1987 (12) TMI 38 - HC - Central Excise

Issues Involved:
1. Refund of excise duty paid on aerated water under mistake of law after expiry of six months from the date of payment.
2. Exigibility of Coca-Cola and Fanta to 20% duty based on the use of blended flavouring concentrates.
3. Constitutional protection against levy or collection of tax except in accordance with law.
4. Estoppel due to petitioner's declaration and limitation for refund application.
5. Time-barred claims and the applicability of Section 11B of the Central Excise Act.

Summary:

1. Refund of Excise Duty Paid Under Mistake of Law:
The court addressed the issue of whether excise duty paid on aerated water under a mistake of law could be refunded after six months from the date of payment. The petitioner, M/s. Agra Beverages Corporation, sought a refund for payments made between 18th March 1973 and 17th June 1977, arguing that Coca-Cola and Fanta were not manufactured with blended flavouring concentrates and thus were not subject to the higher duty rate.

2. Exigibility of Coca-Cola and Fanta to 20% Duty:
The court examined whether Coca-Cola and Fanta were manufactured using blended flavouring concentrates, which would subject them to a 20% duty. The Bombay High Court in Duke and Sons Ltd. v. G.T. Rundani had previously ruled that essence and concentrates were distinct, and this decision was accepted by the Collector, Central Excise of Hyderabad, and affirmed by the Government of India. The court concluded that Coca-Cola and Fanta were manufactured with synthetic essence, not blended flavouring concentrates, making the 20% duty unwarranted.

3. Constitutional Protection Against Levy or Collection of Tax:
The court reiterated that Article 265 of the Constitution protects against the levy or collection of tax except in accordance with the law. Payments made under a mistake of law are refundable, as established in various Supreme Court rulings, including Sales Tax Officer Banaras v. Kanhaiya Lal Mukundi Lal Saraaf and State of Madhya Pradesh v. Bhailal Bhai. The court emphasized that payments made under a mistake of law must be repaid.

4. Estoppel and Limitation for Refund Application:
The government argued that the petitioner was estopped from claiming a refund due to their earlier declaration that the beverages were manufactured with blended flavouring concentrates. The court rejected this argument, stating that estoppel cannot operate against constitutional prohibitions. The court also addressed the issue of limitation, noting that the petitioner had filed applications for refund within six months from the date of knowledge of the mistake of law.

5. Time-Barred Claims and Applicability of Section 11B:
The court examined whether the claims were barred by time, particularly in light of Section 11B of the Central Excise Act. The court held that the six-month limitation period should be counted from the date of knowledge of the mistake of law. The court found that the petitioner had filed some applications within this period, but others were filed much later. The court concluded that the petitioner was guilty of laches for claims filed after a significant delay and thus not entitled to relief for those periods.

Conclusion:
The petition was allowed in part. The court directed the refund of excise duty amounting to Rs. 4,79,682 and Rs. 21,16,952.90 levied between 1st July 1976 and 17th June 1977 on Fanta and Coca-Cola, respectively, and Rs. 7,92,597.20 collected between 18th March 1972 and May 1973. However, the claims for refunds for the periods between June 1973 to December 1973, 1974, 1975, and January to July 1976 were rejected due to laches. Each party was ordered to bear its own costs.

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