Whether Refund of excise duty paid twice due to clerical error is governed by the provisions of Section 11 B?

PJ/Case Laws/2012-13/1278

Case: -  SWASTIK SANITARYWARES LTD Vs UNION OF INDIA

Citation: - 2012-TIOL-757-HC-AHM-CX

Brief facts: - The Petitioner No.1 is a company registered under the Companies Act. The Petitioner No.2 is the office bearer of the company. The company is engaged in the business of manufacture of sanitary wares which are excisable goods. The petitioner company cleared its final product during the period between June, 2002 and September, 2002 on payment of excise duties totaling 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. The Petitioners filed a refund claim before respondent No.3 on 1-11-2003 realizing that the sum of Rs.91,129/- was paid twice.

The respondent No.3, however, prima facie, find 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 which 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 has 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 is paid twice on the same goods and therefore, the claim is admissible, I find that even though the duty payment is not disputed, refund cannot be decided solely on this ground. In fact, time-bar aspect is having an overriding effect even if the refund is 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. vs. Union of India & Ors. reported in 2002 (49) R.L.T. 642 = (2003-TIOL-161-HC-AHM-CX) to which he recorded that the High Court and the Supreme Court only have power to entertain such a claim. He, however, would not have any jurisdiction to ignore the limitation period provided in section 11B of the Act.

Aggrieved by the same the petitioners have 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.

Appellant Contention: - Learned counsel for the petitioners raised following two contentions:-
(1) That the amount paid second time would not take the character of duty. Such amount cannot 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.

(2) Second contention of the petitioners was that the Department cannot 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 support of First contention, counsel referred to the following decisions of the Tribunal opining that when an amount is paid in excess of the customs duty payable, such amount cannot 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.
(i)            In case of Star Textile Engg. Works Ltd. vs. Collector of Customs, Bombay reported in 1985 (22) E.L.T. 552
(ii)           In case of I.T.C. Ltd. vs. Commissioner of Customs, Calcutta reported in   1999
                 (113) E.L.T. 213
     (iii)        In case of Partap Steel Rolling Mills Ltd. vs. Commissioner of Customs, Jamnagar
                  Reported in 2006 (200) E.L.T. 255

In Support of Second Contention counsel relied on following decisions:-

(1) 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.
(2) In the case of Mafatlal Industries Ltd. and Others vs. Union of India and Others reported in 1997 (5) SCC 536 = (2002-TIOL-54-SC-CX) it was held that since undisputedly the petitioners had not passed on the burden of duty on the ultimate consumer, such claim of refund cannot be turned down on the principle of unjust enrichment.

Respondent Contention:-The Learned Counsel for Respondent 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 are available, this writ petition should not be entertained.In support of his contentions, he relied on the following decisions:-

(1) In the case of Commissioner of Customs and Central Excise vs. Hongo India Private Limited and Another reported in (2009) 5 SCC 791 = (2008-TIOL-233-SC-CX) wherein in the context of limitation prescribed under the Act for filing appeal which is 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 is absolute and unextendable and the same cannot be extended referring to section 5 of the Limitation Act, 1963.

(2) In case of Paros Electronics (P) Ltd. vs. Union of India reported in 83 E.L.T. Page 261 wherein the Apex Court held that a duty which was initially paid without protest, cannot 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.

Reasoning of Judgment: The Hon’ble High Court held that 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 cannot take the character of duty paid. Such deposit was purely an error and the amount deposited cannot be co-related with the petitioners' responsibility to discharge excise liability. Such payment of Rs.91,128/- made second time, therefore, in our opinion, cannot be seen as a duty deposited or paid. Under the circumstances, the claim of the petitioners seeking repayment of such amount cannot 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 11B of the Act and in such a case, the period of limitation would apply in all its rigour. Neither the departmental authority nor this court in a writ jurisdiction ignore such statutory period of limitation. This position is abundantly clear flowing from the decision in the case of Mafatlal Industries (supra).

The High Court further held that they 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 is 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 is pointed out. The petitioners have 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:-

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 is 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 is collected. Sub-section (3) of section 68 thus provided for an outer limit of 75 days, but never provided that the same cannot 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 have held that he ought to have deposited same amount once all over again in the following quarter. This is fundamentally flawed logic on the part of the Assessing Officer.

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, cannot 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 have granted adjustment of the duty already paid by the petitioner towards the same liability.

Under the circumstances, The High Court is of the opinion that the department cannot withhold such amount which the petitioner rightfully claimed. Therefore question of applying limitation under section 11B of the Act would not arise since retention of such service tax would be without any authority of law.

The High Court may record that with some of the observations made by this court in the case of Indo-Nippon Chemicals Co. Ltd. (supra), with respect, they have serious doubts. However, since such questions do not directly arise in this petition, they refrain from making any further observations in this regard. The amount of Rs.91,128/- is payable to the petitioners by the respondents. However, since the petitioners filed such a claim only on 1-11-2003, they cannot claim interest on any period prior thereto. The High Court 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.

Decision:- Petition allowed.

Comment:Refund of amount paid erroneously cannot be denied on the grounds that it is barred by limitation when the refund claim is filed within a reasonable time.

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PJ/Case Laws/2012-13/1278

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