2025 (4) TMI 882 - AT - Central Excise

Seeking refund of EC and SHEC paid on OID Cess during the period July 2004 to December 2013 - time limitation - refund claim filed much beyond the permissible time limit of 1 year from the date of payment of EC and SHEC per Section 11B of the Central Excise Act 1944 - failure to establish whether burden of EC and SHEC was passed on or not. HELD THAT - The appellant relied on the decision of the Hon ble Delhi High Court in the case of National Institute of Public Finance Policy 2018 (8) TMI 1524 - DELHI HIGH COURT wherein the Hon ble High Court has observed the limitation contemplated under section 118 of the Excise Act would not be attracted in a case where any amount even though it is not payable as service tax is paid under a mistaken notion. When the matter was referred to the Third Member Bench of this Tribunal in the case of M/s Credible Engineering Construction Projects Limited 2024 (4) TMI 1041 - TELANGANA HIGH COURT the Hon ble Third Member Bench held that the view expressed by the jurisdictional High Court would be binding on this Tribunal and the Hon ble High Court has clearly held that when the refund claim of any amount deposited under mistake of law the limitation provided in Section 11B of the Central Excise Act 1944 would not be attracted. Conclusion - In the case in hand the EC SHEC was paid by the appellant under the mistake of law therefore the time limit in terms of Section 11B of the Central Excise Act 1944 is not applicable to the facts and circumstances of the case. Therefore the refund claim filed by the appellant cannot be dismissed as time barred. The impugned order is set asise - appeal allowed.

Summary

The core legal questions considered in this judgment revolve around the applicability of the limitation period under Section 11B of the Central Excise Act, 1944, to the refund claim of Education Cess (EC) and Secondary & Higher Education Cess (SHEC) paid on Oil Industries Development (OID) Cess. Specifically, the issues are:

(i) Whether EC and SHEC paid on OID Cess, which was levied under a different statutory regime and administered by a department other than the Ministry of Finance (Department of Revenue), constitute duties of excise attracting the levy and collection provisions under the Central Excise Act.

(ii) Whether the refund claim for EC and SHEC paid on OID Cess is barred by the limitation period prescribed under Section 11B of the Central Excise Act, 1944, especially when such payments were made under a mistake of law.

(iii) Whether the principles of unjust enrichment apply to the refund claim, particularly whether the appellant passed on the burden of EC and SHEC to any other party.

(iv) The legal effect of Circular No. 978/2/2014-CX dated 07.01.2014 issued by the CBIC clarifying the scope of levy of EC and SHEC on cesses not administered by the Department of Revenue.

Issue-wise Detailed Analysis

1. Nature of OID Cess and Applicability of EC and SHEC

The legal framework involves the Central Excise Tariff Act, 1985, the Finance Acts of 2001, 2004, and 2007, and the Oil Industry (Development) Act, 1974. The appellant produced crude oil, which was exempt from excise duty but was liable to pay OID Cess under Section 15(1) of the Oil Industry (Development) Act, 1974. EC and SHEC were levied on excisable goods under the Finance Acts, but their levy is contingent upon the underlying duty being both levied and collected by the Ministry of Finance (Department of Revenue).

The appellant initially paid EC and SHEC on OID Cess based on a 2004 circular, believing it was a duty of excise. However, Circular No. 978/2/2014-CX clarified that EC and SHEC can only be levied on duties of excise both levied and collected by the Department of Revenue. Since OID Cess is levied by the Ministry of Petroleum and Natural Gas and merely collected by the Department of Revenue, it does not qualify as a duty of excise for purposes of EC and SHEC levy.

Precedents such as the Gujarat High Court's ruling in Joshi Technologies and the appellant's own case emphasize that OID Cess is not a duty of excise, and hence EC and SHEC are not payable on it. The Court's interpretation aligns with the statutory scheme and the CBIC Circular, confirming that EC and SHEC cannot be levied on cesses not levied by the Department of Revenue.

2. Applicability of Limitation under Section 11B of the Central Excise Act, 1944

Section 11B prescribes a one-year limitation period for filing refund claims of excise duty. The Revenue contended that the refund claim was time barred under this provision. The appellant argued that since EC and SHEC were paid under a mistake of law, Section 11B does not apply.

The Court examined multiple High Court decisions and Tribunal rulings, including the Gujarat High Court in Joshi Technologies and Oil and Natural Gas Corporation Ltd., the Delhi High Court in National Institute of Public Finance and Policy, and the Telangana High Court in Credible Engineering Construction Projects Ltd. These authorities consistently hold that when tax or duty is paid under a mistake of law, the limitation period under Section 11B does not apply.

The reasoning is that the payment was not legally due; thus, the amount paid does not constitute a duty or tax in the legal sense. The limitation period for refund claims begins only when the mistake is discovered, typically upon issuance of a clarifying circular or judicial pronouncement. In this case, the limitation period commenced from the date of Circular No. 978/2/2014-CX (07.01.2014).

The Court also relied on principles from the Limitation Act, 1963, specifically Section 17, which provides that limitation runs from the time the mistake is discovered. This interpretation prevents unjust enrichment of the State and protects taxpayers who paid amounts not legally exigible.

3. Unjust Enrichment and Burden of Proof

The Revenue raised the issue of unjust enrichment, arguing that the appellant failed to prove that the EC and SHEC burden was not passed on to others. The appellate authority had accepted the appellant's evidence that the burden was not passed on.

The Court acknowledged that the appellant discharged its burden of proof on this aspect. It emphasized that without evidence of passing on the burden, the refund claim cannot be rejected on unjust enrichment grounds. Furthermore, the retention of amounts collected without authority of law violates Article 265 of the Constitution, which prohibits taxation without legal sanction.

4. Treatment of Conflicting Decisions and Binding Precedents

The Court addressed conflicting views, notably a contrary decision by the Chennai Bench of the Tribunal. It held that the jurisdictional High Court's decision prevails over Tribunal decisions or decisions of other High Courts, citing the Larger Bench decision in Collector of Central Excise, Chandigarh vs. Kashmir Conductors.

Accordingly, the Calcutta High Court's detailed examination of the issue and its binding nature on the present jurisdiction were given primacy. The Court also noted that the Supreme Court's dismissal of Special Leave Petitions in related cases affirms the binding nature of these High Court rulings.

5. Interest on Refund

The appellant sought interest on the refund amount at 12%, relying on the Tribunal's decision in Parle Agro Pvt. Ltd. vs. Commissioner, Central Goods & Service Tax, Noida. The Court accepted this submission, recognizing that the refund of amounts paid without legal obligation should carry interest to compensate for the time value of money.

Conclusions and Significant Holdings

The Court concluded that:

o OID Cess is not a duty of excise levied and collected by the Ministry of Finance (Department of Revenue); therefore, EC and SHEC are not payable on OID Cess.

o The payment of EC and SHEC on OID Cess was made under a mistake of law.

o The limitation period under Section 11B of the Central Excise Act, 1944, does not apply to refund claims arising from payments made under a mistake of law.

o The limitation period for refund claims begins only upon discovery of the mistake, which in this case is the date of Circular No. 978/2/2014-CX dated 07.01.2014.

o The appellant discharged the burden of proof regarding the absence of unjust enrichment; thus, the refund claim cannot be rejected on that ground.

o The refund claim for the entire disputed period (July 2004 to December 2012) is allowable and not time barred.

o Interest @12% is payable on the refund amount.

The Court stated verbatim from the relevant High Court ruling:

"Education Cess and Secondary and Higher Secondary Education Cess being cesses levied at a percentage of the aggregate of all duties of excise, the basic requirement for levy thereof is the existence of excise duty. In the present case Oil Cess is not a duty of excise and hence, the basic requirement for levy of such cesses is not satisfied."

And further:

"Since the provisions of Section 11B of the Act are not applicable to the claim of refund made by the petitioner, the limitation prescribed under the said provision would also not be applicable and the general provisions under the Limitation Act, 1963 would be applicable. Section 17 of the Limitation Act inter alia provides that when a suit or application is for relief from the consequences of a mistake, the period of limitation would not begin to run until the plaintiff or applicant has discovered the mistake."

The final determination was to set aside the impugned order, allow the appeal, and direct refund of the EC and SHEC paid on OID Cess for the entire disputed period along with interest, recognizing the payments as made under mistake of law and outside the ambit of Section 11B limitation.