1991 (10) TMI 41 - HC - Central Excise

Summary

Issues:
Challenge to legality of order rejecting refund application under Central Excise Rules, 1944 based on limitation under Rule 11.

Analysis:
The petitioners, a partnership firm manufacturing Organic Surface Active Agents, challenged the legality of an order rejecting their refund application under Central Excise Rules, 1944. The duty payable on their product was reduced to 15% ad valorem from 20% ad valorem by a notification dated April 24, 1979. The petitioners claimed a refund for the excess duty paid between April 24, 1979, and May 15, 1979, due to their unawareness of the exemption notification. The initial refund claim rejection by the Assistant Collector was overturned on appeal, but on remand, the refund claim was rejected as time-barred under Rule 11 of the Central Excise Rules, 1944, which allows refunds for a duration of six months prior to the application date.

The Assistant Collector rejected the refund claim based on the limitation under Rule 11, despite the petitioners' argument that such limitation does not apply when filing petitions under Article 226 of the Constitution of India. The Court agreed with the petitioners, stating that the limitation rule does not apply in Article 226 proceedings if duty was recovered without legal authority or paid under a mistake of law. As the duty recovery at 20% ad valorem was unauthorized after the notification reducing it to 15% ad valorem, the Assistant Collector's order was deemed unsustainable, and the petitioners were entitled to a refund of Rs. 39,922.66.

The Department argued that the enactment of Central Act No. 40 of 1991 affects the refund process, suggesting the amount may not be repaid directly to the petitioners but credited to a fund as per the Act's provisions. The Court declined to address the Act's applicability in this case, limiting the relief to a declaration of the petitioners' entitlement to the refund amount. The parties were advised to determine the Act's implications themselves and pursue appropriate enforcement proceedings. The rule was made absolute, setting aside the impugned order and declaring the petitioners' right to the refund amount, leaving the enforcement method open for the petitioners to pursue.