1. This is an appeal transferred under Section 35P(2) of the Central Excises and Salt Act, against the Order No. 1263/79, dated 24th November, 1979 passed by the Appellate Collector of Central Excise, Bombay rejecting the appeal to him as the appellants claim for refund of duty with the Assistant Collector was time barred, under Rule 11 of the Central Excise Rules, 1944 as then in existence. Shri P.K. Thakor, learned Advocate for the appellant, has submitted that the main point involved in the present appeal is that of limitation and consequential determination as to whether the appellants' claim for refund of duty in their letter dated 30-1-1978 to the Assistant Collector of Central Excise was barred by limitation-or not. Shri Thakor has explained that it was for the first time with effect from 1-3-1975 that Item 68 covering all goods not elsewhere specified, was included in the first Schedule to the Central Excise Act. M/s. Shaparia Dock and Steel Co.
Pvt. Ltd. claimed the refund of duty in their letter dated 30-1-1978 on two tugs manufactured by them on the grounds that these were pre-budget stocks and not chargeable to duty under the newly created Item No. 68.
Soon after the insertion of Item 68 in the Central Excise Tariff by the Finance Bill of February, 1975, the appellants were asked to give the declaration of excisable goods in their factory and they had given the declaration in their letter dated 5-3-1975 inter alia showing therein the two tugs Nos. 172 and 173. However, the Inspector of Central Excise had remarked that the tugs had not been fully manufactured and the party had not produced any documents to show the same. But since the department was insisting on payment of duty on the two tugs on the grounds that they had not been fully manufactured and ready for delivery on 1-3-1975 and that therefore the manufacturers should pay duty, the appellants paid duty on tug No. 172 on 30-4-1975 and on tug No. 173 on 28-12-1975, as a result of persistant demand from the department. The 'duty amounts were Rs. 21,010/- in each case. The tug No. 172 was launched from the Docks of the appellants on 30-1-1975 and tug No. 173 was launched on 28-2-1975. The appellants then claimed the refund of duty on 30-1-1978 for both the tugs. The claim was rejected on the grounds of time bar under the then Rule 11 of the Central Excise Rules under the Assistant Collector's order dated 28-5-1978. This order was wrong as the appellants' claim for refund was under the general law of limitation and not under Rule 11 of the Central Excise Rules.
However, the appellants filed in the first appeal to the Appellate Collector of Central Excise on 28-8-1978 and the Appellate Collector rejected their appeal on 24-11-1979 on the grounds that the original claim for refund of the appellant was barred under Rule 11. Hence, against the order dated 24-11-1979 of the Appellate Collector of Central Excise the appellants filed a petition on 17-5-1980 under Section 36 to the Government of India which has been transferred the Tribunal and is to be treated as an appeal in terms of Section 35P(2).
2. Shri Thakor then discussed the provisions of Rule 11 as it stood prior to 6-8-1977 and submitted that the salient features of Rule 11 were that the refund claim should be filed within three months of the date of payment of duty and that it should be on the grounds of inadvertence, error or mis-construction as to the quantity, description or value of goods. Shri Thakor submitted that it would be his endeavour to establish that the appellants' claim in their letter dated 30-1-1978 was not on any of the aforesaid grounds and therefore it was not made in terms of Rule 11 but in terms of the general law that what was not due to the Government should be refunded by the Government. Shri Thakor then referred to new Rule 11 which was introduced with effect from 6-8-1977, and which inter alia incorporated the fact that in case of payment of duty under protest, the time limit laid down thereunder would not apply. However, this rule also was revoked and with effect from 17-11-1980 Section 11B was substituted. After setting out the above propositions, Shri Thakor has argued that Rule 11 was not attracted in the present case as the duty was illegally recovered from the appellants. He has submitted that the charging Section was Section 3 of the Act and it had to be read with Rule 2(v) which defined "duty" as duty payable under Section 3, and Rule 7 of the Central Excise Rules, 1944. Since these two tugs were pre-budget stocks, the duty paid thereon was not in terms of Section 3, but it could be treated as paid in terms of Section 72 of the Contract Act. Since this deals with liability of the person to whom money is paid under mistake, the Government was required to repay the amount in terms of this section.
Shri Thakor submitted that "mistake" envisaged in Section 72 of the Contract Act was not synonymous to "error" contemplated under old Rule 11. Hence Rule 11 was not. applicable to the duty paid by the appellants on the two tugs. This duty was collected without jurisdiction and hence Rule 11 would not apply. Shri Thakor, further, pleaded that the levy and collection of duty on the two tugs violated Article 285 of the Constitution and in this behalf he submitted that he would urge that Rule 11 was ultra wires of the rule-making power of the Government. When the Tribunal pointed out as to whether this was the proper forum where Shri Thakor could advance the aforesaid argument, Shri Thakor submitted that he would mention this fact as done already and leave the matter at that. Having propounded the law as applied to the facts in question, Shri Thakor relied on the following judgments in support of his arguments. The first was 1980 E.L.T. page 417, in the case of Associated Bearing Co. Ltd., dealing with levy of duty on post manufacturing expenses where Bombay High Court had held that the time limit under Rule 11 would not apply to the refund of duty collected on post manufacturing expenses. Secondly, Shri Thakor referred to 1980 E.L.T. page 563 to the case of M/s. CEAT Tyres where also the Bombay High Court had held that in case of wrong classification of goods, the time bar under the Central Excise Law would not apply. Thirdly, Shri Thakor cited 1980 E.L.T page 116 relating to the case of Andhra Fertilizers Corporation wherein the Honourable Court had held that fertiliser in bulk would be treated as pre-budget stock as it was 1988 ] SHAPARIA DOCK & STEEL CO. PVT. LTD. V. COLLECTOR 753 not packed in bags and therefore not in a condition to be delivered to the market, and in that case, duty was not paid due to any inadvertence, error or misconstruction and therefore time, limit under Rule 11 would not apply. Fourthly, Shri Thakor relied on 1981 E.L.T. page 351 relating to the case of Wipro Products Ltd. wherein the High Court laid down the rule that Central Excise authorities were quasi-judicial and they were bound by the decisions of the High Court, and would not deny refund under Rule 11 on the grounds of unjust enrichment. Finally, Shri Thakor referred to 1981 (8) E.L.T. page 468 regarding the case of Maharashtra Vegetables Products Ltd., and drew our attention particularly to para 16. He concluded that in view of these judgments the application for refund was wrongly rejected by the Assistant Collector as time barred under Rule 11 and requested that M/s. Shaparia Dock and Steel Co. Pvt.
Ltd.'s appeal be allowed.
3. Shri N.K. Pattekar for the department explained that after levy of duty under Item 68 by the Finance Bill of 1975, the appellants were required to give a declaration of the excisable goods which they had done and the Inspector of Central Excise had made the remarks on the delaration which were very significant. The appellant had paid the duty on the two tugs without any protest and there was no letter of protest from them. Therefore, it could only be said that the Central Excise duty was paid through an error of law. In that case Rule 11 would apply to their application for refund and for these reasons the orders of the Assistant Collector and the Appellate Collector were legal. It would also be seen that the two tugs did. not have the certificates from the Mercantile Marine Department on the critical date, viz. 1-3-1975 and therefore these two tugs could not have been used by the purchasers and hence the two tugs were not fully manufactured goods and it was. for this reason that the appellants could not produce certificates to the Central Excise Officer when he visited their premises on 5-3-1975. Shri Pattekar therefore, has submitted that the refund claim of the appellant was time-barred and therefore it has been correctly rejected by the Assistant Collector and Appellate Collector of Central Excise.
In view of these facts, he recommended that the Tribunal should also dismiss the appeal.
4. Shri Thakor for the appellants has replied that the Certificates were not available with the appellants on 5-3-1975 and hence it was not possible for them to produce the same to the Central Excise Officer.
The certificates were obtained by the appellants because the Central Excise Department was insisting for the same. In reply to the query from the Bench, the appellants Advocate has clarified that after launching the tugs, they were taken to the adjacent jetty of Bombay Port Trust and there the tugs were kept for fitment and completion. The appellants, further, explained that the jetty of Bombay Port Trust was outside their factory premises.
5. I have examined the submissions of the appellants and the respondent in the present appeal. The salient facts of the case are that M/s.
Shaparia Dock and Steel Co. Pvt. Ltd., manufactured two tugs and these were launched from their dockyard on 30-1-1975 and 28-2-1975. It is admitted that in the conditions these were launched they were not ready for delivery and hence they were not fully manufactured goods. With effect from 1-3-1975 Item No. 68 was introduced in the Central Excise Tariff and the department recovered duty on these two tugs under the aforesaid Tariff Item and the duties on these two tugs were paid on 30-4-1975 and 29-12-1975. The appellants, however, claimed refund of the duty amounts so paid in their letter dated 30-1-1978; but this claim was rejected by the Assistant Collector of Central Excise under Rule 11 on the grounds of time bar. Subjecting the above facts to scrutiny under the provisions of law as they stood at the relevant time, it is seen that the two tugs manufactured by the appellants come within the purview of Item 68, provided that conditions laid down therein are satisfied. For this purpose, I reproduce below Item 68 as inserted in the Central Excise Tariff by the Finance Bill of 1975 : "68. All other goods, not elsewhere specified, manufactured in a factory but excluding :- (a) alcohol, all sorts, including alcoholic liquors for human consumption; (c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).
Explanation. - In this item the expression "factory" has the meaning assigned to it in Section 2(m) of the Factories Act, 1948." 6. I find that as per the above definition of Item 68, the two tugs come within its purview. However, the appellants have claimed that they are not chargeable to duty as they were pre-budget stocks. Scrutinising their contention, it is seen that Central Excise duty is leviable on these tugs in terms of Section 3 as they were goods produced or manufactured in India as defined by Section 2(f) and the duty is to be collected as per the prescribed manner as provided under Section 3.
Rules 9 and 49 of the Central Excise Rules, 1944 prescribe the procedure for collection of duty and as per these rules no goods can be removed from any place where they are manufactured until the Excise duty leviable thereon has been paid. Therefore, under Section 3 read with Rules 9 and 49 manufactured goods cannot be allowed to be cleared from the premises of manufacture before payment of duty. The appellant's claim for non-levy of duty on these two tugs has to be examined in accordance with the aforesaid provisions of law. It is seen that on the dates of removal the two tugs were not in a fully manufactured condition and therefore they were not chargeable to duty in terms of Section 3 of the Act. The principle of not charging duty on fully manufactured goods which come within the purview of excise for the first time, is that these are not chargeable under Section 3 as they have been manufactured already and therefore duty thereon cannot be collected in terms of the Rules, as the Rules are subsidiary to the Act. Since the two tugs were not in a fully manufactured condition on the midnight of 28-2-1975 - 1-3-1975, these would be chargeable to Central Excise duty provided the other conditions of Item 68 are satisfied. The most important condition is that the goods should have been manufactured in a factory defined under Section 2(m) of the Factories Act. Applying this criterion to the two tugs in question it is seen that they were removed from the dockyard before the critical date viz. 1-3-1975 and they were tied at the adjacent jetty of the Bombay Port Trust. Thus, after launching, the two tugs remained in the sea and it cannot be stated that they were within the factory premises as defined under the Factories Act. Therefore, the completion of the manufacturing process of the tugs was done outside the factory premises and therefore no duty is chargeable on the tugs under Item 68. Having thus come to the conclusion it remains to be seen whether the duty collected on these two cases can be refunded or whether its refund is hit by the limitation under Rule 11. The learned Advocate for the appellants has traversed through the original Rule 11, its replacement by revised Rule 11 on 6-8-1977 and the incorporation of Section 11B with effect from 17-11-1980, by Notification No. 182/80, dated 15-11-1980. He has contended that Rule 11 does not apply to the appellants' claim for refund and in support of his contention he has relied on the various judgments as recorded above. While analysing the facts of the case and the law applicable to the facts, I have already held that the goods were not excisable at the time they were removed from the appellant's factory or at the time of their being fully manufactured and therefore no duty is leviable on them. This brings me to the question whether the duty collected on the two tugs can be refunded to the appellants. The learned Advocate has submitted that the refund is not hit by the time bar under Rule 11. In support of his contention he has relied on the specific judgments on the Courts as mentioned above. However, these judgments are not attracted to the case under consideration as they are with reference to the excisable goods and issued in terms of the powers of writs enjoyed by the Honourable Courts; while in the present case the two tugs are not excisable. The refund of duty is therefore to be governed under the general law of limitation and not under Rule 11. I am aware that during the period in question there were no corresponding restrictions on the department as now imposed under Sub-section (5) of Section 11B of the Central Excises and Salt Act, 1944. These have been brought into existence from 17-11-1980 as observed above and they do not have retrospective effect.
They abundantly make clear that prior to the coming into effect of these provisions, refund of duty collected on goods which were not excisable was not governed under the Central Excise Law. The Learned Advocate has relied on the provisions of the Limitation Act, 1963 as the appellant's claim for refund was made within the period of three years. He finds further support from the department's own instructions as contained in the Central Board of Customs and Excise's letter No.5/7/71-CX-I, dated 8-5-1973 published in 1979 Cen-Cus page 152-C. I find that these contentions are correct. In view of these circumstances, I set aside the orders of the lower authorities and direct the refund of duty amounting to Rs. 42,020/- recovered on two tugs to be paid to the appellants. The appeals is thus allowed.
7. Foregoing would show that at the material time, 'tugs' manufactured by the appellants and which were from pre-budget stocks, were not chargeable to duty under the newly created residuary Item 68. The West Regional Bench is functioning at Bombay under the jurisdiction of Bombay High Court. A number of Bombay High Court Judgments have been cited to show that for claiming refund of Excise duty illegally collected, Rule 11 of Rules would not be applicable. It is not necessary to discuss in detail all these rulings. Associated Bearing Co. Ltd. v. Union of India and Anr. - 1980 (6) E.L.T. 415 (Bom.), would show that Rule 11 would not be authorised by law. Wipro Products Ltd. and Anr. v. Union of India and Anr. - 1981 (8) E.L.T. 531 (Bom.) is the other case on point. Besides, the amendment introducing Section 11B in the Act by the Customs, Central Excises and Salt Act and C.B.R.(Amendment) Act, 1978 had not come into force. This amendment came into force only from 17-11-1980 under Sub-section (5) of the newly added section; the provisions of this section apply to 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 not collected were not excisable. At the time of the claim this amendment had not come into force. Relying on the Bombay High Court Judgments and the above legal position, I would agree with the learned, Technical Member, Shri K.S.Dilipsinhji that the refund should be allowed in this case which was filed beyond the time fixed under Rule 11 and within the time under the Limitation Act, 1963.