9911796707
TMI Blog1981 (1) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... the tread rubber. In the beginning the price list submitted by the petitioner for tread rubber for purposes of assessment of excise duty included the value of the metal container also. The price of the metal container as certified by the Costs Accountant came to 52 paise in the value of tread rubber for 1 K.G. In 1970 the petitioner took the stand before the Central Excise authorities that the value of the metal container in which the tread rubber was packed would have to be excluded from the assessable value of tread rubber for the purpose of excise duty under Section 4 of the Act. The Appellate Collector of the Central Excise upheld the contention of the petitioner by his order dated 8-6-1973. It became therefore clear that for the purpose of assessing the value of tread rubber to determine the excise duty payable by the petitioner it was not necessary to include the value of the metal container in which the tread rubber used to be packed. 2. On 13-9-1975 the petitioner claimed a refund of Rs. 8,63,289.97 being the duty paid on the value of the metal containers in which the tread rubber had been sold for the period from 1-6-1968 to 2-4-1970. The first respondent herein after gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any error committed by the first respondent. Therefore, Rules 10 and 11 of the Rules are not applicable to this case. Since the amount was paid by the petitioner by mistake of law, the petitioner will have the time prescribed under the ordinary law of limitation for claiming refund of the said amount and the period of limitation of one year prescribed under Rule 11 read with Rule 173-J of the Rules will not be applicable to such claims. (3) Assuming that Rule 11 applied to the case, Rule 11 is ultra vires of the Act inasmuch as the Act does not confer power on the Rule making authority to prescribe any such period of limitation. 4. Mr. K.N. Balasubramaniam met the argument of Mr. Ramaswami in the following terms— (1) The writ petition itself is not maintainable. The first respondent had issued only a show cause notice and it will be open to the petitioner to advance all his contentions before the first respondent. (2) Rule 10 itself contains an implied power of review. In the circumstances, it will be open to the first respondent to call back the amount refunded when once he is satisfied that the earlier order of refund was erroneously made. (3) Rule 11 does not prescribe a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber. The petitioner preferred an appeal to the Appellate Collector of Central Excise, Madras. The Appellate Collector allowed the appeal by his order dated 8-6-1973. The Appellate Collector observed as follows : "Tread rubber is strong and hard. No question can arise of its suffering breakage of deterioration in quality when it is not packed. The original authority has been informed by the appellant that there had, in fact, been sales of tread rubber with no packing whatsoever, whether of metal or of cardboard... In the instance case of tread rubber, packing is seen to be entirely extraneous to the entire process of manufacture of the commodity, and, as observed more than once above, the commodity could be and has been delivered to customers without being packed. It is evident that tread rubber is delivered to cartons or metal containers merely from commercial or marketing considerations. The charges incurred on such packing cannot form part of the assessable value of the tread rubber. The appeal is accordingly allowed." 6. Thereafter, on 13-9-1975 the petitioner preferred a claim for the refund of Rs. 8,63,289.97 being the duty paid by it on metal containers used for packing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Judicature Acts the Courts of Common Law had no jurisdiction whatever to set aside an order which has been made. The Court of Chancery did exercise a certain limited power in this direction. All Courts would have power to make a necessary correction if the order as drawn up did not express the intention of the court; the court of Chancery however went somewhat further than that, and would in a proper case recall any decree or order before it was passed and entered, but after it had been drawn up and perfected no court or Judge had any power to interfere with it. This is clear from the judgment of Thesigar L.J. in the case of In re : St. Nazair Co., 1879-12 Ch. D. 88. Seshagiri Iyer J. has laid down the following dictum in Anantaraju Shetti v. Appu Hegade, AIR 1919 Mad. 244— "It is settled law that a case is not open to appeal unless the statute gives such a right. The power to review must also be given by the statute. Prima facie, a party who has obtained a decision is entitled to keep it unassailed, unless the legislature had indicated the mode by which it can be set aside. A review is practically the hearing of the-appeal by the same officer who decided the case. There i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise to call for and examine the record of any proceeding in which any decision or order has been passed under the Act or the Rule s made thereunder for the purpose of satisfying themselves as to the correctness, legality or propriety of such decision or order. Section 36(2) confers suo motu powers on the Central Government to revise any decision or order passed under Section 35 or Section 35-A of the Act. Thus, the Act contains sufficient safeguard to correct any order' passed by an authority under the Act which is contrary to law. I have, therefore, no hesitation to hold that it is not open to the first respondent to set aside the order of refund passed by him on 21-1-1978. 10. The next question for consideration is whether Rule 10 of the Rules is applicable to the facts of this case. Rule 10 of the Rules reads as follows :- "10. Recovery of duties or charges short-levied or erroneously refunded. - When duties or charges have been short-levied through inadvertence, error, collusion or misconstruction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods in the part of the owner, or when any such duty or charge, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the conclusion that the petitioner was entitled to a refund of the amount paid on the value of the tin containers as the same is not includible in the assessment of tread rubber for the purpose of excise duty. The refund was made only pursuant to the said order. Consequently, it cannot be said that refund was made erroneously. A refund in order to constitute `erroneous refund' must have been made by reason of inadvertence, error or misconstruction as will be seen from the discussion in the following paragraph. Therefore, I have no hesitation to hold that Rule 10 of the Rules is not applicable to this case. 12. The next question for consideration is whether the application for refund made by the petitioner is barred by limitation. The contention of Mr. Balasubramaniam is that Rule 11 read with Rule 173-J of the Rule s is applicable to this case and therefore the period of limitation is one year. On the other hand, Mr. G. Ramaswami contended that the amount paid on the value of the tin containers is an amount paid by mistake and therefore Rule 11 read with Rule 173-J of the Rule s is not applicable and the period of limitation for the refund of the amount paid by mistake is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be three years under Article 113 of the Limitation Act, 1963. Support for this conclusion may be drawn from the following decisions. 14. In Sales tax Officer v. Kanhayalal Mukundlal, AIR 1959 S.C. 35 it has been observed that where it is once established that payment of tax has been made by a party who was labouring under a mistake of law, the party was entitled to recover the same and the party receiving the same was bound to repay or return it and that the article of limitation that would be applicable would be Article 96 of the Limitation Act, 1908. 15. A similar question arose for consideration before the Patna High Court in Rohtas Industries v. Union of India, AIR 1967 Pat. 366. Rohtas Industries Ltd. had paid excise duty on the entire quantity of soap of all kinds manufactured by it without knowing that by S.R.O. 500, dated the 1st March 1956, the Central Government in exercise of the powers conferred on them by Rule 8 of the Central Excise Rules, 1944, had exempted the first one hundred twenty-five tons of soap of all kinds for home consumption by any manufacturer on or after the 1st day of April from any duty. The company came to know of the exemption only on 8th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reight in the assessable value of the vegetable oil. The Company therefore filed a suit for recovery of the amount levied illegally on the value of tin containers and on account of the freight on the products. It was contended by the Union of India before the High Court of Bombay that the suit was barred by limitation under S. 40 as it stood then. The contention was negatived by the High Court of Bombay. The Court observed thus :- "Now, in the case before us we have held that imposition of central excise duty on the tin container and on freight was not warranted by any of the provisions of the Act of 1944. Thus any levy of central excise duty on the value of tin containers and the cost of freight was wholly outside the law and it could not be said to be a mere question of an error in the exercise of jurisdiction. The Central Excises and Salt Act of 1944 only provides for the duty of excise on excisable goods so that when an attempt is made to levy duty of excise on goods which are not excisable then such a levy falls outside the law and therefore would be illegal." 18. A Division Bench of the Bombay High Court had occasion to consider a similar question in Associated Bearing Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n error in exercise of jurisdiction but it has been held to be on illegal recovery. The jurisdiction of the authorities under the Central Excise Act is to recover duty according to law. If any duty is recovered in such a manner that duty comes to be levied on price which is not permissible in law as in the case of including post-manufacturing expenses in the price of the dutiable article, the levy of duty clearly amounts either to acting in excess of jurisdiction or acting without jurisdiction. Such an act on the part of the Departmental authorities cannot be considered as resulting from any error or misconstruction as contemplated by Rule 11 of the Act. In such a case there is also no question of any inadvertent demand. The very basis of computation of duty becomes wrong and to that extent the recovery is wholly unauthorised." The learned Judge then observed as follows :- "Thus, it clearly appears to us that once the recovery by the department of the excess duty was held to be illegal, the provisions of Rule 11 would not be attracted and such a claim for refund must be considered in the light of the fact that the claim is made on the footing that the payment was made under a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment the High Courts it is well settled will issue appropriate orders or directions to prevent such consequences." 22. In East Commercial Co. v. Collector of Customs, AIR 1962 SC 1893, the Supreme Court by a majority held as follows :- "Where a Collector of Customs proposes to take action under S. 167(8) of the Sea Customs Act, read with Section 3(2) of the Imports and Exports. (Control) Act, 1947, the proceedings under the said Section being quasi-judicial in nature whether a statute provides for a notice or not, it is incumbent upon the Collector to issue notice to the importer disclosing the circumstances under which proceedings are sought to be initiated against him. Any proceedings taken without such notice would be against the principles of natural justice. And if on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified Sections was contravened, the Collector would have no jurisdiction to initiate proceedings pursuant to that notice. In such a case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of Rs. 1.50 per crate of 24 bottles. This freight would clearly be in the nature of post-manufacturing expenses and the mere fact that it has not been separately shown either in the invoice or in the bills, will not make any difference to the legal position that any amount expended or charged to the customer, whether a wholesaler or retailer, on account of freight could not validly and legally be included so far as the wholesale cash price is concerned for the purpose of determining excise duty payable by the petitioners." Therefore, this contention of Mr. Balasubramaniam is also rejected. 25. The next contention of Mr. Balasubramaniam is that the petitioner might have passed on the excise duty to the customers and if the petitioner is allowed to retain the amount refunded it will amount to an unjust enrichment of the petitioner. This argument should have been considered before the refund was originally ordered by the first respondent. After heaving given the refund it will not be open to the respondents to claim it back on the ground that the retention of the amount by the petitioner would amount to unjust enrichment. Further the respondents have not taken any such grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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