Bombay High Court
Vidarba Millis Barar Limited vs Collector Of Cetral Excise, Nagpur And ... on 1 January, 1800
Equivalent citations: 1979(4)ELT555(BOM)
JUDGMENT
1. This petition by the petitioner with is a cotton mill at Achalpur is directed against a demand made by the Central Excise Department for Rs. 4,446.21 P. under rule 10 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules). It is not in dispute that the petitioner which is a textile mill has to pay excise duty in respect of cotton yarn manufacturined by it. In March 1966 the staff of the Central Excise Department took samples of cotton yarn from six bales of yarn and sent them to the chemical Examiner, CentrallRevenue Control Laboratory, New Delhi, for verification of the count of the yarn which is necessary for ascertaining the excised duty payable in respect of the yarn. It was, however, found that the actual count was different fron the data supplied by the mill and same yarn was found to be of higher count than the one declared by the mill. However, the Chemical Examiner gave an opinion that the average count of the samples was of 20 N.F. (New Freench) count or more but less than 34 N.F. According to the Tariff yarn of 34 N.F. count attracts higher rate of excise duty. The consignment was, however, assessed on the basis of average count for the purpose of assessment of the cotton yarn, and on this basis it was found that excess excise duty had been recovered from the mill ewhen the provisional assessment was made. A total amount of Rs. 4446.21 was, therefore, refunded to the petitioner. This refund was made in the form of refund vounchers. On suchletter esnt with the refund vouchers to the petition is Annexure A. dated 21st/24th Oct. 1966 in respect of refund claims for Rs. 1,15201 and Rs. 899.12. This is addressed by the Assistant Collector Central Excise, Integrated Division, Nagpur, to the petitioner mill and states :
"I enclose herewith two refund claim amounting to Rs. 1,152.01 (Rs. One thousand one hundred fifty-two and paise on only) and Rs. 899.12 (Rs. Eight hundred ninety-nine and paise twelve only) for encahment at Achalpur Sub-Tresury with the validity period of the Bills".
2. However, the Department later realised that the refunds had been wrongly made, and by communication dated 28-2-1967 a demand for Rs. 4,446.21 in respect of 17,092 Kg, of cotton yarn came to be made from the petitioner, This demand was challenged by the petitioner before the Assistant colector of Central Excise, Nagpur, by making a representation. It was contended before him that the count of the yarn is always determined on the basis of the average count of the different hanks and, therefore, the original assesment was correctly made and the additional damandshould, therefore, be withdrawn. He took, the view that the cotton yarn was assessed on the count of the yarn and not on the basis of the average count and the demand issued for the realisation of the amount erroneously refunded to the party correctly issued as provided in the rule 10 of the Rules. An appeal against this order taken to the Collector of Central Excise came to be rejected on 9-110-67. The petitioner thereaftert filed this petition challenging the demand made by the Central Excise Department.
3. the case of the Department in the return is that the cotton yarn in question was liable to excise duty under irtem 18-A of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). This entry classifies cotton twist, yarn and thread of all sorts into two castegories : (i) of counts 29 or more, and (ii) of counts les than 29. The expression `count' is defined in the Explanation as meaning "the size of grey yarn expressed as the number of 100 metre hands per one-half kilogram". In respect of multipal fold yarn `count' was defined as meaning the count of the basis single yarn. Thus, according to the Department the excise duty payable was in accordance with item 18-A for determination of which the average count was not relevant at all and cotton yarn. therefore, according to the Department, the refund had been wrongly made and the demand was, therefore, justified. Now, we may at this stage point out that is was not possible for the learned counsel for the petitioner to shaoe that the assessment was made according to the rates prescribed for Item 18-A in the First Schedule to the Act was in any way incorrect. In other wortds, it could not be disputed before us that the duty was in fact payable on the basis of the actual count and not on the basis of average count. The correctness of the demand so far as the quantiative assessment was concerned could not, therefore, be challenged by the petitioner.
4. There is, however, some substance in the contention that at least a part of the demand is made beyond the prescribed period of three months under rule 10 of the rules. Now, it is not in dispute that the basis of the demand which is made on 28-1-1967 is the fact that the amount has been wrongly refunded to the petitioner. The refund voucher as already stated was sent to the petitioner on 24-10-1966 in respect of Rs. 2,051.13. It is urged on behalf of the petitioner that the demand made on 28-1-1967 is beyond the periond of three months as provided in rule 10 of the Rules. It is not in dispute that the total amount of Rs. 4,446.21 which is demandedx by this demand notice dated 28-1-1967 includeds thamount of Rs. 2,051.13 which was refunded on 21st/ 24the October, 1966 and the basis of the demand is that the refund has been wrongly made. Now, rule 10 of the Rules at the relevant time read as follows :
"Recovery of duties or charges short-levied, or erroneously refunded,- When duties or charges-have been short-levied throungh inadverence, error, collusion or mis-construction, on the part of an officer, or through mis-st-atement as to the quantity, descripation or value of such goods on the part of the owner, or when any such duty or charge, aftert having been levied, has been owing to abny such cause, erroneously refunded, the person chargeable with the duty or charge, so short-levied, or to whom such refund has been erroneously made, shall pay the deficency or pay the maount paid to him made within three months from the date on which the duty or charge was paid or adjusted in the owners account-current, if any, or from the date of making the refund."
There is no ambigiuity about is rule. The demand in respect of the excise duty which has been erroneously refunded has to be made within three months "from the date of making the refund". The Learnde counsel for the Department contends that the period of three months must be counted from the date on which the petitioner encashed its refund vouchers from the Treasury. Since the refund vouchers were encashed after 24-10-1966, the demand made on 28-1-1972 would be beyond the period of three months.Now, the return states that the petitioner had encashed the refund vouchers on 2-11-1966. such encashment is, however, not from the Department itself. So far as the ,atter relating to refund is concerned, the refund is complete by the issuing of the refund vouchers. In our view, the date whjen these refund vouchers were enchased by the assessee is not all relevant fot the purpose of computing the period of three months prescribed in rule 10.
The words used in the rule are "from the date of making the refund". The refund is made by the Department in the form of refund vouchers and it is that date frin which the period of three months must be computed for fixing the period during which a lefitimate and legal demand on the basis that some amount has been wrongly refunded can be made by the Department. Thus, so as the maounts refunded on 24-10-1966 are concerned, the demand made by the Department for the first time on 28-1-1967 would be clearly beyond the period of three months and the demand cannot, therefore, be sustained. In view of the mandatory provisons of rule 10 prescribing thr period of lim,itation the demand to the extent of Rs. 2,051.13 P. consisting of two items of Rs. 1,152.01 and 899.12 must, therefore, be quashed. It must, therefore be held that the Department was enlited to validly make a demand only in respect of Rs. 1.395.08 which is the only amount which the petitioner was liable to pay the Department under rule 10 of the Rules. It is not disputed that the petitioner has paid the entire amunts of Rs. 4,446.21. The Department is directed to refund the amount of Rs. 2,051.13 in the view which we have taken.
5. In the result, the petition is partly allowed as indicated above. the petitioner will get its costs from the Dapartment.