Arochem Industries vs Union of India

Pendse, J.—By this petition filed under Article 226 of the Constitution of India, the petitioners are challenging legality of order dated August 31, 1982 passed by the Assistant Collector, Central Excise, Valsad rejecting the application for refund filed by the petitioners. The petitioners are a partnership firm and manufacture Organic Surface Active Agents in their factory situated at Silvassa, Dadra & Nagar Haveli. The manufacture of Organic Surface Active Agents is liable to payment of excise duty under Tariff Item No. 15-AA of the First Schedule to the Central Excises and Salt Act, 1944. The duty payable under Tariff Item No. 15-AA is 20% ad valorem.

The Central Government in exercise of powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 published notification dated April 24, 1979 and exempted payment of duty of excise leviable on Organic Surface Active Agents as is in excess of 15% ad valorem. In other words, the Excise Duty on manufacture of Organic Surface Active Agents was reduced to 15% ad valorem from 20% ad valorem prescribed under Tariff Item No. 15-AA.

The petitioners filed application for refund of duty in excess of 15% ad valorem between the period commencing from April 24, 1979 to May 15, 1979. The application for refund was lodged on September 15, 1980. The petitioners claim that the duty was paid at the rate of 20% ad valorem instead of 15% ad valorem, i.e. at reduced rate as per the notification dated April 24, 1979 because the petitioners were not aware of the exemption notification. The claim of the petitioner for refund was initially turned down by the Assistant Collector of Central Excise without giving any opportunity to the petitioner to show cause. The order passed by the Assistant Collector was set aside in appeal by the Collector of Central Excise and the proceedings were remitted back for fresh determination after service of show cause notice.

On remand, the Assistant Collector by show cause notice dated January 27, 1982 called upon the petitioners to show cause why the refund claim of Rs. 39,922.66 should not be rejected under Rule 11 of the Central Excise Rules, 1944. Rule 11, inter alia, prescribes that the refund is available for a duration of six months prior to the date of filing of the refund application. The petitioners filed their reply pointing out that the provisions of Rule 11 are not attracted to the facts of the case and the claim for refund cannot be turned down on the ground of limitation. The contention of the petitioner did not appeal to the Assistant Collector and by the impugned order, the refund claim was rejected on the ground that the claim was time-barred under Rule 11 of the Central Excise Rules, 1944. The order of the Assistant Collector is under challenge.

Shri Rajadhyaksha, learned Counsel appearing on behalf of the petitioners, submitted that even though the limitation prescribed under Rule 11 is binding on the authorities created under the Statute, the said rule of limitation is not applicable when the petitioners file petitions in this Court under Article 226 of the Constitution of India. The submission is correct and deserves acceptance. By catena of decisions of this Court, it has been pointed out that the provision of limitation under Rule 11 has no application when the assessee files proceedings under Article 226 of the Constitution of India. The assessee is entitled to relief under Article 226 of the Constitution provided it is established that the duty was recovered by the department without any authority of law or the duty was paid by the assessee under a mistake of law. Shri Rajadhyaksha submits that in the present case, the duty was paid because the petitioners were not aware of the exemption notification issued on April 24, 1979. The learned Counsel urged that even though the petitioners were not aware of the notification, the Department could not have recovered duty in excess of 15% ad valorem and the recovery of duty at the rate of 20% ad valorem was without any authority of law. The submission is correct because once the notification is published, then the Department had no authority to recover duty in excess of 15% ad valorem, and the excess duty recovered from the petitioners was entirely without any authority of law and the Department is duty bound to repay the same. In our judgment, the order of the Assistant Collector, therefore, cannot be sustained and the petitioners are entitled to the relief of refund of Rs. 39,922.66.

Shri Desai, learned Counsel appearing on behalf of the Department, submitted that in view of the enactment of Central Act No. 40 of 1991 which has come in operation from September 20, 1991 even though the application for refund is granted, the petitioners are not entitled to seek actual repayment of the amount from the Department. Shri Desai submitted that under the Act, the Parliament has created a fund of which the amount will be credited and disposed of according to the provisions of the Act. Shri Rajadhyaksha submits that the provisions of the Act are not applicable to the facts of the present case. We declined to examine the applicability of the enactment of the Act in the present proceedings. In the present petition, we restrict the relief only to the declaration that the petitioners are entitled to the refund of Rs. 39,922.66 as per the refund application filed on September 9, 1980. We leave the parties to ascertain as to what are the consequences of the enactment of Act No. 40 of 1991 and the applicability of the same to the facts of the case. The petitioners are at liberty to adopt proper proceedings for enforcement of the order.

Accordingly, rule is made absolute and the impugned order dated August 31, 1982 is set aside and it is declared that the petitioners are entitled to refund of amount of Rs. 39,922.66 in accordance with refund application made on September 9, 1980. We are not directing actual repayment of the said amount to the petitioners in view of the claim of Shri Desai that such actual repayment is not permissible after enactment of Act No. 40 of 1991. We are making it clear that we are not examining the question about the application of the Act to the facts of the present case and it is open for the petitioners to adopt appropriate proceedings for enforcement of the order in the circumstances of the case, there will be no order as to costs.