Sujata V. Manohar, J.
1. The petitioners manufacture Pigment Emulsions and Urea Formaldehyde including padding solutions The petitioners commenced the manufacture of padding solutions from 1972. Padding solutions were classified as falling under iteml5Aofthe 1st Schedule to the Central Excises and Salt Act 1944- Item 15A of the first to the Central Excises and Salt Act 1944 deals with artificial or synthetic resins and plastic materials The petitioners under a mistake of law paid excise duty to the respondents on the basis that the padding solutions manufactured by them were classifiable under item 15A.
2. By Trade Notice dated 22nd April 1977, the Collector of Central Praise Bombay declared that padding solutions were pre-condensates falling outside the purview of Item 15A. The notice stated that such solutions will more appropriately fall under the residuary item 68 of the Central Excise Tariff Since the petitioners employed only 9 workers in their plant under the provisions of a Notification No. 105/76 dated 16th March 1976 the petitioners were not liable to pay any excise duty on padding solutions, if they fell within tariff entry 68.
3. The petitioners, therefore, by their letter of 27th April 1977 filed a fresh classification list in accordance with the trade notice dated 22nd April 1977 The petitioners also claimed exemption from payment of excise duty under item 68 of the first schedule in accordance with the provisions of the said notification. Under his letter of 18th/19th May 1977 the Superintendent of Central Excise informed the petitioners that padding solutions were now treated as falling outside the purview of tariff item 15A. The Roods were however, classifiable under tariff item 68. But, in view of the number of workers employed by the petitioners, they did not fall within the purview of tariff item 68. The petitioners were> therefore, informed that they need not pay excise duty under the said Act. The petitioners were further informed that the order was subject to the confirmation of the chemical test as the samples were to be drawn and got tested to ensure that the goods complied with the conditions laid down in the trade notice.
4. On 23rd May 1977, the petitioners filed their first refund application in respect of excise duty on the said goods, wrongly collected under tariff item 15A for the period of one year from April 1976 to May 1977. This refund application was granted to the petitioners under the provisions of Rule 11 of the Central Excise Rules, 1944. It has not been contended by the respondents that the padding solutions manufactured by the petitioners did not confirm to the chemical test conditions laid down in the said trade notice.
5. On 30th May 1977 the petitioners filed another refund application for refund of excise duty paid as from 11th January 1972 till 29th March 1976. The total amount claimed was Rs. 470,329.38. The petitioners have, however, confined their claim for refund, both before the excise authorities as also in this Writ Petition to a period of 3 years from 1st of June 1974 to 30th May 1977.
6. In respect of the second refund application the petitioners were served with a show cause- notice dated 11th September 1978. Thereafter the Assistant Collector, Central Excise, Bombay has passed an order dated 12th April 1979 rejecting the petitioner's claim for refund on the ground that the claim is barred under the provisions of Rule 11 of the Central Excise Rules, 1944. Under the provisions of the said rule, read with Rule 173-J, at the relevant time, an application for refund was required to be made within a period of one year from the date of payment of duty. The petitioners' application was rejected as the same was beyond the time prescribed under the said rule. The petitioners filed the present petition in July 1979.
7. It is contended by the respondents that the petitioners have not exhausted their alternative remedy by way of appeal. This argument ought to have been advanced at the stage of admission of the petition. When the petition has already been admitted and is fixed for hearing on merits the petitioners cannot be asked to resort to an alternative remedy by way of appeal, especially when it has reached hearing after almost six years. In any case a remedy by way of an appeal in the present case cannot be considered as an adequate alternative remedy because the right of appeal i is a statutory right under Section 35 of the Central Excises and Salt Act. | The respondents have consistently taken a view that they are bound to apply the provisions of Central Excise Rules to all appeals and other proceedings and hence it would be futile to ask the petitioners to file an appeal when the result of the appeal is a foregone conclusion.
8. It was next submitted on behalf of the respondents that mistake relating to classification cannot be considered as a mistake relating to jurisdiction. This submission also does not appear to be correct because as a result of classifying goods in the wrong category duty is levied on these goods which is not in accordance with law. In the present case, in view of the fact that the goods in question were classifiable under tariff item 68 they were not liable to any countervailing duty at all, instead they have been charged to the said duty. The collection of duty, therefore, in the present case is clearly collection without the authority of law. Such mistake, therefore, goes to the root of jurisdiction and hence the present case is also governed by the principle that the amount paid under mistake of law can be recovered on the footing that it is a payment made under mistake. To such payments the provisions of Rule 11 of the Central Excise Rules do not apply.
9. It is not necessary for me to cite all the authorities. A reference may be made in this connection, however, to a decision of the Division Bench of this Court at Goa in the case of Leukoplast (India) Ltd. v. Union of India and Ors. reported in 1983 E. L. T. 2106 : 1987 (11) ECR 204. The facts of that case were somewhat similar to the facts of the present case- The mistake in that case was also a mistake relating to classification. The Division Bench of this Court held that Rule 11 would not apply and the bar of limitation under the Central Excise Rules would not be attracted in such cases where the petitioner applies for recovery of amount paid under mistake of law. There are observations to a similar effect made by Division Bench of this Court in the case of Associated Bearing Co. Limited v. Union of India and Anr. reported in 1980 E.L.T. 415 (Bom.) : 1982 ECR 516.
10. The last submission made on behalf of the respondents is to the effect that no refund should be granted to the petitioners because the petitioners have passed on the burden of the additional duty collected on their customers. On the question as to whether the respondents can retain duty levied without the authority of law and deny refund to the party concerned, there was a difference of opinion between two learned judges of this High Court in the case of I.T.C. Limited v. M.K. Chipkar and Ors. being appeal No. 108 of 1977 in Misc. Petition No. 1151 of 1975, 1978 Cen-Cus 153D. In view of the difference of opinion the matter was referred to a third Judge, Shah J. The learned Judge by his judgment dated 9th April 1985 has analysed in detail the various decisions relevant on this aspect, including the latest judgments of the Supreme Court. He has held as under
Having regard to what is discussed above, I see considerable substance in the contention urged by Mr. Desai and Mr. Taleyarkhan that the theory of unjust enrichment cannot be invoked in case of claim for refund of excise duty recovered from the manufacturer without the authority of law. That apart, as already held by me, the decisions of the Supreme Court in Nawabganj Sugar Mills, Shivshankar Dal Mills and U. P. State Electricity Board (cited supra) are distinguishable and on the ratio laid down in the decision of the Supreme Court in D. Cawasji which decision has been interpreted and followed in the various decisions of this Court, I. T. C. cannot be denied its claim for refund of excess excise duty paid by them on the alleged ground that granting relief of refund to them would result in their unjust enrichment.
I am in respectful agreement with the reasoning and the conclusion arrived at by my brother Shah J. in the above case and also the reasoning in judgment of my brother Lentin J, with whose decision Shah J. has concurred. |The petitioners, therefore, cannot be denied refund of the duty collected without the authority of law, on the ground that they might have passed 'on the burden of this excess duty on to their customers.
11. The petitioners have given up their claim for refund of duty for a period prior to 1st of June 1974. Their claim is now confined to the period from 1st June 1974 to 30th May 1977. The petitioners however, have been granted refund of duty from 24th May 1976 till 16th of May 1977. Therefore, they will be entitled to refund of duty for the period 1.6.1974 to 24.5.1976. The petitioners agitated their claim for refund in respect of this period before the respondents soon after the said Trade Notice. Their claim was denied on the ground of the claim being barred, by limitation under an order of 12th April 1979. The petitioners have therefore, immediately filed the present petition in July 1979. The petitioners have, therefore, come to court for the recovery of this claim within a reasonable time and they are therefore, entitled to the refund for the said period.
In the premises the petition is granted. The respondents are directed to calculate the amount of duty refundable to the petitioners for the period 1.6.1974 to 24.5.1976 and to refund the said amount so calculated to the petitioners forthwith thereafter. Such calculation should be made by the respondents and refund granted within a period of 6 months from today.
The rule is made absolute, accordingly. The respondents will pay to the petitioners costs of the petition.