1. The question for consideration in these writ petitions is whether fibre glass sleevings used in the manufacture of plastic glass tubes which in turn are used in the manufacture of miner cap lamp batteries fall within item 53 of the Customs Tariff viz. textile manufactures, not otherwise specified.
2. The petitioner company manufactures miner cap lamp batteries. To insulate positive battery plates they use plastic glass tubes. These plastic glass tubes are made out of imported fibre glass or glass wool sleevings. The fibre glass sleevings are knitted out of a very special kind of fibre glass yarn into tubular sleevings of 0.7 c.m. diameter. The sleevings are made into plastic glass tubes with the use of an outer rigid P.V.C. covering. The plastic glass tubes are then assembled into tubular positive groups over a spine arrangement. The fibre glass sleevings are specially designed and manufactured for the plastic glass tubes of miner cap lamp batteries made by the petitioner company. The plastic glass process is a patent process belonging exclusively to M/s. Swedish Tudor, Sweden. Originally, these fibre glass sleevings were classified under item 73(7)(b) of the Customs Tariff as parts of batteries. Subsequently, on an objection being raised by the audit department, the respondent classified the goods under item 53 of the Customs Tariff as 'textile manufactures not otherwise specified'.
3. The contention of Mrs. Ramani Natarajan for the petitioner is that the fibre glass sleevings cannot be construed as 'textile' in any sense of the term. According to the learned counsel the classification of the fibre glass sleevings by the respondent as textile not otherwise specified within the meaning of item 53 of the Customs Tariff was perverse. On the other hand, Mr. U. N. R. Rao, the learned Senior Central Government Standing Counsel argued that the fibre glass sleevings are received in running length and are knitted out of special kind of fibre glass yarn and consequently they fall within the meaning of textiles not otherwise specified.
4. A similar question arose for consideration before Mohan J. in English Elec. Co. v. Govt. of India, 1977 Tax. L.R. 2260. In that case imported periglass sleevings or silicon elastomer coated glass sleevings were classified by the Customs department within the category of textiles. The learned Judge after referring to the various dictionary meaning of the word 'textile' and also to certain text books on manufacturing technology of continuous glass fibres observed as follows -
'As laid down by the Division Bench in State of Tamil Nadu v. East India Rubber Works, 33 S.T.C. 399, the word 'textile' occurring under item 53 must be interpreted according to its ordinary or popular sense, the sense in which they are commonly understood in ordinary parlance and not in its primary or technical sense. The respondents are interpreting the word 'textile' only in its technical sense. On the contrary, neither the trade nor industry looks upon the periglass sleevings as a variety of textile manufacture as seen from the literature relating to silicon rubber coated glass sleevings and also Vida Flex Vinyl coated glass sleeving'.
Accordingly, the learned Judge held that item 53 of the Customs Tariff did not apply to P.V.C. coated periglass sleevings or silicon elastomer coated glass sleevings. The same principle applies to the fibre glass sleevings which are the subject of classification in these writ petitions. They do not come within the ordinary meaning of the word 'textile' or the sense in which the word 'textile' is commonly understood in ordinary parlance. If the word is understood in its technical sense, as contended by Mr. U. N. R. Rao, then the fibre glass sleevings would come under item 53 of the Customs Tariff. In this case, it has not been established by the respondent that the trade and industry looks upon the fibre glass sleevings as a variety of textile manufacture. In the circumstances, I hold that item 53 of the Customs Tariff does not apply in the case of fibre glass sleevings.
5. W.P. Nos. 3964, 3967, 3969 and 3970 have been filed to quash the demand dated 25-10-1975 made by the respondent for payment of duty on the basis that the fibre glass sleevings fall under item 53 of the Customs Tariff. In view of my finding that fibre glass sleevings do not fall under item 53 of the Customs Tariff, the demands made in these writ petitions are quashed and the writ petitions are allowed, but without costs.
6. In W.P. 3961, 3962, 3963, 3965, 3966 and 3968 of 1977, the petitioner has paid the duty on the basis that the fibre glass sleevings fell within item 53 of the Customs Tariff. In these writ petitions the prayer is for the refund of the excess customs duty paid. Mr. U. N. R. Rao raised a contention that the claim for refund was barred under Section 27 of the Customs Act. Section 27 reads thus -
'27. (1) Any person claiming refund of any duty paid by him in pursuance of an order of assessment made by an officer of customs lower in rank than an Assistant Collector of Customs may make an application for refund of such duty to the Assistant Collector or Customs -
(a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, before the expiry of one year.
(b) in any another case, before the expiry of six months from the date of payment of duty : Provided that the limitation of one year or six months, as the case may be, shall not apply where any duty has been paid under protest.'
In W.P. No. 3962 of 1977, in the affidavit itself it is stated that six cartons of fibre glass sleevings were imported through bill of entry dated 26-4-1972, and the claim for refund of excess duty paid was rejected by the order dated 4-9-1972. In the affidavit filed in support of W.P. No. 3963 of 1977 it is stated that 11 cartons of fibre glass sleevings were imported through bill of entry dated 5-5-1975 and the claim for refund of excess duty paid was rejected by the order dated 26-6-1975. Therefore, in the case of these two writ petitions, even assuming that the contention of Mr. Rao that Section 27 of the Customs Act is applicable the claim for refund has been made within time.
7. In the case of W.P. 3961, 3965, 1966 and 3968 of 1977 no claim for refund has been made prior to the filing of the writ petition. In the affidavit filed in support of the writ petitions, it is stated that in these cases the petitioner paid the customs duty under protest. However, this has been denied in the counter affidavit. No documentary evidence has been filed to show that in these cases the petitioner paid the customs duty under protest. Therefore, the question arises whether the petitioner will be entitled to refund in these cases notwithstanding the fact that the claim for refund has been made long after six months period provided for in Section 27 of the Customs Act. I have now found that the fibre glass sleevings do not fall within the category of 'textile manufacture not otherwise specified' and therefore will not be covered by item 53 of the Customs Tariff, which refers to 'textile manufacture not otherwise specified'. In the circumstances, the levy of customs duty at the rate applicable to textile manufacture not otherwise specified covered by item 53 of the Customs Tariff was unauthorised.
8. In State of M.P. v. Bhailal Bhai, : 6SCR261 , the State of Madhya Pradesh levied sales tax on the sale of imported tobacco. There was no such tax on the sale of indigenous tobacco. A petition for the issue of a writ of mandamus for refund of the sales tax paid on the imported tobacco was filed before in Madhya Pradesh High Court on the ground that the imposition of sales tax on imported tobacco was violative of Art. 301 of the Constitution of India, and that consequently the payment of sales tax already made must be treated to have been paid under mistake of law under the Indian Contract Act. The Madhya Pradesh High Court held that the tax levied was unconstitutional and therefore the writ petitioner was entitled to the consequential relief of refund of tax. The State filed an appeal before the Supreme Court and the Supreme Court confirmed the decision of the High Court. Headnote (B) to the decision reads as follows - 'Where sales tax, assessed and paid by the dealer, is declared by a competent court to be invalid in law, the payment of tax already made is one made under a mistake within Section 72 of the Contract Act and so the Government to whom the payment has been made by mistake must in law repay it. In this respect, the High Court has, in exercise of its jurisdiction under Art. 226 of the Constitution of India, power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law.' It is further observed - 'The provisions of the Limitation Act do not as such apply to the granting of relief under Art. 226. It appears to us however that the maximum period fixed by the Legislature as the time within which the relief by a suit in a civil court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Art. 226 can be measured. This court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action for the remedy but where the delay is more than this period, it will almost always be proper for the court to hold it is unreasonable'. It cannot be disputed that in such cases for obtaining relief by a suit in a civil court, the period of limitation is three years from the date on which the mistake is discovered.
9. A similar view has been taken by the Supreme Court in State of Kerala v. Aluminium Industries Ltd. 16 S.T.C. 689 S.C. In that case, the Supreme Court held thus -
'Money paid under a mistake of law comes within the word 'mistake' in Section 72 of the Contract Act, and there is no question of estoppel when the mistake of law is common to both the assessee and the taxing authority. If refund is not made, remedy through court is open, subject to the same restrictions and also to the bar of limitation under Art. 96 of the Limitation Act, 1908, namely, three years from the date when the mistake becomes known to the person who has made the payment by mistake. It is the duty of the State to investigate the facts when the mistake is brought to its notice and to make a refund if the mistake is proved and the claim is made within the period of limitation.'
10. In Assistant Collector of Customs, Madras v. Premraj and Ganpatraj Co., Madras Electrical Conducts (P) Ltd., 90 L.W. 719, a similar question arose for consideration, before Govindan Nair C.J. and Varadarajan J. An application for refund of extra customs duty collected by applying a rate which was in force prior to the submitting of the bill of entry was rejected by the authorities on the ground that it was made after the time prescribed and stipulated under Section 27 of the Customs Act. The learned Chief Justice observed as follows -
'The Court is empowered to direct the refund in a writ petition under Art. 226 of the Constitution. The duty that has been levied is also a tax within the meaning of Art. 265 of the Constitution and is certainly without the authority of law. There is, therefore, no jurisdiction either to impose the tax or collect the same. This being so, the provisions of the Constitution must prevail notwithstanding the difficulties that may be experienced by the authorities who function under the Act in directing refund.'
11. In W.P. Nos. 4629 to 4631 of 1975 - M/s. Madras Aluminium Co. Ltd. v. Union of India, the question arose whether the petitioner therein were entitled to refund of excess duty paid under a wrong classification. Rule 11 of the Central Excise Rules provided that no duties or charges which have been paid or have been adjusted in an account 'current maintained with the Collector under Rule 9, and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error of misconception, shall be refunded unless the claimant makes an application for such refund under his signature and lodges it with the proper officer within three months from the date of such payment or adjustment, as the case may be'. It was therefore contended before this court that the petitioners would not be entitled to refund in any event as the claim for refund was barred by limitation. Ramanujam J. speaking for the Bench after referring to State of M.P. v. Bhailal Bhai, : 6SCR261 ; State of Kerala v. Aluminium Industries Ltd., 16 S.T.C. 689 S.C., and Assistant Collector of Customs, Madras v. Premraj and Ganapatraj Co. Madras Electrical Conductors (P) Ltd., 1978 E.L.T. (J 630) = 90 L.W. 719, observed as follows -
'Therefore, notwithstanding rules 11 and 173-J, the petitioners will be entitled to get a refund of the excise duty if it is found that excise duty is not payable on properzi rods. We have to therefore hold on the first issue that the claims for refund put forward by the petitioners cannot be rejected merely on the ground that they are barred under rules 11 and 173-J.'
The same principles laid down in the above cases are applicable to the facts of this case. I have for the first time found that the fibre glass sleevings are not textiles falling within item 53 on the Customs Tariff. It therefore follows that the Customs authorities have no authority to levy customs duty on fibre glass sleevings as if is fell within the meaning of 'textile manufacture' under item 53 of the Customs Tariff. The payment of customs duty made by the petitioner in the first instance was under a mistake. It is only by virtue of the finding in this case that the respondent has no authority to recover customs duty on fibre glass sleevings as if it they fell within the meaning of 'textile manufacture' under item 53 of the Customs Tariff, the mistake has become known to the petitioner. Consequently, notwithstanding section 27 of the Customs Act the petitioner will be entitled to the refund.
12. In the Bench decision in W.P. 4629 to 4631 of 1975, above referred to, though it was found that the petitioners therein were entitled to refund, the relief of refund was not actually granted. This was because it was found that the petitioners after paying the excise duty as per the classification made by the authority, had passed on the same to the actual consumers and as a matter of fact the actual consumers had borne the entire liability towards excise duty. In those circumstances, it was felt by this court that if a refund was ordered, the court would be indirectly and unjustly enriching the petitioners by directing a refund of excess duties paid by them. In this context, this court had relied on the decisions of the Supreme Court in In re : The Central Provinces and Berar Act XIV of 1938, 1978 E.L.T. (J 269) = 1939 F.C.R. 18; Boddu Paidanna's case, 1942 F.C.R. 90; R. C. Jall v. Union of India, 1962Supp3S.C.R.436; Orient Paper Mills Ltd. v. State of Orissa, : 1SCR549 ; G.S.G.A. and Co. v. State of Andhra Pradesh, 30 S.T.C. 120. Mr. U. N. R. Rao has added the decision in Shiv Shankar Dal Mills v. State of Haryana, : 1SCR1170 .
13. No exception can be taken to the principles laid down in the above decisions which have now become well settled. In this particular case, the petitioner has filed two additional affidavits on 3-7-1980 and 27-6-1980. In these affidavits it is stated that from 1-3-1970 to 31-5-1974, the price of minor cap lamp battery (accumulator) was Rs. 50. The said price included customs duty at 60% ad valorem. During the pendency of this price list the customs levy fibre glass sleevings was revised to 100% plus 20%. The petitioner has categorically stated that this revised duty was not passed on to the consumers in view of the fact that there was an existing contract and that the price was subsequently revised with effect from 1-6-1974, 1-1-1975 and 1-7-1976. This has not been controverted in the counter affidavit. In WP 3962 and 3968 of 1977, the dates of import were 26-4-1972 and 9-4-1973 respectively. In these cases, the increased customs duty has not been passed on to the consumers as per the supplemental affidavits filed by the petitioner. In W.P. 3963, 3961, 3965 and 3966 of 1977 the dates of import were 5-5-1975, 25-10-1975, 12-11-1975 and 11-12-1976 respectively. As per the supplemental affidavits the price list was revised with effect from 1-6-1974, 1-1-1975, 1-7-1975 and 1-7-1976. Therefore, in these cases, the increased customs duty must have been passed on to the consumers. Therefore, on the principle laid down by Ramanujam J. in the Bench decision above referred to, the petitioner will not be entitled to a refund as any order of refund in his favour will result in his being given an unjust benefit to the same. I therefore hold that the petitioner will be entitled to refund in W.P. 3962 and 3968 of 1977 but he will not be entitled to refund in W.P. 3963, 3961, 3965 and 3966 of 1977. The excess collection if any in W.P. 3963, 3961, 3965 and 3966 of 1977 will be retained by the State for payment out to the ultimate customers as and when the claims are made and established by them.
14. In the result, the order of the first respondent in WP Nos. 3962, 3968, 3963, 3961, 3965 and 3966 of 1977 is quashed. In WP Nos. 3962 and 3968 of 1977 there will be a direction to the respondents to refund the excess customs duty collected. However, in W.P. Nos. 3963, 3961, 3965 and 3966 of 1977 there will be no order for refund of excess customs duty collected since the same has been passed on to the consumers. The writ petitions are ordered accordingly. There will be no order as to costs.
15. In view of the final orders passed on these writ petitions the bank guarantee given by the petitioner will stand discharged.