1. The short point falling for decision in this appeal is whether the refund claim of the appellants was timebarred under Rule 11 of the Central Excise Rules, 1944 or not.
2. The refund claim arose under Notification No. 51/74-Central Excises dated 1-3-74. This notification gave full exemption from payment of Central Excise duty in respect of specified types of cutting tools cleared by or on behalf of a manufacturer up to a value of rupees one lakh in each financial year subject to the condition, inter alia, that the total value of such cutting tools cleared by the said manufacturer during the same financial year did not exceed rupees two lakhs. The refund claim of the appellants related to the financial year 1975-76.
It is their case that they could know only on 31-3-76 as to whether their total clearances in the financial year had or had not exceeded the ceiling limit of rupees two lakhs. Consequently, the fact whether they were entitled to the exemption or not could be known to them only on 31-3-76 and not earlier. They filed their refund claim on 17-2-77.
The appellants maintain that their claim was not time-barred for the following reasons :- (1) Rule 11 laid down the period of limitation for only those refund claims where over-payments of duty had been through inadvertence, error or misconstruction. None of these three elements applied to the appellants' case. Hence the limitation of Rule 11 did not apply to their claim.
(2) Assuming that it did apply, they relied on the Single Judge judgment of Kerala High Court reported at 1978 E.L.T. J. 705-T.T. Pylunny Royal Smiths, Kunnakulam v. Union of India and Ors. in which it had been held in a case of similarly worded exemption notification dated 30-4-1968 relating to steel furniture that the limitation of Rule 11 would run from the close of the financial year.
(3) Even if it was held that the limitation of Rule 11 ran from the date of payment of duty, still their refund claim for the period from 18-2-76 to 31-3-76 was within the prescribed time-limit of one year. They stated that the lower authorities were wrong in applying three months' time-limit as applicable to factories under physical type of control. They maintained that as on the date of filing of their refund claim (17-2-77), they were working under Self Removal Procedure, the time-limit of one year under Rule 11 read with Rule 173-J as on that date applied to them.
3. The Department's Representative stated that the aforesaid Single Judge judgment of Kerala High Court relied on by the appellants had been reversed in appeal by the Division Bench of the same High Court [vide 1983 E.L.T. 2156 (Kerala)] and the Division Bench had held that the limitation of Rule 11 applied from the date of payment of duty, as laid down in the Rule itself, and not from the close of the financial year. He stated that the appellants should either have filed a refund claim each time they paid duty at normal rates or they should have paid duty under protest or under provisional assessment procedure. Since they had not done any such thing, he argued, their claim was time-barred. Regarding the non-applicability of Rule 11, the Department's Representative referred to the statement of clearances of the appellants and maintained that the appellants had planned in advance not to exceed the ceiling limit of rupees two lakhs during 1975-76 and, therefore, if they still went on paying duty at the normal rates, their payments could only be attributed to error-a factor duly covered by Rule 11. Rule 11 was the only rule governing refunds of duty. If this rule did not apply to the appellants, argued the Department's Representative, there would be no authority in the Central Excise Act and Rules to grant them the refund asked for.
4. In a brief rejoinder, the appellants stated that their principal argument that Rule 11 did not apply to their refund claim at all was perhaps not advanced before the Single Judge or the Division Bench of the Kerala High Court as the said argument had not been gone into in both the judgments of the said High Court. The appellants as well as the Department's Representative stated for the information of the Bench that there was no other High Court judgment relating to the point at issue.
5. We have carefully considered the matter. The appellants are right in saying that Rule 11, as it stood during the material period, laid down the period of limitation for only those refund claims where duties had been paid through inadvertence, error or misconstruction. It is nobody's case that payment of duty at the normal rates by the appellants was due to inadvertence or misconstruction. The Department maintains that it was due to error. We do not agree with this conclusion. Entitlement to exemption under the notification was subject to fulfilment of certain conditions one of which was that the total value of the manufacturer's clearances in the same financial year should not exceed rupees two lakhs. Whether a manufacturer fulfilled this condition or not could be known for sure only at the close of the financial year when the aggregate value of clearances during that year would be available. It may be that the appellants had so planned their clearances as not to cross the ceiling limit during 1975-76. But all that this planning gave them was an expectation that they would be able to avail of the exemption in the form of refund of duty. Their actual entitlement to exemption or refund could, however, be known only on 31-3-76. Since their legal right to exemption or refund did not accrue before 31-3-76, it cannot be said that payment of duty at normal rates up to 31-3-76 was due to error on their part. The scheme of the notification was such that before 31-3-76 they had no legal right to clear the goods without payment of duty. We, therefore, agree with the appellants that Rule 11 did not apply to their refund claim.
6. The Division Bench judgment of the Kerala High Court would have been binding on us since we are informed that there is no conflicting judgment of any other High Court. But we find from the two aforesaid judgments of that High Court that the principal argument of the appellants that Rule 11 did not apply to their refund claim at all was not before the said High Court. The Single Judge as well as the Division Bench of the Kerala High Court proceeded on the assumption that the limitation of Rule 11 applied and their two judgments differed only regarding the date from which the limitation under the said rule should run. Since a new argument has been put forth before us and we find force in it, judicial propriety demands that we should not mechanically follow the Division Bench judgment of the Kerala High Court.
7. That brings us to the argument of the Department's Representative that if Rule 11 did not apply, there was no other provision in the Central Excise Law under which the departmental authorities could consider the appellants' refund claim. This point came up before the Division Bench of the High Court of Mysore at Bangalore, in Writ Petitions Nos. 1730 and 1731/1967 in the case of Messrs Gourishankar Silk Weaving Factory and Anr. v. Union of India and Ors.. In this case, the petitioners had paid excise duty on silk fabrics during the period 20th April, 1961 to 31st August, 1962. According to them, no duty was chargeable on the pure silk fabrics in respect of four looms that were exempt under the relevant Govt. orders. The petitioners made an application for refund on 7th March, 1963. The departmental authorities rejected the petitioners' claim on the ground that it was time-barred under Rule 11. The petitioners then approached the High Court under Article 226 of the Constitution of India for a writ in the nature of mandamus. By their judgment dated the 8th of January, 1970, their Lordships of the High Court held as under :- "The contention of the learned counsel for the petitioners is that the case of the petitioners does not fall within the scope of Rule 11 inasmuch as the excise duty was not paid through inadvertance, error or misconstruction. If that be the case, then the remedy of the petitioners is not under Rule 11. There is no provision under the Act or the Rules for making refund by the authorities except under Rule 11. If the case of the petitioners was that the duty was not paid through inadvertance, error or misconstruction, they should have enforced the remedy in a Court of law and not by application to the authorities under the Rules. Therefore, the petitioners are not entitled to seek any writ of mandamus seeking to enforce a statutory duty on the part of the respondents." 8. Since in the appeal before us it is the appellants' own case that Rule 11 did not apply to their refund claim and we agree with them, their appeal has to be rejected, in view of the authority of the Mysore High Court judgment extracted above. Accordingly, we reject the appeal.