Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Cyanides And Pigments Ltd. on 31 October, 1985
Equivalent citations: 1986(6)ECR241(TRI.-DELHI), 1986(24)ELT89(TRI-DEL)
ORDER
S. Venkatesan, Senior Vice President
1. This case relates to the levy of excise duty on synthetic red oxide of iron cleared by the respondents from their factory during the period 1-3-1975 to 2-2-1977. At the time of clearance, duty was paid under Central Excise Tariff Item 68. Subsequently it was held that the goods were classifiable under T.I. 14 and were exempt from duty. The respondents filed a refund claim on 19-1-1979 in respect of duty paid on various dates between 4-6-1975 and 2-2-1977. Their claim was rejected by the Assistant Collector, on the ground that it had been filed much after the expiry of six months as required under Rule 11 of the Central Excise Rules. Against this order the respondents filed an appeal to the Appellate Collector of Central Excise, Calcutta. They cited a judgment of the Hon'ble Patna High Court in the case of Bata Shoe Company (Pvt.) Ltd. v. Collector of Central Excise, Patna-1972 Tax L.R. 1833 to the effect that such a case would not be governed by Rule 11 of the Central Excise Rules. The Appellate Collector accepted this submission and allowed the appeal, under his order dated 23-11-1981. Thereupon the Central Government issued a show cause notice dated 5-10-1982 under Section 36(2) of the Central Excises and. Salt Act, 1944, as then in force. They expressed the tentative view that Rule 11 was applicable to the case and that their refund claim was time-barred under that rule. They accordingly proposed to set aside the order of the Appellate Collector and pass orders as deemed fit.
2. On the provisions relating to the Tribunal coming into force, these proceedings were transferred to the Tribunal to be continued as an appeal by the Collector of Central Excise, Patna.
3. The matter was first taken up on 11-10-1985. Shri Ravinder Narain, appearing for the respondents, raised a preliminary point that the review show cause notice was barred by limitation. He referred to the judgment of the Delhi High Court in the case of Associated Cement Companies Ltd. (1981 E.L.T. 421). The Bench pointed out that there was perhaps a judgment of the Hon'ble Supreme Court directly on the point raised. Since neither side could immediately recall such a decision, the matter was adjourned to today to enable this point to be examined.
4. When the matter was taken up today, Shri P.K. Ram was present for the respondents. He stated that he had seen the judgment of the Supreme Court in the case of M/s. Geep Flashlight Industries Ltd. (1983 E.L.T. 1596 S.C.) which was the case the Bench had in mind and that he would take this pase into account in making his submissions.
5. Shri Ram referred to the provisions of Section 36(2), Central Excises and Salt Act, as in force at the time of issue of the show cause notice. The second proviso to this sub-section was to the effect that no proceedings could be commenced in respect of any decision or order after the expiry of a period of one year from the date of such decision or order. The third proviso, which has special relevance to the present case, reads as under :-
"Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this Section unless the person affected by the proposed order is given notice to show cause against it within the time limit specified in Section 11 A."
Shri Ram submitted that in the present case the Appellate Collector's order directing refund has been passed on 23-11-1981. The show cause notice under Section 36(2) bad been issued on 5-10-1982, i.e. less than a year but more than six months after the date of the Appellate Collector's order. Shri Ram fairly admitted that the refund, though directed by the Appellate Collector, had not been actually paid. He however contended that, even if the Appellate Collector's order was taken to be erroneous, the amount of refund should be taken as covered by the expression "erroneously refunded". Accordingly; the Central Government seeking to review the Appellate Collector's order in terms of Section 36(2), was required to issue the show cause notice within the time-limit specified in Section 11 A, Central Excises and Salt Act, i.e. within six months of the date of the Appellate Collector's order. Since the show cause notice had admittedly been issued more than six months after that date, it should be taken as outside the scope of Section 36(2) and, therefore, as invalid. Consequently, the proceedings initiated under Section 36(2) were also invalid and the show cause notice should be discharged.
6. The Bench asked Shri Ram for his comments with reference to the observations of the Supreme Court in the Geep Flashlight Industries case. In that case, which was one relating to proceedings initiated by the Central Government under the parallel provision of the Customs Act, namely Section 131(3), the Hon'ble Supreme Court had occasion to comment on the meaning of the expression "erroneously refunded" appearing in Section 28, Customs Act. The Supreme Court had observed that in a case of erroneous refund, the period of issue of a show cause notice under Section 28 would be six months from the date of actual refund. If no refund had in fact been made, limitation could not be said to arise, as grant of refund was not actual refund. Accordingly, the Supreme Court held that there was no bar of limitation it that case. It was pointed out to Shri Ram that the circumstances of the present case were similar to those in that case, and the expression to be construed was the same. If the interpretation given by the Hon'ble Supreme Court were applied to the present case it would follow that the show cause notice under Section 36(2) was not barred by limitation.
7. Shri Ram submitted that the decision in the Geep Flashlight Industries case was with reference to the provisions of the Customs Act, 1962. Section 131(3) of that Act, under which the show cause notice had been issued, was in similar terms to Section 36(2) of the Central Excises and Salt Act, but it had no reference to duty having been "erroneously refunded". He therefore submitted that that decision should not be held as applicable to the present case. Shri Ram also referred to the decision of the Delhi High Court in the case of Associated Cement Companies Ltd.-1981 E.L.T. 421 (Delhi).in which it had been held that where the third proviso to Section 36(2) was attracted, the shorter period of limitation prescribed in that proviso would apply, and that the period would run from the date of the appellate order.
8. Shri Ram also referred to the decision of the Supreme Court in the case of N.B. Sanjana v. Elphinstone Spinning and Weaving Mills Co. Ltd. (1978 E.L.T. 399). in paragraph 18 of that judgment, Rule 10 of the Central Excise Rules had been interpreted and it had been observed that the proper interpretation to be placed on the expression "paid" occurring in that rule was "ought to have been paid". Shri Ram submitted that applying that analogy, the term "refunded" in the third proviso should be read as "ought to have been refunded". When the Appellate Collector passed his order directing refund, the proper amount ought to have been refunded to the respondents. Therefore, even if the refund had not actually been made, the date of the Appellate Collector's order could be deemed to be the date on which the amount had been "erroneously refunded".
9. With reference to the preliminary objection raised by the respondents, Shri Tripathi submitted that the show cause notice was not time-barred. He relied on the observations of the Supreme Court in the Geep Flashlight Industries case. According to him, those observations made it clear that a case where the refund had been ordered but not paid could not be said to be a case where duty had been "erroneously refunded". From the terms of the third proviso it would be seen that it was intended to apply only to a case where a fresh liability over and above that resulting from the order sought to be revised, was proposed to be imposed. The present case did not come within the scope of the proviso and, therefore, the show cause notice should be taken as issued within time.
10. In reply, Shri Ram reiterated the submissions already made by him. He further submitted that if the view put forward by Shri Tripathi was correct, this would mean that by not giving effect to the order of refund passed by the first appellate authority, the Department would be able to defeat the time-limit laid down under Section 36(2), and that this would result in a situation which was unfair to the assessees.
11. We thereafter called on Shri Tripathi to proceed with his arguments in support of the Collector's appeal. Shri Tripathi submitted that the refund claim had been made nearly two years after the end of the period to which it related, and was therefore clearly beyond the six months' limit laid down in Rule 11. With reference to the observations of the Appellate Collector, Shri Tripathi submitted that his observation that there was no misconception or inadvertence on the part of the appellants was misconceived, since Rule 11, as it stood at the relevant time, did not make any reference to these ingredients. Shri Tripathi submitted that the Tribunal had consistently taken the view that refund claims under the Central Excises and Salt Act or the Customs Act should be filed within the periods of limitation specified in or under these Acts. The issue had been examined in great detail with reference to the parallel provisions in the Customs Act in the Tribunal's order in the case of Miles India Ltd., 1983 E.L.T. 1026 and the view taken by the Tribunal in that case had been approved by the Hon'ble Supreme Court (1985 E.C.R. 289 S.C.).
12. Shri Tripathi was asked whether he had any comments to make with reference to the judgment of the Hon'ble Patna High Court in the case of Bata Shoe Company Ltd., on which the Appellate Collector had placed reliance. Shri Tripathi stated that in view of the judgment of the Hon'ble Supreme Court in the case of Miles India Ltd., reliance on the judgment of the Patna High Court was of no avail to the respondents.
13. Replying to Shri Tripathi, Shri Ram referred to paragraph 4 of the Appellate Collector's order. Therein the Appellate Collector had observed that when the Central Excise officers committed the mistake of classifying the product under T.I. 68, though it was correctly classifiable under T.I. 14, therewas no misconception or inadvertence on the part of the appellants and, therefore, the refund claim would not be governed by Rule 11 of the Central Excise Rules. He submitted that the Appellate Collector had correctly taken this view. Shri Ram also referred to a Single Bench judgment of the Delhi High Court in the case of Vazir Sultan Tobacco Company Ltd. v. Union of India and Ors.-1981 E.L.T. 140 (Del.). That was a case where duty was held to have been realised in excess by basing the value on the price charged by the dealers of the petitioners. In that case it had been held that the application for refund ought not to have been regarded as an application under Rule 11 of the Central Excise Rules as that rule applied to the refund of duty or charges which were paid under a mistake. The application should have been regarded as a representation not covered by Rules 11 or 173J, and dealt with accordingly. Shri Ram submitted that in the present case also the claim should not have been considered as made under Rule 11 but as one seeking an administrative order.
14. The Bench pointed out to Shri Ram that the Appellate Collector's reliance on the Patna High Court judgment in the case of Bata Shoe Company Ltd. appeared to have been misplaced. It was obvious that the case before the Patna High Court pertained to the period prior to 6-8-1977. Rule 11, as it stood, prior to that date, referred to claims for refund of duties or charges in consequence of their having been paid through inadvertence, error or misconstruction. With effect from 6-8-1977 Rule 11 had been amended and these ingredients had been omitted. The material part of the rule, as amended, read as follows :-
"Any person claiming refund of any duty paid by him may make any 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".
It was pointed out to Shri Ram that the claim for refund in the present case was filed on 19-1-1979, i.e. after amendment of Rule 11, and would therefore be governed by the provisions of the amended rule. Under those provisions there was no requirement that the claim should have been on the basis that duty had been paid through misconception, inadvertence, etc. Accordingly, it appeared that the Appellate Collector had gone wrong in relying on certain observations of the Patna High Court made with reference to a situation when the wording of Rule 11 was materially different. On this Shri Ram submitted that the relevant rule would be one which was in force when the duty was paid, i.e. between 4-6-1975 and 2-2-1977. In this view it was Rule 11 prior to amendment that was attracted and therefore the observations of the Patna High Court were rightly relied upon by the Appellate Collector.
15. In reply, Shri Tripathi reiterated that the refund claim was time-barred. Even in equity the respondents had no case, as they had taken nearly two years to file the refund claim.
16. We have carefully considered the submissions of both sides. We shall first take up the preliminary objection that the show cause notice under Section 36(2) was barred by limitation in terms of the third proviso. We may straightaway point out that the judgment of the Delhi High Court in the case of Associated Cement Companies Ltd. is of no assistance to the respondents. It has not been disputed that if the circumstances described in the third proviso exist, it is the shorter time-limit under that proviso which would be applicable. The question is whether those circumstances exist, in view of the fact that this was a case of refund ordered but not paid : and this point is not dealt within the judgment.
17. We now come to the judgment of the Supreme Court in the case of Geep Flashlight Company. It is true that that was a judgment with reference to Section 131 of the Customs Act, and that the expression "erroneously refunded" does not occur in Sub-section (5) thereto. However, these provisions are parallel to those in Section 36 of the Central Excises and Salt Act. Sub-section (5) by reference brings in Section 28, Customs Act, and that section uses the expressions "refund has erroneously been made" and "erroneously refunded" which are similar or identical to those used in the third proviso to Section 36(2). It is true that in that case the Supreme Court had overruled the objection that the show cause notice was time-baned on the ground inter alia that Sub-section (5) did not refer to erroneous refund. However, the Supreme Court had also taken into account the provisions of Section 28, which were brought in by reference, and had in unmistakable terms pointed out that the grant or ordering of refund was different from the payment of refund. This will be seen from the following extracts of the judgment:-
"18. Counsel for the appellant contended that even if refund has not been made, the date of refund will be the relevant date and six months would be calculated from 20 April, 1972 when refund was ordered and, therefore, the notice dated 10 February, 1975 will be hit by the provisions of limitatation of six months from the relevant date. The contention of the appellant is wrong. It is only where refund has in fact been made and money has been paid, the relevant date will be six months from the date of actual payment for refund.
19. The contention of the appellant that refund will also be a case of short-levy is not correct. Section 28 speaks of three kinds of errors in regard to duties. One is non-levy, the second is short-levy and the third is erroneous refund. Levy is linked to assessment. Section 17 of the Act speaks of assessment order. In the process of assessment two kinds of errors may occur. One is non-levy and the other is short-levy Refund is dealt with in Section 27 of the Act. The expression "erroneously refunded" means refunded by means of an order which is erroneously made. These are three categories of errors in regard to duties.
20. The notice under Section 28 of the Act speaks of demand for money to pay back and the notice is required to be given within six months from the relevant date. In the case of erroneous refund, it would be six months from the date of actual refund. If no refund has in fact been made, limitation cannot be said to arise inasmuch as the relevant date under Section 28 in the case of erroneous refund speaks of the date of refund. The order dated 20 April 1972 granted refund. Grant of refund is not actual refund."
18. In the present case the refund was ordered by the Appellate Collector but was not actually paid. In terms of the above quoted observations of the Supreme Court, this was clearly a case of "grant of refund, but not actual refund". The expression used in Rule 11 i.e. "erroneously refunded" is also to be found in Section 28 Customs Act. We consider that these observations of the Hon'ble Supreme Court, made with reference to a similar situation and similarly worded provisions in the Customs Act, are fully applicable to the present case.
19. Shri Ram had submitted that such a view would lead to a situation where the Department could by delaying the payment of refunds, and thereby gain unlimited time for initiating review proceedings. To this, it may be pointed out that in any case the general time-limit of one year contained in the second proviso would be applicable. Further, we cannot interpret a provision on the basis that the departmental authorities would systematically act in an improper manner. We further observe that the same argument could have been advanced in the Geep Flashlight Industries case which came before the Supreme Court. In any event we are bound by the law as laid down by the Supreme Court and we therefore hold that the show cause notice under Section 36(2) was not hit by limitation.
20. We now come to the merits of the case. In this connection Shri Tripathi submitted that the Tribunal had consistently taken the view that the special time-limits in the Customs Act and the Central Excises and Salt Act would apply to refund claims made under those Acts. As pointed out by him, the view taken by the Tribunal on the parallel provisions in the Customs Act was approved by the Hon'ble Supreme Court in its order dated 6-4-1984 in the case of Miles India Ltd.
21. The respondents had relied on the judgment of the Hon'ble Patna High Court in the case of Bata Shoe Company Ltd. As observed above, that judgment was delivered with reference to a different situation, at a time when Rule 11 was differently worded, and was applicable only to claims for refund made on the ground of payment through inadvertence, error or misconstruction. The claim in the present case was made after Rule 11 has been amended to omit any reference to the nature of the ground on which the claim was made. It has been held by a larger Bench of the Tribunal in the case of Atma Steel (Pvt.) Ltd. and Ors. v. Collector of Central Excise, Chandigarh and Ors, 1984 (17) E.L.T. 331 (Tribunal) 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. Therefore it was Rule 11 as in force on 19-1-1979 that was applicable to the present case. Accordingly, the Appellate Collector's reliance on the Patna High Court judgment was misplaced.
22. The judgment of the Delhi High Court in the case of Vazir Sultan Tobacco Company Ltd. was also, like the Patna High Court judgment, with reference to a period before the amendment of Rule 11. The duty payment was made between 22-2-1972 and the claim for refund was made on 30-3-1973. In holding that the refund application was not covered by Rule 11, the High Court went by the wording of the Rule as it stood before the amendment. The observations of the Delhi High Court on the applicability of Rule 11 to the case before it, would therefore also not be of assistance to the respondents in this case. As regards the general observations regarding the applicability of the time-limit in such cases, there is substance in Shri Tripathi's submission that the position has subsequently been clarified and confirmed by the Supreme Court in the case of Miles India Ltd.
23. We, therefore, find that the order of the Appellate Collector was not a legal, proper and correct order. We, accordingly, allow this appeal, set aside the Appellate Collector's order dated 23-11-1981 and restore the Assistant Collector's order dated 4-7-1979.