1. The captioned appeals involve common issues of fact and law and are, therefore, disposed of by this common Order.
2. The facts of the case, briefly stated, are that M/s. Kanoria Chemical Industries (P) Ltd., Renukoot (the Respondents in the present proceedings) submitted to the Central Excise authorities 13 claims for refund of the duty paid by them during the period from 25-5-1971 to 31-8-1977 on wet chlorine converted into hydrochloric acid. The Assistant Collector of Central Excise, Mirzapur passed 13 orders rejecting the 13 claims on the ground that they were hit by the limitation laid down in Rule 11 of the Central Excise Rules, 1944 (hereafter called 'the Rules') since they were not submitted within 6 months of the payment of duty. The Respondents pursued the matter in appeal. The Appellate Collector, Central Excise, Delhi allowed all the 13 appeals by his Order No. 14 to 27/CE/Alld/87 dated 17-3-1982. The relevant portion of the Order reads thus : "I have gone through the appeals and the case records. In these cases, the issue is whether the case is time-barred or not. The Assistant Collector has rejected the claims as being time-barred, under Rule 11. The appellants have contended that the rule is not applicable and General Law of limitation applies as the claims are filed within 3 years. It is their contention that it is in time, since the Government of India decided in their order in revision No, 1842/77 dated 30-9-1977 has held that wet chlorine is not excisable, and on basis of these orders, Tariff Advice No. 46/78 was issued vide F.No. 105/16/76-CX.3 dated 21-8-1978, I hold that the appellant is correct. In view of the order in revision cited above by them Assistant Collector's orders are accordingly set aside. Refund claims be sanctioned, if otherwise in order".
On examining the case records, the Central Government formed a tentative view that the Appellate Collector's order was not proper, legal and correct. It, therefore, issued a notice F-No.198/B/2/170/82-CD.5 dated 6-9-1982 asking the Respondents to show cause why the said Order should not be set aside as indicated in para 4 of the notice. Paras 4 and 5 of the show cause notice are reproduced below : "4. Government observe that w.e.f. 1-3-1975 Tariff Item No. 68. 'All other goods not elsewhere specified' was inserted in the First Schedule to Central Excises and Salt Act, 1944 for the first time so as to cover all residuary item. Government further observe that as such all Gases, other than those covered by Item 14H came to be classified under Tariff Item 68 with effect from 1-3-1975. From 1-3-1975 therefore wet chlorine appears to be classifiable under Tariff Item 68 of Central Excise Tariff and Central Excise duty under the aforesaid tariff entry is recoverable for the post 28-2-1975 period, the assessee are therefore prima facie entitled for the refund of only that amount which is paid in excess of the Central Excise duty leviable under Item 68 and that too if the claim for this period is not hit by limitation under Rule 11 of Central Excise Rules, 1944 as it stood at the material time.
5. The Central Government, therefore, are tentatively of the view that the order in appeal No. 14 to 27-CE/ALLD/81 issued on 17-3-1982 is not proper, legal and correct in so far as the post 28-2-1975 period is concerned and propose to set aside the order of the Appellate Collector, Central Excise, New Delhi to the extent indicated in para 4 above or pass such orders as deemed fit after consideration of the submissions of the assessee".
By a letter dated 5-10-1982, the Respondents denied the allegations in the show cause notice and prayed that the proceedings be dropped.
3. These proceedings had not concluded before the setting up of this Tribunal. Hence, they were transferred to the Tribunal in terms of Section 35P of the Central Excises and Salt Act (hereafter referred to as 'the Act') for disposal as if it were an appeal filed before the Tribunal. We have heard Shri S.N. Khanna, Depth Representative for the appellant-Collector and Shri A.P. Mathur, Advocate for the Respondents.
4. At the outset, it is relevant to note that the proceedings before us are limited to the period from 1-3-1975 (see para 4 of the Government's show cause notice) to 31-8-1977= 5. Shri S.N. Khanna, Deptl. Representative, submitted before us that the refund claims in all these cases were filed after the expiry of a period of 6 months from the respective dates of payment of duty. Shri Mathur, Counsel for the Respondents admitted that this was so. Shri Khanna further submitted that, for the reasons set out in the Assistant Collector's order, it could not be said that the Respondents had paid duty on the goods under protest, although they had carried on some correspondence with the excise authorities. In this connection, he referred to Central Excise Notification No. 116/81,. dated 11-5-1981 promulgating Rule 223B regarding the procedure to be followed in cases where duty is paid under protest. No protest was lodged in respect of each payment of duty. The Appellate Collector went wrong in applying the general law of limitation ignoring the specific limitation in the Central Excise law. For this proposition, the Departmental Representative relied upon the Calcutta High Court decision in Incheck Tyres Ltd. v. Union of India and Ors. - 1978 ELT 3-643, wherein the Court held that until the payment was made under protest explicitly, there was no scope of infer from circumstances that the petitioner had paid duty under protest in respect of consignments other than the ones where duty had been paid under protest,, It is necessary to lodge protest in clear terms that the payment was made not only involuntarily but under protest. Though this decision was with respect to refund claims under the Customs Act, the principle applied to refund claims under the Central Excise law also- Another decision relied upon is that the Supreme Court in Miles. India Ltd. v. Assistant Collector of Customs, -1985 ECR 289, where the Court held that the Customs authorities were justified in disallowing the claims for refund as they were bound by the limitation in Section 27(1) of the Customs Act. Yet another citation is the decision of the Tribunal in Collector of Central Excise, Bombay v. Healer India Laboratories - 1983 ECR 1223-D.6. In reply, Shri Mathur, Counsel for the Respondents, drew our attention to the several letters written by the Respondents to the Depth authorities protesting against the requirement of paying duty as, for examble, letters dated 5-6-1971, 22-7-1971, 27-4-1977 and 30-11-1977 at pages 160, 161, 162-165 and 166-167 of the Paper Book filed by the Respondents. Attention was also drawn to the Department's letters of 15-12-1977 (page 168), 26/27-12-1977 (page 170) and 28-9-1978 (page 174) to show that the Department was aware of the fact that the Respondents were paying duty under protest. Thus, it was clear that the limitation under Rule 11 did not apply to these claims.
7. It was also submitted by Shri Mathur that the issue of classification of wet chlorine under Item 68 CET was not before the lower authorities and that, therefore, the review proceedings initiated by the Central Government to classify wet chlorine under Item 68, CET was beyond the scope of review and barred under Section 36(2) of the Central Excises and Salt Act.
8. We shall first deal with the question of whether, in the facts and circumstances of the case, it could be said that the Respondents were paying duty on wet chlorine under protest. Before we consider this question, it is useful to note that Rule 233B setting out the procedure to be followed in cases where duty is paid under protest was promulgated by Notification No. 116/81, dated 11-5-1981. Evidently, this procedure which was introduced for the first time would not have retrospective effect. What, therefore, we have to see is whether the Respondents made it known to the excise authorities that they were being compelled to pay duty on wet chlorine against their wishes and that, therefore, they were paying duty under protest. By a letter dated 5-6-1971, the Respondents wrote to the Superintendent, Central Excise, Allahabad stating that if was. their feeling that chlorine gas converted into hydrochloric acid (wet chlorine) should not attract excise duty. They requested that the goods should be exempted and a confirmation in this regard was asked for. The letter also briefly set out why the Respondents felt that wet chlorine gas was not liable to be charged to duty. This letter was followed by another dated 22-7-1971 again seeking exemption of wet chlorine gas from excise duty for the reasons set out therein. It appears from the said letter that there was a discussion between the Respondents and the Superintendent and Assistant Collector during the latter's visit to the Respondents' factory. The letter ended by saying that for the time being the Respondents shall be paying duty under protest. There is another letter again of 22-7-1971 more or less covering the same ground and restating that duty on wet chlorine was paid under protest,, There is a gap in the correspondence and the next letter is dated- 27-4-1977 again taking up, with the Assistant Collector the Respondents' case that wet chlorine was not liable to duty under Item No. 14H. This letter, which is quite detailed, says that wet chlorine is neither compressed nor liquified nor solidified gas as set out in Item No, 14H. It also contends that wet chlorine is not marketable and is not something which can ordinarily be brought to the market to be bought and sold unless it is dried, liquified, etc. Wet chlorine, therefore, cannot be considered to be "goods" within the meaning of Section 3 of the Central Excises and Salt Act, 1944- The letter further quotes the Supreme Court decision in the Delhi Cloth & General Mills Co case - AIR 1963 SC 791 and the South Bihar Sugar Mills Ltd. case - AIR 1968 SC 922. The letter ends by saying that the Respondents would await the Assistant Collector's order till 31-3-1977 whereafter they would be compelled to stop payment of duty. This letter is followed by another on 30-11-1977.
This time, citing an order-in-revision No. 1842 of 1977 dated 30-9-1977 (Dhrangadhra Chemical Works Ltd., Sahupuram - 1978 ELT 3-713) holding that wet chlorine was not "goods" within the meaning of Section 3 of the Central Excises and Salt Act, 1944 and that it could neither be treated as compressed gas. The letter reminds the Assistant Collector that as per the instructions of the Department, the Respondents had been paying duty under protest. It requests the Assistant Collector to accord permission to stop further payment of duty on wet chlorine. The first letter of the Department available on record is the one dated 15-12-1977 from the Assistant Collector, Mirzapur to the Respondents saying that the matter had been referred to the higher authorities for decision and that in the meantime, the Respondents should continue payment of duty on wet chlorine. To this, the Respondents replied on 22-12-1977 stating that, though the Government in revision had ruled that wet chlorine did not attract duty, still, on the Assistant Collector's insistance, the Respondents were continuing the payment of excise duty under protest. To this, the Assistant Collector replied on 27-12-1977 to the effect that till the Collector's orders were received, the Respondents should continue payment of duty. Thereupon, the Respondents wrote to the Collector, Allahabad on 26-12-1977 setting out the history of the case and requesting the Collector to issue directions to the Assistant Collector, Mirzapur in the matter and also to grant the consequential relief and refund of the excise duty already paid under protest. This is followed by a telegraphic reminder on 12-9-1978. The Collector's reply of 28-9-1978 asks the Respondents to approach the Assistant Collector for further necessary action in the light of tariff advice No. 46/78, dated 21~8-1978. This tariff advice is in pursuance of the Government's order in revision referred to earlier.
9. From the above narration of the correspondence between the Respondents and the Departmental authorities it is crystal clear that right from the beginning the Respondents were paying duty on the Department's" insistance and that they had made it quite clear to the Department that they were paying duty under protest. As we have said earlier, there was no prescribed procedure during the relevant period for lodging protest. We have, therefore, to deduce from the facts and circumstances whether the payment of duty was it fact made Under protest. On this point we do not have the slightest doubt that the payment of duty was being made under protest right from the very beginning. In view of this position, the limitation under Rule 11 would not hit the refund claims. However, we agree with the Departmental Representative that the Appellate Collector was in error in applying the general law of limitation and ignoring the specific rule of limitation contained in Central Excise Rule 11. In the present case, however, this really does not make for any difference since we have found that, in view of the protests in the matter of payment of duty, the limitation in Rule 11 would not apply in these cases.
10. The decisions cited by the Departmental Representative do not, in our view, advance the Department's case. The Calcutta High Court in (supra) was in respect of the consignments where no protest was lodged.
Here, as we have shown a series of protests were lodged at different points of time. The Supreme Court's decision in (supra) also is not applicable to the present case because- the whole point is that there was effective and continued protest at being asked to pay in which event limitation would not apply. The Tribunal's decision in 1983 ECR 1223D is also not applicable because in the case neither was duty paid under protest nor was the assessment provisional. Here the duty was being paid under protest.
11. The review show cause notice seeks to classify wet chlorine under Item No. 68 of the Central Excise Tariff Schedule from 1-3-1975, the date on which Item No. 68 was inserted in the Central Excise Tariff Schedule. The notice goes on to say that the Respondents are prima facie entitled for the refund of that amount of duty which was paid in excess of the duty leviable under Item No. 68 and that too if the claim for this period is not hit by limitation under Rule 11. We have already found that the claims are not hit by Rule 11.
12. The Respondents object to the introduction of Item No. 68 into the proceedings at this stage when that item was not in the picture before the lower authorities. The show cause notice does not set out the basis for the tentative view taken by Government that wet chlorine falls under Item No. 68 from 1-3-1975. In this context, it is relevant to note that the Central Government had in the Dhrangdhra Chemical Works Ltd. case (supra) held that wet chlorine did not constitute "goods" within the meaning of Section 3 of the Central Excises and Salt Act, 1944. Of course, in that case Item No. 68 was not in the picture and the order-in-revision said that wet chlorine was not excisable under Item No. 14H. We do not agree with Shri Mathur that the question of correct classification of the goods cannot be gone into at this stage.
As held by this Tribunal in Cynamid India Ltd. v. Collector of Central Excise, Bombay - 1984 (15) ELT 186, it would not be in the interest of justice or conduce to a proper disposal of the question of correct classification of goods if the appellants are prevented from raising a new ground so long as that ground is relevant to the question of classification. In this connection the Supreme Court's observations in the Commissioner of Income-tax, Madras v. Mahalakshmi Textiles Mills Ltd. "By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities is convassed. Under Sub-section (4) of Section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal.
If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant hat relief. The right of the assessee to relief is not restricted to the plea raised by him." Of course, the relief in that case, was for the assessee. Here, relief is sought for by the Department. That should not, however, make for any difference to the application of the principle laid down by the Supreme Court. It is, therefore, clear that consideration of Item No. 68 as a possible entry in the tariff for classification of wet chlorine would be in order, particularly in the light of Rule 10 of the Customs, Excise and Gold (Control) Appellate Tribunal (Procedure) Rules, 1982 which permits new grounds to be urged in appeal.
12. We shall next deal with Shri Mathur's contention that the proceedings initiated by the Central Government to classify wet chlorine under Item No. 68, GET -was barred under Section 36(2) of the Central Excises and Salt Act, 1944. Section 36(2) of the Act (as it stood at the material time) provided that where the Central Government was of opinion that any duty of excise had not been levied or had been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under Section 36 unless the person affected by the proposed order was given notice to show cause against it within the time-limit specified in Section HA-In the present case, it cannot be said that duty had not been levied or had been short-levied. Duty under Item No.14H was levied. The duty proposed to be retained and not refunded because the goods are tentatively held by the review notice to 'be assessable under Item 68, GET is of a lower order than the duty collected under Item No. 14H. Therefore, this is not, strictly speaking, a case of short-levy or non-levy as contemplated in Section 11A which concerns itself with situations where demand is issued asking the assessee to pay a certain sum of money on the ground that the duty leviable was not levied or paid or asking him to pay an additional amount of money on the ground that the duty already collected falls short of the duty actually leviable, i.e. duty was short-levied or short-paid. Such is not the situation here. The third proviso to Section 36(2) contemplates a limitation in the event of a notice being issued, inter alia, in a situation of erroneous refund,, In the present case, the refund in pursuance of the order passed by the Appellate Collector of Central Excise has not been paid. There is no question, therefore, of seeking to recover, by the present notice, any amount of money erroneously refunded. The notice has been issued prior to the amount being refunded. Now, erroneous refund could arise due to several reasons. One reason could be application of a wrong rate of duty or admission of a discount or some such element for deduction from the assessable value; Another reason, as in this case, could be erroenous classification. Section 36(2), viewed in this light, permits initiation of proceedings, as in this case, asking the assessee to show cause why a part of the amount ordered to be refunded by the appellate authority should not be denied on the ground that had the goods been correctly classified, the refund amount would be reduced to that extent.
13. In this connection, it is useful to refer to the judgment of the Supreme Court in Geep Flashlight Industries Ltd. v. Union of India" and Ors. - 1983 ELT 1596. In that case, the Central Government, acting under Section 131(3) of the Customs Act, 1962, had issued a notice to M/s. Geep Flashlight Industries Ltd. stating that "since the goods were processed ore not meant for extraction of metallic manganese, they ceased to qualify as an 'ore' within the normally accepted sense of the term as in Item 26 of Indian Customs Tariff. It, therefore, appears to the Government that the appellate order does not appear to be sustainable. Therefore, in exercise of the powers under Section 131(3) of the Customs Act, 1962, the Government of India proposes to annul the Order-in-Appeal No. 590-593/1972 passed by the Appellate Collector of Customs, Calcutta. "The appellants' contention was that the power of suo motu revision under Section 131(3) of the Act in so far as it related to a case of non-levy or short-levy of duty must be exercised within the period of limitation prescribed in Section 131(5) of the Act. Sub-section (5) of Section 131 provides that "where the Central Government is of opinion that any duty of Customs has not been levied or has been short-levied, no order levying or enhancing the duty shall be made under this Section unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 28". It was the further contention of the Appellants' Counsel that if Government wanted to revise the appellate orders for refund on the ground that there should not be any refund, it would also be a case of short-levy and, therefore, the limitation of six months, as provided in Section 28 of the Customs Act, should apply.
The Court considered the relevant provisions of the Customs Act and rejected the appellants' contention that refund would also be a case of short-levy. It further held that in the case of erroneous refund, the notice to pay back the amount erroneously refunded was required to be given within six months from the relevant date, i.e. the date of actual refund. If no refund had in fact been made, the limitation could not be said to arise inasmuch "s the relevant date under Section 28 in the case of erroneous refund was the date of refund. "Grant of refund, said the Court, was not actual refund." 14. The situation in the present case is analogous. Though Section 36(2) of the Central Excises and Salt Act talks also of erroneous refund unlike Section 131(5) of the Customs Act, this difference would not make for any tenable basis for not applying the ratio of the judgment of the Supreme Court in the Geep Flashlinght Industries case.
The refund in pursuance of the Appellate Collector's order not having been actually made, the review notice, in so far as it seeks to reduce the amount of refund, is not hit by the limitation in Section 11A of the Act.
15. In the light of the above discussions, we are of the view that the question of classification of wet chlorin under Item "No. 68, GET, as raised in the review notice, was not beyond the scope of the review which we are now hearing as an appeal by the Department, nor was it barred under Section 36(2) of the Central Excises and Salt Act, 1944.
However, we would leave the question of classification of wet chlorine under Item No. 68 CET to be gone into by the Collector (Appeals) after giving both sides an opportunity to state their respective cases.
16. In the light of the above discussions, we set aside the impugned order of the Appellate Collector and direct him to adjudicate upon the question whether wet chlorine produced by the Respondents fell for classification under Item No. 68 of the Central Excise Tariff Schedule during the period from 1-3-1975 to 31-8-1977. We have already held that the claims for refund of duty in the present cases were not hit by the limitation in Central Excise Rule 11. The exact amount of refund of duty to the appellants shall be adjudged by the Collector (Appeals) in the light of the decision that he may arrive at on the classification of the goods.
17. The appeals are disposed of with the above observations and directions. Since the matter is pretty old, the Collector (Appeals) shall endeavour to dispose it of as early as possible but not later than four months from the date of communication of this order.
18. The Supreme Court judgment in Geep Flashlight Ltd. 1983 ELT 1596 was in a dispute that involved two items 26 and 28 of the old Customs Tariff. The Appellate Collector framed an order which ran : I, therefore, allow the appeals and direct that the goods be reassessed under Item 26 of the Indian Customs Tariff and the consequential refund of duty granted.
19. It is clear from this and there were 2 items and the last decision was in favour of one of the two items convassed by the opposing parties. Furthermore, the court dealt- with whether a refund is equal to short levy. It said it was not and that grant of refund is not equal to actual refund. The Hon'ble court said no time limit affected a notice under Section 131(5) of the Customs Act, 1962 as the section did not speak of any limitation in regard to a revision of an order of erroneous refund of duty.
20. We have here a very different dispute. The Central Government has issued a notice that said that from 1-3-1975 all gases became assessable under Item 68, unless covered by Item 14-H. This was correct. But what was not correct was that the Central Government wanted to levy duty under Item 68 on the wet chlorine from 1-3-1975, when this item was never an item that appeared in the dispute. The notice of the Government is dated 6-9-1982 and seeks duty for the period 1-3-1975 to 31-8-1977. It is a new case, a new assessment and a new demand - and it is barred by limitation. Nor does it help the Government's case that it seeks to recover the money for this new demand from the money in its custody, money which belongs by right to the assessee, by refunding only what is in excess of the duty calculated according to Item 68.
21. Money can be sequestered and appropriated only to recover monies adjudged recoverable by due process. Until money is adjudged so due, it cannot be appropriated or adjusted in the manner proposed September 1982. A sum of money must first be found by a proper authority to be recoverable before steps to recover are taken. Such steps can be by attachment, sale, detentions. But these steps must not precede the adjudgment by a proper authority.
22. Is the Central Government a proper authority for a new demand or a new assessment? It is not. The power to issue demands are given by Section 11A only to an Central Excise Officer. The Central Government is not a Central Excise Officer. Nor can the Central Government make an assessment which this notice, in effect, seeks to do. All it can do is to decide a dispute of assessment - it cannot, of its own voluntary motion, make an assessment. Only the proper officer can do that.
23. Only the Central Excise Officer can now raise a demand under Item 68 on the wet chlorine by recourse to Section 11A. He may do so. But this will not mean the Central Excise Department can hold on to the money due as refund to the factory. This money should be refunded totally. The duty was paid under protest as rightly observed by learned brother Sankaran. The new assessment and demand under Item 68 will take its own course as provided by law.
24. The Supreme Court's observations in 1967 (3) SCR 957 regarding Mahalaxmi Textiles is clearly about a new ground for granting relief to an assessee. I am not convinced that this judgment can be read as permission to introduce a new demand or assessment which may, according to law, be already barred by time limit. I do not think we can interpret this as the court's approval of a new claim or demand at the appeal stage even if such new demand or claim is affected by the time limit.
25. The disability affects the government as it does the assessee.
Neither is immune to the attack of time bar. This bar operates inexorably, relentlessly; and all claims and demands afflicted, by it cannot be saved and must perish.
In the light of the majority view, the appeals are disposed of in accordance with the observations and directions contained in the majority decision.