Indian Oil Corporation Ltd. vs Union of India

Akil Kureshi, J.—Petitioner Indian Oil Corporation (IC for short) has filed this petition challenging the order dated 20-12-2010 by which its revision application came to be dismissed by the Government. The petitioner had supplied aviation fuel to Air India. It is the case of the petitioner that for the foreign bound flights such fuel would not attract excise duty. The petitioner had, however, mistakenly paid the same. Upon Air India raising objection to payment of excise duty, the petitioner came to realize the mistake and filed its refund claim on 14-8-07 of Rs. 4,38,705/-. The Adjudicating Authority issued show cause notice on 22nd October 2007 why such refund claim should not be rejected on the following grounds:

On scrutiny of the refund claim, it appears that the said refund claim is not sanctionable under the provisions of Section 11B of Central Excise Act, 1944 on the following grounds:-

(i) that in respect of part of the refund claim of Rs. 34,462.14 pertained to the 13.620 KL AIF supplied in June 2006, M/s. Gujarat Refinery cleared the said AIF in May 2006, under Invoice No. D-2550 dated 27-5-06 and the duty was paid in June 2006. Since the refund claim was filed on 14-8-2007, the said part of refund claim of Rs. 34,462.14 appears to be time-barred u/s 11B of the Central Excise Act, 1944.

(ii) That the no documentary evidence showing element of duty of excise has been borne by you, has been produced with the said refund claim.

(iii) That no documentary evidence, viz. original invoice, ARE-1 show clearing of duty paid goods for export or intended for export was submitted.

(iv) That no documentary evidence was submitted showing co-relation that the duty paid goods was exported by you.

(v) that no proof of export from jurisdictional customs authorities was submitted.

(vi) That no documentary evidence has been produced from the Air India authorities that the AIF supplied to the Flight No. AI-4114, AI-4116 and IC 735 where International Flights

After hearing the petitioner, the Adjudicating Authority rejected the refund claim on 12-2-08 holding that the petitioner had failed to establish compliance with the requirements of the Rules and the exemption notification. The petitioner''s appeal came to be dismissed on 29-8-08, whereupon the petitioner approached the Revisional Authority. The Revisional Authority dismissed the Revision by the impugned order. Hence this petition.

It is not in dispute that part of the refund claim is barred by the limitation prescribed u/s 11B of the Act. Refund claim which was filed on 14-8-07 could cover the period only upto 14-8-06 i.e. one year from the relevant date. The remaining claim, however, also is contested by the respondents on the ground that the petitioner failed to establish compliance with the mandatory requirements. On the other hand, the case of the petitioner is that the entire claim should have been adjudicated and granted.

With respect to the question of limitation, we have by a separate order passed in the case of this very petitioner in Special Civil Application No. 12072 of 2011 held against the petitioner making following observations:

We are unable to uphold the contention that such period of limitation was only procedural requirement and therefore could be extended upon showing sufficient cause for not filing the claim earlier. To begin with, the provisions of Section 11B itself are sufficiently clear. Sub-section (1) of Section HE, as already noted, provides that any person claiming refund of any duty of excise may make an application for refund of such duty before the expiry of one year from the relevant date. Remedy to claim refund of duty which is otherwise in law refundable therefore, comes with a period of limitation of one year. There is no indication in the said provision that such period could be extended by the competent authority on sufficient cause being shown. Secondly, we find that the Apex Court in the case of Mafatlal Industries Ltd. and Others Vs. Union of India (UOI) and Others, had the occasion to deal with the question of delayed claim of refund of Customs and Central Excise. Per majority view, it was held that where refund claim is on the ground of the provisions of the Central Excise and Customs Act whereunder duty is levied is held to be unconstitutional, only in such cases suit or writ petition would be maintainable. Other than such cases, all refund claims must be filed and adjudicated under the Central Excise and Customs Act, as the case may be. Combined with the said decision, if we also take into account the observations of the Apex Court in the case of Kirloskar Pneumatic Company (supra), it would become clear that the petitioner had to file refund claim as provided u/s 11B of the Act and even this Court would not be in a position to ignore the substantive provisions and the time limit prescribed therein.

The decision of the Bombay High Court in the case of Uttam Steel Ltd. (supra) was rendered in a different factual background. It was a case where the refund clam was filed beyond the period of six months which was the limit prescribed at the relevant time, but within the period of one year. When such refund claim was still pending, law was amended. Section 11B in the amended form provided for extended period of limitation of one year instead of six months which prevailed previously. It was in this background, the Bombay High Court opined that limitation does not extinguish the right to claim refund, but only the remedy thereof. The Bombay High Court, therefore, observed as under:

In present case, when the exports were made in the year 1999 the limitation for claiming rebate of duty u/s 11B was six months. Thus, for exports made on 20th May 1999 and 10th June 1999, the due date for application of rebate of duty was 20th November 1999 and 10th December, 1999 respectively. However, both the applications were made belatedly on 28th December 1999, as a result, the claims made by the petitioners were clearly time-barred. Section 11B was amended by Finance Act, 2000 with effect from 12th May 2000, wherein the limitation for applying for refund of any duty was enlarged from ''six months'' to ''one year7. Although the amendment came into force with effect from 12th May, 2000, the question is whether that amendment will cover the past transactions so as to apply the extended period of limitation to the goods exported prior to 12th May 2000 ?

The case before the Bombay High Court in the case of Vidushi Wires Pvt. Ltd. and Another Vs. Union of India (UOI) and Another, also arose in different factual background. The observations made therein, therefore, Which are even otherwise general in nature would not apply in the present case.

In the case of Cosmonaut Chemicals (supra) [2009 (233) E.L.T. 46 (Guj.)], facts were peculiar. The assessee had to file certain documents in terms of Rule 18 of the Rules along with the claim for refund to be filed as provided u/s 11B of the Act. Such documents had to be supplied by the Customs Authorities. Customs Authorities delayed supply of such documents. It was on this ground that the petitioner therein could not file the refund claim within the time prescribed. The Bench therefore observed as under:

As noticed hereinbefore, provisions of Section 11B of the Act stipulate that a claim has to be accompanied by requisite documents, requisite documents in case of an assessee who has exported duty paid goods being copy of shipping bill duty endorsed by the Customs Authorities. Hence, if the Customs Authorities delay parting with a copy of shipping bill bearing necessary endorsement, an assessee cannot be put to disadvantage on the ground of limitation when the assessee is not in a position to make a claim without accompanying documents.

In the decision of the learned Single Judge of the Calcutta High Court in case of Asoka Industries (supra), there is only passing remarks that time limit should be reckoned from the time when the party realize about the mistake regarding payment of duty. However, such passing observation would not convince us to accept the claim of the petitioner particularly in view of the decisions of the Apex Court in the case of Mafatlal Industries (supra) and Kirloskar Pneumatic Company (supra).

In view of the above discussion, we find that the authorities were justified in holding that the refund claim of the petitioner was barred by limitation prescribed u/s 11B of the Act. We find no infirmity in the impugned orders. The petition is therefore, dismissed.

With respect to the claim which fell within the period of limitation which was rejected on the ground of non-compliance with the mandatory requirements, in the case of this very petitioner in Special Civil Application No. 12703 of 2011 2012 (280) ELT 507 (Guj.) we have remanded the proceedings before the Revisional Authority for fresh consideration making following observations:

Having thus heard the learned counsel for the parties, we find that there was several documents before the authorities and in particular the revisional authority, which would prima facie suggest that the petitioner had arguable case of linking the duty paid fuel being supplied for foreign pound flights. It is not even the case of the respondents that if such a case was established, the exemption notification would not apply. In other words, even the respondents agree that if the petitioner had supplied the excise paid fuel to Air India for its foreign bound flights as per the exemption notification, such duty ought to have been refunded. It is, however, the case of the respondents that the petitioner failed to establish this vital and important aspect.

As pointed out by the counsel for the petitioner, we also notice that looking to the peculiar nature of the transaction in such cases, the exemption notification dated 26-6-2011 itself prescribes special procedure for store for consumption on board an aircraft on foreign run. Clause (6) of the notification reads as under:

(6) Special procedure for store for consumption on board an aircraft on foreign run : Notwithstanding anything contained in this paragraph, in case of mineral oil products falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) exported as stores for consumption on board an aircraft on foreign run, the products as remain on board an aircraft after completion of an internal flight but prior to its reversion to foreign run, the rebate for which shall be granted without production of documents evidencing the payment of duty thereon. The proper officer of Customs shall certify in the manner specified by the Commissioner of Central Excise the quantity of products left on board for determining the quantum of rebate therefore.

Being a question of fact which would require examination of bulky materials, it would not be appropriate on our part to scan through such documents and to make our final conclusive remarks on the rival contentions. However, we are of the opinion that present is a case where the petitioner''s case should be re-examined by the revisional authority. If on availability of evidence on record, it is established that the petitioner has fulfilled the mandatory and substantive requirement of the rules and the notification, its refund claim should not be defeated on the ground of some procedural infraction or the documents not being supplied in the original at the outset. In other words, on the basis of available and reliable documents and the materials on record, if the petitioner is in a position to establish before the Revisional Authority that the excise duty though exempt was paid wrongly, surely its refund claim should be granted.

With the above observations, the order passed by the Revisional Authority is set aside. For the purpose of reconsideration, the issue is placed back before the Revisional Authority. The Revision of the petitioner shall be decided afresh bearing in mind the observations made hereinabove and after considering the submissions of both sides. The petition is disposed of accordingly.

In the result, this petition is disposed of in following terms. To the extent the petitioner''s refund claim pertained to the period beyond one year from the relevant date, the same would not be maintainable. To the extent the claim is within the period of limitation, the Revisional Authority shall re-examine the issue after hearing the petitioner and the Department. For such purpose and to that limited extent, the order of the Revisional Authority is set aside. The petition stands disposed of accordingly.