Patna High Court
The Tata Iron And Steel Co. Ltd. vs The Union Of India (Uoi) And Ors. on 29 August, 1991
Equivalent citations: 1992(1)BLJR538
Author: S.B. Sinha
Bench: S.B. Sinha
JUDGMENT S.B. Sinha, J.
1. In this writ application, the petitioner has prayed for issuance of a writ of certiorari for quashing an order dated 11-12-1986 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (Respondent No. 7) and as contained in Annexure-7 to the writ petition.
2. The feet of the matter lies in a very narrow compass.
3. The petitioner has its electric shop at Adityapur where ingots and billets etc. are manufactured out of fresh unused steel melting scrap received from its main works situated at Jamshedpur.
4. According to the petitioner, its main plant being an integrated steel plant, the scraps produced therein fulfills the description of fresh unused steel melting scraps.
5. By reason of a notification dated 1-3-1973 bearing No. 66 of 1973, the Central Government exempted ingot, produced from duty paid steel scraps.
The said notification is contained in Annexure-1 to the writ application.
6. By reason of another notification dated 18-6-1977 bearing No. 150/ 77 the Central Government exempted certain types of scraps from payment of duty, namely, steel melting scrap produced in an integrated steel plant and used for production of ingots with the aid of electric furnace.
The said notification is contained in Annexure-2 to the writ application.
7. By reason of another notification dated 18-6-1977, the Central Government reduced the rate of excise duty on iron and steel products by Rs. 330 per Metric Tonne, provided the same was manufactured out of such ingots produced in electric furnace as stated above.
8. Difficulties having arisen relating to interpretation of the said notifications in the context of Tariff items 26 and 26-A, clarifications were sought for and consequently a departmental clarification was issued wherein it was opined that assessment would include 'Nil Duty Assessment' and the amount "paid" has to be construed to mean "contracted to be paid".
9. The said notification is contained in Annexure-3 to the writ application. The petitioner, thereafter made a representation that it was entitled to reduction of duty as specified in the aforementioned Notification No. 152/77. However, it went on depositing the amount while it pressed its claim for reduction of duty.
10. By a letter dated 17th October, 1978, as contained in Annexure-4 to the writ application, the Assistant Collector, Central Excise, Jamshedpur informed the petitioner that it was entitled to get the benefit of duty reduction of the product manufactured out of steel ingots on which, duty at the appropriate rate had been paid in terms of the 1st and 2nd proviso appended to the aforementioned notification Nos. 152/77 and 153/77.
The said letter dated 17-10-1978 is contained in Annexure-4 to the writ application.
11. From a perusal of the aforementioned letter of the Assistant Collector, it appears that the petitioner had prayed for refund by way of deduction in duty of iron and steel products paid prior to November J5th 1978 amounting to Rs. 7,68,284.30.
12. By an order dated 27-11-1979, the Assistant Collector, rejected the said claim, inter alia, on the ground that no order of the competent authority has been passed allowing the prayer of the petitioner for reduction of duty on iron and steel products manufactured out of steel ingots and scraps on payment of duty prior to 15-11-1978.
A copy of the said letter is contained in Annexure-5 to the writ application.
13. The petitioner preferred an appeal against the said order and by an order dated 30th April, 1981, the said appeal was allowed by the Collector (Appeals) and thus the prayer for refund of excise duty was allowed.
The said order is contained in Annexure-6 to the writ application.
14. It was held by the Appellate authority that once the petitioner was allowed to avail the exemption under, the aforementioned to notifications, it became entitled to the benefit in respect of the goods cleared prior to the interpretation put by the Collector of Central Excise.
15. The department preferred an appeal before the Customs, Excise, Gold (Control) Tribunal against the aforementioned appellate order and by an order dated 11-12-1986, the Tribunal allowed the appeal, inter alia, on the ground the claim for refund of the excise duty made by the petitioner was barred under the law of limitation.
16. In this case, a counter-affidavit has been filed on behalf of the respondents.
Paragraphs 7 and 13 of the counter-affidavit upon which reliance has been placed by the learned Senior Standing Counsel of the Central Government read as follows:
That with regard to statements made in para-9 of the writ petition it is stated that under notification No. 150/77 C-E dated 18-6-1977 the Government of India exempted from whole of duty, the fresh unused steel melting scrap, namely (1) Skull Scrap (ii) Broken ingot mould (iii) Bolts and Shorts (iv) Mould starching which arise in steel melting scrap and (v) Turnings and Borings failing erstwhile Tariff item No. 26 of removed from integrated plant to an electric furnace unit after following the Chapter X procedure and as such it cannot be said that it has paid a duty at nil rate as no nil rate was prescribed for it. The scraps in question were fully exempted from duty.
That with regards to the statements made in para 25 of the writ petition, it is stated that besides the claim being time barred the party was not entitled to reduction of duty under Notification No. 152/ 77 dated 18-11-1977 unless the duty was paid on the raw materials from which the finished product has been manufactured.
17. Mr. K.D. Chatterjee, the learned Counsel appearing on behalf of the petitioner drew my attention to a decision of this Court in Tata Yodogawa Ltd. and Tisco Ltd. v. Union of India and Ors. CWJC Nos. 337 and 338 of 1981 disposed of on 9th September, 1986 which is reported in 1986 BLT 200, and submitted that therein this Court considered the scope, effect and support of the notifications as contained in Annexure 1 and 2 to the writ application.
In that decision, a Division Bench while interpreting the aforementioned Notifications NoS. 152 and 153 of 1977 held that the expression "paid" should be construed as "ought to have been paid."
The Division Bench held:
Proceeding further, Notification No. 150/77 has exempted from duty even the scraps and when a duty paid means a duty contracted to have been paid on the exemption by Notification No. 150/77, the Tisco may be said to have it contracted the said duty and thus have paid it to satisfy the requirement of Notification No. 66/73. To this interpretation one can find support from contemporonia expositio by the respondents. It is well-settled that administrative construction, i.e. contemporaneous construction placed by administrative or executive officer charged with executing a statute gene rally should be clearly accepted as they do it and follow it realising they did not make any demand of duty from the petitioner in respect of the ingots manufactured by them. For them, the words falready paid" could not have one meaning to interpret Notification No. 150/77 and another to interpret Notification No. 66/73.
The advice contained in the letter dated 18-8-1980 of the Central Board of Excise and Customs of the Collector of Central Excise, Patna has neither stated the context nor any reason not to give the same meaning to the words "already paid" used in Notification No. 66/ 73 as one given to the words used in Notification No. 150/77. There is apparently no reason to extend the exemption and apply the above interpretation to Notification No. 150/77 and not to Notification No. 66/73. In their submissions before us the respondents have failed to give any cogent reason for not acknowledging in the words "duty already paid" the meaning "the duty contracted to have been paid.
18. Mr. Chaterjee, therefore, submitted that in view of the decision of this Court, it must be held that whatever excise duty has been paid by the petitioner was by way of mistake in law and thus the question of limitation on refund as contained in Rule 11 of the Central Excise and Salt Rules as it thence stood does not arise.
The learned Counsel, in this connection has relied upon in Patel India v. Union of India ; Sri Vallabh Glass Works Ltd. and Anr. v. Union of India and Ors. AIR 1984 SC 971 : Nerol Abendalyv. Union of India, 1979 ELT 181; Wipro Products v. Union of India, 1981 ELT 531; Maharashtra Veg. Products v. Union of India 1981 ELT468(sic) Cuddapah Co-operative Sugar Ltd. v. Union of India (1988) 38 ELT; Paharpw Cooling Tower Ltd. v. Union of India and Union of India and Ors. v. Arphi Incorporated .
19. The learned Counsel further submitted that if a tax is collected under the coercive power of the State, the State is not entitled to retain the same and as such, a writ of mandamus must issue directing the respondents to refund the same without going into the question of limitation inasmuch as, there cannot be any period of limitation for compelling performance of such duties by issuing a writ of mandamus.
The learned Counsel, in this connection has relied upon a decision of the Supreme Court in Shiv Shankar Dal Mills etc. v. The State of Baryana and Ors. ; Salenah Tea Company Ltd. etc. v. The Superintendent of Taxes, Nowgong and Ors. AIR 1790 SC 722 and in Commissioner of Sales Tax U.P. v. Auriya Chamber of Commerce Allahabad 1986 (25) ELT 877.
20. It was further submitted that the period of limitation i.e. six months as contained in Rule 11, as it then existed, would not be applicable if the payment was made under protest.
21. According to the learned Counsel, the fact that the petitioner deposited the amount of duty under protest would appear from the order of the Collector as contained in Annexure-4 to the writ application.
22. Mr. Debi Prasad, the learned Counsel appearing on behalf of the respondents, on the other hand, submitted that from the statements made in Paras 7 and 13 of counter-affidavit, as noticed hereinbefore, it will be evident that the petitioner was not entitled to any exemption from payment of duty.
The learned Counsel further contended that the period of limitation provided for in Rule 11 which is in pari materia with Section 11-B of the Central Excises and Salt Act, which being a special statute, the period of limitation specified in the said Rule shall prevail over the General law of limitation.
The learned Counsel further submitted that in any event a writ of madamus cannot be issued to direct refund of taxes, if there has been a change in law nor can a refund to be directed to be made if the same would amount to unjust enrichment of the petitioner.
The learned Counsel, in support of his contentions relied upon in The Commissioner of Saks Tax, V.P. Lucknow v. Parson Tools and Plants Kanpur AIR 1976 SC 1039; Godavari Plywoods Ltd. v. Union of India and Ors. and in Canara Steel Ltd. v. Assistant Collector of Central Excise .
23. In this case, this Court is not concerned with the question which has been raised in the counter-affidavit that the petitioner-Company was not entitled to the benefit of the notifications as contained in Annexure-1 and 2 to the writ application, inasmuch as the Collector (Appeals) as also the Tribunal themselves have found that the petitioner is so entitled. Even the Collector, in terms of its order dated 11-12-1986 has found that the petitioner is entitled to get the benefits of the said notification.
24. In this view of the matter, the only question which arises for consideration is as to whether the impugned order as contained in Annexure-7 to writ application suffers from the infirmity in so far as it was held therein that the claim of the petitioner was barred under the law of limitation.
25. Rule 11 of the Central Excise Rules as it then stood read as follows:
Claim for refund of duty.--(1) Any person claiming refund of any duty paid by him may make an application for(sic)refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the date of payment of duty:
Provided that the limitation of six months shall not apply where any duty has been paid under protest.
Explanation.--Where, any duty is paid provisionally under these rules on the basis of the value of the rate of duty, the period of six months shall be computed from the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be.
(2) If on receipt of any such application the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty paid by the applicant should be refunded to him, he may make an order accordingly.
(3) Where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may, refund the amount to such person without his having to make any claim in that behalf.
(4) Save as otherwise provided by or under these rules no claim for refund of any duty shall be entertained.
Explanation.-for the purpose of this rule, "refund" include rebate referred to in Rules 12 and 12-A.
26. Sub-sections (1) to (4) of Section 11-B which has been inserted by reason of Custom, Central Excise and Salt Rules and Board of Revenue (Amendment) Act, 1978 (Act No. 25 of 1978) and which came into force with effect from 17-1-1984 are in pari materia with Rule 11 aforementioned.
27. However, Sub-section (5) of Section 11-B of the said Act is a new provision and by reason thereof, a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duties also comes within the purview of the aforementioned provision.
28. Sub-section (5) of Section 11-B contains a non-obstante clause.
It is, therefore, evident that the decisions which are based upon interpretation of Section 11-B of the Act with reference of Sub-section (5) thereof w ill have no application in relation to a period when Rule 11 aforementioned was in force, as the said provision is prospective in its operation.
29. It is now well-settled by reason of various decisions of the Supreme Court of India as also of different High Courts, that if any duty has been paid by the assessee under mistake of law, the general law of limitation shall apply.
This position of law in view of the various decisions of the Supreme Court of India is no longer res integra.
30. Reference, in this connection may be made to Commissioner of Sales Tax, U.P. v. Awiya Chamber of Commerce, Allahabad 1986 (25) ELT 867, wherein the Supreme Court, inter alia, held that in terms of Article 265 of the Constitution, no tax shall be levied or collected except by authority of law and when such tax is collected and levied, the amount is refundable to the assessee . because the realisatian was illegal and right of refund was embedded in the fact of payment.
31. In Cuddapah Co-operative Sugars Ltd. v. Union of India and Ors. , a Division Bench of the Andhra Pradesh High Court held that Rule 11 has no application to cases where the Department breaches a legal duty by acting contrary to the terms of the exemption notification. It was further held that the failure on the part of the affected party to claim refund within the period of limitation prescribed in Rule 11 cannot absolve the Department of the legal duty cast upon it. The latter outweighs the former. The wrong must be remedied by ordering refund of the illegal collect ed excess duty when the Department comes to know of it either suo motu or on the application cf the affected party.
Yet in another recent decision in Paharpur Cooling Tower Ltd. v. Union of India 1980 (47) ELT 235, a Division Bench of the Allahabad High Court held:--
We are of the opinion that where it is found that payment of tax was made under a mistake of law, the right to refund would not depend on whether the payment was made under protest or otherwise. We are further of the opinion that to such claims the bar of Section 11-B does not apply. We are fully fortified by the decisions of this Court in which it has been consistently rdedrely Son Supreme Court decisions that where payments are made under a mistake of law, the bar of limitataon created Section 11-B of the Central Excise and Salt Act, 1944 would no apply ft has been further ruled that to such claims rfrrfundthe"three years' rule would be attracted under the general law as in the case of suits, the starting point being the date of knowledge of the fact that the payments were made under a mistake of law.
See Guru Charan Industrial Works v. Union of India and Ors. and Raman Electrical, Mathura,. Union of Win and Ors. 1998 (33) ELT 275 (All).
32. In Shri Vallabh Glass Works Ltd. and Ors. v. Union of India and Ors. , the Supreme Court was dealing with the matter of refund and held as follows:
In the instant case the appellants had made excess payments on being assessed by the Department and such payments cannot .be treated as Voluntary payments precluding them from recovering them. See Sales tax Officer, Banaras v. Kanhaiya Lal Mukundlal Saraf . We do not also find that conduct of the appellant is of such a nature as would disentitle them to claim refund of excess payments made m respect of goods other than wired glass.
33. In this case from the facts as mentioned hereinbefore, it is evident that the department itself had to interpret the effect of notification No. 66/73 and notification No. 150/77(Annexure 1 and 2) Vis-avis the notification No 152/77 dated18-6-1977, by reason of a departmental circular.
34. From a perusal of the order passed by Assistant Collector, Central Excise, dated 17-12- 1977, it appears that the petitioner filed various application for refund on 9-12-1977 which was within the period of six months from the date of the issuance of the department clarification.
35. It is therefore, clear that the petitioner filed an application for refund with six months from the date of the circular aforementioned.
36. It is no longer in doubt or dispute that the payment of excise duty was made by the petitioner because of wrong interpretation of the notification which thus must be held to have been made by mistake in law.
37. In terms of its order, dated 17-10-1978, the Assistant Collector, Central Excise also intimated that the Collector had directed that the petitioner would be entitled to get the benefit of the duty deduction on the production manufactured in the factory out of the steel ingots in terms of earlier order, dated in terms of the aforementioned notification Nos. 152/77, 153/77 and his earlier order, dated 7-11-1977 to the contrary would be treated as withdrawn.
38. However he purported to have observed that his earlier order, dated 7 12-1977 has been withdrawn henceforth meaning thereby a perspective operation was given thereto.
This, in my opinion, is impermissible in law.
39. If the petitioner made a claim of the refund of the duty alleging therein that it had made payment by mistake of law; it was the duty of the concerned authority of the Central Excise Department to consider the same on its proper prospective but it had no jurisdiction to accept it with prospective effect and reject the contention of the petitioner so far as its claim for refund is concerned.
40. Similarly, the Assistant Collector of Central Excise in his letter, dated 27th November, 1979 (Annexure-5) observed that the petitioner is not entitled to any refund of duty prior to 15-11-1978 as there had no express order of any competent authority allowing deduction of duty by it prior to the said period.
41. From the conspectus of facts as narrated hereinbefore, it is thus clear that the petitioner is neither guilty of any delay or laches in claiming refund nor can it be said that its application for refund was barred under the law of limitation as provided for in Rule 11 of the Central Excise Rules.
Rule 11, therefore, in view of the decision of the Supreme Court aforementioned had no application in the facts and circumstances of the case.
42. In Patel India (Pvt.) Ltd. v. Union of India and Ors. 1983 ELT 1495 : AIR 1973 SCI 300, the Supreme Com t while considering a matter of refund under the provisions of Section 27 of the Customs Act, which is in pari materia with Rub 11 aforementioned, held that the general law of limitation i.e. the limitation of three years shall apply in respect of a claim of refund of duty paid under mistake of law.
43. It is true that the statute of limitation is a statute of repose. It is further true that the period of limitation provides for procedural matters and does not deal with the substantive right. It is also true that the Parliament has the necessary competence to provide for a period of limitation, but it is well-known that such a statute has to be construed strictly.
44. As indicated hereinbefore, at all material times, Rules 11 of the Central Excise Rules was in force.
Even assuming that a period of limitation can be fixed by £he executive in exercise of its rule-making power, the same has to be construed in the context in which it was made.
45. At this juncture the decisions relied upon by Mr. Prasad may be noticed.
In Madras Rubber Factory Ltd. v. Union of India and Ors. 1983 ELT 1579, the Supreme Court held on the basis of the material on records that there was nothing to show that the duty was paid under protest whether generally or specifically.
In that case, the appellant thereof also did not challenge the order of assessment in any appeal or in revision nor was it case of payment of provisional duty.
The said decision, therefore, has no application in the facts and circumstances of the case.
46. In Godavari Plywoods Ltd. v. Union of India and Ors. upon which strong reliance has been placed by Mr, Debi Prasad, a Division Bench of the Andhra Pradesh High Court took into consideration various decisions including the decision of the Supreme Court in Shri Ballav Glass Works v. Union of India ; Kesoram Cement v. Union of India 1982 ELT 214 and D. Cawasji & Co. v. State of Mysore , as also a Devision Bench of the Bombay High Court in Leukoplast (India) Ltd. v. Union of India 1983 ELT 2106 and various other decisions.
The Andhra Pradesh High Court held:
It is well-settled that Rule cannot control the operation of the main provisions in the Act. Stream can rise no higher than the source. Therefore, the Customs, Central Excise and Salt and Central Board of Revenue (Amendment) Act 25 of 1978 was made by the Parliament.
The aforementioned observations were made while seeking to distinguish a decision of the Bombay High Court in Associated Bearing Co. Ltd. v. Union of India 1980 ELT 415.
47. From the observation of the Andhra Pradesh High Court itself, it is clear that a claim for refund under Rule 11 of the said Rule shall stand on a different footing.
The learned judges of Andhra Pradesh High Court considered the preexisting law, the scope of amendment, the procedural rights of the parties in details; the need to make amendment the effect thereof and in particular of Sub-section (5) of Section 11-B it was held owing to the observations made by the Supreme Court in Kaushalya Rani's case, (Supra) that a case where the tax has been collected by mistake in law, Section 72 of the Contract Law would apply, Sub-section (5) of Section 11-B had to be introduced. It further held that in that view of the matter, special law of limitation as provided for under Section 11-B shall prevail.
Evidently, such is not the position here.
48. la this case, this Court is concerned with the law as it existed prior to coming into force of Section 11-B of the said Act and particularly Sub-section (5) thereof.
49. In Chandra Steel v. Assistant Collector of Central Excise has also no application in the facts and circumstances of the present case, as in that counter-affidavit, no case for unjust enrichment has been made out.
50. It is, therefore, clear that the petitioner is entitled to obtain a writ of certiorari quashing the order passed by the respondent No. 7, whereby it refused to refund the amount of Rs, 7,68,284.30p. to the petitioner.
51. In view of my findings aforementioned, as at present advised, it is not necessary to consider the other contentions raised at the bar.
52. In the result, this application is allowed and the respondents are hereby directed to refund the aforementioned amount to the petitioner within a period of two months from the date of receipt of a copy of this judgment.
However, in the facts and circumstances of the case, there will be no order as to costs.