Whether bar of limitation apply on twice payment of duty by mistake?

Case:- SWASTIK SANITARYWARES LTD. VERSUS UNION OF INDIA

Citation:- 2013(296) E.L.T. 321 (Guj.)

Brief Facts:- The petitioners had challenged an order dated 23-3-2004 passed by the respondent No.3 – Deputy Commissioner of Central Excise. The petition arose in the following factual background. The petition No.1 was a company registered under the Companies Act. The petitioner No. 2 was the office bearer of the company. The company was engaged in the business of manufacture of sanitary wares which were excisable goods. The petitioner-company cleared its final product during the period between June, 2002 and September, 2002 on payment of excise duties totalling to Rs. 91,129/-. The petitioners due to a pure clerical error, paid the same amount of duty on same clearances all over again by debiting the amount in the Personal Ledger account.
Realizing that the sum of Rs. 91,129/- was paid twice, the petitioners filed a refund claim before respondent No. 3 on 1-11-2003. The respondent No. 3, however, prima fine, finding that the refund claim was barred by limitation, issued a show-cause notice dated 9-1-2004 calling upon the petitioners to show cause why the same should not be rejected. It was contended that the refund claim was made beyond a period of one year which was the limitation period prescribed under the law.
The petitioners filed a detailed reply to the show cause notice under communication dated 10-2-2004. In the reply to the show cause notice, they elaborated that the amount was paid second time erroneously, the same was, therefore, not excise duty and the revenue should, therefore, in all fairness, refund the same. It was pointed out that the duty in question relates to five consignments exported by the petitioners to Nepal. The total duty of Rs. 91,129/- was paid at the time of export. Second time at the month end of each month of clearance, such duty was paid by making necessary debit entries in the Personal Ledger Account of the petitioner No. 1 company. It was contended that in view of the said facts, the provisions of Section 11B of the Central Excise Act, 1944 ('the Act', for short) would not apply. It was contended that the Government had no jurisdiction to retain such amount erroneously deposited.
The adjudicating authority, however, passed impugned order dated 23-3-2004 rejecting the refund claim. In the order, he accepted the petitioners contention that the duty was paid twice on the same goods. He recorded as under:
"Next argument of the assessee that duty was paid twice on the same goods and therefore, the claim was admissible, I find that even though the duty payment was not disputed, refund could not be decided solely on this ground. In fact, time-bar aspect was having an overriding effect even if the refund was admissible on merit."
Principally on this ground, he rejected the refund claim. The petitioners had referred to a judgment of this court in case of Indo-Nippon Chemicals Co. Ltd. & Anr. v. Union of India & Ors. reported in 2002 (49) RLT 642 = 2005 (185 ) E.L.T 19 (Guj.) to which he recorded that the High Court and the Supreme Court only had power to entertain such a claim. He, however, would not had any jurisdiction to ignore the limitation period provided in Section 11B of the Act.
This order, the petitioners had challenged directly before this court mainly on the ground that there being no disputed questions at all, the petitioners may not be relegated to the alternative remedy of appeals. Such petition was entertained and admitted by this court way back in the year 2004.

Appellant’s Contentions:- Learned counsel for the petitioners raised following two contention:‑
That the amount paid second time would not take the character of duty. Such amount could not be retained by the Government. Refund claim, therefore, should have been granted without reference to the period of limitation prescribed under Section 11B of the Central Excise Act.
In support of such contention, counsel referred to the following decisions of the Tribunal opining that when an amount was paid in excess of the customs duty payable, such amount could not be considered as the customs duty and would not, therefore, fall within the ambit of Section 27 of the Customs Act providing for refund of customs duty. In such decisions, it was held that though there was no provision for refunding such amount, there was no provision under the Customs Act for refunding such amount also.
In case of Star Textile Engg. Works Ltd. v. Collector of Customs, Bombay reported in 1985 (22) E.L.T. 552.
In case of I.T.C. Ltd. v. Commissioner of Customs, Calcutta reported in 1999 (113) E.L.T. 213.
In case of Partap Steel Rolling Mills Ltd. v. Commissioner of Customs, Jamnagar reported in 2006 (200) E.L.T. 255.
Counsel also relied on a recent decision of a Division Bench of this court dated 5-7-2012 in the case of CC. Patel & Associates Pvt. Ltd. v. Union of India in Special Civil Application No. 1861/2005 wherein in the context of refund of service tax wrongly paid to the petitioner therein, this court made certain observations.
Second contention of the petitioners was that the Department could not withhold such duty which would result into unjust enrichment in favour of the Government. On the principle of restitution and equitable consideration in exercise of writ jurisdiction, this court may also direct refund of such amount by the respondents.
In this connection, counsel relied on following decisions :-
In case of Indo-Nippon Chemicals Co. Ltd. (supra) wherein the finding that a certain duty was paid under the insistence of the Department under mistaken belief of the Department as well as of the assessee of a certain circular, Division Bench of this court granted refund thereof even beyond the period of limitation.

Further, in the decision in the case of Mafatlal Industries Ltd. and Others v. Union of India and Others reported in 1997 (5) SCC 536 = 1997 (89) E.L.T. 247 to contend that since undisputedly the petitioners had not passed on the burden of duty on the ultimate consumer, such claim of refund could not be turned down on the principle of unjust enrichment.

Respondent’s Contentions:- On the other hand, learned counsel opposed the petition contending that the decision of this court in the case of indo-Nippon Chemicals Co. Ltd. (supra) would not apply. He submitted that the period of limitation prescribed under Section 11B of the Act would be applicable. Since admittedly the refund claim was filed after the period of limitation, the same was rightly rejected by the competent authority. He also contended that since statutory appeals were available, this writ petition should not be entertained.
In support of his contentions, he relied on the following decisions:-
In the case of Commissioner of Customs and Central Excise v. Hongo India Private Limited and Another reported in (2009) 5 SCC 791 = 2009 (236) E.L.T. 417 wherein in the context of limitation prescribed under the Act for filing appeal which was extendable only up to a limited period prescribed, the Apex Court held that the time limit prescribed for making a reference to the High Court was absolute and unextendable and the same could not be extended referring to Section 51of the Limitation Act, 1963. They, however, failed to see any relevance of this judgment since such a controversy was not arising in the present petition at all.
In case of Pares Electronics (I)) Ltd. v. Union of India reported in 1996 83 E.L.T. 261 wherein the Apex Court held that a duty which was initially paid without protest, could not be claimed refund of on the basis of decision taken in case of some other assessee particularly when the order refunding duty had become final.
The contention of the respondents that due to availability of alternative remedy, this petition should not be entertained needed only a summary disposal. This petition was entertained as far back as in 2004 after bipartite hearing. There were no disputed questions of facts. Availability of appeal otherwise also was not a total bar in entertaining a writ petition. Without any further elaboration, such a contention is, therefore, rejected.

Reasons of Judgment:- The facts in the present case were virtually admitted. The petitioners cleared excisable goods on payment of total duty of Rs. 91,128/-. Same duty was paid all over again at the month end when such goods were cleared by making debit entries in the Personal Ledger Account of the petitioners. Break-up of such duty

PLA Page No.	Entry No. & Date	Invoice No.	Amount debited
3	6 dated 5-6-2002	214	Rs. 21,419/-00
4	13 dated 17-7-2002	317	Rs. 4,792/-00
4	16 dated 23-7-2002	341	Rs. 27,209/-00
4	17 dated 24-7-2002	343	Rs. 17,333/-06
6	32 dated 30-9-2002	531	Rs. 20,375/-00
		Total	91,128/-06

Thus, the fact that the amount of Rs. 91,129/- was paid twice for the same clearance was not in dispute at all. In fact, in the order-in-original, the adjudicating authority accepted the contention of the petitioners that duty was paid twice on the same goods and that therefore the claim was admissible. Hon’ble Judge, however, rejected the claim observing that even though the duty payment was not disputed, refund could not be decided solely on this ground.
With respect to the petitioners' contention that such duty burden was not passed on to the consumer or any other party also, there was no dispute at all. In the show-cause notice that the adjudicating authority issued intending to reject the refund claim, no such allegation was made. The sole basis on which he was prima facie of the opinion that the claim was not maintainable was that the claim was barred by limitation. Even in response to the present petition, the respondents had not taken such a stand in the affidavit-in-reply.
The Hon’ble Judge, therefore, proceeded on two undisputed factual aspects namely, that the excise duty of Rs. 91,128/- was initially paid at the time of clearance, such amount was deposited again under mistake and further that such burden was not passed on to the consumer.
When the petitioners paid the duty of Rs. 91,128/- at the time of clearance of goods, they discharged their excise duty liability on such clearances.
Thereafter, the petitioners had no further excise duty liability on such goods. If by mistake or a pure clerical error or an oversight, the petitioners also thereafter debited the same amount in the Personal Ledger Account and deposited a sum of Rs. 91,128/- all over again, such deposit could not take the character of duty paid. Such deposit was purely an error and the amount deposited could not be co-related with the petitioners' responsibility to discharge excise liability. Such payment of Rs. 91,128/- made second time, therefore, in their opinion, could not be seen as a duty deposited or paid. Under the circumstances, the claim of the petitioners seeking repayment of such amount could not be seen as a refund claim made under Section 11B of the Act.
If, for any reason, the petitioners were seeking refund of a duty paid, such claim had to be examined under Section 118 of the Act and in such a case, the period of limitation would apply in all its rigor. Neither the departmental authority nor the court in a writ jurisdiction ignore such statutory period of limitation. This position was abundantly clear flowing from the decision in the case of Mafatal Industries (supra) wherein in the concluding portion of the majority judgment it was held and observed as under :-
“108. The discussion in the judgment yields the following propositions. We may forewarn that these propositions were set out merely for the sake of convenient reference and were not supposed to be exhaustive. In case of any doubt or ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment.
(i) Where a refund of tax/duty was claimed on the ground that it had been collected from the petitioner/plaintiff - whether before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter - by misinterpreting or misapplying the provisions of the Central Excises and Salt Ad, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by misinterpreting or misapplying any of the rules, regulations or notifications issued under the said enactments, such a claim had necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified there under and within the period of limitation prescribed therein. No suit was maintainable in that behalf. While the jurisdiction of the High Courts under Article.226 - and of this Court under Article 32 - could not be circumscribed by the provisions of the said enactments, they will certainly had due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11-B. This was for the reason that the power under Article 226 had to be exercised to effectuate the rule of law and not for abrogating it.”
In the present case, however, the Bench found that the second deposit of the same amount on clearance of the same goods did not amount to deposit of excise duty and was a pure mistaken deposit of an amount with the Government which the revenue could not retain or withhold. Such claim, therefore, would not fall within Section 11B of the Act. It was true that insofar as the Act was concerned, for refund of duty, the provision was contained in Section 118. However, merely because there was no specific statutory provision pertaining to return of amount deposited under a mistake, per se, in their opinion, should not deter them from directing the respondents to return such amount. Admittedly, there was no prohibition under the Act from returning such an amount. Allowing the respondents to retain such amount would be, in our opinion, highly inequitable. The Judge may not be seen to suggest that such a claim can be raised at any point of time without any explanation. In a given case, if the petitioner was found to be sleeping over his right, or raises such a claim after unduly long period of time, it may be open for the Government to refuse to return the same and this court in exercise of discretionary writ jurisdiction, may also not compel the Government to do so.
In the present case, however, no such inordinate delay was pointed out. The petitioners had contended that the error was noticed by them some time in October, 2003 whereupon immediately on 1-11-2003, such refund claim was filed.
In a recent judgment in case of C.C. Patel & Associates Pvt. Ltd. (supra), this court had occasion to deal with somewhat similar situation where the petitioner had deposited service tax twice which was not being refunded by the Department. In that context, it was observed as under:-
“(12) We fail to see how the department can withhold such refund. We say so for several reasons. Firstly, we notice that under sub-section(3) of section 68, the time available to a service provider such as the petitioner for depositing with the Government service tax though not collected from the service recipient was 75 days from the end of the month when such service was provided. This was in contrast to the duty to be deposited by a service provider upon actual collection by the 15th of the month following the end of the month when such duty was collected. Sub-section (3) of section 68 thus provided for an outer limit of 75 days, but never provided that the same could not be paid by the 15th of the month following the end of the month when such service was provided. Thus, if the petitioner deposited such duty with the Government during a particular quarter on the basis of billing without actual collection, he had discharged his liability under sub-section (3) of section 68. Thereafter, on an artificial basis, the Assessing Officer could not had held that he ought to had deposited same amount once all over again in the following quarter. This was fundamentally flawed logic on the part of the Assessing Officer.
(13) Further, to accept such formula adopted by the Assessing Officer would amount to collecting the tax from the petitioner twice. The petitioner having already paid up the service tax even before collection in a particular quarter, could not be asked to pay such tax all over again in the following quarter on the same service on the ground that such tax had to be deposited in the later quarter but was deposited earlier. Any such action would be without authority of law. Further, before raising demand of Rs. 1,19,465/- under the head of duty short paid, the Assessing Officer should had granted adjustment of the duty already paid by the petitioner towards the same liability.
(14) Under the circumstances, we were of the opinion that the department could not withhold such amount which the petitioner rightfully claimed. Under the circumstances, question of applying limitation under section 11B of the Act would not arise since we hold that retention of such service tax would be without any authority of law.”
Before closing, he recorded that with some of the observations made by this court in the case of halo-Nippon Chemicals Co. Ltd. (supra), with respect, he had serious doubts. However, since such questions do not directlyarise in this petition, he refrained from making any further observations in this regard.
Under the circumstances, the amount of Rs. 91,128/- was payable to the petitioner by the respondent. However, since the petitioners filed such a claim only on 1-11-2003, they could not claim interest on any period prior thereto.
It was, therefore, directed that the respondents shall pay to the petitioners a sum of Rs. 91,128/- with simple interest at the rate of 9% per annum after a period of three months from the date of the application dated 1-11-2003 till actual payment. The petition was disposed of accordingly. Rule made absolute.

Decision: Appeal allowed.

Comment: The crux of this case is that limitation under Section 11B cannot be upheld if there is no inordinate delay on part of the assessee in claiming the refund. Further, where payment of duty has been made twice on the same goods clearance then such amount cannot be retained by the Government stated if the amount was deposited again under mistake and further that such burden was not passed on to the consumer. Hence, refund was granted in favour of petitioner along with simple interest in the abovementioned case too.

Prepared By:Hushen ganodwala

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