Swadeshi Felt Manufacturers and Others vs Union of India (UOI) and Others

M.B. Sharma, J.—A limited controversy in this writ petition is as to whether the petitioner is entitled to the refund of the excise duty which was paid the petitioner under protest and if so what is the period of limitation. A question will arise and in my opinion it is an important question, more so in this equitable jurisdiction of this Court as to whether the petitioner is entitled to any amount even if the excise duty was paid by it under protect.

It may be stated at the very outset that so far as the liability of the petitioners for payment of excise duty on woollen felts which the petitioners used to manufacture is concerned, it is no longer res Integra in view of the decision of the Supreme Court in the case of Union of India (UOI) and Others Vs. Gujarat Woollen Felt Mills, . In the aforesaid case the question had arisen as to whether the felts manufactured by Gujarat Woollen Felt Mills are "Woollen fabrics" with in the meaning of Entry 21 in the First Schedule to the Central Excises and Salt Act, 1944 (for short the Act). The High. Court of Allahabad held that the products were not "woollen fabrics" and directed refund the amount collected as excise duty from the firm. The Supreme Court agreed with the Allahabad High Court and dismissed the appeal. It may be stated that in the case of Zoraster and Co. (Suppliers) Pvt Ltd. v. Union of India and Ors. such firm also used to manufacture woollen fabrics, the Supreme Court in civil appeal No. 1519 and 1920 of 1976 S.M. Jain v. Union of India and Ors. decided on 8th March 1976 had takes a similar view and said, that the case stands covered, by a decision of that court in Civil Appeal 1930 of 1971.

The petitioner-firm M/s. Swadeshi Felt Manufacturers was paying excise duty under Tariff Item No. 21 to the First Schedule of the Act beginning from the year 1970. Alter the decision of the Gujarat High Court in the aforesaid case of Gujarat Woollen Felt Mills (supra), the petitioner-firm started paying excise duty from 1st April 1972 under protest and a rubber stamp "under protest" was affixed on each of the voucher etc. This Court in the case of S. Zoraster and Co. (Supplies) Pvt. Ltd. Vs. The Union of India (UOI) and Others, had also taken a view that expression "woolen fabrics" does not include "woollen felt" and after the decision of that court in the year 1976 it appears that the petitioner-firm stopped paying excise duty on 7th July 1976. It also filed for refund of excise duty paid vide application dated 19th June, 1970 which according to learned Counsel for the petitioner amounted to Rs. 2,34,960. It appears that the petitioner-firm initially claimed a sum of Rs. 2,34,960 vide Annex,6 for the period from 10th July 1970 to 15th May 1976. But it was called upon to pay revised claim confined by three orders from the date of application, i.e., 19th June, 1976 and the petitioner filed a revised claim for refund to the tune of Rs. 1,28,956. The claim use filed in prescribed form in duplicate. The petitioner was allowed claim of Rs. 1,30,191.91 and the said amount was refunded to the petitioner. For the balance of amount the petitioner filed an appeal before the Collector (appeals). The petitioner also claimed in that appeal that it was entitled for the refund of the excise duty paid from the year 1970 to the date of initial payment at any rate w.e.f. 1st July , 1972 when it started paying the excise duty under protest. The Collector issued show cause notice u/s 35(2) of the Act to the petitioner firm on 7th June 1980 wherein the petitioner firm was intimated that the collector has refused to grant the refund of the excise duty paid. The petitioner showed cause and thereafter the Collector (Appeals) under order dated 28th April, 1982 made an order reviewing the order of the Assistant Collector and directing to refund of the excise duty but limited the grant of refund to the period of one year prior to the application. It may be stated that the amount comes to Rs. 62,822.22 and the Superintendent Central Excise asked the petitioner firm to pay the amount.

The question is as to whether Rule 11 of the Rules will apply or any other rule will apply. This Court had an occasion to examine the question in the case of Man Industrial Corporation v. Superintendent, Central Excise, MOR, Jaipur and Ors. 1989 (1) RLR 773 and placed reliance on the earlier case of this Court Shiv Steel Works and Others Vs. Union of India (UOI) and Others, wherein it was held that an act done by the Excise authorities cannot be said to be an act done under the Act and Rule 11 read with Rule 174(J) of the Central Excise Rules would not be applicable and that Article 113 of the Limitation, Act, 1963 which is residuary article would be applicable (sic) under Article 113 of the Limitation Act the period of limitation is three year from the date when the mistake is discovered. Once it has been held that the excise duty was not payable under the Act and had been recovered in my opinion it can be said that the recovery was made without due authority of law and cannot be said to be made under the provisions of the Act. Rule 11 of the Rules cannot be attracted which rule can only be attracted in case the act could have done have under the provision of Act or Rule. Therefore, in my opinion the period of limitation is three years from the date when the mistake was discovered The petitioner-firm stopped paying the excise duty from July, 1976 and had also started paying it under protest from 1st July, 1972, An application for refund was filed on 19th June, 1976 and, therefore, in my opinion, the" petitioner was entitled for the refund of the excise duty paid for the last three years immediately preceding to the year 1976. It was entitled for the refund of the excise duty paid during the period from 18th June, 1973 to 19 June, 1.976 and, therefore, the Assistant Collector was right in allowing the claim for three years and the view takes by the Collector u/s 35A that under Rule 11 only refund for one year was permissible was not correct.

But the question arises that when admittedly and it can be presumed that the petitioner had paid the excise duty whether can he be allowed to claim the amount. In this case I will not like to make a distinction for such of the amount which has been refunded under the order of the Assistant Collector and such amount which is now claimed under the order of the Collector. Division Bench of this Court in this case of Delhi Cloth & General Mills Co. Ltd. v. Union of India and Ors. 1982 RLR 837 was dealing with a case of refund of the excise duty. The court in para 11 to 14 of the aforesaid judgment said that the sale price must have been fixed after taking into consideration the customs duty and the additional duty or countervailing duty. The court further said that the petitioner has not come out with a ease that the additional duty has not been included in the cost of structure of the rayon tyre-cord or fabric, while passing the goods to the purchaser. The court also said that in case of refund of illegally levied customs duty on raw material it should in all fairness normally belong to the customers of the finished products. The court, therefore, refunded to order the refuned of the duty. It can be presumed that the petitioner-firm passes the customs (sic) duty on the customers and if any refund is allowed now, it will be allowing the petitioner to fee unlawfully enriched at Use cost of the customers.

I am of the opinion that so far as the amount has already been refunded to the petitioner, it will not be equitable order that the petitioner should refund the amount to the excise department and at the same time any part of the amount which amount could have bees refunded to the petitioner, the petitioner cannot be allowed to refund it for the reason as aforesaid.

Consequently, I hereby party allow this writ petition, quash the order Annex. 24 dated 28th April, 1982 of the Collector as well as Annex. 25 dated 24th April, 1982 of the Superintendent, Central Excise asking the petitioner for refund of the amount of Rs. 62,822.22. The aforesaid orders arc quashed and the rest of the petition is dismissed. Costs made easy.