1. In this case, the combined Order-in-Appeal passed by the Appellate Collector disposed of the following three Orders-in-Original passed by the Assistant Collector :- (1) Order dated 18-5-76 rejecting the appellants' refund claim for Rs, 7,10,636.55 for the period 1962-1972.
(2) Order dated 18-7-76 rejecting the appellants' refund claim for Rs. 4,475.98 for the period 1970-1971.
(3) Order dated 17-1-76 directing the appellants to pay back the amount of Rs. 2,45,930.08 refunded to the appellants erroneously earlier, for the period January, 1973 to December, 1973.
When the matter came up for hearing before this Bench, we noticed that the appellants had filed a common revision application before the Central Government and thereafter one supplementary appeal before this Tribunal. The appellants explained that in respect of the Assistant Collector's order dated 17-1-76, they had already obtained the necessary relief from the Kerala High Court. Thus, there were only two appeals pending before the Tribunal. The Bench decided to treat the Appeal No. 165/79-D as relating to the Asstt. Collector's order dated 18-5-76 and Appeal No. 166/79-D as relating to the Assistant Collector's order dated 18-7-76. Consequently, Appeal file No. 167/79-D was ordered to be treated as closed.
2. As a common issue is involved in both the appeals pending before us, they arise out of the same Order-in-Appeal, relate to the same appellants and were argued before us together, they are being disposed of by this combined order.
3. The facts of the case, in brief, are that the appellants manufacture plywood. They also manufacture a wood product called 'Compreg'. Plywood was a dutiable product under Item 16-B of the Central Excise Tariff.
The department sought to charge central excise duty on Compreg also under this item. The appellants lodged a letter of protest on 8-7-63 contending that Compreg was not plywood and hence not at all excisable.
At the material time, an exemption notification issued by the Central Govt. listed Compreg as one of the products falling under Item 16-B and for which a concessional rate was fixed in the same notification. The departmental authorities persisted in their stand that Compreg was liable to duty under Item 16-B. The appellants went on paying the duty demanded and took up the matter at the higher level with the Central Board of Excise & Customs as well as with the Indian Standards Institute. Ultimately, the stand of the appellants that Compreg was not plywood and was not an excisable item was accepted by the department.
The Central Government issued an amending notification No.204/73-Central Excises, dated 8-12-73 whereby it deleted Compreg from the list of concessional-rated products under Item 16-B. A Trade Notice was also issued soon after clarifying that Compreg was not an excisable product. Thereafter, during January-March, 1974, the appellants filed the subject refund claims for refund of the duty paid by them on Compreg during the period from 1962 to December, 1973. The Asstt.
Collector rejected the refund claims on the grounds that- (1) the amounts collected erroneously in respect of Compreg were not "duty" because this commodity had never been excisable and so neither Rule 11 of the Central Excise Rules, 1944 nor any other provision of the rules or the Central Excises and Salt Act, 1944 provided for refund of such amounts, (2) refund could not be granted by resort to the Limitation Act because the said Act was not applicable to quasi-judicial proceedings in the Customs and Central Excise matters, and (3) while it was true that the Government could not enrich itself at the expense of the assessee but it was equally true that if the refund was granted to the appellants then it would amount to a payment of gratis as the appellants themselves had already recovered the amount, paid by them as duty, from the consumers.
In appeal, the Appellate Collector upheld the Asstt. Collector's view that Limitation Act was not applicable to quasi-judicial proceedings.
He held further that the amendment made by exemption notification No.204/73-CE, dated 8-12-73 was not retrospective, that the notification issued by the Govt. of India was as good as the Tariff and both could not run counter to each other and were to be read in consonance.
Against the order of the Appellate Collector, the appellants filed a revision application before the Central Govt. which, on transfer to this Tribunal, has been taken up as the subject appeal No. 165/79-D. As already stated, they filed a supplementary appeal also which has been treated as the subject Appeal No. 166/79-D.4. In addition to pursuing their departmental remedies before the Appellate Collector and the Central Government, the appellants filed a Writ O.P. No. 4947 of 1976, followed by Writ Appeal No. 331 of 1978, in the Kerala High Court against the order dated 18-5-76 of the Asstt.
Collector. Their writ appeal was finally decided by the Division Bench of the High Court on 28-5-1979 holding that an alternative remedy by way of appeal was available to the appellants and, therefore, the writ petition must abate under Article 226(3) of the Constitution.
5. During the hearing before us, it was the common ground of both parties that Compreg was not an excisable product during the material period (1962-1972) and hence no duty was payable thereon. The appellants argued at length that they had been coerced by the department to pay the said duty and in this connection they invited our attention to their protest letter dated 8-7-63. The learned representative of the department at first cast doubts on the veracity of the protest letter saying that no mention of it had been made before the lower authorities. But after the appellants produced copies of their correspondence with the department preceding their protest letter dated 8-7-63, showed that they had mentioned about the protest in their appeal to the Appellate Collector in 1976 and in their writ petition before the Kerala High Court and backed their claim with an affidavit, the learned representative of the department accepted the authenticity of the protest letter. It was also not denied by him that during the material period, though 'protest' was not formalised in the rules, it was, by convention and established practice, accepted that any payments made under protest would not be hit by the time bar for refund claims.
The claim for refund of the duty paid on Compreg having been conceded on merits as well as on the ground of limitation, the only objection of the department that was ultimately pressed before us was that Rule 11 dealt with refund of duty, that since Compreg was not excisable during the material period, the amount collected in respect thereof could not be called duty and hence could not be refunded under Rule 11 or any other provision. Reliance was placed by the department on a judgment dated 8-1-1970 of the Mysore High Court (Division Bench) in Writ Petition Nos. 1730 and 1731/ 1967- Gowri Shankar Silk Weaving Factory and Anr. v. Union of India and Ors.-in which it was held that if refund was not covered by rule 11, the only remedy available to the assessee was to file a civil suit and that the departmental authorities were competent to grant only those refunds which were covered by Rule 11 or some other provision of the Act or the rules. Reliance was also placed by the department on Rule 2 (v) which read : " 'Duty' means the duty payable under Section 3 of the Act." The learned representative of the department laid stress on the word "payable" in this definition and said that any amount paid as duty but which was not payable under the Act could not be called duty under this definition. The Bench put it to him that if this argument was stretched, any amount paid in excess of that payable under the Act could also not be treated as duty and hence not refundable under Rule 11. Such an argument, the Bench observed, would render the rule meaningless and nugatory. Thereupon, the learned representative of the department fairly conceded that a workable interpretation would have to be put on the wording of Rule 11 so that the rule was not made nugatory. He was also very fair in not denying the hardship that would be caused to the appellants if they were driven to file a civil suit at this stage and he went to the extent of giving an assurance that if the appellants gave a notice to the department under Section 80 of the Civil Procedure Code, he would be prepared to request the department to refund the amounts forthwith.
6. In a brief rejoinder, the appellants stated that once the money was collected as tax, there was no question of non-jurisdiction or non-competence to refund the same under Rule 11. If necessary, the departmental authorities could always refund the monies collected without authority of law, in their administrative capacity. The appellants cited judgments of the Supreme Court and of the High Courts, delivered in writ proceedings, to the effect that monies collected as taxes under mistake of law should not be retained by the department by resort to technicalities.
7. We have given the matter our earnest consideration. Since the merits of the appellants' refund claims as well as the limitation aspect are no longer contested by the department, the only point for us to decide is whether the departmental authorities should be asked to refund the monies to the appellants or the appellants should be asked to file civil suits. The monies were paid as far back as 1962-1972. The appellants not only fought their battles with their local departmental authorities as well as the Central Board of Excise and Customs at Delhi, they also went in writ proceedings in the Kerala High Court. On the High Court pointing out to them that the remedy of appeal under Section 35 of the Act was available to them against the Assistant Collector's order, they reverted to pursue the departmental remedies.
Even the learned representative of the department did not deny the hardship that would be caused to the appellants if they were asked to take resort to the remedy of civil suit now. We have already discussed above, and the learned representative of the department also fairly conceded, that a reasonable interpretation would have to be put on the wording of Rule 11 which did not make the rule a dead letter. We deem it necessary to recapitulate here that at the material time the exemption notification issued by the Central Govt. listed Compreg as one of the concessional-rated products falling under Item 16-B of the Tariff, the amounts were collected from the appellants as duty by the departmental authorities despite the appellants' protest that no duty was payable and the amounts were assessed, collected and accounted for as duty in statutory documents such as A.R.ls, gate passes, R.T. 12 returns, R.G. 1 and Personal Ledger Account etc. We, therefore, feel that the Asstt. Collector had the necessary jurisdiction and competence to grant refund of such amounts under Rule 11. So far as the Mysore High Court judgment is concerned, we find that the facts of the present case are quite distinguishable. Rule 11 at the relevant time dealt with refund of duty and other charges paid through inadvertence, error and misconstruction. In the case before the Mysore High Court, the refund claims were held to be not due to inadvertence, error or misconstruction and hence outside the purview of Rule 11. In the present case before us, it is apparent that the department collected the duty on Compreg from the appellants, despite the appellants' protest, because of the erroneous interpretation placed on entry 16-B of the Tariff by the department. It was clearly a case of collection due to error or misconstruction. In the circumstances, we find that the Mysore High Court judgment does not stand in the way of Asstt.
Collector dealing with the appellants' refund claims.
8. Before we conclude, there is one more aspect of the matter which is required to be dealt with. The refund claims of the appellants now before us relate to the period from 1962-1972. On the appellants' own showing, their protest letter against charge of excise duty on Compreg was sent only on 8-7-1963. The protest letter can, therefore, save from time bar under Rule 11 only such of the amounts paid as duty for Compreg which were paid from 8-7-1963 onwards. No claim or protest prior to 8-7-1963 has been brought to our notics. In the circumstances, the claim relating to the period prior to 8-7-1963 has to be held as time-barred under Rule 11 and we do so.
9. We allow the two appeals accordingly with consequential relief to the appellants with effect from 8-7-1963.