1988 (5) TMI 164 - AT - Central Excise

Summary

Issues:
1. Time-barred notice of review by the Collector under Section 35A.
2. Applicability of Section 11A in the case of refund review.
3. Interpretation of time-limit specified in Section 11A.
4. Legal validity of the Collector's order for recovery of the refund.

Analysis:
1. The dispute arose from a refund of Rs. 114,450.40 granted by the Assistant Collector to M/s. Kirloskar, later deemed erroneous by the Collector. The Collector issued a notice under Section 35A of the Central Excises and Salt Act to recover the amount, leading to a legal challenge regarding the timeliness of the notice.

2. The counsel for M/s. Kirloskar argued that the notice issued by the Collector in September 1981 was time-barred under Section 11A, which imposes a time-limit for recovery actions. The Collector contended that since Section 11A was not in force when the refund was granted in October 1980, the one-year time-limit under Section 35A applied.

3. The court examined the applicability of Section 11A and noted that the Collector misinterpreted the law. While Section 11A may not have been in force when the refund was made, it was in effect when the Collector issued the recovery notice. The court clarified that the time-limit specified in Section 11A should be calculated from the date of the erroneous refund, making the Collector's notice time-barred.

4. The court emphasized that the recovery action by the Collector was not in compliance with the law due to the time-barred notice. It rejected the argument that the department had a vested right to apply the one-year time-limit under Section 35A, emphasizing that Section 11A's introduction nullified such vested rights. Consequently, the court ruled the Collector's order illegal and prohibited the recovery of the disputed refund amount.

In conclusion, the judgment focused on the correct interpretation and application of statutory provisions regarding the time-limit for recovery actions under Section 35A and the impact of Section 11A on such proceedings, ultimately ruling in favor of the appellant by deeming the Collector's recovery order as illegal.