Gujarat High Court
M/S. Oil And Natural Gas Corporation ... vs Union Of India & 2 on 15 March, 2017
Author: Harsha Devani
Bench: Harsha Devani, A.S. Supehia
C/SCA/18787/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 18787 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR.JUSTICE A.S. SUPEHIA
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of No
the judgment ?
4 Whether this case involves a substantial question of No
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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M/S. OIL AND NATURAL GAS CORPORATION LIMITED....Petitioner(s)
Versus
UNION OF INDIA & 2....Respondent(s)
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Appearance:
MR ANAND NAINAWATI, ADVOCATE for the Petitioner(s) No. 1
MS AVANI S MEHTA, ADVOCATE for the Respondent(s) No. 3
NOTICE SERVED for the Respondent(s) No. 2 - 3
NOTICE UNSERVED for the Respondent(s) No. 1
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CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR.JUSTICE A.S. SUPEHIA
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C/SCA/18787/2016 JUDGMENT
Date : 15/03/2017
ORAL JUDGMENT
(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. By this petition under Article 226 of the Constitution of India, the petitioners have challenged the order-in-original dated 28.4.2015 passed by the third respondent to the extent the third respondent has rejected the refund claim of Rs.14,92,44,294/- as time-barred and has ordered the remaining refund amount of Rs.4,22,67,238/- to be credited to the Consumer Welfare Fund, as well as the order-in-appeal dated 29.6.2016 passed by the second respondent upholding the order-in-original.
2. The petitioners are inter alia, engaged in the exploration, development and production of crude oil falling under Chapter Heading 2709 of the First Schedule to the Central Excise Tariff Act, 1985. Crude oil produced by the petitioners is chargeable to NIL rate of central excise duty and hence, the petitioners do not pay basic central excise duty on crude oil. The petitioners, however, pay Oil Industries Development Cess ("OID Cess") levied under section 15 of the Oil Industry (Development) Act, 1976 (hereinafter referred to as "the OID Act") on crude oil cleared by them. The petitioners also pay National Calamity Contingent Duty (NCCD) on crude oil under section 136 of the Finance Act, 2001. Such payments were made by the petitioners and were collected by the Department from the petitioners without any dispute.
3. The case of the petitioners is that they understood that Page 2 of 12 HC-NIC Page 2 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT OID Cess levied on crude oil is a duty of excise and, therefore, paid Education Cess at the rate of 2% under section 93(1) of the Finance Act, 2004 (with effect from 9.7.2004) as well as Secondary and Higher Secondary Education Cess ("SHE Cess") at the rate of 1% under section 138(1) of the Finance Act, 2007 (with effect from 1.3.2007) on the OID Cess paid by the petitioners on crude oil manufactured. During the period March, 2005 to January, 2014, the petitioners paid an amount of Rs.19,15,11,532/- as Education Cess and SHE Cess on OID Cess under the bona fide belief that OID Cess is a duty of excise and Education Cess and SHE Cess are levied on duties of excise. It is the case of the petitioners that they have not recovered the Education Cess and SHE Cess paid on OID Cess levied on crude oil from their customers.
4. By a circular dated 7.1.2014, the Central Board of Excise and Customs clarified that a cess levied under an Act which is not administered by the Ministry of Finance (Department of Revenue) but only collected by Department of Revenue under the provisions of that Act cannot be treated as a duty which is both levied and collected by the Department of Revenue. It was, therefore, reiterated that the Education Cess and the Secondary and Higher Secondary Education Cess are not to be calculated on cesses which are levied under the Acts administered by Department/Ministers other than the Ministry of Finance (Department of Revenue) but are only collected by the Department of Revenue in terms of those Acts.
5. It is the case of the petitioners that since OID Cess is levied under an Act administered by the Ministry of Petroleum & Natural Gas and collected by the Department of Revenue, Page 3 of 12 HC-NIC Page 3 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT Ministry of Finance, in terms of the above circular, they are not liable to pay Education Cess and SHE Cess on the OID Cess levied on crude oil. The petitioners, therefore, filed a refund claim vide letter dated 5.2.2014 claiming refund of Rs.18,77,08,118/- paid towards Education Cess and SHE Cess calculated and paid on the OID Cess levied on crude oil for the period from March, 2005 to January, 2014. The refund claim was subsequently revised to Rs.19,15,11,532/- vide letter dated 21.4.2014. Along with the refund claim, the petitioners also filed certain documents. Vide letter dated 24.2.2014, the Superintendent of Central Excise sought additional documents from the petitioners which were provided by the petitioners with letter dated 21.4.2014. Subsequent thereto, a show cause notice dated 27.7.2014 came to be issued to the petitioners proposing to reject the refund claim filed by the petitioners. In response thereto, the petitioners filed a detailed reply dated 7.10.2014. Personal hearing was held in the matter and the petitioners also undertook to file additional written submissions. It is the case of the petitioners that without appreciating the submissions made by the petitioners, the Assistant Commissioner of Central Excise, Division-II, Surat-II, the third respondent herein (hereinafter referred to as the "adjudicating authority"), by the impugned order-in-original dated 28.4.2015 rejected the refund claim filed by the petitioners. By the order-in-original, the third respondent granted refund of Rs.4,22,67,238/-, out of the total refund claim of Rs.19,15,11,532/- and rejected the remaining refund claim of Rs.14,92,44,294/- as time barred. The refund of Rs.4,22,67,238/- was ordered to be credited to the Consumer Welfare Fund in terms of sections 12B and 12C read with section 11B of the Central Excise Act, 1944 and accordingly, no Page 4 of 12 HC-NIC Page 4 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT amount was paid by way of refund. Against the said order- in-original, the petitioners went in appeal before the third respondent Commissioner (Appeals), who vide order dated 29.6.2016 rejected the appeal, giving rise to the present petition.
6. Mr. Anand Nainawati, learned advocate for the petitioners, invited the attention of the court to the decision of this court in the case of Joshi Technologies International, INC-India Projects v. Union of India, rendered on 16.6.2016 in Special Civil Application No.2556 of 2015, to submit that the controversy involved in the present case stands concluded by the said decision in favour of the petitioners and hence, the adjudicating authority was not justified in holding that the refund claim of the petitioners was time-barred and in directing the amount to the extent was found to be within limitation, to be deposited in the consumer welfare fund. It was, accordingly, urged that the petition deserves to be allowed in terms of the relief prayed for in the petition.
7. On the other hand, Ms. Avani Mehta, learned senior standing counsel for the respondents, reiterated the contents of the affidavit-in-reply filed on behalf of the respondents and submitted that under the provisions of rule 6 of the Central Excise Rules, assessment of duty is done by the petitioner itself. It was submitted that the petitioner had exercised the option of assessment of duty under rule 6, that is, self- assessment and has paid duty for the relevant period, which was deemed to be final assessment and has attained finality. It was submitted that after a period of about nine years, the Page 5 of 12 HC-NIC Page 5 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT assessment, which has attained finality, cannot be re-opened and refund cannot be claimed except in a case where the investigation, audit or inquiry in pursuance of the demand of such duty is pending. The assessment having attained finality, at this belated stage, the petitioner is not entitled seek reopening of such assessment by claiming refund. It was urged that having regard to the facts and circumstances of the case, there is no infirmity in the impugned orders and hence, the petition deserves to be dismissed.
8. For the purpose of appreciating the controversy in issue, it may be apposite to refer to the decision of this court in the case of Joshi Technologies International, INC-India Projects v. Union of India (supra), wherein this court has held thus:
"Merely because the provisions of the Central Excise Act, 1944 and the rules framed thereunder for collection and refund viz., the machinery provisions have been incorporated in the OID Act for collection and refund of the cess levied thereunder, it cannot be inferred that the Oil Cess imposed under the provisions of the OID Act assumes the character of central excise duty. The finding recorded by the adjudicating authority that the Oil Cess is in the nature of excise duty, is erroneous and contrary to the law laid down by this court in Commissioner v. Sahakari Khand Udyog Mandli Ltd. (supra).
• In the Circular dated 7th January, 2014, reference to sugar cess and tea cess levied under the Sugar Cess Page 6 of 12 HC-NIC Page 6 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT Act, 1982, and the Tea Act, 1953, respectively, is merely illustrative in nature and what is meant by the circular is that the cesses which are collected by the Department of Revenue, but levied under an Act which is administered by different Department are not chargeable to Education Cess and Secondary and Higher Secondary Cess chargeable under the provisions of the Finance Acts, 2004 and 2007, respectively.
• Education Cess and Secondary and Higher Secondary Education Cess being cesses levied at a percentage of the aggregate of all duties of excise, the basic requirement for levy thereof is the existence of excise duty. In the present case Oil Cess is not a duty of excise and hence, the basic requirement for levy of such cesses is not satisfied. Furthermore, for the purpose of levy of Education Cess and Secondary and Higher Secondary Education Cess, two other conditions precedent, are required to be satisfied, viz., (i) that the duty of excise should be levied by the Central Government in the Ministry of Finance (Department of Revenue); and (ii) the duty of excise should be collected by the Central Government in the Ministry of Finance (Department of Revenue). In the present case, since the machinery provisions of the Central Excise Act, 1944 and the rules framed thereunder have been incorporated in the OID Act, the second condition precedent is satisfied, viz. that the cess is collected by the Central Government in the Ministry of Finance (Department of Revenue); however, the first condition with regard to levy of such duty of excise by the Central Page 7 of 12 HC-NIC Page 7 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT Government in the Ministry of Finance (Department of Revenue) is not satisfied inasmuch as the Oil Cess under the OID Act is levied by the Ministry of Petroleum and Natural Gas. In the aforesaid premises, the requirements of section 93 of the Finance Act, 2004 and section 138 of the Finance Act, 2007 are not satisfied in the present case, and consequently, the said provisions have no applicability to the facts of the present case. The petitioner, therefore, cannot be said to have been liable to pay Education Cess and Secondary and Higher Secondary Education Cess under the above provisions.
• In the facts of the present case, the refund is claimed on the ground that the amount was paid under a mistake of law and such claim being outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. The petitioner was, therefore, justified in filing the present petition before this court against the order passed by the adjudicating authority rejecting its claim for refund of the amount paid under a mistake.
• Since Oil Cess is not a duty of excise, the amount paid by the petitioner by way of Education Cess and Secondary and Higher Secondary Education Cess, cannot in any manner be said to be a duty of excise inasmuch as what was paid by the petitioner was not a duty of excise calculated on the aggregate of all the duties of excise as envisaged under the provisions of section 93 of the Finance Act, 2004 and section 138 of the Finance Act, 2007. Thus, the amount paid by the Page 8 of 12 HC-NIC Page 8 of 12 Created On Mon Aug 14 09:09:10 IST 2017 C/SCA/18787/2016 JUDGMENT petitioner would not take the character of Education Cess and Secondary and Higher Secondary Education Cess but is simply an amount paid under a mistake of law. The provisions of section 11B of the Central Excise Act, 1944 would, therefore, not be applicable to an application seeking refund thereof. The petitioner was therefore, wholly justified in making the application for refund under a mistake of law and not under section 11B of the Central Excise Act, 1944.
• Since the provisions of section 11B of the Act are not applicable to the claim of refund made by the petitioner, the limitation prescribed under the said provision would also not be applicable and the general provisions under the Limitation Act, 1963 would be applicable. Section 17 of the Limitation Act inter alia provides that when a suit or application is for relief from the consequences of a mistake, the period of limitation would not begin to run until the plaintiff or applicant has discovered the mistake, or could, with reasonable diligence, have discovered it. Since the period of limitation begins to run only from the time when the applicant comes to know of the mistake, the application made by the petitioner was well within the prescribed period of limitation. Moreover, since the very retention of the Education Cess and Secondary and Higher Secondary Education Cess by the respondents is without authority of law, in the light of the decision of this court in Swastik Sanitarywares Ltd. v. Union of India (supra), the question of applying the limitation prescribed under section 11B of the CE Act would not arise.
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• Even in case where any amount is paid by way of self assessment, in the event any amount has been paid by mistake or through ignorance, it is always open to the assessee to bring it to the notice of the authority concerned and claim refund of the amount wrongly paid. The authority concerned is also duty bound to refund such amount as retention of such amount would be hit by Article 265 of the Constitution of India which mandates that no tax shall be levied or collected except by authority of law. Since the Education Cess and Secondary and Higher Secondary Education Cess collected from the petitioner is not backed by any authority of law, in view of the provisions of Article 265 of the Constitution, the respondents have no authority to retain the same.
• If the adjudicating authority was not satisfied with the Chartered Accountants certificate and the other material produced by the petitioner, he could have called upon the petitioner to produce further documentary evidence in support of its claim that it had not passed on the incidence of duty to the purchaser. However, without affording a reasonable opportunity to the petitioner to produce documentary evidence in support of its claim that there was no unjust enrichment, the adjudicating authority was not justified in holding that there was unjust enrichment. Therefore, the finding that the petitioners claim is hit by unjust enrichment cannot be legally sustained."Page 10 of 12
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9. From the facts as emerging from the record, it is evident that the above decision would be squarely applicable to the facts of the present case. It is, however, an admitted position that the above referred decision of this court which was rendered on 16.6.2016 is subsequent to the passing of the order-in-original dated 28.4.2015, and therefore, was not available at the time when the order-in-original came to be passed. It appears that the order in appeal having been made on 29.6.2016, soon after the judgement and order dated 16.6.2016 came to be passed, the same may not have been produced before the Commissioner (Appeals). Consequently, the authorities below did not have the benefit of the said decision. It would, therefore, be in the interest of justice if the matter is restored to the file of the appellate authority to consider the appeal afresh in the light of the observations made in the above referred decision.
10. For the foregoing reasons, the petition succeeds and is accordingly allowed to the following extent:
The impugned order-in-appeal dated 29.6.2016 passed by the second respondent Commissioner (Appeals) is hereby quashed and set aside and the appeal is restored to the file of the Commissioner (Appeals) to decide the same in accordance with law, keeping in view the observations made by this court in the case of Joshi Technologies International, INC-India Projects v. Union of India (supra) as well as the other submissions that may be made on behalf of the petitioners. Rule is made absolute to the aforesaid extent.
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