1. The defendants in the suit O.S. 339 of 1977 on the file of the Subordinate Judge of Krishnagiri, viz., the Secretary, Ministry of Finance, Government of India, New Delhi, the Collector of Central Excise, Madras and the Superintendent of Central Excise, Dharmapuri, are the appellants in the above appeal. The respondent herein, viz., a partnership firm engaged in the manufacture of matches filed the suit, O.S. 339 of 1977 on the file of the Subordinate Judge, Krishnagiri, for the recovery of a sum of Rs. 13,839.60 being the amount alleged to have been illegally collected from it by the appellants. The case of the respondent (plaintiff) before the lower court is follows : For the period from 22-7-1967 to 31-12-1974, the plaintiff paid excise duty at the rate of Rs. 3.75 per gross of matches of 50 boxes. The Superintendent of Central Excise, Dharmapuri, issued a demand notice dated 4-6-1975 alleging that the Supreme Court of India by its judgment dated 4-11-1974, held that duty leviable was Rs. 4.30 per gross of matches of 50 boxes and hence called upon the plaintiff to pay the differential duty of Rs. 33,152.62. The Superintendent of Central Excise, Dharmapuri, threatened the plaintiff with preventing the clearance of matches unless and until the differential duty was paid. Subsequently the plaintiff paid the 1/3rd of the amount of differential duty viz. Rs. 11839.20 under protest. The plaintiff contended that the whole demand was time-barred under the provisions of the Central Excises and Salt Act, hereinafter referred to as the Act, but the same was not heeded to by the authorities. The plaintiff's case was that where there is any short-levy or non-payment of duty rule 9, rules 10 and 10-A of the Central Excise Rules, 1944, provided for the collection of such duties. Rule 10-A has been struck down as invalid by the High Court of Madras. Hence Rule 10 governs the case of non-payment of short-levy and the demand can be made only in respect of the period within three months before the date of demand. Under the law, the authorities have no power to collect any day beyond the period of three months prior to the date of demand notice. This question has been finally decided by the High Court of Madras in its judgment in W.P. 4145 of 1975, dated 30-9-1975 which directly applies to this case. Rule 11 does not apply to the plaintiff's case, because that refers to duty paid under Rules 9 when the authorities had power to collect the duty. As the demand notice issued is illegal, the defendants are bound to return the amount, collected from the firm. The plaintiff issued a notice under S. 80 C.P.C. The plaintiff claimed interest at 12 per cent from the date of payment.
2. The third defendant, viz., the Superintendent of Central Excise, Dharmapuri, filed a written statement contending that the plaintiff was allowed concessional rate of duty at the rate of Rs. 3.75 per gross of matches of 50 boxes from 22-7-1967 to 21-12-1974, as per the notification No. 162/1967 dated 21-7-1967. The said notification was subsequently amended by notification No. 205/1967 dated 4-9-1967 which introduced certain conditions for grant of concession at the rate of Rs. 3.75 per gross. As the plaintiff did not satisfy the conditions, he is bound to pay Rs. 4.30 per gross. But as a result of the decision of the High Court of Judicature at Madras striking down sub-clause (b) of clause (i)(a) of the proviso to notification No. 162/1967 as amended by notification No. 205/1967 the plaintiff was allowed concessional rate of assessment as per the declaration filed by the plaintiff every year. The department filed an appeal in the Supreme Court, against the judgment and the per the judgment dated 4-11-1974, the Supreme Court dismissed the writ petitions filed by the parties setting aside the order of the High Court. Hence the plaintiff ought to have paid Rs. 4.30 per gross, but had not paid due to the decision of the High Court. So a demand notice was issued to the plaintiff calling upon him to pay the differential duty of Rs. 33,152.62. Since many of the match manufacturers pleaded their inability to pay the huge amount of differential duty, the Government of India took a lenient view and ordered that 2/3rd of the amount of duty due and outstanding will be remitted in case 1/3rd of the mount of duty was paid by them prior to 30-9-1975. The plaintiff paid the amount voluntarily without any protest. It is false to say that the plaintiff was threatened with any prevention of clearance of matches. After the decision of the High Court of Madras and in order to avid contempt of court but nevertheless subject to the result of the appeal in the Supreme Court the department resorted to assess the plaintiff at the lower rate and not that it had given up its right of collection of differential duty, There is no question of time-limit in the matter of collection of duty. The claim is not barred by limitation. It is not correct to say that the collection in the above case is devoid of authority of law. The decision rendered in W.P. 4145 of 1975 is not applicable to the facts of this case. It is incorrect to say that Rule 11 does not apply to the facts of this case. Hence the third defendant prayed for the dismissal of the suit.
3. The written statement filed by the third defendant was adopted by the defendants 1 and 2.
4. The respondent (plaintiff) filed a reply statement asserting the plaint allegations and contending that the payments made by the plaintiff are not voluntary. The plaintiff protested against collection but the defendants refused permission for the removal of matches unless and until the excise duty was paid, Rule 11 will apply only to cases of payment through inadvertent error or misconstruction and not collected by threat or coercion. On these pleadings the following issues were framed -
1. Whether the notice of demand and collection of duty are not illegal under the provisions of the Central Excises and Salt Act
2. Whether the plaintiff is entitled to the suit amount
3. Whether the said demand and collection is time-barred under the provisions of the Central Excises and Salt Act
4. To what relief is the plaintiff entitled
On issue Nos. 1 to 3 the learned Subordinate Judge found that the short-levy was due to the High Court striking down sub-clause (b) of clause (i)(a) of the proviso to Notification No. 205 of 1967. Such being the position in view of the subsequent decision of the Supreme Court, setting aside the judgment of the High Court the Revenue has the power to demand and bring into the net of taxation the escaped levy which in this case is the difference between Rs. 4.30 and Rs. 3.75 per gross.
5. The learned Subordinate Judge did not uphold the contention of the defendants that as per Rule 11 the plaintiff cannot file a suit to recover the amount and held that the plaintiff's remedy is only by way of an application for refund before the competent authorities.
6. The learned Subordinate Judge also found that the demand and collection are time-barred and the Revenue cannot claim the difference in duty for more than three months' amount prior to the notice.
In view of the abovesaid finding the learned Subordinate Judge passed a decree in favour of the plaintiff for Rs. 11,839.20 with interest at 6 per cent per annum from 25-8-1976 till the date of realisation, with costs.
7. This first appeal is filed by the Revenue challenging the correctness of the judgment of the learned Subordinate Judge.
8. On the basis of the arguments advanced the following points arise for determination in this appeal -
1. Whether the claim for excise duty short levied beyond three months from the date of delivery is barred
2. Whether the conduct on the part of the assessee in accepting the terms of the trade notice Ex B 1, and remitting one-third of the amount claimed with a view to get rid of two-third of the claim, amounts to a voluntary payment on the part of the assessee which cannot be brought under S. 72 of the Indian Contract Act
9. Before discussing the points that arise for determination in this appeal certain facts pertaining to the case will have to be stated. The plaintiff who is the manufacturer and dealer in matches at Dharmapuri was allowed a concessional rate of duty at the rate of Rs. 3.75 per gross of matches of 50 boxes from 22-7-1967 to 31-12-1974, as per notification No. 162/1967 dated 21-7-1967. The said notification was subsequently amended by notification No. 205 of 1967 dated 4-9-1967 which introduced certain conditions for concessional amount of duty at the rate of Rs. 3.75 per gross. The plaintiff (respondent) did not satisfy the conditions as per the amended notification No. 205 of 1967. Hence the rate of duty payable by the plaintiff is Rs. 4.30 per gross. The amended notification No. 205 of 1967, dated 4-9-1967, was challenged before this Court and this court struck down the provisos introduced by the amended Notification No. 205 of 1967. In view of the judgment of this court the plaintiff was charged with a duty at Rs. 3.75 per gross. On appeal by the Revenue the Supreme Court set aide the judgment of this Court on 4-11-1974, holding that the amended notification No. 205 of 1967 is valid. In view of the decision of the Supreme Court a notice, dated 4-6-1975 marked as Ex A1 was issued by the third defendant demanding the plaintiff to pay the differential duty of Rs. 33,152.62. Since many of the match manufacturers pleaded their inability to pay the huge amount of differential duty, the Government of India took a lenient view and ordered that two-third of the amount of duty due and outstanding will be remitted in case one-third of the amount of duty was paid by them prior to 30-9-1975, as per Ex B1 dated 27-6-1975. The plaintiff took advantage of the trade notice viz., Ex B1 and paid one-third of the demand amounting to Rs. 11,839.20. When there is any short-levy or non-payment of duty, rules 9, 10 and 10-A provide for the collection of such duties. Rule 10-A which provided for collection of duty if the duty had been short-delivered by serving notice on the person concerned, had been struck down by this court. Under Rule 10 if duty had been short-levied the concerned officer is bound to serve a notice on the owner within three months from the date on which the duty or charge was paid or adjusted in the owner account current. In view of the decision of this Court the authorities have no power to collect any duty beyond the period of three months from the date of the demand notice. A Division Bench of this Court in W.P. 4145 to 4155 of 1975 has held that under the law the authorities have no power to collect any duty beyond the period of three months prior to the date of demand notice. The plaintiff has come forward for recovery of the amount so collected.
10. In a similar case that came up for decision before a Division Bench of this Court to which I was a party viz. W.P. 427 of 1981 etc., in the judgment dated 23-11-1981 the case of the Revenue that they are entitled to collect the differential duty for the entire period and in any event for the purpose of calculating three months as per Rule 10 the period will have to be calculated from the date of the judgment of the Supreme Court was not accepted. The Bench of this court having negatived both these contentions held that there was no provision in the Act or the Rules to keep a liability for excise duty alive either by a protective assessment procedure or some other procedure, since the liability could not be kept alive in respect of one person on the basis that the question of liability is pending adjudication in the case of some other manufacturer of matches. Since excise duty is payable before the goods are removed from the factory and once the goods are cleared and they go outside the factory, the only way under which the department can recover the short-levy or the escaped duty is by resorting to Rule 10. That Rule specifically provided that action could be taken only within three months from the date on which the duty or charge was paid or adjusted which according to the decision of the Supreme Court in N. B. Sanjana v. E.S. and W. Mills, : 1973ECR6(SC) could be within three months from the date on which the duty ought to have been paid or adjusted. Under the Act, the duty ought to have been paid before the goods are removed from the factory and therefore, the date of removal is unalterably fixed and the date of delivery cannot be shifted on any account. In view of this decision the claim of the Revenue for the escaped assessment in this case which is beyond three months from the date of the removal of the goods is clearly time-barred. Hence the finding of the lower court that the notice of demand as per Ex A1 is illegal will have to be upheld as per the decision of a Bench of this court in W.P. 327 of 1981 etc. judgment dated 23-11-1981.
11. The second argument of Mr. K. N. Balasubramaniam, learned counsel appearing for the Revenue is that the plaintiff had voluntarily taken advantage of the concession granted under the trade notice Ex B1, according to which if one-third of the differential duty is paid on or before the prescribed date the remaining two-third will be remitted and on that basis the plaintiff remitted one-third of the amount and the same amounts to a contract between the Revenue and the plaintiff and such a contract is binding even if the levy is subsequently found to be not in accordance with law. The only point for consideration in this appeal is whether the plaintiff taking advantage of the trade notice Ex B1 remitting one-third of the differential duty can contend the levy itself is illegal and on that basis claim refund of the amount paid as excise duty.
12. In this connection, the main contention on the part of the Revenue is the plaintiff having accepted the terms offered in the trade notice Ex B1 and having got rid of two-third of the assessment cannot give a go-bye to the contract and claim the one-third of the amount remitted subsequently. In other words the payment of one-third amount is a voluntary payment and the same cannot be claimed by the plaintiff. It was also urged that the payment was made voluntarily without protest and on this account also the plaintiff is not entitled to claim refund of the amount paid.
13. On behalf of the respondent (plaintiff) it was contended that the payment was made in pursuance of the notice of demand issued as per Ex. A1 and in view of Ex. A1 the payment can only be said to be made under coercion and there is no contract between the plaintiff and the Revenue in this regard. Reliance was placed in the case reported in Karanja Municipality v. New East India Press Co. , a Division Bench of the Nagpur High Court observed as follows :-
'It was next contended on behalf of the Municipal Committee that the payments here were voluntary and accordingly that that plaintiffs were not entitled to sue for the recovery of anything paid in these circumstances. Reliance was placed on 7 Halsbury's Laws of England, p. 279, and on a number of decisions. We need not look into these cases because it is undoubted that there is authority for the view that when a tax is paid without protest it is a voluntary payment and therefore cannot be recovered, but with all due respect to the Judges who so held we are of opinion that that enunciates the law too broadly.
Whether a payment is voluntary or not is a question of fact and a number of circumstances have to be taken into account. Here it is admitted by the plaintiffs that they received no written notice or demand, nor was there any attachment of their property, nor were any coercive processes levied against either of them or their property. All that happened was that the Bill Collector came and demanded the money and the plaintiffs paid.
But though the plaintiffs paid without any formal proceedings taken out it cannot be forgotten that the Municipal Committee had the sanction of the law behind it. It was not necessary for it to express any open threat to enforce these sanctions because every one knows, or at any rate every body must be deemed to know that that is what happens when a tax is not paid. Therefore when a demand is made for a tax, whether in writing or orally the person from whom the tax is being recovered is entitled to assume that if he does not pay unpleasant consequences will follows; his property will be attached and so forth.'
14. In the case reported in State of Andhra Pradesh v. Somasankara, : AIR1963AP140 , the Andhra Pradesh High Court while dealing with a similar case held the payment of tax by compounding and the tax subsequently having been declared invalid the suit for refund to tax already paid under the invalid law is maintainable under S. 72 of the Contract Act by which a person to whom money has been paid or anything delivered under coercion must repay or return it. In the case reported in U.O.I. v. Elphinstone Spg. and Wvg. Mills Co. Ltd., 1978 E.L.T. 680 it has been held that even if wrong trade notices are issued still the Government cannot be estopped from canvassing the true interpretation of the statute before a Court of law as trade notices have no statutory effect.
15. The question to be decided in this case is whether the conduct of the plaintiff in remitting one-third of the amount as per the trade notice Ex. B1 will amount to a voluntary payment which cannot be brought under S. 72 of the Indian Contract Act. On the facts it is seen that there was a demand notice as per Ex. A1. The issue of demand notice clearly entails that in the absence of payment coercive steps will follow. Hence any payment made in pursuance of Ex. A1 cannot be said to be a voluntary payment. Further the conduct of the assessee in taking advantage of the trade notice Ex. B1 will not nullify the demand notice, and the remittance cannot be said to be voluntary. It has also been held in the decision reported in U.O.I. v. Elphinstone Spg. and Wvg. Mills Co. Ltd., 1978 E.L.T. 680 that the trade notice has no statutory effect. Under the circumstances the payment of one-third of the differential duty by the plaintiff cannot be said to be a voluntary payment and Section 72 of the Contract Act applies to the present case. Hence the respondent is entitled to recover the amount paid by him. The contention of the learned counsel for the appellants in this regard will have to be negatived.
16. In the result the judgment and decree of the lower Court are confirmed. However, there will be no order as to costs.