant stated that plaintiff was al lowed concessional rate duty at the rate of Rs. 3.75 per gross from 22-7-1967 to 31-12-19.74, as per the Notification No. 162 of 1967 dated 21-7-1967. This Notification was amended by Notification No. 205 of 1967 dated 4-9-1967, which introduced certain conditions for grant of concessional rate of Rs. 3.75 per gross. Plaintiff did not comply with the conditions, and hence, was bound to pay Rs. 4.30/-per gross. As a result of the decision of the High Court of Madras striking down Clause (b) and (i-a) of the Proviso to Notification No. 162 of 1967 amended by Notification No. 205 of 1967, plaintiff allowed a concessional rate of assessment as per the declaration filed every year and without prejudice to the rights of department. Department had filed an appeal before Supreme Court against the said judgment and it was al lowed. Hence, plaintiff ought to have paid Rs. 4.30 but the amount could not be collected from time to time, because of the pendency of the matter in the Supreme Court. Therefore, he was called upon to pay the differential duty of Rs. 33,152.62 but since similarly placed match manufacturers pleaded inability to pay huge amounts. Govern-, ment of India took a lenient view and ordered that if one-third of the amount which had become due was paid by 30-9-1975, then two-thirds of the amount would be recovered. Taking advantage of this concession, plaintiff paid the amount without any protest, Hence there is no question of any time limit being applied and it is not barred by limitation. There is no question of any short levy. Rule 10 does not govern the levy and collection in this case. The decision in Mahahoob Bani Beevi v. Inspector, Central Excise H.O.R. II, Kovilpatti, W.P.No.4145 of 1975, is not applicable to this case. It is equally correct to state that R.ll does not apply to make the necessary applications before the proper Officer, within the period pre scribed for refund of amount under Rule 11, the present suit is not maintainable.
3. The trial Court held that the plaintiff has to succeed in view of the decision in Mahaboob Bani Beevi v. Inspector, Central Excise H.O.R. II Kovilpatti, W.P.No.4145 of 1975 and therefore, decreed the suit for Rs. 7,839.20 with interest at 6 percent per annum from 25-84976 to date of realisation with proportionate costs. On the learned Judge in A.S.No.264 of 1978 upholding the decree, this Letter Patent appeal had been preferred.
4. Mr.T.Somasundaram, learned Counsel for defendants at the outset would point out that Rule 10-A having been struck down by this Court and as the said decision is how pending in the Supreme Court unless it be made out by plaintiff that Rule 10 would apply it is only the period of limitation as prescribed under Indian Limitation Act, 1963, that would apply to the facts and circumstances pf this case. He further submits that it was only after Supreme Court upheld the concerned Notification in Nos. 162 and 205 of 1967, by judgment dated 4-11-1974, the department could make a demand for payment of Rs. 4.30 per gross, be cause until then, it had to claim only at the rate of Rs. 3.75 per gross and which had prejudiced the rights of the department. Thereafter, even though Department was entitled to collect the entire amount due, by Trade Notice (CE) 104/75, dated 27.6.1975, Union of India, thought that to alleviate the difficulties of match manufacturers, who would be liable to pay huge amounts, had extended a concession that if one-third of the amount is paid by 30.9.1975, then two-thirds of the dues outstand ing would not be recovered. Availing of the said concession so extended and without any protest, plaintiff having made the payment, it cannot now take a different stand, as it had been coerced to make the payment by threats in the demand notice.
5. Mr.Krishnan, learned Counsel for plaintiff, in his strenuous submissions would plead that, the claim made by the department in the demand notice in Ex Al dated 4-8-1975 to pay a sum of Rs. 33,152.62, and along side threatening that in the event of non-payment as demanded, clearance of goods would not be allowed, was an illegal demand by virtue of Section 72 of the Contract Act. Once a public authority makes a demand, threatening to take coercive proceedings, such a demand is illegal and any compliance with such a demand notice could not be treated as acquiescence. The High Court had struck down Rule 10-A in W.P.No.4145 of 1975, which is yet to be set aside by the Supreme Court. Hence, the demand made based on he trade notice was also illegal and inoperative, and therefore the payments made under such circum stances would not confer any right on defendants, who cannot ever recover taxes without authority of law. Hence he pleads that, under such circum stances the suit for refund was maintainable.
6. Rule 10 read as follows:
Recovery of duties or charges short-levied, or erroneously refunded. When duties or charges have been short-levied through inadvertence, error collusion or misconstruction on the part of an officer, or through misstatement as to the quantity, description or value of such goods, on the part of the owner, or when any such duty or charge after having been levied, has been owing to such cause, erroneously re funded, the person chargeable with the duty or charge, so short-levied, or to whom such re fund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess as the case may be, on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owners account-current, if any, or from the date of making the refund". Rule.l0-A having been struck down in Agarwal Bros v. Union of India, 1973 T.L.R. 2213, and even though the matter is now pending before the Supreme Court as on date, this matter has to be approached on the basis that the said rule is not in force. It is the claim of the plaintiff that the facts and circumstances of the case fall squarely within Rule 10. It is persistently pleaded that the period of limitation as found therein is applicable to the facts and circumstances of this case and therefore, after a period of three months from the date of demand the defendants had no authority to clam any amount based on the decision of the Supreme Court, which was rendered to never be treated as a voluntary payment, when the amount had been collected under threat of refusal to clear the goods. It is further pleaded that as per Section 72 of the Contract Act, it is implied that the demand made was vitiated by coercion.
7. This Court struck down certain clauses in Notification Nos. 162 and 205 of 1967. But for it, the plaintiff would have been always demanded to pay duty at the rate of Rs. 4.30 per gross. He did not satisfy the conditions for grant of concessional rate of Rs. 3.75 and, therefore, in law, he was liable to pay only Rs. 4.30 per gross. The demand could not be made by defendants because the appeal filed by it against the said judgment was pending in the Supreme Court and it allowed it only on 4-11-1974. Therefore, for this period from 22t7-1967 to 31-12-= 1974, a sum of Rs. 33,152.62 became payable. It was on representations made by the trade Union of India resolved to collect only one-third of the amount which had become due and hence issued Ex.B.l trade notice extending concession which was available only till 30-9-1975. Responding to this concession plaintiff had paid one-third of the amount. Ex-A.2 produced by plaintiff shows that it had paid the amount t of Rs. 11,839.20 on 17-9-1975 under protest. It was a payment made based on the trade notice under Ex.B.l dated 27-6-1975. There was absolutely no threat in Ex.Bl. Only a period had been fixed within which the concession could be availed of. In paragraph 3, it is stated that if one-third of the amount is not paid by the said time, it would entail forfeiture of this concession and the entire out standing dues would be recovered from the Unit concerned. Therefore, the word 'forfeiture' used in a sense inappropriately, was with reference to the concession that was extended, and not any other threat or coercion. No doubt, the plaintiff had paid the amount under protest but still whether defendants are precluded from collecting the amount which becomes lawfully recoverable is the only other aspect to be considered. The decision in W.P.No.4145 of 1975 has no relevance, because it concerns with the striking down of Rule 10-A. No doubt, the matter is now pending in the Supreme Court, but until then, the contents therein cannot be looked into for the purposes of this case at this point of time. Hence, the plaintiffs contention is that, only Rule 10 governs the case, and when the duty had been short-levied, the demand under Ex.A-l, dated 4-6-1975 is hopelessly barred by limitation. But for the threat under Ex.A.l, and trade notice issued under Ex.B-1, the plaintiff would not have paid the amount. Authorities refused to deliver the goods unless the amount is paid and that was why in ExA.2 the remittance was made with the caption "Under protest".
8. R.l0 would apply only if it be shown that duty had been short-levied through indavertence, error, collusion or misconstruction of the part of the Officer. In the instant case, the demand could not be made from time to time, because of the pendency of the appeal in the Supreme Court against the judgment of this Court striking down certain clauses in the two Notifications referred to above. Hence, the short-levy was not due to inadvertence or error or collusion on the part of an officer. There is no question of any officer of the Department misconstruing the provision of the Act of the Notification, etc. Only in such of those instances which are visualised in R.l0, the period of limitation provided therein would apply. Rule 10-A having been struck down the only other provision availed is for the department to rely upon Indian Limitation Act, the demand having been made within the time provided there under. The claim that defendants had no authority to collect the amount after issue of the trade notice, has to necessarily fail.
9. To claim that the defendants have practised coercion by extending threat, as pleaded in para graph 6 of the plaint, learned Counsel relied on some decisions. The learned Judge held that any payment made in pursuance of ExA.l cannot be said to.be a voluntary payment. In Sri Raja Venkat-agiri Apparao Bahadhur v. Timmataju Venkatakuumba Rao, it was held that, if a payment was made into court by plaintiff, when he applied for an order to set aside the sale of his property in execution of a decree against some one else, though not made under protest, it must be considerred to be a payment made under coercion, within the meaning of Section 72 of the Con tract Act. It was pointed out in Kanhyalal v. National Bank of India, 40 Cal.588, by the Privy Council that the word 'coercion' used in Section 72 is used in the general and ordinary sense of the word, and that its meaning is not controlled by the definition in Section 15 of the Contract Act. A Division Bench in Karana Municipality v. New East India Co. A.I.R.1948 Nag.215, held that, merely be cause tax is paid without protest, it cannot be treated as voluntary payment and whether it was voluntary or not is a question of fact and a number of circumstances have to be taken into account. When a municipal tax is paid, the normal presumption would be that the assesses is paying because he knows 100 per cent of the consequences that follow if he does not pay, and in such a case, if the tax had been illegally recovered, then the money is recoverable under Section 72 as payment made in coercion. N.B.Sanjana v. Elphinstone Mills dealt with the scope of Rr.9,10 and 10-A of Central Excise Rules and it was held that if demands are made long after the expiry of the period of three months, under R.l0, then such demands are not valid. It was pointed out then this Rule will have to be understood and interpreted in the context in which it appears. It was further held in the said decision as follows:
Though the word used are 'short-levied' and paid' in order to attract R.l0 it is not necessary that some amount of duty should have been assessed and that the said amount should also have been actually paid. It will apply even to cases where there has been a nil assessment, in which case, the entire duty later on assessed must be considered to be the duty originally short-levied.
10. On behalf of defendants, reliance is placed on Union of India v. Sarojini, 1975 T.L.R.410 wherein the Division bencheld that any payment made whether voluntary or otherwise under a mistake, either of law or of fact, can be, recovered, once the mistake is established, and that merely because notice of demand issued under the Income Tax department in the prescribed form contains a warning that the legal process would be put into force for realisation in the event of non-payment, it does not make the payment made in pursuance of such a notice outside the category of voluntary payments. The payments so made cannot be said to be made under coercion and as such they cannot be recovered.
11. None of the decisions relied upon by plaintiff could be of any avail, because under the facts and circumstances of the case Rule 10 would have no applicability for the reasons stated above. As for Section 72 of the Contract Act, in the light of the decision of the Division Bench relied upon by the defendants, there was no element of coercion in the instant case. Rather, the payment made was not consequent to any threat, but consequent to the trade notice Ex.Al, which did not contain any threat of coercive action that will be taken. There fore, when the demand made was only in respect of one-third of the duty which had become pay able, and the amount having become lawfully recoverable consequent to the decision of the Supreme Court, dated 4-11-1974; plaintiff had no right to seek for refund as prayed for. Hence, this appeal is allowed with costs throughout.