Indian Oil Corporation Ltd. (No. 1) vs Union of India and Others

Akil Kureshi, J.—This petition is filed by Indian Oil Corporation Ltd. ("IOC" for short) challenging the order passed by the Government of India on December 20, 2010, rejecting the revision application of the petitioner and confirming the orders passed by the Departmental authorities. The facts leading to the present petition are as follows:

The petitioner had during the period between April, 2005 and October, 2005 supplied aviation fuel (hereinafter referred to in brief as ATF) to Air India flights which were foreign bound. On such fuel, the petitioner had also paid excise duty though according to the petitioner the same was under mistake. The petitioner having raised the bills with Air India with respect to such supply of fuel, the Air India apparently refused to pay the excise duty on the ground that such duty was not required to be paid. Upon such development, the petitioner filed refund claims with the Departmental authorities on March 22, 2007. After one round of orders, the adjudicating authority issued a show-cause notice dated October 22, 2007 calling upon the petitioner to state why such refund claim of Rs. 6,93,914 should not be rejected. Tentative reasons for the authority to issue such notice were two. Firstly, the authority was of the opinion that the refund claims were belated and therefore in breach of the limitation provisions contained in section 11B of the Central Excise Act ("Act", for short) and secondly, that necessary documents evidencing the element of duty of excise having been paid on the goods were not produced.

The petitioner replied to such notice. After hearing the petitioner, the adjudicating authority, however, by his order dated January 7, 2008 rejected the refund claim. The adjudicating authority held as under:

I further find that the refund claim was filed on March 22, 2007 in respect of duty paid for the period from April, 2005 to October, 2005. In terms of the provisions section 11B of the Central Excise Act, 1944, a refund claim is to be filed within a period of one year from the relevant date. In the present case, the relevant date is payment of duty. Considering the date of payment of duty, the refund claim was required to be filed on or before November 4, 2006 whereas in the present case, the refund claim was filed on March 22, 2007. So, the refund claim is hit by bar of limitation of one year as stipulated under the provisions of section 11B of the Central Excise Act, 1944. In view of this, their refund claim is liable to be rejected on the ground of time bar.

Against the order passed by the adjudicating authority, the petitioner preferred Departmental appeal. The appeal also came to be dismissed by order dated August 29, 2008. The appellate authority also held that the refund claim was belated. Against the order of the appellate authority, the petitioner preferred a further revision before the Government. The Government of India by the impugned order dated December 20, 2010 dismissed the revision also on the ground of the claim being time barred.

The petitioner has, therefore, approached this court by filing the present petition calling in question the order passed by the Government confirming the orders of the Departmental authorities. The only question that arises for our consideration is whether the authorities and the Government were justified in rejecting the refund claim of the petitioner only on the ground of limitation.

At the outset, we may notice that in section 11B of the Act, it is provided that any person claiming refund of any duty of excise may make an application for refund of such duty to the concerned officer before expiry of one year from the relevant date in such form and manner as prescribed. The term "relevant date" is explained in Explanation (B) u/s 11B. The relevant portion of section 11B reads as under:

11B. Claim for refund of duty.--(1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other 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 the provisions of sub-section (2) substituted by that Act:

Provided further that the limitation of one year shall not apply where any duty has been paid under protest . . .

Explanation.--For the purpose of this section,--

(B) ''relevant date'' means,--

(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods,--

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the post office concerned to a place outside India;

(b) In the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

(ea) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order;

(eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;

(f) in any other case, the date of payment of duty.

On the basis of the above statutory provisions, the counsel for the petitioner contended that the authorities erred in treating the claim of the petitioner as barred by limitation. He submitted that the duty was paid under a mistaken belief. When such mistake came to light of the petitioner on being pointed out by the purchaser, the petitioner filed its refund claim. The counsel submitted that the provisions of limitation should be viewed in the peculiar facts of the present case.

In support of his contention, the counsel relied on the following decisions:

(i) In the case of Uttam Steel Ltd. Vs. Union of India (UOI), , wherein the Bombay High Court considered the question of filing of refund claim beyond the period of limitation and whether the same debars the exporter from claiming the rebate of duty.

(ii) In the case of Vidushi Wires Pvt. Ltd. and Another Vs. Union of India (UOI) and Another, , wherein the Bombay High Court discussed the aspects pertaining to interpretation of statutes in the context of the statutory provisions being either mandatory or directory in nature.

(iii) Reliance was also placed on a Division Bench decision of this court in the case of Cosmonaut Chemicals and Another Vs. Union of India (UOI) and Another, , wherein the refund claim of the assessee was held to be within time when on account of default on the part of the customs authorities necessary documents were not available which were required to be attached to the refund claim.

(iv) Reliance was also placed on a decision of the Calcutta High Court in the case of Ashoka Industries Vs. Union of India (UOI), wherein it was observed that "in the instant case, the petitioner came to know about the mistake when the Customs Tariff Amendment Bill, 1982 came into force from April 15, 1982 and even if the limitation of six months is to be counted then also the application for refund on October 11, 1982 it cannot be said that the refund claim made by the petitioner is barred by limitation".

On the other hand, the learned counsel Shri Kogje opposed the petition, 8 contending that the period of limitation prescribed u/s 11B of the Act is not flexible. The petitioner had admittedly not filed refund claim within such period. The authorities had no power for condonation and therefore the refund claim was rightly rejected. Relying on the affidavit-in-reply filed by the respondents, the counsel further argued that even otherwise, the refund claim was not maintainable since the necessary documents substantiating the claim were not submitted.

The counsel relied on the decision of the apex court in the case of Union of India and Another Vs. Kirloskar Pneumatic Company Limited, wherein the apex court observed that the High Court may not be bound by the limitation under articles 226 and 227 of the Constitution, however, cannot ignore the time limit prescribed u/s 27 of the Customs Act.

Reliance was also placed on a decision of the apex court in the case of Mangalore Chemicals and Fertilisers Ltd. Vs. Deputy Commissioner of Commercial Taxes and others, wherein the apex court observed that there would be a distinction in conditions for exemption between those which are procedural or technical and those which are substantive.

Having thus heard the learned counsel for the parties, the short question that calls for consideration is whether the authorities were justified in rejecting the petitioner''s claim for refund only on the ground of limitation. As already noted, section 11B of the Act and in particular sub-section (1) thereof provides for making a refund claim within one year from the relevant date. The term "relevant date" has been explained in Explanation (B) of section 11B. The present case would fall under sub-clause (a) of clause (B) to the Explanation, namely, in the case of goods exported out of India. This would be so since as per rule 18 of the Central Excise Rules, 2002 pertaining to rebate of duty, the Explanation specifically provides that export includes goods shipped as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft. Resultantly, the relevant date would be the one prescribed in sub-clause (i) of clause (a) when goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded or leaves India. Accordingly, the relevant date in the present case would be when the fuel was supplied by the petitioner to Air India for its foreign going flight which left the country. In the present case, such supply was made on different dates between April, 2005 and October, 2005. Thus the refund claim which was filed on March 22, 2007 was clearly beyond the period of one year. It thus clearly emerges that refund claim was made beyond the period of limitation prescribed u/s 11B of the Act.

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 11B, 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 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 Union of India and Another Vs. Kirloskar Pneumatic Company Limited, , 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. Vs. Union of India (UOI), 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 the 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 May 20, 1999 and June 10, 1999, the due date for application of rebate of duty was November 20, 1999 and December 10, 1999 respectively. However, both the applications were made belatedly on December 28, 1999, as a result, the claims made by the petitioners were clearly time barred. Section 11B was amended by the Finance Act, 2000 with effect from May 12, 2000, wherein the limitation for applying for refund of any duty was enlarged from ''six months'' to ''one year''. Although the amendment came into force with effect from May 12, 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 May 12, 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 a 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 and Another Vs. Union of India (UOI) and Another, , the facts 16 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. The customs authorities delayed the 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, the 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 duly 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 the case of Ashoka Industries Vs. Union of India (UOI), , there is only a passing remark that time limit should be reckoned from the time when the party realise 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 Ltd. and Others Vs. Union of India (UOI) and Others, and Union of India and Another Vs. Kirloskar Pneumatic Company Limited, . 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.