1990 (11) TMI 164 - HC - Central Excise

Issues Involved:

1. Whether the products manufactured and cleared by the plaintiffs prior to 21-5-1976 were not speciality oils exempted from excise duty?
2. Whether the payment of excise duty by the plaintiff for the products cleared prior to 21-5-1976 was not a mistake?
3. Whether the claim for refund by the plaintiff is barred by time?
4. To what relief is the plaintiff entitled?

Issue-Wise Detailed Analysis:

Issue 1: Whether the products manufactured and cleared by the plaintiffs prior to 21-5-1976 were not speciality oils exempted from excise duty?

The court found that the plaintiff had consistently claimed that the products manufactured were speciality oils and not lubricating oils. The Trade Notice No. 175/75 dated 3-10-1975 (Ex. D1) issued by the defendants clarified that certain speciality oils manufactured out of duty-paid base mineral oil were exempt from excise duty, provided their primary function was not lubrication. The court noted that the plaintiff paid excise duty under Tariff Item 11-B by mistake and filed a refund application on 17-5-1977, which was initially rejected but partly allowed upon remand. The court concluded that the products manufactured by the plaintiff were indeed speciality oils exempted from excise duty as per Ex. D1.

Issue 2: Whether the payment of excise duty by the plaintiff for the products cleared prior to 21-5-1976 was not a mistake?

The court held that the payment of excise duty by the plaintiff was made under a mistake. The plaintiff became aware of the exemption only in May 1977 and immediately filed for a refund. The court referenced the Appellate Collector's order, which indicated that the products were speciality oils and not compounded lubricating oils. The court found that the plaintiff's payment of excise duty was a mistake of fact and law, falling under Sec. 72 of the Contract Act, which allows for the recovery of money paid under mistake.

Issue 3: Whether the claim for refund by the plaintiff is barred by time?

The court examined the applicability of Rule 11B of the Central Excise Rules and Sec. 14(2) of the Limitation Act. It was determined that the plaintiff filed the refund application within three years from the date of knowledge of the mistake, which was in May 1977. The court also considered the period during which the plaintiff was pursuing legal proceedings for the refund, from 17-5-1977 to 28-11-1980, and held that this period should be excluded under Sec. 14(2) of the Limitation Act. The court concluded that the suit was filed within the limitation period and was not barred by time.

Issue 4: To what relief is the plaintiff entitled?

The court decreed that the plaintiff is entitled to recover Rs. 2,71,754.40 being the excise duty wrongly paid, with interest at 12% p.a. from 17-5-1977 until the date of decree and at 6% p.a. from the date of decree until realization. The court acknowledged that the plaintiff is liable to pay 1% excise duty under Tariff Item 68, amounting to Rs. 2718/-, which should be deducted from the total claim. Thus, the plaintiff is entitled to Rs. 2,69,036.40 after deduction.

Conclusion:

The suit is decreed in favor of the plaintiff for the recovery of Rs. 2,69,036.40 with interest at 12% p.a. from 17-5-1977 till the date of decree and at 6% p.a. from the date of decree till the date of realization, with pro-costs.

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