1. The present proceedings arise out of the notice of review bearing No. 380/103/80-Cus. II dated 6-2-81 issued by the Central Government in exercise of the powers vested in them under Section 131 (3) of the Customs Act, 1962 (hereinafter referred to as the Act), as it stood at the material time, calling upon the Respondents to show cause why the order-in-appeal bearing No. S/49-360/79R dated 23-8-79 passed by the Appellate Collector of Customs, Bombay, (on the appeal preferred by the Respondent against the order-in-original bearing No. S/6-C-3279/78R dated 7/9-8-1978 passed by the Assistant Collector of Customs, Bombay) should not be set aside. The Assistant Collector, by his above cited order, rejected the Respondents' claim for refund of the additional duty of customs levied and collected on a consignment of Methyl Cellulose imported by them, as barred by the limitation under Section 27 (1) of the Act. The Appellate Collector, by his order of 23-8-79, held that the levy of additional duty was ab-initio wrong since Methyl Cellulose was not among the enumerated cellulose derivatives in item No. 15A (1) (iii) of the Central Excise Tariff Schedule (CET) which alone were liable to Central Excise duty under the said item. In this view of the matter, he held that the time-limit under Section 27 (l) of the Act did not apply to the case. Since the initial claim was within the limit applicable under the Indian Limitation Act, he allowed the appeal and directed refund of the additional duty collected. It is this order that is sought to be set aside by the Central Government's show-cause notice of 6-2-81 under Section 131 (3) of the Act. This matter which was pending before the Central Government has, on the setting up of this Tribunal, come to it as transferred proceedings under Section 131 B(2) of the Act for disposal as if it were an appeal filed before it. It appears that in pursuance of the Appellate Collector's order, the Custom House refunded the amount of Rs. 35,748.25 to the Respondents.
2. The grounds on which the Appellate Collector's order was proposed to be reviewed were:- (i) This is not a case where the goods in question fall outside the purview of the Central Excises & Salt Act or the Customs Act ab initio. Therefore, the ratio of the Calcutta High Court decision in Incheck Tyres Ltd. v. Assistant Collector of Customs, would appear to apply to this case.
(ii) In terms of the said decision, if an amount was unlawfully collected, the petitioner's right to refund is governed by the Statute itself and the petitioner is bound to comply with the conditions set out therein.Madras Rubber Factory v. Union of India in spite of holding that V.P. Latex was correctly assessable 'to duty under item 39 as against the duty levied under item 87 of the Indian Customs Tariff Schedule, dismissed the appeal on the ground that the claim for refund was filed beyond the statutory period of six months.
(iv) In view of the above decisions, the time-limit under Section 27 (1) of the Act, would appear to apply to the present case. The appellate order therefore, does not appear to be correct in law.
3. The Respondents were, by the aforesaid notice, asked to show-cause why- (i). The Appellate Collector's order should not be reviewed and set aside ; (ii) the Respondents should not be asked to pay back the amount apparently refunded erroneously to them in pursuance of the said order of the Appellate Collector ; and (iii) the order of the Asstt. Collector should not be restored or modified as considered fit.
4. In their reply dated 20-4-1981 to the above said show-cause notice, the Respondents made the following salient submissions :- (i) Since the notice was not given within the time-limit specified in Sec. 28 of the Act, it is time-barred because of the provisions of Section 131(5) ibid. The refund was made in November, 1979 and the notice was issued on 6-2-81.
(ii) Methyl Cellulose fell for levy of additional duly of Customs only under item 68 CET. However' imported goods were exempt from the levy of additional duty of Customs under that item by virtue of Customs notification No. 364-Cus., dated 2-8-76.
(iii) Pence there was no authority at all under the law to levy additional duly of customs on the imported Methyl Cellulose.
(iv) The time-limit laid down in the procedural code is more based on administrative convenience and practicability. It can apply only to proper and legally valid assessments made in accordance with law.
(v) If collection of import duty is contrary to the statutory notifications, the time-bar in Section 2,7 of the Act cannot apply-Patel India \ Union of India (AIR 1973 SC 1300). Where duty is illegally recovered, the time-limit laid down under the statute cannot apply- Associated Bearing Co. Ltd, v. Union of India-1980 ELT 415 (Bom.).
(vi) If an assessee was not aware of an existing exemption notification when duty was worked out and paid, he is entitled to refund and the time-limit of six months provided in Sec. 27 of the Act will be inapplicable as the excess duty was recovered clearly in contravention of the notification and is also without jurisdiction so that the same is liable to be refunded by a direction in the nature of man-dumus, though the claim has been clearly rightly rejected by the Customs under the said section...Premraj GanpatraJ & Go. Pvt. Ltd. v. Asstt. Collector of Customs, Madras,---1977 ELT J166.
(vii) Calcutta High Court decision in the Incheck Tyre case, being of a single judge, cannot be relied upon, in preference to the decisions of Division Benches of various High Courts as well as of Supreme Court. Similarly, reliance should not be placed on the Supreme Court decision in the Madras Rubber Factory case.
Elaborating this last point reference was made to the observations of the Madras High Court in the Asstt. Collector of Customs, Madras v. Premraj Ganpatraj & Co. Pvt. Ltd.-1978 ELT (J630).
(viii) The assessing officer, in this case, had, in asssesing additional duty of Customs, exceeded his jurisdiction. It is not correct to contend that such levy was an error within jurisdiction.
Reference was made to the decision of the Delhi High Court in Modi Rubber Ltd, v. Union of India-1978 Cencus 5. The appeal was heard on 17-11-1983. Shri A.S. Sundar Rajan DR, on behalf of the Appellant, submitted that- (i) The contention that, the show-cause notice was time-barred because of the provisions of Sec. 131 (5), was not correct. Reliance was placed in this context on the Supreme Court Judgment in the case of Geep Flashlight Industries Ltd. v. Union of India and Ors.-1983 ELT (ii) On the question of limitation as applicable to claims for refund under the Central Excise and Customs laws, there are a number of decisions. The following were cited Following the ratio of these decisions, the subject claim was rightly rejected by the Assisstant Collector as barred by limitation u/s. 27 (1) of the Act.
(i) he had nothing to say regarding the applicability of Section 131(5) of the Act to the present case, (ii) The written submissions contained in the reply to the show-cause notice might be given due consideration. He drew pointed attention to .7977 ELT J 166.
(iii) Methyl Cellulose 450 was a drug as could be seen from the British Pharmacopoeia 1980. Therefore, no Central Excise duty was chargeable thereon with reference to Item 68 CET and hence no additional duty of Customs on the imported goods.
7. We have carefully considered the submissions of both sides. We have thought it proper to set out the written submissions of the Respondents at some length because the learned Consultant for the Respondents during the hearing had made a submission that the written submissions should be taken into consideration and that he was not going over them again.
8. Turning first to the applicability of Section 131(5) of the Act to the present case, the said Sub-section read as follows at the relevant time : "Where the Central Government is of opinion that any duty of Customs has not been levied or has been short-levied, no order levying or enhancing the duty shall be made under this section unless the person affected by the proposed order is given notice to show-cause against it within the time-limit specified in Section 28." Now Section 28(1) provides that "Where any duty has not been levied or has been short-levied, or erroneously refunded, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or which has been so short-levied or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice..." Sub-section (3) provides that for the purposes of Sub-section 1, the expression "relevant date" means in a case where duty has been erroneously refunded, the date of refund.
9. The Respondents' contention is that the notice under Section 131(5) is hit by the limitation provided in Section 28. To this the answer of the appellant is that this very matter came to be decided by the Supreme Court in Geep Flashlight Industries Ltd. case-1983 ELT 1596(SC).
10. Section 131(3) of the Act under which the show cause notice was issued by the Central Government reads thus : - "The Central Government may of its own motion annul or modify any order passed under Section 128 or Section 130".
(i) where it is proposed to enhance any penalty or fine in lieu of confiscation or confiscate goods of greater value, it is expressely provided that a show cause notice must be issued to the affected person within one year from the date of the order sought to be annulled or modified; (Sub-section (4)).
(ii) Where it is proposed to levy or enhance duty in cases of non-levy or short levy, it is provided that the show cause notice must be issued within the time limit specified in Section 28 (Sub-section (5)).
(iii) Thus, on the face of it, no time-limit has been provided for issue of show cause notice in cases where the Central Government acting in exercise of its sou motu powers [Section. 131(3)] proposes to pass an order directing repayment of an erroneous refund.
(i) "erroneous refund" is neither a case of non-levy or short levy : the three situations have been separately and clearly spelt out in Section 28 which also spells out a separate definition of the expression "relevant date" [for issue of show cause notice under Section 28(1)] in cases of erroneous refund of duty.
(ii) Therefore, the time-limit provided in Section 131(5) (with reference to the time-limit in Section 28) for issue of notice in cases of short levy and non-levy cannot extend to cases of erroneous refund of duty.
(iii) In the Geep Flashlight Industries case-1983 E.L.T. 1596 (S.C.) decided by the Supreme Court on 28-10-1976, the appellant's (Geep Flashlight) contention was that the power of suo motu revision contained in Section 131(3) was subject to the provisions of Section 131(5). It was further contended that if the Government wanted to revise orders for refund on the ground that there should not be any refund, it would also be a case of short-levy, and, therefore, the limitation of six months as provided in Section 28 would apply. It needs to be noted here that in the case before the Supreme Court, though the appellate order directed refund of duty, the refund had not, in fact, been made. The Hon'ble Supreme Court held that only where refund had, in fact, been made and money paid, the relevant date would be six months from the date of actual payment of refund.
This was with reference to Section 28. The Court also held that erroneous refund was not a case of short levy. In para 23 of the judgment, the Court held :- "The provisions contained in Section 131(5) of the Act speak of limitation only with regard to non-levy or short-levy. It is significant that Section 131(5) does not speak of any limitation in regard to revision by the Central Government of its own motion to annul or modify any order of erroneous refund of duty. The provisions contained in Section 131(5) with regard to non-levy or short-levy cannot be equated with erroneous refund inasmuch as the three categories of errors in the levy are dealt with separately." 13. Though the present case differs from the Geep Flashlight case in that the refund had, in fact, been made, that by itself does not help the appellant. The ratio of the decision of the Supreme Court in the Geep Flashlight case is squarely attracted and the contention that the notice under Section 131(3) was hit by limitation cannot be sustained.
To be sure, the learned Counsel for the appellant did not argue on this point when the Department's Representative cited the Supreme Court judgment.
14. The next point which arises is whether, in the present case, the provisions of Section 27(1) were rightly invoked by the Assistant Collector whose order is proposed to be restored by Government show cause notice setting aside the Appellate Collector's order. There is no dispute about the fact that the original claim was filed before the Assistant Collector beyond the time limit laid down in Section 27 of the Act. The appellant's contention, however, was that since this was a case of levy of additional duty of customs without the authority of law, Section 27 did not apply but the general law of limitation. Now, was this a case of levy without authority of law If methyl cellulose did not fall under item No. 15A(i) CET-as the Appellate Collector has held -, it would have fallen under item 68 CET, the residuary entry.
Shri Sogani did not dispute this but submitted that, in that case, the benefit of an extant exemption notification was available to the appellants and that it should have been extended to them by the customs authority. Therefore, it boils down to a case,not one of levy without, jurisdiction, but one of erroneous assessment The applicability of Section 27 to such a case has been considered on several occasions by the Tribunal. It is necessary to cite only two of such decisions : - (i) Afro-Asian Association, Bombay \. Collector of Customs, Bombay - 1983 ELT 372 (CEGAT)Miles India Ltd., Baroda. v. Appellate Collector of Customs, Bombay The Tribunal held in these and several other decisions that the time-limt laid down in Section 27(1) of the Act would apply to claims for refund of duty made under the provisions of the Act before the departmental quasi-judicial authorities.
15. In the above two decisions, several judgments of the High Courts and the Supreme Court have been discussed and we do not, therefore, consider it necessary to traverse the same ground in this Order, 16. In the result, the appeal succeeds and is allowed. The Appellate Collectors' order is set aside. The amount erroneously refunded to the appellant in pursuance of the Appellate Collectors' order shall be paid back by them to the Collector of Customs, Bombay within three months from the date of communication of this Order.