1979 (3) TMI 62 - HC - Central Excise

Summary

Issues Involved:
1. Liability of excise duty on fertilizers in stock as of February 28, 1969.
2. Applicability of Rule 11 of the Central Excise Rules, 1944.
3. Claim for refund under Section 72 of the Indian Contract Act.
4. Bar of limitation under the Limitation Act, 1963.
5. Discretionary power of the court under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Liability of Excise Duty on Fertilizers in Stock as of February 28, 1969:
The core issue of whether the fertilizers in stock, specifically 10,738-5047 metric tonnes, as of February 28, 1969, are liable to pay excise duty is not disputed in the instant case. The question was not argued in the writ petition, and the focus was on the refund of the excise duty paid.

2. Applicability of Rule 11 of the Central Excise Rules, 1944:
The Collector of Central Excise resisted the claim for the refund, citing Rule 11 of the Central Excise Rules, 1944, arguing that the claim is barred due to the company's delay and that the refund cannot be ordered due to the laches of the company. However, the court held that Rule 11 does not apply to the facts of the case. It was determined that the company had not paid the amount by "inadvertence," "error," or "misconstruction" of any rule, but rather under enforcement by the Excise officials. Therefore, Rule 11 was not applicable.

3. Claim for Refund under Section 72 of the Indian Contract Act:
The company argued that the payment was made under "mistake" within the meaning of Section 72 of the Indian Contract Act, and the mistake was dispelled on March 11, 1976, when the Madras High Court decided the dispute. The claim was made within six weeks of this realization. The court referred to the settled scope of "mistake" under Section 72, citing precedents such as Shiba Prasad Singh v. Srish Chandra Nandi and the confirmation by the Supreme Court in the Sales Tax Officer, Banaras and Others v. Kanhaiya Lal Mukund Lal Saraf and Others.

4. Bar of Limitation under the Limitation Act, 1963:
The respondent argued that the payment may have been made under "coercion" and not "mistake," and thus the claim should be made within three years of payment, making the claim barred under the Limitation Act. The court examined the case of Tilokchand Motichand and Others v. H.B. Munshi, Commissioner of Sales Tax, Bombay and Others, where the Supreme Court discussed the relevance of the Limitation Act to claims under Article 32 and 226 of the Constitution. The court emphasized that utmost expedition is required for such claims and that the court has discretionary power to entertain claims even after a lapse of time, depending on the circumstances.

5. Discretionary Power of the Court under Article 226 of the Constitution of India:
The court concluded that the payment was made under protest and as a measure of business expediency, thus falling under "mistake" or "coercion." The claim was made within six weeks of the realization of the mistake, and there were no laches on the part of the petitioner company. The court exercised its discretion under Article 226 to allow the refund claim despite the potential bar under the Limitation Act, citing the discretionary power recognized in Bhailal Bhai's case and the rationale of the Supreme Court in Tilokchand Motichand's case.

Conclusion:
The writ petition was allowed as prayed for, granting the refund of Rs. 3,59,113.68 to the petitioner company, with no order as to costs.