1983 (12) TMI 286 - AT - Customs

Summary

Issues Involved:

1. Applicability of Section 131(5) of the Customs Act, 1962.
2. The legality of the levy of additional duty on Methyl Cellulose.
3. The applicability of the time-limit under Section 27(1) of the Customs Act for refund claims.
4. The erroneous refund and the requirement to repay the refunded amount.

Issue-wise Detailed Analysis:

1. Applicability of Section 131(5) of the Customs Act, 1962:

The respondents argued that the notice under Section 131(5) was time-barred as it was not issued within the time limit specified in Section 28 of the Act. The refund was made in November 1979, and the notice was issued on 6-2-1981, which exceeded the six-month period from the date of refund. The appellants countered this by referencing the Supreme Court judgment in Geep Flashlight Industries Ltd. v. Union of India, which clarified that the time limit in Section 28 applies only to cases of non-levy or short-levy and not to erroneous refunds. The Tribunal agreed with the appellants, stating that "erroneous refund" is not a case of non-levy or short-levy and thus is not subject to the time limit in Section 28. The Tribunal concluded that the notice under Section 131(3) was not hit by limitation.

2. The legality of the levy of additional duty on Methyl Cellulose:

The Assistant Collector initially rejected the respondents' claim for a refund of the additional duty on the grounds of limitation under Section 27(1) of the Act. The Appellate Collector, however, held that the levy of additional duty was ab initio wrong since Methyl Cellulose was not among the enumerated cellulose derivatives in Item No. 15A(1)(iii) of the Central Excise Tariff Schedule (CET), which alone were liable to Central Excise duty. The respondents argued that Methyl Cellulose should fall under Item 68 CET, which was exempt from additional duty by virtue of Customs Notification No. 364-Cus., dated 2-8-1976. The Tribunal noted that if Methyl Cellulose did not fall under Item No. 15A(i) CET, it would fall under Item 68 CET. Therefore, the issue was not one of levy without jurisdiction but one of erroneous assessment.

3. The applicability of the time-limit under Section 27(1) of the Customs Act for refund claims:

The respondents contended that the time limit under Section 27(1) did not apply because the levy of additional duty was without authority of law. They cited various judgments to support their claim that the time limit for refund claims should not apply in cases of illegal duty collection. The Tribunal, however, referred to several decisions, including Afro-Asian Association, Bombay v. Collector of Customs, Bombay, and Miles India Ltd., Baroda v. Appellate Collector of Customs, Bombay, which held that the time limit laid down in Section 27(1) applies to claims for refund of duty made under the provisions of the Act before the departmental quasi-judicial authorities. The Tribunal concluded that the time limit under Section 27(1) was rightly invoked by the Assistant Collector.

4. The erroneous refund and the requirement to repay the refunded amount:

The Tribunal found that the Appellate Collector's order, which directed the refund of the additional duty collected, was not correct in law. Consequently, the amount erroneously refunded to the respondents in pursuance of the Appellate Collector's order was to be paid back to the Collector of Customs, Bombay, within three months from the date of communication of the Tribunal's order.

Conclusion:

In conclusion, the Tribunal allowed the appeal, set aside the Appellate Collector's order, and directed the respondents to repay the erroneously refunded amount to the Collector of Customs, Bombay, within three months. The Tribunal upheld the applicability of the time limit under Section 27(1) for refund claims and clarified that the notice under Section 131(3) was not time-barred.