2015 (7) TMI 958 - HC - Central Excise

Denial of refund claim - period of limitation - duty was paid under protest or voluntary - Exemption at consessional rate of duty vide Notification No.140/83-CE dated 5th May, 1983 - Held that - Appellant had specifically indicated in the declaration form under Rule 173B that they are paying the duty under protest, which was part of their letter dated 24th December, 1996 in which the appellant had categorically insisted that no duty was payable on the product manufactured by them. - The language and content of the letter dated 24th December, 1996 read with the declaration form as reproduced above leaves no room for doubt that the appellant had pleaded in unequivocal terms, namely, that duty was not payable on shampoo manufactured by them. The contents of the letter makes it clear that despite the appellant having lodged the protest in the declaration form, the department was insisting on payment of duty on the manufacture of shampoo and hence, the appellant had put on record for paying the amount under protest with a further prayer to permit the appellant to avail the provisional assessment to duty under Rule 9B of the Rules till the case was finally decided. Appellant had established beyond doubt that the appellant had always been contesting the department s claim for levying duty on the product manufactured by them and regularly agitated that no such duty was payable. In our view, if the appellant was disputing the levy of duty and was agitating that no duty was payable and that payment was being made because of insistence of the department to pay under threat of seizure of the product, it cannot be said that payments made by the appellant was not made under protest. We are of the opinion that the assessee had lodged the protest in accordance with Section 11B of the Act read with Rule 233B of the Rules of 1994. - Tribunal and the departmental authorities have committed a manifest error in non-suiting the appellant s application for refund on the ground that no protest letter was filed in accordance with the procedure prescribed under Rule 233B of the Rules. Since we have held that the protest letter was filed by the appellant, the question of the application being barred by limitation under Section 11-B of the Act does not arise. - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Classification of the product for excise duty purposes.
2. Entitlement to exemption from duty.
3. Compliance with procedural requirements for claiming refund.
4. Timeliness of the refund claim.
5. Validity of the protest lodged by the appellant.

Issue-wise Detailed Analysis:

1. Classification of the Product for Excise Duty Purposes:
The appellant, a charitable society, manufactured Satritha Herbal Shampoo and Neem Shampoo, claiming they were exempt from duty under Notification No.140/85-CE. The Central Excise department, however, classified the shampoo under Tariff Chapter sub-heading No.3305.99, making it subject to duty. The appellant filed a declaration under Rule 173B of the Central Excise Rules, 1944, disagreeing with the department's classification and indicating they would pay duty under protest.

2. Entitlement to Exemption from Duty:
The appellant argued that their product did not attract central excise duty under Chapter heading 3305.99, citing a Supreme Court judgment that classified shampoo as liquid soap under Chapter Heading 34.01. They also claimed their product was exempt as it was manufactured from raw materials like Sikakai, Amla, and Ritha, and was a village industry product registered with the U.P. Khadi & Gramudyog Board.

3. Compliance with Procedural Requirements for Claiming Refund:
The appellant issued a letter on 24th December 1996, requesting provisional assessment under Rule 9B until the classification dispute was resolved. They later applied for a refund of Rs. 9,68,931/- for the period 1st January 1997 to 31st January 1998, asserting they paid duty under protest. The Deputy Commissioner rejected the refund claim, stating the appellant did not follow Rule 233B procedures for paying duty under protest and thus was not entitled to a refund.

4. Timeliness of the Refund Claim:
The authorities initially rejected the refund claim as time-barred, arguing that the appellant did not file a formal protest letter as required under Rule 233B. The appellant contended that their declaration and letter constituted sufficient protest, making the refund claim within the limitation period as per Section 11B of the Central Excise Act, which exempts the six-month limitation if duty is paid under protest.

5. Validity of the Protest Lodged by the Appellant:
The Tribunal and departmental authorities held that no proper protest letter was filed, thus the refund claim was time-barred. However, the court found that the appellant's declaration under Rule 173B and their letter dated 24th December 1996 constituted a valid protest. The court emphasized that Rule 233B should not be interpreted in a narrow or hyper-technical manner and that substantial compliance with the rule was sufficient.

Conclusion:
The court concluded that the appellant had indeed lodged a protest in accordance with Section 11B of the Act and Rule 233B of the Rules. It held that the procedural requirements under Rule 233B should not override the substantive provisions of Section 11B. The Tribunal and departmental authorities erred in rejecting the refund claim on procedural grounds. The court quashed the impugned orders and remanded the matter to the competent authority to decide the refund application on merits and in accordance with the law.

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