1974 (7) TMI 55 - HC - Central Excise

Summary

Issues:
1. Challenge against demand made by Central Excise Department for excise duty on cotton yarn.
2. Dispute over the correctness of the refund made by the Department.
3. Interpretation of Rule 10 of the Central Excise Rules regarding the period for making a demand for erroneously refunded amounts.

Analysis:

1. The petitioner, a cotton mill, challenged a demand by the Central Excise Department for excise duty on cotton yarn. The Department initially refunded an amount to the petitioner, but later demanded the same amount, leading to a dispute. The assessment was based on the count of the yarn, not the average count, as per the relevant tariff. The petitioner contended that the original assessment was correct, but the Department insisted on the demand, which was upheld in subsequent appeals.

2. The Department argued that the cotton yarn was liable for excise duty based on specific classifications in the Central Excises and Salt Act. The dispute centered on whether the refund made by the Department was correct. The Department maintained that the refund was erroneous as the duty was to be assessed based on the count of the yarn, not the average count. The petitioner failed to challenge the assessment based on the prescribed rates, affirming the correctness of the demand made by the Department.

3. Regarding the interpretation of Rule 10 of the Central Excise Rules, the Court analyzed the period within which a demand for erroneously refunded amounts must be made. The rule stipulated a three-month period from the date of making the refund. The Department contended that the period should be counted from when the refund vouchers were encashed by the petitioner. However, the Court clarified that the date of making the refund, i.e., when the refund vouchers were issued, was crucial for calculating the three-month period. As the demand made by the Department exceeded this period for a portion of the refunded amount, the Court ruled in favor of the petitioner for that specific amount.

In conclusion, the Court partially allowed the petition, quashing a portion of the demand made by the Department due to exceeding the prescribed period under Rule 10. The Department was directed to refund the amount corresponding to the period limitation violation. The petitioner was entitled to costs from the Department for the successful challenge against the demand.