1982 (9) TMI 56 - HC - Central Excise

Proforma credit is not admissible only by adjustment - Refund - Statutory provision having two interpretations - Excise duty - Levy at different rates is not discriminatory. - Statute

Issues Involved: Application of Rule 56-A, entitlement to refund, interpretation of clause (vi), constitutional validity, delay by excise authorities, and claim for interest.

Issue-Wise Detailed Analysis:

1. Application of Rule 56-A:
The core issue revolves around Rule 56-A of the Central Excise Rules, 1944, which allows manufacturers to receive credit for excise duty paid on raw materials used in manufacturing finished goods. The petitioners, a company manufacturing fertilizers, sought credit under this rule for the excise duty paid on base fertilizers used in their production. The relevant portion of Rule 56-A was cited to understand its application and the conditions under which credit could be claimed.

2. Entitlement to Refund:
The petitioners claimed a refund of Rs. 77,587/- based on the proforma credit for excise duty paid on base fertilizers. They argued that due to delays by the excise authorities in granting the credit, they had to make large cash deposits to clear their goods. The delay in crediting the proforma account resulted in a surplus credit balance when excise duty on their finished goods was abolished on 1st March 1970. The petitioners contended that they were entitled to a refund of this surplus.

3. Interpretation of Clause (vi):
The petitioners challenged the application of clause (vi) of sub-rule (3) of Rule 56-A, which prohibits cash refunds of proforma credit. They argued that this clause should not apply to their claim for refund due to the delay caused by the excise authorities. They sought a limited interpretation of clause (vi), suggesting it only barred cash refunds in excess of the excise duty payable on finished goods, not refunds of deposits made due to delayed credit.

4. Constitutional Validity:
The petitioners also challenged the constitutional validity of clause (vi), arguing that it violated Articles 19(1)(f) & (g), 31(1), 31(2), and 300(a) of the Constitution of India. They contended that the clause imposed unreasonable restrictions on their right to property and business and amounted to deprivation of property without authority of law.

5. Delay by Excise Authorities:
The petitioners highlighted the delay caused by the excise authorities in granting the proforma credit, which led to their claim for a refund. They argued that the authorities' lack of coordination and improper conduct resulted in the delay, and thus, they should not be penalized by the application of clause (vi).

6. Claim for Interest:
The court recognized the petitioners' right to claim interest due to the prolonged retention of the amount by the respondents. Although the petitioners did not initially claim interest, the court directed that interest at the rate of 6% per annum would be payable from 1st December 1982 if the payment was not made by the respondents by the specified date.

Judgment Summary:
The court quashed the order of the Appellate Collector, which denied the petitioners' claim for a refund based on clause (vi) of Rule 56-A. The court held that the petitioners were entitled to a refund of Rs. 77,587/- and issued a mandamus directing the respondents to make the payment by 30th November 1982. The court also directed that interest would be payable at 6% per annum from 1st December 1982 if the payment was delayed. The court emphasized that the interpretation of clause (vi) was limited to its form in 1970 and did not necessarily apply to its amended version.

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