Calcutta High Court
Indian Cable Co. Ltd. vs Cus., Ex. And Gold (Control) Appellate ... on 30 May, 1989
Equivalent citations: 1990(49)ELT342(CAL)
JUDGMENT Monoranjan Mallick, J.
1. The Indian Cable Co. Ltd. in the writ petition prays for a declaration that the purported assessment of the imported cable impregnating non-drawing N.D. 354 under Tariff Item No. 38.01/19(1) of the Customs Tariff Act of 1975 is without jurisdiction, that the said compound containing 70% by weight Petroleum Mineral Oil was assessable under the Tariff Item No. 27.10(1) of the Customs Tariff Act, 1975 and the Respondents are bound to refund the excess amount realised tinder Item No. 38.01/19(1) of the Customs Tariff Act, 1975 and for a writ of Mandamus for directing the Respondents to forthwith refund to the petitioner the sum of Rs. 44,446.38 with interest at the rate of 12% per annum being the excess duty realised by the respondents without jurisdiction and without authority of law.
2. The facts are briefly as follows :
The petitioner is a well-known manufacturing company having its factories in diverse places and its registered office at 9, Hare Street, Calcutta. The petitioner No. 1 carries on the business for manufacturing various kinds of electrical cables and for the said purpose has to import, inter alia, cable impregnating compound. The said imported cable impregnating compound contains more than 70% of weight of Petroleum Mineral Oil. On 15th June, 1978 the petitioner imported 20 metric tonnes cable impregnating non-drawing compound No. ND-354 from M/s. Dussek Brothers Ltd. London under Bill of Entry No. D/1-558 dated 15th June, 1978 on board the vessel S.S. PINDAROS. The said imported materials contained more than 70% of Petroleum Mineral Oil and was meant for actual use in industrial consumption in the manufacture of cable in the factory of the petitioner No. 1 at Jamshedpur.
The petitioners duly submitted all relevant documents including the technical datas supplied by the foreign manufacturer as well as the test certificate and the relevant catalogue and literature to the Custom's Appraiser along with the Bill of Entry for the purpose of assessment of import duty to be levied under the law in respect of the said imported materials which clearly stated that the said materials contained not less than 70% by weight of Petroleum Mineral Oil. The Customs Authority without making any test purported to assess and collect the import duty on the said imported materials under the Heading No. 38.01/19(1) of the Customs Tariff Act and the petitioners had to pay a sum of Rs. 1,11,115.96 on account of the said purported duty calculated at the rate of 60%plus 15% under the mistaken belief that Customs Authority has calculated the duty in accordance with law.
3. If the Customs Authorities examined and tested the said imported goods they would as in the various cases as mentioned in the writ petition assessed and levied the said imported goods as falling under Entry No. 27.10(1) of the Customs Tariff Act, 1975 and should have levied the duty at the rate of 40% and 5% ad valorem. In the result the petitioners are entitled to get the refund of Rs. 44,446.38. The petitioners applied by the application dated November 22,1979 to the Assistant Collector of Customs appraising Refund Section, Customs House, Calcutta for refund of the above sum but by the order dated 6th December 1979 the Assistant Collector of Customs rejected the application on the ground that the same is barred by limitation Under Section 27 of the Customs Act. Being aggrieved the petitioner preferred appeal to Appellate Collector of Customs, Customs House, Calcutta but the appeal has also been dismissed on 23rd May 1980. They then preferred revisional application which has been heard by the Customs, Excise and Gold (Control) Appellate Tribunal, Special Bench, and that Bench by the order dated 11th August 1983 rejected the revision petition.
4. The petitioners allege that the above orders are all arbitrary, illegal and void. The authorities failed to consider that the Customs did not have the legal authority to assess the duty under 38.01/19(1) of the Customs Tariff, that the realisation of the excess duty is without any authority of law and the Customs has no right to collect the excess duty which the said authority is liable to refund and the provision of Section 27 of the Customs Act are not attracted when the levy sought to be refunded is without authority of law and paid by bonafide mistake.
5. Hence this writ petition.
6. The Respondents have not filed any affidavit-in-opposition but have contested the writ petition. It is urged that the concerned authorities were justified in refusing the application for refund as the same was filed long after the expiry of the period of six months of the payment of the duties. It is also urged that the Assistant Collector of Customs, the Appellate Collector of Customs and the Customs, Excise & Gold (Control) Appellate Tribunal were justified in refusing the claim of refund as it was barred by the limitation provided in Section 27(1) of the Customs Act, 1962. My attention has been drawn to the judgment of the Tribunal dated 29.8.85 in which the Tribunal relied on the Supreme Court decision in Miles India Ltd. v. The Assistant Collector of Customs, reported in 1987 (30) ELT 641 (SC) where it has been held that the quasi-judicial authorities functioning under the Customs Act as well as the Tribunal are bound to apply the said time limit and cannot ignore it and resort to the general law of limitation.
7. It is, therefore, urged that the writ petitioner cannot urge before this Court that the orders by the Customs Authorities and the Tribunal are illegal and arbitrary.
8. It is also submitted that when the petitioner did not apply for refund within the period of six months from the date of the payment of the duty, the writ court should not interfere with the order of rejection passed by the Customs Authorities and the Tribunal and should not use its discretion in favour of a party who was not diligent in making a claim for refund within the prescribed period of limitation.
9. The first point for decision is whether the Customs Authorities as well as the Tribunal were justified in rejecting the claim of refund on the ground of limitation.
10. On behalf of the respondent, my attention has been drawn to the decision of Miles India Ltd. v. Assistant Collector of Customs, 1987 (30) ELT 641. In that decision, the Supreme Court has held that the Customs Authorities were justified in disallowing a claim for refund as they were bound by the period of limitation provided therefor under Section 27(1) of the Customs Act. In another decision, reported in Collector of C.E., Chandigarh v. Doaba Co-op. Sugar Mills, 1988 (37) ELT 478 (SC) the Supreme Court has observed that even though for refund of duty recovered without the authority of law, limitation under the general law is applicable, yet refund claims made before the Departmental authorities are governed by the limitation provided under Customs Act/Central Excise Act or the Article made thereunder and the authorities functioning under an Act are bound by its provisions. That was a case in which the refund claims was made by the authorities concerned. The Supreme Court in that decision held that the authorities functioning under the Act are bound by the provisions of the Act and if the proceedings are taken by the department for refund even from the assessee itself the provisions of limitation prescribed by the Act would prevail. The Supreme Court has, however, indicated in that decision that it may, however, be open to the department to initiate proceeding in the Civil Court for recovery of the amount due to the department in case such a remedy is open on the ground that the money received by the assessee was not in the matter of refund.
11. In view of the above discussion, I have no doubt in my mind that the Customs authorities and the Tribunal did not commit any illegality in rejecting the claim on the ground that it is barred by Section 27(1) of the Customs Act.
12. It is contended on behalf of the writ petitioner even if it be conceded that the Customs Authorities and the Tribunal could not go beyond the statute of limitation provided in the Customs Act, yet, when the writ petitioner has clearly established that the Customs have illegally assessed the duty under Heading No. 38.01(19)(l) of the Schedule of the Customs Tariff Act when required to be assessed under Heading 27(10) of the Customs Tariff Act and when the Customs Authorities for the subsequent periods assessed the Customs duty under Heading 27(10) of the Customs Tariff and even in a case of payment of duty under the Heading 38.01(19)(l) of the Schedule to the Customs Tariff Act under protest the Customs Authorities granted the petitioner refund, then it has been clearly established that the goods in question was assessable to the customs duty under Heading 27(10), that the Customs Authorities realised the excise duty without properly verifying the documents of the petitioner, that the imported goods contain petroleum oils not fess than 70% by weight and the petitioner also paid the said duty as demanded by the Customs under the bonafide belief that the duty was assessed properly and that when the petitioner discovered the mistake and applied for refund then the writ court is quite competent to direct the refund as it is a case of payment of excess duty by the petitioner by mistake of law and the recovery thereof by the Customs is without the authority of law and when this refund application is well within a period of three years from the date when the mistake was discovered and the prayer for refund was made then even if the Customs Authorities cannot make the refund in view of Section 27(1) of the Customs Act, the writ court has enough jurisdiction to order the refund and when in this case no affidavit-in-opposition has been filed by the Customs, challenging the facts alleged in the writ petition, then it must be held that the Customs have got nothing to challenge these facts in the writ petition and therefore this court should exercise its jurisdiction to order refund of the excess amount realised by the Customs with interest.
13. As regards the facts stated in the writ petition the respondents have no dispute to raise that the imported goods in question being Cable Impregnating Non-drawing compound weight 20 metric tonnes imported by the petitioner on 15th June, 1978 had the Petroleum content of not less than 70%. The petitioner has also annexed documents in support of their contention that subsequent to this importation even Customs Authorities recovered duties on this very product under the Heading 27(10) of the Schedule to the Customs Tariff Act, 1975. The Respondent Customs have not filed affidavit-in-opposition to challenge the facts of the case. Therefore, the assessment of the customs duty for the above goods in question under the Heading 38.01/(19)(l) was definitely without the authority of law as it was assessable under the Heading 27.10 and as a result the excess amount of Rs. 44,446.38 has been realised by the Customs from the petitioner on 15th June, 1978.
14. Therefore the recovery of the above amount by the Customs is definitely without any authority of law. The petitioner has alleged that it has paid the said duty bonafide believing that the duty was properly assessed. It is, however, urged in the writ petition that the public notice issued by the Bombay Port was thereafter detected by the petitioner and the petitioner also got the similar goods released from Bombay Customs during 1979 by paying duty under the Heading 27.10(1) of the Schedule to the Customs Tariff Act. It is also alleged that sometime in 1979 Assistant Collector of Customs, Bombay sent a sample of Cable Impregnating Compound 59 to the University of Bombay, Department of Chemical Technology and the Department of Chemical Technology submitted result of such tests to the Assistant Collector of Customs Bombay reporting that the petroleum oil contained in the goods was by weight 72.4%. The petitioner has also alleged that he also obtained report in respect of similar materials from Jadavpur University for the purpose of submitting the same for the Customs Authority, Calcutta and the report was obtained dt. 26th July, 1978 which certified that the sample of ND 359 was found to contain Petroleum 76% weight. The copy of the report is marked Annexure 'B'.
15. The petitioners have also alleged that in 1981 the Calcutta Customs also assessed the customs duty for this product under Heading 27.10.
16. From the above discussions, it is clear that after the payment of the duty in this case, on 15th June, 1978 the petitioner were satisfied from receiving the reports both from the Jadavpur University as well the report submitted to the Assistant Collector of Customs, Bombay by the Department of Chemical Technology, of the University of Bombay that the duty that was assessed for the goods in question was erroneously assessed under the Item 38.01/(19)(l) of the Schedule to the Customs Tariff Act, 1975. The petitioners have applied for refund of the excess amount on November 22,1979 that was definitely beyond six months from the date of the payment of the duty. But it is consistently held by the Supreme Court that when the tax was paid without the authority of law then the general law of limitation should apply and the claim of three years from the date of knowledge of mistake was not barred. Several decisions of the Supreme Court have been cited in support of the contention that Section 27 of the Limitation Act is not applicable for recovery of the duty without the authority of the law. Following decisions of the Supreme Court are relevant. In it has been that the provision of Section 27 of the Customs Act has no application when the assessment and the recovery was made without the authority of law. In it has also been observed that when the assessment and excess duty is without the authority of law, then there is a legal obligation on the part of the Government to refund the excess amount and corresponding right to the assessee to recovery.
17. The latest decision of the Supreme Court cited before me is reported in Salonah Tea Co. Ltd. v. Supdt. of Taxes, Naogan and Ors., 1988 (1) S.C.C. page 401. In that decision, the Supreme Court has held that in an application under Article 226 of the Constitution, the Court has power to direct the refund. The Division Bench of Supreme Court have observed that in the matter of refund Courts have made a distinction between those cases where the claimant approaches High Court seeking relief for refund only and those where refund is sought as a consequential relief after striking down the order of assessment, that a petition solely praying for the issue of a writ of Mandamus directing the State to refund the money alleged to have illegally collected by the State as tax is not ordinarily maintainable for the simple reason that a claim for such a refund shall always be in a suit against the authority which have illegally collected the money as a tax and in such a suit it is open to the State to raise all possible defences to the claim which cannot in most cases the appropriately raised and considered in exercising the writ jurisdiction. The Supreme Court has further observed that the High Court shall exercise power under Article 226 of the Constitution to direct the refund when the refund is claimed as a consequential relief after striking down the order of assessment unless there has been avoidable laches on the part of the petitioner which indicate either the abandonment of his claims or which is of such a nature for which there is no probable explanation and which will cause any injury either to respondent or to any third party. It has further been observed that in some cases the period of three years is normally taken as a period beyond which the court should not grant relief but that is not an inflexible Article and that it depends on the facts of each case. In that decision the High Court quashed the assessment but did not direct the order of refund of the tax paid on such assessment. The Supreme Court setting aside the judgment of Gauhati High Court directed that on setting aside the assessment the High Court under Article 226 of the Constitution should have directed the refund of the tax paid on such assessment.
18. In the above decision of Supreme Court all the previous decisions of the Supreme Court have been reviewed by the Division Bench of the Supreme Court presided over by Sabyasachi Mukharji, J.
19. It is clear from the above decision, as well as the other relevant decisions referred to by the Supreme Court in the above decision that when a tax or duty was paid by mistake of law and such mistake was subsequently disclosed to the petitioner, then even though such application for refund was filed before the Customs Authorities beyond the Special Law of limitation prescribed under Section 27(1), the High Court in its jurisdiction under Article 226 of the Constitution on being satisfied that the payment was made by mistake of law and the refund was applied for on discovery of such mistake can grant to the assessee the order of refund even though the claim is barred by the Special Law of limitation. It is well-settled that when the payment is made by mistake and the recovery by customs is without authority of law then Section 27(1) of the Customs Act has no manner of application and that would not debar the petitioner from recovering such assessment by filing an application under Article 226 of the Constitution. In this case the writ petitioner has prayed for declaration that the purported assessment of the imported cable impregnating compound under Tariff Item No. 38.01/19(1) of the Customs Tariff Act, 1975 has been made without jurisdiction and that the same was assessable under Item No. 27.10(1) of the said Tariff Act.
20. I am satisfied that the petitioner is entitled to such a declaration. So the principle laid down in Salonah Tea Co. case is squarely applicable and this Court can declare the excess amount realised as without authority of law and can direct the refund of the excess amount paid by invoking jurisdiction under Article 226 of the Constitution. On behalf of the Respondent it is streneously argued that the petitioner's only remedy is by filing a civil suit for recovery of the said amount is not acceptable in view of the decision of the Supreme Court in Salonah Tea Co.'s case.
21. In the result, I allow the writ petition and make the Rule absolute in terms of prayers (a), (b), (c) and (d) of the writ petition. The amount of Rs. 44,446.38p. with interest at the rate of 12% per annum from the date of payment till the date of the recovery to the writ petitioner shall be paid by the respondents to the writ petitioner within a period of two months from the date of this order.
22. The writ petition is allowed. The Rule is made absolute.
23. All parties shall act on a signed copy of the operative portion of this judgment on the usual undertaking.