1980 (10) TMI 80 - HC - Central Excise

Refund Excess duty paid by compulsion Provisional assessment Writ jurisdiction Duty recovered by mistake

Issues Involved:
1. Classification of D.W. Tarpaulin and D.W. Jute canvas under Item 22A of the Central Excises and Salt Act, 1944.
2. Liability of the respondents to refund excess excise duty.
3. Applicability of Rule 11 of the Central Excise Rules, 1944.
4. Limitation period for claiming refund.
5. Whether the duty was paid under compulsion or through inadvertence, error, or mis-construction.
6. Unjust enrichment of the petitioner due to the refund.

Issue-Wise Detailed Analysis:

1. Classification of D.W. Tarpaulin and D.W. Jute canvas under Item 22A of the Central Excises and Salt Act, 1944:
The petitioner, Khardah Company Limited, manufactures D.W. Tarpaulin and D.W. Jute canvas. Initially, these products were classified under entry 22A(2) of the First Schedule to the Central Excises and Salt Act, 1944, attracting an excise duty of Rs. 125 per M.T. However, the excise authorities later reclassified these products under entry 22A(1), which imposed a higher duty of Rs. 250 per M.T. The Central Government ultimately decided on April 29, 1964, that these products should be classified under entry 22A(2), confirming the petitioner's original classification.

2. Liability of the respondents to refund excess excise duty:
The petitioner sought a refund of the excess excise duty paid between May 1962 and April 1964 due to the incorrect classification. The respondents initially refused the refund, citing Rule 11 of the Central Excise Rules, 1944. The Court held that the excess duty was paid under compulsion, not through inadvertence, error, or mis-construction, making Rule 11 inapplicable. The respondents were liable to refund the excess duty as it was realized without authority of law.

3. Applicability of Rule 11 of the Central Excise Rules, 1944:
Rule 11, as it stood at the relevant time, provided that no duties paid through inadvertence, error, or mis-construction should be refunded unless claimed within three months from the date of payment. The Court found that the excess duty was paid under compulsion due to the assessing authorities' demand and pending final classification by the Central Government. Thus, Rule 11 was deemed inapplicable.

4. Limitation period for claiming refund:
The respondents argued that the petitioner's claim was time-barred under Rule 11. However, the Court held that since the excess duty was paid under compulsion and not through inadvertence, error, or mis-construction, the special limitation under Rule 11 did not apply. The claim for refund was enforceable as the excess duty was realized without authority of law.

5. Whether the duty was paid under compulsion or through inadvertence, error, or mis-construction:
The Court found that the petitioner paid the excess duty under compulsion, as the goods would not have been cleared otherwise. The initial classification by the petitioner was correct, and the subsequent payments at the higher rate were made pending the Central Government's final decision. Therefore, the payments were not made through inadvertence, error, or mis-construction.

6. Unjust enrichment of the petitioner due to the refund:
The respondents contended that refunding the excess duty would result in unjust enrichment of the petitioner, as the incidence of the duty might have been passed on to customers. The Court overruled this objection, citing the Supreme Court's observations that the liability to pay excise duty is on the assessee, irrespective of whether the burden is passed on to customers. The refund was ordered as the duty was realized without authority of law.

Conclusion:
The application succeeded, and the impugned orders were set aside. The respondents were directed to refund the excess duty realized from the petitioner between May 14, 1962, and February 29, 1964. The operation of the order was stayed for three months, and a certificate under Article 133(1) of the Constitution was refused.

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