1985 (5) TMI 161 - AT - Central Excise

Issues Involved:
1. Limitation period for refund claims under Rule 11 of the Central Excise Rules, 1944.
2. Classification of wet chlorine under Tariff Item No. 68 of the Central Excise Tariff Schedule.
3. Validity of the Central Government's review notice under Section 36(2) of the Central Excises and Salt Act, 1944.
4. Procedure for payment of duty under protest.

Issue-wise Detailed Analysis:

1. Limitation Period for Refund Claims:
The Assistant Collector rejected 13 refund claims submitted by the Respondents on the ground that they were time-barred under Rule 11 of the Central Excise Rules, 1944, as they were not filed within 6 months of the duty payment. The Appellate Collector, however, allowed the appeals, stating that the general law of limitation (three years) applied, not Rule 11, because the duty was paid under protest. The Tribunal found that the Respondents had consistently communicated their protest against the duty payments through various letters, thus making Rule 11 inapplicable. The Tribunal concluded that the claims were not hit by the limitation under Rule 11 due to the continuous protest.

2. Classification of Wet Chlorine:
The Central Government's review notice proposed classifying wet chlorine under Tariff Item No. 68 from 1-3-1975, making the Respondents eligible for a refund only for the excess duty paid over the duty leviable under Item 68. The Respondents contended that this classification issue was not raised before the lower authorities and was beyond the scope of review. The Tribunal, however, held that considering Item No. 68 for classification was appropriate and not beyond the review scope, as it was relevant to the correct classification of goods. The Tribunal directed the Collector (Appeals) to adjudicate on the classification of wet chlorine under Item No. 68.

3. Validity of the Central Government's Review Notice:
The Respondents argued that the review proceedings were barred under Section 36(2) of the Central Excises and Salt Act, 1944, which restricts actions for non-levy or short-levy of duty to the time limit specified in Section 11A. The Tribunal found that the case did not involve non-levy or short-levy but rather an erroneous classification, which did not fall under the purview of Section 11A. The Tribunal referenced the Supreme Court's judgment in Geep Flashlight Industries Ltd., which held that the limitation period for erroneous refunds starts from the actual refund date, and since no refund had been made, the limitation did not apply.

4. Procedure for Payment of Duty Under Protest:
The Tribunal examined the correspondence between the Respondents and the Departmental authorities and concluded that the Respondents had made it clear from the beginning that they were paying duty under protest. The Tribunal noted that Rule 233B, which formalized the protest procedure, was introduced only in 1981 and did not apply retrospectively. Thus, the Tribunal deduced from the facts and circumstances that the duty was paid under protest, making the limitation under Rule 11 inapplicable.

Separate Judgment by H.R. Syiem (Dissenting Opinion):
H.R. Syiem dissented, arguing that the Central Government's review notice, which sought to levy duty under Item 68 from 1-3-1975, introduced a new demand barred by limitation. He emphasized that the Central Government was not a proper authority to issue such a demand and that the duty paid under protest should be refunded entirely. He disagreed with interpreting the Supreme Court's judgment in Mahalaxmi Textiles as permitting a new demand or assessment at the appeal stage if it was time-barred.

Final Order:
In light of the majority view, the appeals were disposed of with the observations and directions contained in the majority decision. The Collector (Appeals) was directed to adjudicate on the classification of wet chlorine under Item No. 68 and determine the exact refund amount. The matter was to be resolved expeditiously within four months.

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