2015 (9) TMI 774 - HC - Central Excise

Denial of refund claim - non-exercising of discretion by the commissioner - returned goods were subjected to a further process of reconditioning or remake - whether the period of one year stipulated under the proviso (i) is in conflict with the prescription contained in Section 11B or whether Rule 173L merely aids the implementation of the prescription under Section 11B with additional conditions - Held that - Rule 173L(1) states under proviso (i) that the claim for refund on returned goods may be admitted only if such goods had been returned to the factory within one year of the date of payment of duty or within such further period not exceeding one year in the aggregate. - returned goods were subjected to a further process of reconditioning or remake and they were sold to a different customer - if a substantial provision of the statutory enactment contains both the period of limitation as well as the date of commencement of the period of limitation, the rules cannot prescribe over a different period of limitation or a different date for commencement of the period of limitation. In this case, sub-section (1) of Section 11B stipulates a period of limitation of six months only from the relevant date. The expression relevant date is also defined in Explanation (B)(b) to mean the date of entry into the factory for the purpose of remake, refinement or reconditioning. Therefore, it is clear that Section 11B prescribes not only a period of limitation, but also prescribes the date of commencement of the period of limitation. Once the statutory enactment prescribes something of this nature, the rules being a subordinate legislation cannot prescribe anything different from what is prescribed in the Act. Under the proviso (i) to Rule 173L, the Commissioner is given the discretion to extend the period of one year stipulated therein by a further period not exceeding one more year. In other words, the Commissioner has the power and discretion under proviso (i) to Rule 173L to entertain an application within a total period of two years. This is a case where the Commissioner should have at least exercised the said discretion in favour of the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Appeal under Section 35-G of the Central Excise Act, 1944 for rejection of demand for refund.
2. Interpretation of substantial questions of law regarding duty payment and refund under the Central Excise Act, 1994.
3. Application of Section 11B and Rule 173L of the Central Excise Rules, 1944 in the context of refund claim for returned goods.
4. Conflict between statutory provisions and rules regarding the period of limitation for refund claims.
5. Discretion of the Commissioner in extending the period of limitation for refund claims.

Analysis:

The appellant filed an appeal under Section 35-G of the Central Excise Act, 1944, challenging the rejection of their demand for refund. The appeal raised substantial questions of law related to the interpretation of the Act. The key issues revolved around the payment of duty for the same goods twice and the subsequent refund claim. The Tribunal's decision was questioned concerning the legal position that duty paid twice should be available as a refund, as per the Act's provisions. The Tribunal's failure to consider the harmonious reading of Section 11B and Rule 173L was also contested.

The case involved the return of manufactured goods by the appellant for reconditioning and resale, leading to a refund claim for the duty paid on the returned goods. The rejection of the refund claim by the authorities was based on Rule 173L, specifically the limitation period of one year from the date of duty payment. The primary contention was whether this limitation period conflicted with the provisions of Section 11B, which prescribed a different timeframe for refund applications.

The Court analyzed the statutory provisions and rules governing refund claims, emphasizing that rules cannot prescribe a different period of limitation or date of commencement than what is stipulated in the Act. The Court noted that the rules should not conflict with the statute and that the Commissioner has the discretion to extend the limitation period for refund claims. The judgment highlighted the importance of statutory provisions prevailing over rules and the need for a consistent interpretation of legal provisions to ensure fair treatment of taxpayers.

In conclusion, the Court allowed the appeal in favor of the appellant, directing the respondents to make the refund within a specified timeframe. The judgment underscored the importance of adhering to statutory provisions while considering refund claims and the need for authorities to exercise discretion in favor of taxpayers when warranted.