1988 (9) TMI 60 - HC - Central Excise

Summary

Issues Involved:
1. Applicability of Rule 10 of the Central Excise Rules.
2. Limitation period for the demand notice.
3. Coercion under Section 72 of the Contract Act.
4. Validity of the demand notice and payment under protest.

Detailed Analysis:

1. Applicability of Rule 10 of the Central Excise Rules:
The plaintiff/respondent argued that the demand notice issued by the third defendant for the differential duty was barred by limitation under Rule 10 of the Central Excise Rules. Rule 10 governs cases of non-payment or short-levy due to inadvertence, error, collusion, or mis-construction by an officer. The plaintiff claimed that the demand was illegal as it was beyond the period of three months prescribed by Rule 10. However, the court held that Rule 10 was not applicable in this case because the short-levy was not due to any of the reasons specified in Rule 10 but was due to the pendency of the appeal in the Supreme Court against the judgment striking down certain clauses in the notifications.

2. Limitation Period for the Demand Notice:
The plaintiff contended that the demand notice issued on 4-6-1975 was barred by limitation as per Rule 10. The court noted that Rule 10-A, which could have been relevant, had been struck down, and therefore, the limitation period under the Indian Limitation Act, 1963, would apply. The court concluded that the demand was made within the time provided under the Indian Limitation Act, and thus, the claim that the defendants had no authority to collect the amount was unfounded.

3. Coercion under Section 72 of the Contract Act:
The plaintiff argued that the payment made under the demand notice was coerced and thus recoverable under Section 72 of the Contract Act, which deals with payments made under coercion. The plaintiff cited several judgments to support the claim of coercion. However, the court found that the trade notice (Ex. B-1) did not contain any threat of coercive action but merely extended a concession. The court held that the payment made under protest did not amount to coercion, as there was no element of threat in the trade notice.

4. Validity of the Demand Notice and Payment Under Protest:
The plaintiff paid one-third of the demanded amount under protest, claiming that the payment was made due to the threat of non-clearance of goods. The court examined the circumstances and found that the payment was made in response to the trade notice, which extended a concession without any threat. The court concluded that the payment was not coerced and was lawfully recoverable following the Supreme Court's decision dated 4-11-1974. Consequently, the plaintiff had no right to seek a refund.

Conclusion:
The court allowed the appeal with costs, holding that:
- Rule 10 of the Central Excise Rules was not applicable.
- The demand notice was within the limitation period as per the Indian Limitation Act.
- There was no coercion under Section 72 of the Contract Act.
- The payment made under protest was valid and lawfully recoverable.

The judgment emphasized that the plaintiff's contentions regarding the applicability of Rule 10 and the claim of coercion were unfounded, and the payment made under the trade notice was not coerced but a lawful recovery.