Refund of duty consequent to the order of revisional authority

PJ/Case Law /2016-17/3406

Case-ACCRA PAC (I) P. LTD. Versus GOVERNMENT OF GUJARAT HOME DEPARTMENT

Citation-2016(342) E.L.T.557(Guj.)

Brief Facts- The petitioners held necessary licence for storing alcohol and for manufacturing the products falling under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (hereinafter to be referred to as, “the Act of 1955”). The respondent-authorities visited the premises of the petitioners and on the basis of inquiries made during such visit, issued a show cause notice dated 16th October, 1998 demanding the differential duty of Rs. 2,48,612/-. The petitioners replied to the said show cause notice. The Superintendent of Prohibition and Excise, Valsad however, passed an order in August, 1999 confirming the duty demand. Against such order, the petitioners preferred an appeal before the appellate authority. Such appeal came to be dismissed by the appellate authority on 13th July, 2000. The petitioners preferred further appeal, which also came to be dismissed on 15th March, 2004. After one round of litigation before this Court, the petitioners approached the revisional authority. The revisional authority allowed the revision of the petitioners by an order dated 3rd June, 2008. In the meantime, the petitioners had under-protest deposited the said sum of Rs. 2,48,612/- with the respondents.
When the petitioners succeeded before the revisional authorities, they filed an application for refund of the duty paid under protest. Such application was filed before the Respondent No. 3 on 5th December, 2008. On such application, the Respondent No. 3 did not pass any order initially for a period of two years. The petitioners went on writing letters and reminders seeking refund. Ultimately, the Respondent No. 3 issued a show cause notice dated 14th June, 2010 calling upon the petitioners why their application for refund be not rejected. In such show cause notice, the reason indicated was that in the valuation of the preparations manufactured by the petitioners, labour charges and over-heads charges were not included, which during the visit of the petitioners’ factory was noticed and the petitioners could not give satisfactory explanation. It was on this premise that the Respondent No. 3 proposed to reject the petitioners refund application.

Appellant’s Contention- They pointed out inter alia that they had already succeeded on merits before the revisional authorities. They pointed out that the question of undervaluation was gone into by the revisional authorities and decided in their favour. It was stated as under :-
“(g) Once the final appellate authority, namely, Government of India has set aside the orders of Government of Gujarat, the charge of undervaluation does not exist. Because the orders regarding undervaluation by you as upheld by Commissioner (P and E) and Deputy Secretary, Government of Gujarat has merged in the final orders of Additional Secretary, Government of India as he is the final authority to decide the dispute of undervaluation under the MTP Act and the Rules framed thereunder.
(h) Therefore, today the objections of AG are no more valid and as per law, those objections even do not exist.”

Respondent’s Contention-The Respondent No. 3 however, passed impugned order dated 12th October, 2010 and rejected the refund claimed by the petitioners on the same ground on which he had issued show cause notice. In other words, he held that in the valuation of preparations, the petitioners had not included the labour charges and overhead charges with respect to which the petitioners could not render any satisfactory reply. This has resulted into undervaluation of the assessable value in turn resulting into short levy of duty. In respect to the notice issued, the respondents appeared and filed reply dated 12th February, 2013. In such reply, principally, two objects are raised - Firstly, that the impugned order is appealable. Our attention is drawn to Rule 127 of the Medicinal & Toilet Preparations (Excise Duties) Rules, 1956 (“Rules of 1956” for short) in this regard. Another objection of the respondents is that the Act of 1955, or the Rules of 1956 make no provision for paying the interest. The refund therefore, if at all to be granted, would not carry any interest.

Reasoning Of Judgement-To the mind of the tribunal , the stand adopted by the respondents is wholly impermissible under the law. The petitioners have succeeded before the revisional authority, who had by order dated 3rd June, 2008, quashed the demand previously raised by the adjudicating authority as confirmed by the appellate authorities. In the meantime, since the petitioners had already under-protest, deposited a sum of Rs. 2,48,612/- with the respondents, the petitioners were entitled to refund thereof. No rule or provision has been pointed out, under which such amount could have been retained by the respondents. Though our attention was drawn to Rule 9 of the Rules of 1956, tribunal is prima facie of the opinion that such rule would apply in cases where refund is sought of the duty which has been paid through inadvertence, error or misconstruction. This may not apply where the duty is paid under the order passed by the adjudicating authority. In any case, only requirement of Rule 13 is that such refund must be claimed within six months. It is not even the case of the respondents that refund claim of the petitioners is hit by such requirement. In that view of the matter, the respondents simply could not have withheld the refund flowing from the revisional order, which had become final. Admittedly, the respondents had not challenged the said order before any Court or forum. That being the position, it was simply not open for the Respondent No. 3 to reject the refund claim of the petitioners. To do so, would amount to ignoring an order of the higher authority which was binding on the Respondent No. 3. In his show cause notice as well as under order rejecting the request for refund, he pressed in service, the very same grounds which were decided by the revisional authority in favour of the petitioners. Tribunal may recall that the duty demand was raised on the ground that the petitioners had not included labour charges and overhead charges in the toilet preparations manufactured by them. This, according to the authorities, had resulted into under-valuation of the assessable value of the goods. When such issue was decided in favour of the petitioners, it was simply not open for the Respondent No. 3 to raise the same question while considering the petitioners’ refund claim. Legal jurisprudence expects certain finality to an issue, once it is judicially decided by the highest authority, or against which no further proceedings are carried. Such decision binds all parties concerned; including the governmental authorities. It was simply not open for the Respondent No. 3 to either choose or not to choose to withhold the refund order. In the view of tribunal , he has committed a serious error not only of raising a question in his show cause notice but by way of pressing such an issue in service in passing an order refusing refund to the petitioners. This was despite the petitioners specifically bringing to his notice the reply to the show cause notice issued by the Respondent No. 3.

Decision-Appeal allowed

Comment-The analogy of the case is that the respondent no.3 who has passed an order which is completely illegal and against all canons of law cannot press into service availability of alternative remedy. Thus the petitioners must receive interest ,after three months from the date of their application for refund. The respondent no.3 had the duty to release the refund within period. He has not only failed in his duty but he prolonged the litigation by rejecting the refund claim on completely frivolous, untenable and objectionable ground. By doing so, he in fact, drew the petitioners to further litigation, which was wholly avoidable. Thus the appeal was allowed.
Prepared By- Arundhati bajpai

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PJ/Case Law /2016-17/3406

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