1. The petitioners manufacture preserved foods and patent medicines. Their product 'Alprovit Liquid' was classified under Tariff Item IB of the 1st Schedule to the Central Excises and Salt Act, 1944. It appears that the petitioners paid duty under item IB for the period between 17th June 1978 and 5th August 1980. On 7th March 1981 they asked for drawing of samples for the purposes of re-classification of the goods and claiming total exemption under notification No. 17/70 dated 1st March 1970. Samples were accordingly drawn and on 15th February 1982 the excise authorities agreed that the product was entitled to exemption under the notification. On 18th March 1982 the petitioners applied for refund of the excise duty paid between the period 17th June 1978 and 5th August 1980. By his order dated 31st July 1982 the Assistant Collector, Central Excise, rejected the claim as being time barred under Section 11B of the Act, He relied upon Sub-section (5) thereof which states that 'notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim.' This petition was filed on 29th September 1982 impugning the order dated 31st July 1982.
2. Mr. Bhatkal, learned Counsel for the petitioners, has placed great emphasis upon the judgment of this Court in Special Civil Application No. 2118 of 1976 dated 5th March 1980, Associated Bearing Co. Ltd. v. Union of India and Anr. 1982 ECR 516. The Division Bench considered the effect of the decision in Union of India v. Mansingka Industries Pvt. Ltd. 77 Bom. L. K. 663 : 1976 Cen-Cus 7 and observed that it laid down that the jurisdiction of the authorities under the Central Excise Act was to recover duty according to law. It appeared to the Bench that once the recovery of duty was held to be illegal the provisions of Rule 11 of the Excise Rules, which was then in force, would not be attracted and as such a claim for refund had to be considered in the light of the fact that the claim is made on the footing that the payment was made under a mistake of law and within 3 years from the time when the mistake was discovered.
3. Rule 11 which was then in force was replaced by Section 11 B of the Act as and from 15th November 1980. The provisions of that rule and of this section are in pari materia except that Sub-section (5) has been newly added.
4. Mr. Sethna, learned Counsel for the respondents, drew ray attention to the fact that in the classification list filed by the petitioners on 8th June 1978 exemption had been claimed under the said notification but that claim had been rejected by the authorities and no appeal bad been preferred, nor payment under protest had been made. He also pointed out that in the subsequent classification list of 1st March 1979 and of 19th June 198G exemptions under the notifications had not been claimed. In Mr. Sethna's submission, therefore, the petitioners had not made payment of the excise duty under a mistake of law and the provisions of Section 11-B were, therefore, applicable. Thus, in his submission, the impugned order was correct.
5. If the petitioners had filed a petition impugning the order by which they were denied exemption, the order would have been struck down and the recovery of the duty would have been held to be illegal. The judgment of the Division Bench in the Associated Bearing case holds that when the recovery by the authorities of duty is illegal the provisions of Rule 11, and, consequently, of Section 11-ft, would not be attracted. Such a claim for refund has to be considered on the footing that it was made under a mistake of few within 3 years from the time when the mistake was discovered.
6. In the instant case, the recovery 6f duty from the petitioners between the period 17th June 1978 find 5th August 1980 was illegal. The petitioners claim for refund must, therefore, be considered on the footing that the payment of duty between these dates was made under a mistake of law. Accordingly, Section U-B would have no application to it. The claim having been made within 3 years of the discovery of the mistake, it ought to have been allowed. In view of the discussion on the aforesaid basis, the vires of Section 11B(5) has not been canvassed.
7. The petition is, therefore, made absolute in terms of prayer (c). Refund shall be made within a period of 8 weeks.
8. Respondents to pay the costs of the petitioners. Rule accordingly.