1. This appeal arises out of and is directed against Order in appeal bearing No. A-893/ BI-249/83 dated 13-4-1983 passed by the Collector of Central Excise (Appeals) Bombay.
2. The brief facts necessary for the disposal of this appeal be stated as under:- The Respondents, M/s. India United Mills No. 1 is a composite Mill engaged in the manufacture of 'cotton blanket cloth' and 'cotton waste blankets' which were classified under Tariff Item No. 19-I and Tariff Item No. 68 respectively. By their letter dated 24-7-1980, they claimed refund of Rs. 6,25,200.40 p. duty amount paid for the period from 4-8-1977 to 28-6-1980 on the 'cotton waste blankets'.
The Assistant Collector, Central Excise, in his order dated 21-8-1981, despatched on 24-8-1981 rejected the claim by observing that: On scrutiny of your above referred refund claim it is observed that the same pertains to the C. Lists Nos. 119, 127, 135, 19, 49, 93, 53, 60, 19, 91, 29, 39 filed by you from time to time for classifying the said blankets under Tariff Item 68 and further observed that, these C. Lists had not been filed under protest, nor any letter of protest was given by you stating that you did not agree for the classification of your blankets under Tariff Item 68, as and when you filed the above C Lists. This indicates that the duty was paid by you voluntarily as per the approved classification lists. Merely writing on some gate passes the words, "duty paid under protest" cannot serve the purpose of protest, when no reasons for such protest are mentioned. There is ralso no appeal filed by you against the approval of the aforesaid C. Lists." Being aggrieved by the said order of the Assistant Collector, the respondents herein preferred an appeal before the Collector of Central Excise (Appeals) Bombay. Collector (Appeals) allowed the appeal holding that during the relevant time, cotton blankets were classifiable under Tariff Item 19 CET and not classifiable under Tariff Item 68 CET. He further held that the Assistant Collector's view that the duty had been paid voluntarily was not acceptable inas much as they made a specific endorsement of payment of duty under protest on the GPI and that the duty had been paid at the instance of the lower authorities' direction contained in their letter dated 23-2-1979. The Collector (Appeals) however, directed the lower authority to verify from the departmental records that the endorsement of under protest has been made in the relevant GPIs and wherever the same does not appear the refund amount should be reduced to that extent.
Being aggrieved by the Order of the Collector (Appeals), the Collector of Central Excise, Bombay I authorised filing of the appeal in question.
3. During the hearing of this appeal, Shri Pattekar, for the Collector, contended that the Collector (Appeals) committed an error in holding that the letter dated 21-2-1979 issued on 23-2-1979 is not an order by the Central Excise Officers. It was in the nature of advice. It was open to the respondents herein not to accept the advice or even to ignore the same. The respondents herein had filed classification lists and in none of those lists, they raised any dispute as to the classification and no appeal had also been filed against the classification. As a matter of fact even earlier to the letter of 23-2 1979, the respondents herein were classifying the product as falling under Tariff Item 68. Further, in their letter dated 19-9-1979, the respondents herein claimed exemption from duty under Notification No.179/77 dated 18-6-1977. This conduct negatives the finding of the Collector (Appeals) that they started paying duty as directed by the Central Excise Officers by their letter dated 23-2-1979. Shri Pattekar contended that if the respondents herein had paid the duty without disputing the classification the payment should be considered as one having been made voluntarily. It was also contended by Shri Pattekar that mere mention on gate passes "duty paid under protest" would not be sufficient to claim refund. They were required to state the reasons as to why they were paying the duty under protest. Shri Pattekar contended that the respondents herein were following SRP, they were filing R.T.12 returns and they were being finalised. No appeals were filed against the assessment orders. Therefore, no refund can be granted to them.
Shri Pattekar further contended that the refund was sought from 4-8-1977 to 28-6-1980 by an application dated 24-7-1980. The claim made for the period prior to 6 months from the date of claim was barred by time and that the Collector (Appeals) committed an error in allowing the entire claim. It was also contended by Shri Pattekar that 'paid under protest' was made on the triplicate copies of the gate passes and random check carried out show that the duplicate copies did not contain such endorsement. Therefore, the alleged payment under protest was not true. He, therefore, prayed that the appeal may be allowed and the order of the Collector (Appeals) may be set aside.
4. Shri Phadnis for the respondents, however, submitted that the appellant was not correct in contending that their claim related to the period from 4-8-1977 to 28-6-1980. The refund claims according to Shri Phadnis pertained for the period from 4-8-1977 to 23-9-1977 and from 1-3-1979 to 28-6-1980. He alleged that in view of the directions contained in the letter dated 2-7-1979 of the Office Supdt. no duty was paid between 24-9-1977 to 28-2-1979 and therefore, the question of claiming refund for the said period did not arise. Shri Phadnis further contended that the classification lists relied upon by the department were not submitted voluntarily but they were made as per the directions of the jurisdiction Superintendent made from time to time. It was alleged by Shri Phadnis that as the respondents were required to remove cotton blankets they had no other go but to pay the duty under protest.
As there was no procedure prescribed to record the protest they made an endorsement on the gate pass, which is a duty paid document. Shri Phadnis, further contended that there was confusion as to whether the cotton blanket fell under Tariff Item No. 68 or not. In any case, when the respondents had made an endorsement on the gate pass, duty paid under protest, such a payment cannot be treated as payment of duty voluntarily. It was further contended by Shri Phadnis as there was a direction by the Superintendents by a letter of 23-2-1979, the question of filing appeal against the classification did not arise. The procedure of payment of duty under protest was prescribed for the first time by Rule 233-B which came into force with effect from 11-5-1981.
Therefore, the question of following the procedure prescribed under 233-B which came into force with effect from 11-5-1981, at the relevant time, did not arise. Finally, Shri Phadnis relied upon the decision of the special Bench. B in appeal No. 1984-88 B, Collector of Central Excise, Calcutta v. Stewarts and Lloyds of India Ltd., Calcutta reported in 1984-E.C.R. 1559 (CEGAT).
5. We have carefully considered the submissions made on both sides. The short question that arises for consideration is : Whether the Collector (Appeals) was not correct in holding that the Respondents herein were entitled to claim refund of duty paid on cotton blankets for the period from 4-8-1977 to 28-6-1980 Before proceeding to answer the above question, it would be necessary to set out certain facts which are indisputable or over which there is no controversy.
6. The Respondents, M/s. India United Mills, are working under the Self Removal Procedure. They are governed by Chapter VII-A of the Central Excise Rules. It was only on the gate passes the endorsement 'duty paid under protest' was made and not on any other document. No letter was addressed to the Central Excise authority as to why the duty was being paid under protest. Even in the gate pass the reason for paying the duty under protest, was not endorsed. The refund application was stated to have been made on 24-7-1980. According to the Assistant Collector and according to the order of the Collector (Appeals), the refund was claimed for the period from 4-8-1977 no 28-6-1980. But the learned Advocate for the respondent had clarified that clo duty was paid between 24-9-1977 to 28-2-1979 and as such the question of taiming refund does not arise. With these facts, we shall proceed to consider he question which we have set out, earlier.
7. In his order, the Assistant Collector has observed that the refund claims pertained to 12 classification lists filed from time to time and the said lists had not been filed under protest. He has further observed that there was no letter of protest given by the respondents herein that they did not agree with the classification. It was also observed by him that merely writing on some gate passes the words 'duty paid under protest' cannot serve the purpose of protest when no reasons for the protest was mentioned.
8. The Collector (Appeals) however, was of the view that the duty was paid under protest and in pursuance of the direction contained in the letter dated 23-2-1979. Now, having regard to the finding of the Collector (Appeals) it is necessary for us to ascertain as to whether there was any direction in the letter dated 23-2-1979 and whether the payment of duty made subsequent to the said letter was made under protest. The respondents herein had filed a copy of the letter dated 23-2-1979. It is exhibit 'D' to their cross-objection. The said letter reads :- "Sub. :-Cotton fabrics falling under Tariff Item 19 of C.E. and classification of towels, blankets etc. matter reg....
It may be noted that towels, blankets, handkerchiefs etc. which are not covered by description of cotton fabrics under Tariff Item 19 are classifiable under Tariff Item 68 also as they are made-up articles from cotton fabrics. You are, therefore, advised to file classification lists/price lists in respect of blanket cloth under Tariff Item 19 and (Blankets) under Tariff Item 68. It may also be noted that the above position is since 18-6-1977 and contrary instructions issued by the Range Superintendent earlier, if any may please be treated as withdrawn." Now it is seen from the subject mentioned in the letter and the contents that the Assistant Collector only advised the respondents herein to file classification lists/price lists in respect of blanket cloth under Tariff Item 19 and blankets under Tariff Item 68. Since the respondents were working under S.R.P. they were required to file classification lists for the approval of the proper officer.
Admittedly, the respondents herein had filed classification lists.
Sub-rule (4) of Rule 173-B enjoins on the proper officer to require the assessee to file a fresh list or an amendment of the list already filed if the list earlier approved by the proper officer requires alterations. The said sub-rule makes it obligatory for the assessee to file a fresh list or an amendment of the list already filed. Sub-rule (5) provides that if there is dispute about the rate of duty, the same shall nave to be finalised and modification if any, shall have to be intimated to the assessee. It 1S not the case of the respondent that after the receipt of the letter of 23-2-1979, they raised any dispute about the rate of duty. On the other hand, they agreed for the classification suggested by the Assistant Collector. Therefore respondent's contention that subsequent to the letter dated if started making payment of duty under protest is rather difficult to believe. It may be pointed out here that under Sub-rule (3) of Rule 173-B, where the assessee disputes the rate of duty approved by the proper officer in respect of any goods, he has to pay the duty under protest at the rate approved by the officer, but he has to give an intimation to the proper officer. Admittedly, this procedure was also not followed by the respondent. Rule 173-F provides for determination of duty and payment of duty by the assessee himself. Under Rule 173-G(3) the assessee is required to submit a monthly return, popularly known as R.T. 12 return within 7 days after the close of each month to the proper officer. Rule 173-1 requires the proper officer to complete the assessment memorandum on the return submitted by the assessee. It is not the case of the respondent that while making the debit entries in their P.L.A. account they made any endorsement that the debit entry was made under protest.
It was also not the case of the respondent that while submitting the R.T. 12 returns, they made an endorsement that duty was paid under protest. It was also not the case of the respondent that there had been no finalisation of their R.T. 12 returns. Though there was no procedure laid down as to the manner in which the payment should be made under protest, having regard to the provisions referred to above, merely writing on the gate passes that the duty was paid under protest would not be sufficient to hold that the payment was made under protest for the purposes of claiming refund of duty. The gate pass is not a duty paid document, it could at best evidence the payment of duty.
9. Rule 52 of the Rules, requires a manufacturer who desires to remove the goods, to make an application in triplicate to the proper officer before removal of the goods. The proper officer is required to assess the amount of duty due on the goods and on production of the evidence that the duty has been paid into the treasury or paid to the amount of the Collector in the Reserve Bank of India or the State Bank of India, he shall allow the goods to be cleared. The protes. should be at the time of payment of duty. In the case of assessees governed by S.R.P., it should be at the time when they make debit entries in their P.L.A.The gate pass only enables the assessee to remove the goods from the factory. If really the respondents had any objection for the classification made by the proper officer, one would have expected them to address a letter objecting to the classification and the rate of duty. Admittedly, no such letter was addressed. Shri Pattekar for the respondent Collector contended that though there was no procedure laid down as to the manner of payment under protest, conventionally, assessees used to write to the authorities that the payments are made under protest and they also indicate the reasons as to why payments were made under protest.
10. On consideration of all the aspects we are unable to agree with the Collector (Appeals) that mere endorsement of the words "duty paid under protest' on the gate pass would be sufficient to hold that the payment of duty was made under protest for the purposes of claiming refund.
11. The decision relied upon by the learned Advocate for the respondent instead of supporting his contention, supports the view we have taken.
From the facts of that case, it is clear that the respondents therein protested against the classification and they were allowed to pay duty under protest. In those circumstances the Special Bench held that the limitation prescribed under 11B was inapplicable. It further held that in the absence of evidence regarding the intimation required to be conveyed to the assessee under Sub-Rule (5) of Rule 173-D, the respondents therein were not required to challenge the classification.
In the instant case, as has been pointed out earlier, no objection was taken as to the classification. The procedure required under Rule 173 B (3) was also not followed. In the circumstances, we hold that the decision relied upon by the learned Advocate for the respondent is inapplicable to the facts of the present case.
12. The only other question that remains for consideration is whether the appellants were entitled to claim refund of any amount The order of the Collector (Appeals) indicates that cotton blankets are not required to be classified against Tariff Item 68 and there was a Trade Notice dated 21st June, 1980. Apparently, because of the said trade notice the respondents herein claimed refund by their letter dated 24-7-1980. If no duty is payable in respect of cotton blankets under Tariff Item 68 and if the respondents had paid the duty under the said item, they are entitled to claim refund, as the payment can be considered as one having been made under mistake of law. But then the claim would be governed by the limitation prescribed under the rules in force at the relevant time. The refund has to be claimed within a period of 6 months from the date of payment. Therefore, there should be no legal objection to the refund of duty paid for the period of 6 months immediately prior to the date of claim viz. prior to 24-7-1980.
The Central Excise authority shall consider as to whether cotton blankets removed by the respondents were not chargeable to duty under Tariff Item 68 at the relevant time and if they are satisfied that no duty was chargeable and if they are further satisfied that the respondents had paid the duty under the said Tariff Item, they shall order refund of the duty paid for the period of 6 months immediately prior to 24-7-1980.
13. In the result, this appeal is allowed, the order passed by the Collector (Appeals) is set aside and the matter is remanded to the Assistant Collector of the purposes mentioned in paragraph 12.