1967 (3) TMI 116 - HC - Central Excise

Summary

Issues Involved:
1. Plaintiff's knowledge of the exemption.
2. Applicability of Section 40(2) of the Central Excises and Salt Act, 1944.
3. Applicability of Article 96 of the Indian Limitation Act, 1908.
4. Bar of limitation under Section 40(2) of the Act and Article 96 of the Limitation Act.

Detailed Analysis:

1. Plaintiff's Knowledge of the Exemption:
The plaintiff claimed ignorance of the Central Government's exemption of the first 125 tons of soap from excise duty, which was notified on 1st March 1956. The plaintiff argued that it only became aware of this exemption on 8th January 1958. Evidence from P.W. 1, a long-time employee, supported this claim, stating he learned of the exemption in November 1957. Correspondence (Ext. B and Ext. 1) between the plaintiff and the Central Excise Inspector further corroborated this timeline. The trial court's reliance on A.R. forms (Exts. A to A/4) indicating "free from duty" entries in February 1956 was deemed irrelevant, as the exemption notification itself was published later, on 1st March 1956. Thus, the plaintiff's assertion of discovering the exemption in January 1958 was accepted.

2. Applicability of Section 40(2) of the Central Excises and Salt Act, 1944:
The trial court concluded that the suit was barred by Section 40(2) of the Act, which prescribes a six-month limitation period for suits related to actions done under the Act. However, the appellate court found that the plaintiff's payment was made under a mistake of law, discovered in November 1957. The court held that the plaintiff's application for a refund was outside the purview of the Act and its rules, as there was no provision for claiming refunds beyond three months from the date of payment. Therefore, the orders rejecting the refund claim were not considered actions done under the Act, making Section 40(2) inapplicable.

3. Applicability of Article 96 of the Indian Limitation Act, 1908:
Article 96 provides a three-year limitation period from the date the mistake becomes known to the plaintiff. The appellate court determined that the mistake was discovered in November 1957, and the suit was filed on 30th June 1960, well within the three-year period. The court emphasized that Article 96 covers both mistakes of fact and law, and the limitation period runs from the plaintiff's knowledge of the mistake, without requiring diligence on the plaintiff's part.

4. Bar of Limitation under Section 40(2) of the Act and Article 96 of the Limitation Act:
The trial court incorrectly applied Section 40(2) of the Act, assuming the plaintiff had knowledge of the exemption in February 1956. The appellate court clarified that the suit was not barred by Section 40(2) since the plaintiff's claim did not relate to actions done under the Act. Instead, Article 96 of the Limitation Act was applicable, and the suit was filed within the permissible period from the date the mistake was discovered.

Conclusion:
The appeal was allowed, and the plaintiff's suit was decreed. The judgment and decree of the trial court were set aside. No order as to costs was made for the appeal.