Gujarat High Court
Indo-Nippon Chemicals Co. Ltd. And Anr. vs Union Of India (Uoi) And Ors. on 22 February, 2002
Equivalent citations: 2002(82)ECC657, 2005(185)ELT19(GUJ), (2002)3GLR8
Author: D.M. Dharmadhikari
Bench: D.M. Dharmadhikari
JUDGMENT D.M. Dharmadhikari, C.J.
1. Rule. Mr. Mukesh R. Shah waives service of Rule.
2. The petitioner-company is manufacturing plasticizers. The petitioner Company has been taking the MODVAT credit of duty paid on the inputs received by its factory for manufacture of goods to be cleared for home consumption as well as for export.
3. The petitioner-company is aggrieved by the orders of the respondent-Central Excise Authorities in retaining the benefit of Rs. 41,18,212/- alleged to have been illegally accrued in favour of the revenue. According to the petitioner company, MODVAT credit for the aggregate amount mentioned above was rightly taken, but under mutual mistake, both of the petitioner as manufacturer and the respondent Authorities, the said MODVAT credit was reversed in February/ March, 1995. The petitioner company as well as the respondents were totally oblivious of Public Notice No. 6 of 1995 issued by the Central Government on 9-1-1.995 and which was published in 1st March issue of Excise Law Times at page T-17 that manufacturers/exporters working under the Quantity Based Advance Licence Scheme (Q.B.A.L.) can take input stage credit under amended Notification No. 204 of 1992 containing Q.B.A.L. Scheme. When the petitioner discovered this mistake in November, 1995, it filed an application under Section 11B of the Central Excise Act, 1944 (short 'Act') which came to be rejected finally on the ground of limitation by respondent No. 3-Assistant Commissioner of Central Excise, against which, the present petition under Article 226 of the Constitution of India has been preferred.
4. A few important facts in greater details are necessary to appreciate the legal controversy before us arising under the provisions of Section 11B of the Act.
5. The period involved in the present case is between the years 1994 and 1995 and in the relevant period, there were two policies of the Union of India under the Import-Export Policy for granting licences to various exporters for import of goods against such exports. One Scheme was known as Value Based Advance Licence Scheme (V.B.A.L.) and the other Scheme was known as Quantity Based Advance Licence Scheme (Q.B.A.L.).
6. The Central Government had issued two Notifications under the Act, thereby providing full exemption to the goods imported against V.B.A.L. as well as Q.B.A.L. Under Notification No. 203 of 1992-CUS dated 19-5-1992, as modified from time to time, exemption was granted to the materials imported against V.B.A.L. Similarly, under Notification No. 204 of 1992-CUS, dated 19-5-1992, as amended from time to time, exemption was granted to the materials imported against Q.B.A.L.
7. The above exemptions under both the Notifications were subject to fulfilment of conditions laid down therein. One of the conditions in Notification No. 203 of 1992-CUS relating to V.B.A.L. Scheme was that no input stage credit can be obtained while manufacturing exported goods under Rule 56A or Rule 57A of the Central Excise Rules, 1944. The petitioner company had obtained Quantity Based Advance Licence under Q.B.A.L. Scheme and had manufactured various goods and exported them to various foreign countries during the years 1994 and 1995. Since the petitioner had been manufacturing and clearing same goods for home consumption as well, it availed MODVAT credit of duty paid on the inputs used in relation to manufacture of such goods cleared for home consumption as well as for export. While working under Q.B.A.L. Scheme covered by Notification No. 204 of 1992-CUS, local Central Excise Officers in charge of the petitioner's factory insisted that input stage credit taken by the petitioner for manufacturing goods used for export should be reversed as it was not entitled to MODVAT credit of such manufactured products exported. On their insistence, the petitioner-company reversed the total MODVAT credit of Rs. 41,18,212/- by filling debit entries in the MODVAT Register.
8. In the meantime, Central Government had amended Notification No. 204 of 1992 containing Q.B.A.L. Scheme in which it was provided that input stage credit could be taken by the manufacturer/exporter working under the said Q.B.A.L. Scheme. The only further restriction imposed in the amended Q.B.A.L. Scheme was that manufacturer/exporter would not be allowed to transfer or sell material imported and the said imported material has to be used by the manufacturer/exporter itself/himself. This amendment to Q.B.A.L. Scheme was notified by Public Notice No. 6 of 1995 issued by the Central Government on 9-1-1995 and published on 1-3-1995 in the issue of Excise Law Times, page T-17. The petitioner's case is that knowledge of the said Public Notice and amended policy of the Central Government in Q.B.A.L. Scheme contained in Notification No. 204 of 1994 was derived by it in November, 1995. Its further case is that although the petitioner company had rightly availed the MODVAT credit which it was entitled to do, because of want of knowledge of the amendment of Q.B.A.L. policy by Public Notice No. 61995 issued by the Central Government, the local Central Excise Officers also erroneously insisted on the petitioner to reverse the MODVAT credit entries in its MODVAT Credit Register. Thus, it was a case of mutual mistake on the part of the petitioner and the local Central Excise Authorities.
9. The petitioner, in November, 1995 filed an application for refund of MODVAT credit erroneously reversed by it.
10. The Assistant Commissioner of Central Excise rejected the refund claim stating that provisions of Section 11B of the Act were not applicable to claims based on alleged erroneous reversal of MODVAT credit.
11. The petitioner company then preferred an appeal to the Commissioner of Central Excise and Customs (Appeals) who vide his order dated 4-9-1998 set aside the order of the Assistant Commissioner and remanded the case to the original authority for adjudication afresh on the ground that provisions of Section 11B of the Act are attracted to the refund application. After remand of the case to the Original Authority, the petitioner received a show-cause notice dated 7-12-1998 proposing to reject the refund application on the ground that the same was filed on 29-11-1995, and was barred by the prescribed limit of six months under Section 11B of the Act, computing the commencement of limitation from February/March, 1995 being the months in which MODVAT credit entries were alleged to have been erroneously reversed. The petitioner company then filed a reply to the show-cause notice taking the stand that to an application for refund based on restoration of credit, limitation period under Section 11B of the Act would not be applicable. The Assistant Commissioner, by the impugned order passed on 15-12-1998 (Annexure 'I') rejected the application for restoration of MODVAT credit on the ground that counting the period of limitation from February/March, 1995 being the months in which alleged erroneous reversal of credit entries were made, the application for refund filed on 18-11-1995 was beyond the prescribed period of six months.
12. Learned Counsel Mr. Paresh Dave appearing for the petitioner raised various legal contentions. Firstly, it is contended that MODVAT credit is not 'duty of excise', and therefore, Section 11B of the Act is not applicable for refund or restitution of MODVAT credit, and therefore, the time-limit of six months prescribed for claiming refund of duty of excise under Section 11B would also not be attracted in the present case. Heavy reliance is placed on the decision of the Supreme Court in the case of Collector of Central Excise v. Raghuvar (India) Ltd., reported in AIR 2000 SC 2027 in support of this contention. Learned Counsel referred to Rule 2(27) of the Central Excise Rules, 1944, which defines the term 'duty' to mean duty payable under Section 3 of the Act. It is submitted that MODVAT credit (now described as Cenvat in newly introduced Section 2AA of the Central Excise Act) was earlier covered only by Rules 57A to 57J of 1944 Rules and is not 'duty' payable under Section 3 of the Act. Relying on the decision in Raghuvar case (supra), it is urged that the said case arose on facts reflecting a converse situation on MODVAT credit. In it action was initiated for recovery of erroneous MODVAT credit by the Department under Section 11A of the Act, and it was held that provisions dealing with MODVAT credit constitute a complete self-contained Scheme and provisions of Section 11A cannot be read into it. Taking support from the said decision of the Supreme Court in Raghuvar case (supra), learned Counsel argued that Sees. 11A and 11B, as held by the Larger Bench of the Supreme Court in Mafatlal Industries case, reported in 1997 (5) SCC 536, are complementary to each other and as Section 11A cannot be availed by the Department in case of MODVAT credit, Section 11B should also be held as not available for claiming refund of MODVAT credit by a manufacturer. In this respect, it is further pointed out that it is only after insertion of Section 2A to the Act by Section 91 of the Finance Act, 2000 with effect from 12-5-2000 that reference to the expressions 'duty of excise' or 'duty' will prospectively be construed to include CENVAT (previously known as MODVAT). Thus, the Legislature has now included MODVAT/Cenvat in the expression 'duty' and this Section, is therefore, applicable only with effect from 12-5-2000. Prior to the above period, the expression 'duty' as defined under Rule 2(27) would apply and MODVAT was not 'duty' during the relevant period.
13. On the basis of the first contention that Section 11B of the Act with the procedure and limitation contained therein is not attracted to the refund based on MODVAT credit, it is submitted that since the petitioner has not passed on the burden of excise to any other party and as it is not a case of unjust enrichment, on the principle laid down by the Larger Bench of the Supreme Court in Mafatlal Industries case (supra), this Court in exercise of powers under Article 226 of the Constitution should allow the application and permit MODVAT credit either in cash or by adjustment towards duty on its future clearances. Reliance is also placed on the decision of the Supreme Court in Union of India v. Raj Industries, reported in 2000 (120) ELT 50.
14. Learned Counsel Mr. M. R. Shah appeared for the Department and in his reply, made an attempt to distinguish the case of Supreme Court in Raghuvar case (supra) stating that it arose out of the proceedings under Section 11A of the Act, and it was decided on the basis of the provisions contained in Rule 57-I as it stood prior to its amendment on 16-10-1988 as part of the MODVAT Scheme. On behalf of the Department, learned Counsel submits that on a plain reading of provisions of Section 11B particularly reading clause (c) below proviso to Sub-section (2) thereof, the claim based on MODVAT credit is clearly covered by the provisions of the said Section and the procedure and period of limitation prescribed therein are clearly attracted. It is argued that since the claim based on MODVAT credit is clearly barred by limitation under Section 11B of the Act, the petitioner should not be allowed to indirectly obtain relief by approaching this Court under Article 226 of the Constitution, when such a course is not approved by the Larger Bench of the Supreme Court in Mafatlal Industries case (supra). In this respect, it is further argued that the petitioner itself invoked the provisions of Section 11B and approached the Assistant Commissioner of Central Excise. Aggrieved by rejection of the claim by him, it challenged the same before the Appellate Authority and the latter remanded the matter for adjudication afresh. In these circumstances, the petitioner should not be allowed to turn round and contend that provisions of Section 11B are not attracted to its refund claim.
15. Faced with the situation aforesaid, arising from the plain language in clause (c) of the proviso to Sub-section (2) of Section 11B, which refers expressly to MODVAT credit, the learned Counsel for the petitioner in his counter reply submitted that the proviso contained in clause (c) should not be construed as enlarging the scope of the main provisions in Sub-section (1) of Section 11B to read MODVAT credit to be covered by it. On the interpretation of the main provisions in the light of the proviso, reference is made to the decisions of the Supreme Court in --
Income Tax Commissioner v. I. M. Bank Limited, reported in AIR 1959 SC 712;
Dibyasingh Malana v. State of Orissa, reported in AIR 1989 SC 1737 (Paras 2 & 7) Dwarka Prasad v. Dwarka Das, reported in AIR 1975 SC 1758 (Paras 17 & 18) S.B.K. Oil Mills v. Subhash Chandra, reported in AIR 1961 SC 1596 (Paras 8 & 9) It is submitted that so far as the legal position is concerned, it would not change on the basis of the remand order made at interlocutory stages of the proceedings. The views expressed by the Departmental Authorities, it is argued, are not binding on the High Court. Reliance is placed on --
Jasraj v. Hemraj, reported in AIR 1977 SC 1011 (Para 14) Collector of Central Excise v. Hindustan Lever Ltd., reported in 2000 (120) ELT 3 (SC) (Para 5).
16. On the basis of the rival contentions advanced, the principal question that has to be decided by us is, regarding applicability of the provisions of Section 11B of the Act. At the outset, we have to make it clear that the legal position based on the provisions of the Act cannot change on the basis of different stands taken by the petitioner at different stages of the proceedings. It is rightly submitted on behalf of the petitioner that the views expressed by the respondent Excise Authorities are not decisive and will have to be tested by this Court on the basis of the provisions of the Act and the Rules.
17. It is true that prior to insertion of Section 2A with effect from 12-5-2000 in the Act, by Section 91 of the Finance Act, 2000, in the expression 'duty of excise' or 'duty', MODVAT or CENVAT was not expressly included. But this legislative change is no reason to hold that expression 'duty of excise' or 'duty' prior to insertion of Section 2A of the Act had no relation whatsoever with MODVAT credit. Under MODVAT Scheme, duty paid on inputs is allowed to be taken as credit for duty payable on the final product. A manufacturer who avails MODVAT Scheme takes credit of duty paid on inputs in clearance of his final product. This credit taken is nothing but a constituent of duty. When credit of duty is taken or credit is denied, duty to that extent, decreases or increases on the final product. MODVAT credit is thus the second name for duty. Merely because it is now expressly included in the definition of duty by insertion of Section 2A in the Act, it cannot be held that it was not so prior to the insertion of that Section. The argument, therefore, advanced that MODVAT credit is not a part of duty, has to be rejected as unsustainable on the provisions of the Act, Rules and the MODVAT Scheme contained in them.
18. Learned Counsel for the petitioner has very heavily relied on the decision of the Supreme Court in Raghuvar's case (supra) to support his submission that the claim based on MODVAT credit is not covered by Section 11B of the Act. The Supreme Court in the said case held that the Department's action for recovery of duty consequent upon erroneous reversal of MODVAT credit would not be covered by Section 11A of the Act.
19. We have carefully gone through the facts and ratio of the said judgment of the Supreme Court in Raghuvar case (supra). What we find is that the Supreme Court therein compared the provisions of Section 11A with the provisions contained in Rule 57-I as originally stood prior to and after the amendment made on 16-10-1988. After comparing the provisions of Section 11A and Rule 57-I unamended and Rule 57-I amended, the Supreme Court came to the following conclusion :
"The recovery of duty availed of and utilised in utter breach of the faith and mutual trust and confidence which is the raison d'etre for the proper and successful working of the MODVAT Scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act of any excise duty not levied or paid or has been short levied or short paid. They fall into two distinct and different categories altogether with basic as well as substantial differences to distinguish them from each other. As a matter of fact, Rule 57-I envisages disallowance of the credit and consequential adjustment in the credit account or the amount current maintained by the manufacturers and if only any such adjustments are not possible proceed to recover the amount equivalent to the credit illegally availed of. Consequently, the situation postulated to be dealt with under Rule 57-I cannot be said to involve a case of manufacture and removal of excisable goods without subjecting such goods to levy or payment of the various nature and category enumerated in Section 11A. Hence, Section 11A of the Act on its own terms will have no application or operation to cases covered under Rule 57-I of the Rules."
In coming to the above conclusion, it was also held --
"...the provisions contained in Section 11A are general in nature and application and the MODVAT Scheme being a specific and special beneficial Scheme, with self-contained procedure, manner and method for its implementation, providing for its own remedies to undo any mischief committed by the manufacturer in abuse thereof, the provisions of the said special Scheme alone will govern such a situation and there is no scope for reading the stipulations contained in a general provision like Section 11A into the provisions of the rules in question which alone will govern in its entirety the enforcement of the MODVAT Scheme."
20. It has also to be taken note of from the judgment of the Supreme Court in the case of Raghuvar (supra) that Rule 57-I prior to its amendment on 6-10-1988 permitted proper Officer to disallow MODVAT credit wrongly availed in the account of the manufacturer, and it did not prescribe any period of limitation for doing so. It has also taken note of the amendment with effect from 6-10-1988 of Rule 57-I, providing six months' period of limitation from the date of such credit to the proper Officer, to take action for disallowing credit. In case, where there was wilful mis-statement, collusion or suppression of fact on the pan of manufacturer, period of six months' limitation has to be read as five years in the amended provision.
21. It is, therefore, on the basis of provisions of Rule 57-I prior to and after its amendment as compared with Section 11A of the Act that the Supreme Court came to the conclusion that the period of limitation prescribed under Section 11A for initiating proceedings for excess levy or short levy at the instance of the Department are not attracted to case of MODVAT credit.
22. This case before us is on the question of applicability of Section 11B of the Act for the purpose of seeking refund of credit availed under the MODVAT Scheme read with the Notifications incorporating Import-Export Policy Q.B.A.L. For better appreciation of the contentions advanced by the learned Counsel for the parties, Section 11B of the Act in its relevant part thereof deserves to be quoted :
"11B. Claim for Refund of Duty -
(1) xxx (2) xxx
Provided that the amount of duty of excise as determined by the Assistant Commissioner of Central Excise under the foregoing provisions of this subsection shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -
(a) rebate of duty of excise on excisable goods exported out of India or on excisable material used in the manufacture of the goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the Rules made, or any Notification issued, under this Act;
(d) duty of excise paid by the manufacturer if he had not passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of applicants as the Central Government may, by Notification in the Official Gazette, specify;
Provided further that no Notification under Clause (f) of the first proviso shall be issued unless in the opinion of the Central Government, the incidence of duty has not been passed on by the person concerned to any other person."
23. On behalf of the Department, reliance is placed on Clause (c) of the proviso to Sub-section (2) of Section 11B for the submission that the provisions of Section 11B are clearly attracted to MODVAT credit. Sub-section (2) of Section 11B provides that wherever duty of excise paid is held to be refundable to the applicant, order of refund has to be made, but the amount so determined has to be credited to the Fund meaning Consumer Welfare Fund. Proviso to Sub-section (2) states that in cases falling under Clauses (a) to (f), the amount refundable after determination would not be credited to Consumer Welfare Fund and shall be paid to the applicant. In clauses (a) to (f) is clause (c), where on determination of the amount refundable, instead of crediting the same to the Fund, it has to be paid to the applicant. Clause (c) speaks of 'refund of credit of duty paid on excisable goods used as inputs in accordance with the Rules made, or any Notification issued, under this Act'.
24. Learned Counsel for the petitioner submits that clause (c) below the proviso to Sub-section (2) cannot be taken aid of for construing Sub-section (1) of Section 11B and holding that in the expression 'duty', MODVAT credit is included. It is argued that prior to insertion of Section 2A in the Act and as defined under the Rules, 'duty' did not expressly include in its definition, MODVAT credit.
25. We have given careful consideration to the submissions made on the effect of Clause (c) below the proviso to Sub-section (2) for the purpose of construing the main provision contained in Sub-section (1) of Section 11B, which prescribes procedure and limitation for application for refund. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which, but for the proviso, would be within the purview of the enactment. To this real nature of proviso is also another principle of interpretation that the proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception. Ordinarily, it is foreign to the proper function of proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. Proviso can be taken aid of as useful guide to construction of the main enactment. If the enacting portion of a Section is not clear a proviso appended to it may give an indication as to its true meaning. As stated by Lord HerschelJ, 'Of course, a proviso may be used to guide you in the selection of one or other of two possible constructions of the words to be found in the enactment, and show when there is doubt about its scope, when it may reasonably admit of doubt as to having this scope or that, which is the proper view to take of it'. Mudholkar, J. in Hindustan Ideal Insurance Co. Ltd. v. Life Insurance Corporation Limited, reported in AIR 1963 SC 1087 stated the rule thus - 'there is no doubt that where the main provision is clear, its effect cannot be cut down by the proviso. But where it is not clear, the proviso, which cannot be presumed to be a surplusage, can properly be looked into to ascertain the meaning and scope of the main provision'. Since the natural presumption is that but for the proviso, the enacting part of the Section would have included the subject-matter of the proviso, the enacting pan should be generally given such a construction which would make the exceptions carved out by the proviso necessary and the construction which would make the exceptions unnecessary and redundant should be avoided (See : Principles of Statutory Interpretation by Justice G. P. Singh, Eighth Edition, 2001, pages 168, 169, 174, 175 and 176).
26. Keeping in mind the above principles on aid of proviso for construction of main enactment, we have to examine the correctness of the contentions advanced on behalf of either of the parties. As has been pointed out to us, Sub-section (2) in the main provisions speaks of refundable amount to be credited to Consumer Welfare Fund. Clauses (a) to (f) in the proviso including Clause (c) which makes mention of MODVAT credit, provide that the amount refundable under the MODVAT Scheme has to be paid to the applicant and it is not to be credited to the Fund. Clause (c) in the proviso thus has limited function for the purpose of Sub-section (2) that such refund towards MODVAT credit is to be paid to the applicant. Main Section 11B in Sub-section (1) definitely covers refund claims based on MODVAT credit. If that were not so, clause (c) in the proviso to Sub-section (2) would not have been incorporated. We cannot accept the argument advanced on behalf of the petitioner by the learned Counsel that Sub-section (1) should be interpreted as not to include refund claims based on MODVAT credit and clause (c) of the proviso to Sub-section (2) cannot be taken aid of to read into Sub-section (1) such claim as included in the main Sub-section (1). If the interpretation as sought to be placed on the provisions on behalf of the petitioner is accepted, Clause (c) of the proviso to Sub-section (2) would be rendered meaningless and of no effect. As per settled principles of interpretation of the proviso and its aid to be taken of for interpreting the main provisions, we are persuaded to accept the view point canvassed by the learned Counsel for the Department that Clause (c) of the proviso to Sub-section (2) is clear legislative indication that under Sub-section (1) of Section 11B, refund claims on the basis of MODVAT credit wrongly denied are fully covered in the absence of any special provision for it in the Rules containing MODVAT Scheme.
27. At the conclusion of arguments, the learned Counsel for the petitioner handed over to us, a note to bring to our notice, the provisions contained in Rule 57F as a part of the MODVAT Scheme in Notification No. 85 of 1987-CE dated 1-3-1987 as amended by Notification No. 2 of 1994-CE(NT) dated 24-1-1994. Relying on Rule 57F in the Notification, issued thereunder, submission made is that refund based on MODVAT credit Scheme is governed by the said Rule and the Notification issued under the said Rule, and therefore, general provisions for claiming refund under Section 11B of the Act would not be attracted. On basis of Rule 57F, it is urged, as an additional ground, that the decision of the Hon'ble Supreme Court in Raghuvar India Limited (supra) squarely covers the legal issue and the prescribed period of six months' limitation for making refund claim under Section 11B is not attracted to the refund claim. It is submitted that if the refund application is not unduly delayed and it being within reasonable time, same deserves to be granted by this Court in exercise of jurisdiction under Article 226 of the Constitution of India.
28. We have looked into the provisions contained in Rule 57F and the Notification issued thereunder (copies of which were supplied to us along with written submissions). We do not find anything in Rule 57F or the Notification issued thereunder to infer non-applicability of the provisions under Section 11B of the Act. As we have in detail discussed and construed the provisions of Sub-section (1) of Section 11B of the Act with the aid of Clause (c) under proviso to Sub-section (2) of Section 11B of the Act to come to a conclusion that the claim for refund of duty based on MODVAT credit Scheme is maintainable under the said Section, in our opinion, the provisions contained in Rule 57F and the Notification issued thereunder do not take away right of a party to resort to the provisions of Section 11B of the Act for such a refund. Rule 57F with the Notification enables refund to be claimed under the MODVAT credit Scheme but the procedure and the limitation for claiming such refund would be governed by the provisions of Section 11B of the Act.
29. We have, therefore, come to the conclusion that in view of clear language of Clause (c) in the proviso to Sub-section (2), claim for refund based on MODVAT credit is maintainable in accordance with the procedure and limitation prescribed in Sub-section (1) of Section 11B of the Act. We have also come to the conclusion that provisions of Section 11A are not comparable fully with the provisions of Section 11B particularly in the light of Clause (c) in the proviso to Sub-section (2) thereof. We also find that the decision of the Supreme Court in the case of Raghuvar (supra), which has been heavily relied on behalf of the petitioner, is distinguishable on the basis of provisions of Section 11A and Rule 57-I prior to and after the amendment as compared by the Supreme Court to hold that action of Department for recovery based on MODVAT credit Scheme is covered by the self-contained procedure in Rule 57-I and Section 11A is not applicable to an action proposed to be taken by the Department based on the said Scheme.
30. The next question is whether the respondent Authorities in the Excise Department were right in rejecting the petitioner's claim on the ground that the application under Section 11B was filed admittedly beyond the prescribed period of six months as was the period fixed prior to its substitution with one year with effect from 12-5-2000 by Section 101 of the Finance Act, 2000. Sub-section (1) of Section 11B in fixing period of limitation uses the words 'six months' from the 'relevant date'. 'Relevant date' has been defined in Explanation (B) below the Section. To cases not covered by Clauses (a) to (e), (ea) and (be), clause (f) applies for computing period of limitation from relevant date. The relevant portion of the Explanation (B) reads thus :
"Explanation (B) -
'relevant date' means -
(a) X X X
(b) X X X
(c) X X X
(d) X X X
(d) X X X
(e) X X X (ea) X X X (be) X X X
(f) in any other case, the date of payment of duty."
31. On behalf of the Department, it is urged that the Assistant Commissioner of Central Excise was right in holding that period of limitation will have to be reckoned in accordance with clause (f) of Explanation (B) from February/ March, 1995 when the credit entries were reversed. The claim for refund made on 29-11-1995 was thus held to be clearly beyond the prescribed period of six months.
32. The only question that arises for consideration is whether in this case, period of limitation for the purpose of Clause (f) should necessarily be counted from February/March, 1995 when the credit entries were reversed. It is not seriously disputed on behalf of the Department that it was on the insistence of the Department that the credit entries in the MODVAT account were reversed by the petitioner on an erroneous belief that under Q.B.A.L. Scheme, MODVAT credit could not have been availed. It was only in November 1995 when Public Notice No. 6 of 1995 published in the Excise Law Times, page T-17, dated 1-3-1995 came to the knowledge of the petitioner that it filed a refund claim.
It is nobody's case that before November, 1995 the petitioner was well aware of the Public Notice. Learned Counsel for the Department argued that the petitioner cannot be allowed to plead ignorance of law and it should be presumed that the petitioner had knowledge of the Public Notice which had clarified that MODVAT credit can be availed on the inputs used for manufacturing items for export.
33. What we find from the undisputed fact is that there was want of knowledge of the Public Notice to the petitioner, and also to the Department. The Department insisted on reversal of MODVAT credit in the MODVAT account of the petitioner, as the local Central Excise authorities were also unaware of the Public Notice published in the Excise Law Times. There is great force in the submission made on behalf of the petitioner that MODVAT credit rightly availed was erroneously reversed on the insistence of the local Excise Authorities of the Department. Thus there was mutual mistake committed by the Departmental Authorities and the petitioner. As it is clearly a case of mutual mistake, we do not find any ground why the general law contained in Section 17 of the Limitation Act should not come to the rescue of the petitioner. Section 17 provides that where in a suit or application, the period of limitation is prescribed and the suit or application is based upon a mistake, the period of limitation would not begin to run until the plaintiff or the applicant has discovered the mistake or could have, with reasonable diligence, discovered it. For the application of the general principle of Limitation Act, undoubtedly, it was a case of mutual mistake and so far as reasonable diligence is concerned, even the excise authorities locally stationed were unaware of the Public Notice which enabled the petitioner to avail MODVAT credit on inputs. In such circumstances, provisions of Section 17 can be pressed into service in favour of the petitioner. Sub-section (2) of Section 29 of the Limitation Act provides that provisions of Sections 4 to 24 (which includes Section 17) shall apply to special law insofar as and to the extent to which they are not expressly excluded by such special law or local law.
34. Since the provisions of the Act do not expressly exclude applicability of Sections 4 to 24 and particularly Section 17 of the Limitation Act, the said provision of the Limitation Act can be made applicable to refund claims filed under Section 11B of the Act.
35. For the purpose of commencement of limitation under Clause (f) of Explanation (B) to Section 11B of the Act, even though reversal of MODVAT credit was done in February/March, 1995 since the mistake was discovered only in November, 1995 when the Public Notice clarifying the legal position came to the knowledge of the petitioner, the period of limitation for the purpose of refund application would commence from November, 1995 i.e. on discovery of mutual mistake of the parties. In the circumstances, we hold that provisions of Section 11B of the Act are attracted to the refund application filed by the petitioner. On the question of limitation, our conclusion is that since the claim is based on discovery of mistake, the period of limitation would not commence from the date of reversal of MODVAT credit, but from the date when the mistake committed mutually of wrong reversal of credit by the parties was discovered in November, 1995. The refund claim, has therefore to be held to be within time.
36. Lastly, the question is whether there are any relevant equitable considerations as recognised in the decision of the Larger Bench of the Supreme Court in Mafatlal Industries (supra) to deny the refund based on MODVAT credit to the petitioner. It is undisputed position that credit was taken on the inputs used in manufacture of goods for export. Therefore, there was no question of passing on the burden of excise duty to the transferee that is foreign buyer. It is a case of refund claim based on erroneous reversal of MODVAT credit, and therefore, the burden of duty could not have been passed on to any one. It is, therefore, not a case of any unjust enrichment of the petitioner. This is the only relevant consideration to be taken note of as held by the Supreme Court in Mafatlal Industries case (supra). The concept of unjust enrichment so as to justify denial of refund claim to the tax payer should justly operate against the Department as well. If the tax payer is not to 6e allowed to make unjust enrichment, the Taxing Authority should also not be permitted to make unjust gain. In the instant case, the Department has not been able to deny that although MODVAT credit could have been availed by the petitioner, on the insistence of the local Central Excise Authorities, credit already taken was erroneously reversed. In such circumstances, the Department cannot be allowed to take advantage of the mutual mistake committed by the parties, in ignorance of Public Notice clarifying the legal position on Q.B.A.L. Scheme.
37. We do not find anything in the decision of the Supreme Court in the case of Mafatlal Industries (supra) to deny relief of refund to the petitioner under Article 226 of the Constitution of India.
38. Consequently, as a result of conclusion arrived by us above, we allow the petition. We set aside the adverse order viz. O.I.O. No. 107/Refund/ Div-III/98, dated 15-12-1998 passed by the Assistant Commissioner of Central Excise, Division III, Vadodara (third respondent), Annexure 'I' to the petition. We direct the respondents to allow restoration of MODVAT credit of Rs. 41,18,212/- in favour of the petitioner in cash or by adjustment towards its recurring liability. In view of the legal controversy involved, we make no order as to interest payable on the refund claim and would direct the parties to bear their own costs.
Rule is made absolute.