1980 (3) TMI 96 - HC - Central Excise

Duty paid under mistake - Civil suit not barred - Limitation - Mistake - Connotation of - Writ jurisdiction - Refund - Application rejected as time barred

Summary

Issues Involved:
1. Whether the suit for refund of excise duty was time-barred.
2. Applicability of Section 40 of the Central Excises and Salt Act, 1944.
3. Applicability of Rule 11 and Rule 173-J of the Central Excise Rules, 1944.
4. Determination of the limitation period for filing the suit.
5. Maintainability of the suit after rejection of the refund application by the Assistant Collector.

Issue-wise Detailed Analysis:

1. Whether the suit for refund of excise duty was time-barred:
The defendant argued that the entire suit was time-barred and should not have been decreed. The contention was based on the limitation prescribed under Rule 11 read with Rule 173-J of the Central Excise Rules, which stipulates a one-year period for claiming a refund of excise duty erroneously paid. However, the court held that the suit was governed by the general law of limitation, which prescribes a three-year period for such suits. The court emphasized that under ordinary law, the limitation for such a suit is three years from the accrual of the cause of action.

2. Applicability of Section 40 of the Central Excises and Salt Act, 1944:
Section 40 provides protection for actions taken under the Act. The court noted that the defendant's counsel conceded that the duty in question was not chargeable according to the correct interpretation of the notifications. Therefore, the act of the Excise Department in realizing the duty was not considered an act done under the Act. Consequently, the suit was maintainable and not barred under Section 40.

3. Applicability of Rule 11 and Rule 173-J of the Central Excise Rules, 1944:
Rule 11 stipulates a three-month period for claiming a refund of duties paid erroneously, while Rule 173-J extends this period to one year. The court clarified that these rules apply to applications for refunds under the special act, not to suits filed under ordinary law. Therefore, the limitation for the suit was governed by the general law of limitation, which is three years.

4. Determination of the limitation period for filing the suit:
The court referred to several precedents, including the Supreme Court judgments in State of Madhya Pradesh v. Bhailal Bhai and State of Kerala v. Aluminium Industries Ltd., which established that the period of limitation for recovery of money paid under a mistake of law is three years from the date when the mistake is known. The court accepted that the plaintiffs discovered the mistake when they became aware of the Allahabad High Court judgment in February 1976. The suit filed on 12-11-1976 was within the three-year limitation period.

5. Maintainability of the suit after rejection of the refund application by the Assistant Collector:
The defendant argued that the suit was not maintainable because the plaintiffs' application for a refund was rejected by the Assistant Collector as time-barred. The court rejected this argument, stating that the application was dismissed on the ground of limitation, not on merits. The court held that the rejection of the application under the special act did not bar the plaintiffs from seeking a remedy through a suit under ordinary law.

Conclusion:
The court dismissed the appeal filed by the Union of India and allowed the appeal filed by the plaintiffs. The decretal amount was enhanced from Rs. 40,485/- to Rs. 1,53,002.35 paise, with costs of both courts. The defendant was ordered to pay the decretal amount within four months, failing which they would be liable to pay interest at the rate of 9% per annum from the date of the judgment.