1980 (9) TMI 89 - HC - Central Excise

Finance Bill - Imposition of duty and subsequent withdrawal - Duty paid provisionally is liable to refund

Issues Involved:
1. Whether the petitioners are entitled to a refund of the excise duty collected on maida under the Provisional Collection of Taxes Act.
2. Interpretation and application of Sections 3, 4, and 5 of the Provisional Collection of Taxes Act, 1931.
3. The effect of Notification No. 162 dated 10-8-1971, exempting maida from excise duty.

Detailed Analysis:

1. Entitlement to Refund of Excise Duty:

The petitioners, Messrs United India Roller Flour Mills Ltd., sought a refund of Rs. 32,004 collected as excise duty on maida for the period from 29-5-1971 to 9-6-1971. The Finance Bill No. 27 of 1971 proposed the inclusion of maida under Item 1-E of the Central Excise Tariff, and the duty was collected provisionally. However, the Finance Act passed on 10-8-1971 did not levy excise duty on maida, and Notification No. 162, issued the same day, exempted maida from excise duty. The petitioners' applications for a refund were rejected by the Assistant Collector of Central Excise, Madras, and subsequent appeals were also dismissed.

2. Interpretation and Application of Sections 3, 4, and 5 of the Provisional Collection of Taxes Act, 1931:

- Section 3: Allows the Central Government to declare that provisions in a Bill for the imposition or increase of a duty shall have immediate effect. The Finance Bill No. 27 of 1971 contained such a declaration, leading to the provisional collection of excise duty on maida.

- Section 4: States that a declared provision shall have the force of law immediately upon the introduction of the Bill and shall cease to have effect when the Bill is enacted with or without amendment, or by a notification following a motion in Parliament, or on the expiry of the seventy-fifth day after the Bill's introduction.

- Section 5: Provides for refunds of duties collected if the declared provision comes into operation as an enactment in an amended form or ceases to have effect under Section 4(2)(b) or (c). The court noted that the Finance Bill became an enactment with an amendment as it did not include the provision for excise duty on maida, thus entitling the petitioners to a refund.

3. Effect of Notification No. 162 dated 10-8-1971:

The Central Government's Notification No. 162, dated 10-8-1971, exempted maida from excise duty. The petitioners argued that this exemption, along with the absence of a provision for excise duty on maida in the Finance Act, necessitated a refund of the duty collected. The court agreed, stating that the declaration under Section 3 ceased to have the force of law when the Finance Bill was enacted without the provision for excise duty on maida.

Judgment:

The court concluded that the petitioners were entitled to a refund of the excise duty collected on maida. The Finance Bill, as passed, did not include the provision for excise duty on maida, and the subsequent notification exempted maida from such duty. Therefore, the provisional collection of excise duty was unauthorized under the final enactment. The writ petition was allowed, and the rule nisi was made absolute, directing the Union of India to refund the sum of Rs. 32,004 to the petitioners. The petitioners were also awarded costs, with the advocate's fee fixed at Rs. 250.

Editor's Comments:

The judgment hinges on the interpretation of Sections 3, 4, and 5 of the Provisional Collection of Taxes Act, 1931. The court's application of these sections led to the conclusion that the petitioners were entitled to a refund due to the Finance Act's omission of the excise duty provision on maida. The editor notes that the exemption notification did not amend or delete the tariff entry, which could imply that the court may have erred in applying Section 5 to this case. However, the court's decision focused on the fact that the Finance Act, as passed, did not impose excise duty on maida, thus entitling the petitioners to a refund.

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