9911796707
TMI Blog1993 (7) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise on all excisable goods which are produced or manufactured at the rates set forth in the Schedule to the Act. Prior to January 1982, the Company paid excise duty on P.P. moulding powders in accordance with the rates prescribed under Item No. 15-A of the First Schedule. Item No. 15-A refers to artificial or synthetic resins and plastic materials and other materials and articles specified therein. 2. By circular dated May 5, 1982, the Government of India informed all the Collector of Central Excise that the Chief Chemist of Central Government had opined that it would be difficult to consider the transformation of phenolic resins into P.P. moulding powders as a process of manufacture. By another circular dated October 6, 1982 the Central Government referred to earlier circular and also upon order passed on April 26, 1982 by Government of India in exercise of revisional powers holding that P.P. moulding powders obtained by modification of phenolic resins with fillers and other additives do not cease to be phenolic resins. The circular provides that since phenolic resins include phenolic moulding powders, the further modification of phenolic resins by fillers, additives, etc. doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners thereupon took out Notice of Motion No. 2405 of 1988 on September 2, 1987 seeking direction to the respondents to forthwith make the refund. On December 2, 1988, the respondents were directed to deposit Rs. 12,43,986.93 in this Court on or before December 16, 1988 and the petitioners were permitted to withdraw the said amount. It is not in dispute that the petitioners had withdrawn the said amount. The petitioners are now seeking refund of the balance amount of Rs.1,70,84,550.64. The break-up of this amount is : Rs. (1). Excess duty paid on P.F. moulding powders between May 1979 and January 1983. 92,80,472.58 (2). Excess duty paid on U.F. moulding powders between May 1980 and August 1983. 55,17,785.35 (3). Excess duty paid on M.F. moulding powders between May 1980 and August 1983. 22,86,292.71 4. Before adverting to the submissions urged in support of the claim, it is necessary to refer to the provisions for refund of duty as prescribed under the Act and the Rules. Till November 17, 1980, claim for refund of duty was required to be made in accordance with provisions of Rule 11 of Central Excise Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er person : Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with provisions of sub-section (2) substituted by that Act: Provided further that the limitation of six months shall not apply where any duty has been paid under protest. (2) If, on receipt of any such application, the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund : Provided that the amount of duty of excise as determined by the Assistant Collector of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to applicant, if such amount is relatable to - (a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (b) unspent adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty and if the levy is not of excise only, then Section 11B of the Act is not attracted. The learned Counsel urged that application of Section 11B of the Act should be restricted only to cases of recovery of illegal excise duty, within jurisdiction of the excise authorities and not to a levy which is prohibited by the Constitution. Shri Desai, learned Counsel appearing on behalf of the Department, on the other hand, urged that the claim that the recovery of excise duty was without jurisdiction and violative of Constitutional prohibition is not accurate. It was urged that it was for the Excise authorities to determine whether a particular process amounts to manufacture and the mere fact that the assessment of Excise Officer was erroneous in view of subsequent developments cannot lead to the conclusion that recovery of excise duty was without jurisdiction. The learned Counsel urged that the right of refund is available to the petitioners as soon as it was decided that the process undertaken by the petitioners does not amount to manufacture but the grant of refund is regulated by the provisions of Section 11B of the Act and as there is machinery provided by the Act for grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional prohibition because subsequently, it was determined that the process undertaken by the petitioners does not amount to manufacture as contemplated under section 2(f) of the Act. 7. Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. The respondents had recovered excise duty under the authority conferred by Section 3 of the Act and the levy was on the .basis of the conclusion of the Assistant Collector that the process undertaken by the petitioners amounts to manufacture. Shri Andhyarujina contended that once it was subsequently found that the process undertaken did not amount to manufacture, then it must follow that the recovery of excise duty was without any authority of law and in breach of constitutional mandate under Article 265 of the Constitution of India. It was also claimed that the recovery of duty cannot be termed as excise duty and, therefore, the petitioners cannot be driven to file an application under Section 11B of the Act. The submission was advanced obviously because the right to claim refund is circumscribed by various conditions provided under Section 11B of the Act after amendment on Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the orders passed were without jurisdiction and the recovery of duty was in breach of constitutional prohibition. The distinction between total lack of jurisdiction and irregularity in exercise of jurisdiction is well defined and error or irregular exercise of jurisdiction cannot be equated with lack of jurisdiction. The Excise authorities being entitled to determine the character of the process undertaken by the petitioner and the levy of excise duty was based upon the decision on the character of the process, it cannot be claimed that the Excise authorities were acting without jurisdiction. 8. Reference can be usefully made to the decision of the Supreme Court reported in A.I.R. 1965 Supreme Court 1942 (M/s. Kamala Mills Ltd. v. State of Bombay) where the question arose as to whether the decision on the question about the character of sale transaction can be treated as decision on the collateral activity. The Supreme Court negatived the claim and Chief Justice Gajendragadkar speaking for the Bench observed : "At this stage, we are only dealing with question as to whether Mr. Sastri is right in contending that an erroneous conclusion of the appropriate authority on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action. In appeal to the Supreme Court, the majority held that since the respondent had no authority to levy a tax beyond what Section 142A of the Government of India Act, 1935, or what Article 276 of the Constitution of India permitted, the assessment proceedings were void in so far as they purported to levy tax in excess of the permissible limit and authorise its collection, and the assessment order was no answer to the suit for recovery of the excess amount, and, therefore, the suit was maintainable. The majority observed that the Constitution is a fundamental law of the land and it is unnecessary to provide in any law that anything done in disregard of the Constitution is prohibited. It was further held that a tax can be recovered only if it is payable and it would be payable only after it is assessed. The suit instituted by the appellant was held not to be barred on the ground that the Act does not provide a machinery for making claim for refund or repayment on the ground of unconstitutionality of the levy and the jurisdiction of the civil Court in cases of refund is not taken away. The minority decision relied upon the judgment of the Privy Council reported in 74 Indian Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta Shoe Company had paid octroi duty at a certain rate. The Corporation re-opened and revised the assessment and levied double duty by way of penalty. The Company filed suit after pursuing the remedies under the Act and making payment for recovery on the ground that the Corporation was not entitiled to levy the amount by way of octroi duty and penalty. The trial Court decreed the suit and the High Court modified the decree. In appeal to the Supreme Court, it was held that the suit was barred from cognizance of Civil Court. Chief Justice Chandrachud speaking for the Bench observed that both the Act and the Rules contain provisions enabling the aggrieved party to affectively challenge an illegal assessment or levy for double duty and, therefore, the ordinary remedy by way of a suit would be excluded on a true interpretation of Section 84(3). The Supreme Court noticed that various provisions of the Act conferred power upon the Corporation to assess and recover octroi duty and double duty on goods which are brought within municipal limits for sale, etc. It was then observed: "The circumstance that the defendants might have acted in excess of or irregularly in the exercise of that pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the petitioners should approach Excise authorities under Section 11B of the Act to seek relief or relief can be granted independently under Article 226 of the Constitution of India. In our judgment, the decision in Salonah. Tea Company's case, therefore, has no application to the facts of the case. 10. In our judgment, the conclusion is inescapable that the petitioners cannot seek relief of refund de hors the provisions of Section 11B of the Act. The claim that the recovery of duty cannot be termed as excise duty because the recovery was based on a wrong assessment that the process undertaken by the petitioners amounted to manufacture cannot be accepted. The Excise authorities recovered excise duty under the colour or the authority flowing from the provisions of Central Excises and Salt Act and merely because the assessment was irregular as noted subsequently, the character of duty does not cease to be an excise duty. In our judgment, it is not permissible for the petitioners to seek relief of refund by-passing the provisions of Section 11B of the Act. Section 11B of the Act does not create a right of refund but merely regulates and as per sub-section (3) of Section 11B, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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