1980 (2) TMI 81 - HC - Central Excise

Tyres and fork-lift trucks - Classification - Refund - Error - Connotation of - Mistake of law - Discovery of - Limitation - Writ Jurisdiction - Discretion -Alternative remedy - Date of knowledge

Issues Involved:

1. Classification of tyres for fork-lift trucks under the Central Excises and Salt Act.
2. Refund of excess excise duty paid due to a mistake of law.
3. Applicability of Rule 11 of the Central Excise Rules and Sections 17 and 29 of the Limitation Act.
4. Right to retain amounts illegally collected as tax.
5. Application of Section 72 of the Contract Act.
6. Jurisdiction and validity of orders under Rule 11.
7. Limitation period for filing refund claims and writ petitions.
8. Requirement to file a civil suit versus a writ petition for refund claims.

Detailed Analysis:

1. Classification of Tyres for Fork-lift Trucks:
The petitioner, a public limited company, manufactured tyres for fork-lift trucks and mistakenly classified them under Item 16(1) (tyres for motor vehicles) instead of Item 16(3) (all other tyres) of the Central Excises and Salt Act, resulting in a higher excise duty. The mistake was discovered after a letter from Voltas Ltd. informed the petitioner of an Appellate Collector of Customs decision classifying fork-lift truck tyres under Item 16(3).

2. Refund of Excess Excise Duty Paid:
The petitioner applied for a refund of Rs. 2,67,822.22, later corrected to Rs. 2,67,869.41, for the excess duty paid from 14th June 1971 to 5th March 1974. The Assistant Collector allowed a partial refund for the period within 12 months prior to the application but rejected the claim for earlier periods as time-barred under Rule 11 of the Central Excise Rules.

3. Applicability of Rule 11 and Limitation Act:
The petitioner argued that under Rule 11, read with Sections 17 and 29 of the Limitation Act, the limitation period should start from the date of discovering the mistake. However, this argument was not pressed due to a precedent set by the High Court in a similar case.

4. Right to Retain Amounts Illegally Collected:
The petitioner contended that the Department had no right to retain amounts illegally collected as tax without any authority of law. The duty paid under a mistake of law is recoverable under Section 72 of the Contract Act. The Department argued that the orders were valid under Rule 11, which allowed refunds only for a period of one year prior to the application.

5. Application of Section 72 of the Contract Act:
Section 72 mandates that money paid by mistake must be repaid. The court held that the excess duty paid by the petitioner was due to a mistake of law and/or fact. Rule 11 did not cover such mistakes, as it was intended for clerical or arithmetical errors. The court referenced several precedents, including Bata Shoe Co. v. Collector of Central Excise and Sales Tax Officer v. Kanhaya Lal, affirming that payments made under a mistake of law are recoverable.

6. Jurisdiction and Validity of Orders under Rule 11:
The court found that the Department's orders under Rule 11 were not justified as they did not address the mistake of law. The excess duty was collected without the authority of law, and the Department was aware of this, as evidenced by the partial refund granted.

7. Limitation Period for Filing Refund Claims and Writ Petitions:
The court held that the petitioner had filed the refund application and the writ petition within the appropriate time frames. The refund application was made within three years from the earliest date of payment, and the writ petition was filed within three years from the discovery of the mistake and within six months from the appellate order.

8. Requirement to File a Civil Suit versus a Writ Petition:
The court rejected the argument that the petitioner should have filed a civil suit instead of a writ petition. It emphasized that there were no triable issues raised by the respondents, and driving the petitioner to a suit would be unjust and inequitable. The court referenced the Supreme Court's guidelines in State of Madhya Pradesh v. Bhailal Bhai, affirming that the extraordinary remedy under Article 226 should not be denied when there is no unreasonable delay or triable issue.

Conclusion:
The court set aside the impugned orders and directed the respondents to refund the amount of Rs. 2,38,481.24 to the petitioner within eight weeks. The court also awarded costs to the petitioner, emphasizing the futility of the Department's technical defenses and the broader concept of justice.

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