Maintainability of Refund when Assessment unchallenged.

PJ/Case Laws/2010-11/1003

Case: Collector of Central Excise, Kanpur v/s Flock (India) Pvt Ltd

Citation: 2000 (120) ELT 285 (SC)

Issue:- Whether refund claim is maintainable when the assessment order is not challenged by the assessee in appeal and has attained finality?

Brief Facts:- Respondent was manufacturer of jute hessian floked with nylon flocks. They filed a classification list claiming that the said product comes under tariff item 22-A. The Assistant Collector held that the said product was classifiable under tariff item 22-B and not under tariff item 22-A and the applicable rate of duty would be 25% ad valorem.

Respondent did not challenge this order in appeal. Thereafter, respondent filed application for refund of duty alleging inter alia that the said product was wrongly classified under tariff item No. 22-B, instead it ought to have been classified under tariff item No. 22-A and that the differential duty should be refunded.

The Adjudicating Authority rejected the refund claim on the ground that the earlier order classifying the said product under tariff item 22-B had attained finality.

The appeal filed by the respondent against this order was allowed by the First Appellate Authority. Matter was remanded with direction to reconsider the matter on merits including the question whether the goods were classifiable under tariff item 22-A or 22-B.

Aggrieved by this order, Revenue filed an appeal before the Tribunal which was rejected. Hence, Revenue is before the Apex Court.

Respondent’s Contentions:- With the regard to the question that whether the jurisdiction of the Assistant Collector while considering an application for refund of duty paid is independent of the jurisdiction exercised by him in determining classification of the product in question, Respondent submitted that the jurisdiction to determine the validity and sustain ability of the claim for refund of duty is an independent jurisdiction and in exercise of that jurisdiction the Assistant Collector is not fettered by any order passed by the authority regarding classification of the product. As such the Assistant Collector could independently consider the claim for refund of duty on merits without being fettered by the previous order passed by him in the matter relating to the question of classification of the product and failure on the part of the assessee to challenge the orders of classification of the product under tariff item 22-B is of no consequence.

Reasoning of Judgment:- The Apex Court pursued the provisions of Section 11B and of Section 35 of the Central Excise Act, 1944 and held that from these provisions theposition is clear that any order passed by an authority under the Act is appealable to the Collector (Appeals) and a further appeal to the appellate tribunal against the order of the Collector (Appeals) is also provided in section 35. The hierarchy of authorities for adjudication and determination of a matter relevant for charging the excise duty is for a purpose. It is not an empty formality. Classification of the goods manufactured by an assessee is important for the purpose of levy and collection of excise duty. Under Rule 173B every assessee is required to file with the proper officer a list of goods manufactured by him for approval and the proper officer shall after such inquiry as he deems fit approve the list with such modifications as are considered necessary and all clearances are to be made only thereafter.

It was further held that a right of appeal is a creature of the statute. It is a substantive right. An order of the appellate authority is binding on the lower authority who is duty bound to implement the order of the superior authority. Refusal to carry out the direction will amount to denial of justice and destructive of one of the basic principles in the administration of justice based on hierarchy of authorities.

It was further held that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot, be countenanced.

It was further held that the view taken by the Apex Court also gains support from the provision in sub-rule (3) of Rule 11 wherein it is laid down that 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. The provision indicates the importance attached to an order of the appellate or revisional authority under the Act therefore, an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund which if the Court may term it so is in the nature of execution of a decree/order.

It was held that in the present case it was specifically mentioned in the order of the Assistant Collector that the respondent may file appeal against the order before the Collector (Appeals) if so advised.

Thus, impugned order set aside.

Decision:-Appeal allowed.

Comment:- Although it is old case but it is still important. When the custom clearance is done and assessment is done then it is advisable to file the appeal. Normally, the assessee files the refund and it is rejected in view of this decision.

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PJ/Case Laws/2010-11/1003

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