1988 (7) TMI 65 - HC - Central Excise

Exemption notification - Sugar - Refund - Duty collected contrary to - Limitation - Unjust enrichment - Incentive rebate

Summary

Issues:
Claim for refund of excess excise duty paid under Notification No. 35/76-C.E. between February 1978 and August 1978. Application rejected based on Rule 11-B of Central Excise Rules.

Analysis:
The petitioner, a sugar factory, sought a refund of Rs. 8,38,975.85 paid as excise duty between February 1978 and August 1978 under Notification No. 35/76-C.E., which entitled new factories to a reduced excise duty rate. The petitioner applied for a refund in 1982, beyond the six-month limit under Rule 11-B, which was rejected. The central issue was whether the petitioner was entitled to the refund despite the delay in the application.

The Court noted that the petitioner was entitled to pay excise duty at a reduced rate of 20% under the notification but was charged at the normal rate of 37-1/2%. The delay in claiming the refund was attributed to the petitioner's lack of awareness about the tax benefits until 1981. The Court emphasized that the excess collection of duty was illegal due to the misapplication of the notification.

Regarding the application of Rule 11 of the Central Excise Rules, the Court held that the rule did not apply when the department collected tax contrary to the exemption notification. The Court emphasized that the department's breach of legal duty could not be excused by the limitation period under Rule 11.

The Court cited a Supreme Court ruling emphasizing that equitable considerations could outweigh the limitation period in granting relief under Article 226 of the Constitution. The Court rejected the argument of unjust enrichment, stating that the refund was intended to support newly established factories and was not a case of unjust enrichment.

Ultimately, the Court allowed the writ petition, directing a refund of the excess excise duty paid. The application for leave to appeal to the Supreme Court was rejected as the case did not involve substantial questions of law requiring Supreme Court consideration.