1982 (12) TMI 51 - HC - Central Excise

Summary

Issues Involved:
1. Whether the claim for excise duty short-levied beyond three months from the date of delivery is barred?
2. Whether the conduct on the part of the assessee in accepting the terms of the trade notice and remitting one-third of the amount claimed amounts to a voluntary payment that cannot be recovered under Section 72 of the Indian Contract Act?

Issue-wise Detailed Analysis:

1. Whether the claim for excise duty short-levied beyond three months from the date of delivery is barred?

The plaintiff, a manufacturer of matches, was initially allowed a concessional rate of duty at Rs. 3.75 per gross of matches as per Notification No. 162/1967. This notification was amended by Notification No. 205/1967, which introduced conditions that the plaintiff did not satisfy, thus making the payable duty Rs. 4.30 per gross. The High Court of Madras struck down the provisos introduced by the amended notification, allowing the plaintiff to pay the concessional rate. However, the Supreme Court later upheld the validity of the amended notification, leading to a demand notice for differential duty.

The plaintiff contended that the demand was time-barred under Rule 10 of the Central Excise Rules, which allows for the collection of short-levied duty only within three months from the date of payment or adjustment. The lower court found that the demand notice was illegal as it was issued beyond the three-month period, making the collection time-barred. This decision was upheld by referencing a Division Bench ruling in W.P. 4145 to 4155 of 1975, which confirmed that authorities have no power to collect duty beyond three months from the date of the demand notice.

2. Whether the conduct on the part of the assessee in accepting the terms of the trade notice and remitting one-third of the amount claimed amounts to a voluntary payment that cannot be recovered under Section 72 of the Indian Contract Act?

The plaintiff paid one-third of the demanded differential duty under protest, following a government trade notice that offered a remission of two-thirds of the duty if the remaining one-third was paid by a specific date. The Revenue argued that this payment was voluntary and constituted a binding contract, thus not recoverable under Section 72 of the Indian Contract Act.

The court examined whether the payment was indeed voluntary. It was found that the payment was made under coercion due to the demand notice, which implied that non-payment would lead to coercive actions. The court referenced several cases, including Karanja Municipality v. New East India Press Co. and State of Andhra Pradesh v. Somasankara, which supported the view that payments made under threat or coercion, even without formal proceedings, are not voluntary. The court concluded that the trade notice did not nullify the demand notice and the payment was not voluntary. Therefore, Section 72 of the Indian Contract Act applied, entitling the plaintiff to recover the amount paid.

Conclusion:

The court confirmed the judgment and decree of the lower court, holding that the demand for differential duty was time-barred and the payment made by the plaintiff was not voluntary. Consequently, the plaintiff was entitled to recover the amount paid, and there would be no order as to costs.