Brief of the Case
In the case of The Commissioner Customs & Central Excise V/s M/s. Panyam Cements & Minerals Industries Ltd. it was held that invoking Section 11A is not mandatory for recovering the wrong refund granted.
Facts of the Case
M/s. Panyam Cements and Minerals Industries Limited, Kurnool hereinafter referred to as the respondent is manufacturer of cement and clinker falling under Chapter Heading 2502.29 and 2502.10. The respondent filed a price list effective from 1.10.1975 in respect of Grey Portland cement and claimed the deduction of packing charges from the assessable value on the ground that the packing material is of durable nature and is returnable as provided. The Jurisdictional Assistant Commissioner did not accept the exclusion of packing charges from the assessable value and the price list was approved including the packing charges thereon. The respondent after receipt of the approved price list started paying duty under protest. Though the respondent paid the duty under protest, thereafter, he did not take any steps to challenge the approved price list by filing appeal questioning the inclusion of package charges from the assessable value. Thereby the duty payable came to be crystallized as approved by the Assistant Commissioner.
On 7.5.1985, the respondent filed the refund claiming the said amount has been paid as excise duty on packing charges during the period 1.10.1975 to 8.1.1976 on the ground the packing material i.e. gunny bags are of durable nature and is returnable within the meaning of Section 4(4) (d) (1) of the Act and thus the value is deductible from assessable value. By issuing show-cause notice dated 17.8.1986 and after considering the objections filed by the
Respondent, adjudication order was passed on 19.08.1986 granting the refund. Thereafter, the department filed an appeal against the adjudication order and the Commissioner had set aside the same on 29.10.1987. In the interregnum period pursuant to the refund order granted by the Assistant Commissioner amounts were refunded to the respondent. The respondent questioned the order dated 29.10.1987 by filing Appeal No.1022 of 1996 before the CEGAT, South Zonal Bench at Madras. The said appeal was allowed on 7.8.1996 directing the Appellate Commissioner to consider the appeal denovo. Thereafter, once again the Appellate Commissioner vide its order dated 4.2.2002 in Appeal No.66/97(H)(D)CE allowed the appeal by setting aside the order in original dated 19.09.1986 holding that the respondent was not entitled to refund. Further a direction was issued to pay back the said amount. The respondent once again filed the appeal before the CEGAT and the same came to be numbered as Appeal No.E/550/2002. The CEGAT while confirming the order dated 4.2.2002 held that the respondent was not entitled to claim refund of the amounts paid during 1.10.1975 to 8.1.1976. The CEGAT while confirming the order dated 4.2.2002 held that the respondent was not entitled to claim refund of the amounts paid during 1.10.1975.
to 8.1.1976. However, held that the said amounts were not recoverable from the respondent on the ground that no proceedings were issued under Section11A of the Act. In the above set of facts, the department is in appeal.
Contentions of the Assessee
The Assessee contended that the Tribunal has erred in holding that the independent proceedings under Section 11A of the Act are required to be initiated for recovering the sum of money which has been refunded to the respondent in the process of adjudicating claim under Section 11B of the Act inspite of the fact that on merits the Tribunal had found that the respondent was not entitled to such refund. The assessee further submitted that in the set of facts, the department is not seeking to recover erroneously refunded duty amount but was seeking to recover the duty amount refunded on account of the adjudication order passed on 19.9.1986 which order came to be set aside in the appeal proceedings. In other words, the recovery was sought to be made by way of restitution and putting back the parties in the same position before passing the adjudication order. The very refund claim was not maintainable and the same could not have been entertained by the Assistant Commissioner after a long lapse of time and thus the alleged exercise of power by the Assistant Commissioner under Section11B of the Act was itself erroneous and the said aspect stands confirmed by the orders of the appellate authorities which orders have become final. Thus holding the respondent was never entitled for refund of the alleged excise duty amount paid.
Inasmuch as the very adjudication order holding that the respondent was not entitled to refund of the amount came to be set aside and the amount is recoverable from the respondent and the provisions of Section 11A have no application in such situations. The appellant submitted that the circular dated 22.9.1998 of the C.B.E.C relied by the Tribunal is erroneous and the said circular has no application to the facts of the case. The appellant further submitted that submits that the circular dated 22.9.1998 of the C.B.E.C relied by the Tribunal is erroneous and the said circular has no application to the facts of the case. Apart from the fact the said circular was not binding on the Tribunal being a quasi judicial forum.
Contentions of the Revenue
The Revenue relied on the various judgments which are as follows:-
a) CCE vs. Ratan Melting and Wire Industries
b) CCE vs. Minwool Rock Fiber Ltd
c) Madras Rubber Factory Ltd vs. Assistant Collector of Central Excise, Madras.
d) Collector of Central Excise, Kanpur vs. Flock (India) Pvt. Ltd
e) Assistant Collector of Customs vs. Anam Electrical Manufacturing Co.,
f) Asian Paints Ltd vs. CCE, Bombay
g) CCE, Shillong Vs. Wood Craft Products
h) Kalyani Packing Industry vs. Union of India
The Revenue contended that the order of the Tribunal is unassailable and the scope of the appeal is limited to the questions of law which have been raised by the department, particularly in the facts of the present case. The Tribunal had rightly relied on the circular of the C.B.E.C apart from the judgment of the Supreme Court in Kalyani Packaging Industry case (8 supra). The Revenue further contended that it is now well settled through various judgments of the Tribunals and the same have been approved by the Supreme Court. It is impermissible for the department to resort to the provisions of Section 35E of the Act for recovering erroneously refunded duty amount and thus holding independent Section11A proceedings are required to be initiated. The revenue further submitted that the only way to recover the erroneously refunded duty amount is under the provisions of Section11A of the Act and there are no other provisions in the Act.
Held by Hon’ble High Court
The Hon’ble High Court stated that in the facts of the present case, it is an undisputed and admitted fact that though the respondent paid the duty under protest, he did not take any further steps as prescribed under Rule 233B of Rules for determination of the correct duty payable and thereafter seek refund of the amount excess paid, if any. Rule 233 B (8) coupled with the note makes it clear and categorical breach in following the provisions and procedure prescribed under the Rule 233B of the Rules would attach the finality to the duty as payable.
The Hon’ble Court referred to Section 11B of the Act as was in force at the relevant point of time
Claim for refund of duty.
(1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date in such form as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person: Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 , such application shall be deemed to have been made under this sub- section as amended by the said Act and the same shall be dealt with in accordance with the provisions of subsection (2) as substituted by that Act]: Provided further that] the limitation of six months shall not apply where any duty has been paid under protest.
(2) if, on receipt of any such application, the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:
Provided that the amount of duty of excise as determined by the Assistant Collector of Central Excise under the foregoing provisions of this sub- section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is, relatable to—
(a) rebate of duty of excise on excisable goods exported out of India or, on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant’ s account current maintained with the Collector of Central Excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify: Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person.
(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub- section (2).
(4) Every notification under clause (f) of the first proviso to subsection (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its reassembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.
(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub- section (2), including any such notification approved or modified under sub- section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.”]……..
Rules 233B of the Rules came to be inserted with effect from 11.5.1981. Section 11B and Rule 223B are two different provisions which deal with the refund of excise duty. While Section 11B sets out a limitation of six months for making of an application for refund of any duty of excise paid, Section 11B does not lay any limitation for such application to be made in cases where the excise duty is paid under protest. (The starting point of six months from the relevant date came to be inserted by the Finance Act No.2 of 1980). Such protest application is required to be considered in terms of Rule 9B and Rule 173CC.
Further the Rules also prescribe a clear limitation beyond which the refund of the excess duty paid is impressible. Rules 233B of the Rules came to be inserted with effect from 11.5.1981. Section 11B and Rule 223B are two different provisions which deal with the refund of excise duty. While Section 11B sets out a limitation of six months for making of an application for refund of any duty of excise paid, Section 11B does not lay any limitation for such application to be made in cases where the excise duty is paid under protest. (The starting point of six months from the relevant date came to be inserted by the Finance Act No.2 of 1980). Such protest application is required to be considered in terms of Rule 9B and Rule 173CC.
The obvious reason for not placing any limitation made applicable for the duty paid under protest is that the same is required to be adjusted on determination of the correct duty payable on the determination of the protest petition. However, in the present case, t is observed that the aspect of limitation is being dealt with incidentally though the same does not arise in the facts of the present case because the duty payable as per the approved price list became final by operation of Rule 233B(8) of the Rules.
As noted above, in view of operation of Rule 233B the duty as approved had become final. In the first place the refund application is misconceived and was not maintainable as the respondent failed to avail the remedies available under the Act. In this context reference may be made to the judgment of the Supreme Court in Mafatlal Industries Ltd., and Others vs. Union of India and Others (paras 79 and 104). Further it is also noticed that the Supreme Court in Union of India (UOI) and ors. Vs. Uttam Steel Ltd., had categorically held that the claim under 11B of the Act could be made only in cases where the claim is allowed that is the claims made within limitation. In that view of the matter the very application filed by the respondent seeking refund in the year 1985 was not maintainable and ought to have been dismissed by the authority – Assistant Commissioner without any further discussion.
The Hon’ble Court further stated that in the refund order, the Assistant Commissioner went on to decide the issue the validity or otherwise of the duty demanded as if the same was in issue, which could have been done by him only in the process of considering the protest petition led under Rule 233B read with Rules 173B and 173CC. In other words, the consideration of refund application was erroneous as the same was not maintainable. The Appellate Commissioner rightly set aside the same which also came to be confirmed by the Tribunal. In that view of the matter, the refund of money which has been made to the respondent was in the process of adjudicating his claim under Section 11B of the Act.
The Hon’ble further states that Sections 11A and 11B of the Act are two independent provisions and parameters which are required to be considered in the process of application under Sections 11A and 11B of the Act being totally different and independent there is no interconnection between the same. The orders passed under both the Sections 11A and 11B of the Act are amenable for appeal and further appeal to the higher forums. There is no warrant for one to conclude for implementing the orders passed under Section 11A of the Act recourse is to be taken to the provisions of Section 11A of the Act. The authorities are not bound by the circular and it is also open for the authorities not to implement the same. In view of the judgment of the Supreme Court in Minwool Rock Fiber Ltd case (2 supra), the departmental circulars are not binding on the Tribunal and at any rate, the Tribunal did not say that they are bound by the circulars. However, reliance has been placed by the Tribunal on the decision of the Tribunal in the case of Richardson & Cruddas Ltd., Vs CCE, Bombay.
A careful analysis of the Sections 11A and 11B of the Act would leave no manner of doubt that there is an adjudication process involved in the processing of the applications made under Sections 11A and 11B of the Act and further the orders passed under Sections 11A and 11B of the Act are appealable. The determination of an application made under Section 11B of the Act would result in the entitlement of an applicant for refund of any excise duty paid. If a very determination does not result in declaration of entitlement of refund any money paid in obedience to an order by an authority in the process of adjudication of such claims cannot be termed as granting of erroneous refund. Such payment would fall in the category of implementation of an order, subject to finality of such order. In other words, such refund would be outside the scope of the erroneous refunds contemplated under Section 11A of the Act. In a way Section 11A and 11B of the Act operate in two different streams.
The Hon’ble Court further stated that similar case was considered by the Madras High Court in Sivananda Pipe Fittings Ltd., Vs Superintendent of Central Excise, and Hosur. In the said case the petitioner therein was granted refund by processing the application of petitioner therein under Section 11 B (1) of the Act. In appeal the appellate authority set aside the communication granting refund. A specific contention was raised that the appellate authority under Section 35A of the Act can merely decide an issue and refer a case to the adjudicating authority and thereafter the procedure contemplated under Section 11A of the Act has to be followed. The ground of limitation was also raised. The learned single Judge after adverting to the respective contentions of the parties had held as follows:
So far as the facts and circumstances of the case are concerned, there is no dispute that the impugned order came to be passed within the six months period visualised under Section 11-A and that notice of the application filed under Section 35-E (4) was also served upon the petitioner calling upon him also to file his cross objections, if any, and he was fully heard and then orders have been passed and communicated to the petitioner, also. There is no need to follow the procedure prescribed under Section 11-A once over again. So far as the facts and circumstances of the present case are concerned, it may also be taken that the provisions of Section 11-A have also been substantially and effectively complied with when the procedure under Section 35-E has been followed and notices have been issued and no legitimate or real grievance whatsoever could be made by the petitioners. There is also no substance or merit in the plea that the authority exercising power under Section 35-E(4) can only set aside the order of the adjudicating authority and cannot direct refund to the State or order recovery of the amount erroneously refunded. When the very order, as in this case, that is the subject matter in issue in the application filed under Section 35-E (4) is the earlier order of refund passed by the adjudicating authority, and the legality and propriety of passing such an order, while the Collector of Appeals sets aside such an order, the Collector of Appeals shall be entitled as of necessity to direct the return or repayment or recovery of the money erroneously refunded. Such powers are conserved to the Appellate Collector as a necessary and incidental power essential for the effective discharge of the jurisdiction under Section 35-E(4) of the Act. Otherwise, it would be a futile exercise of powers and such a construction cannot be countenanced at all by Courts and render an effective power conferred really purposeless or useless. The impugned order, therefore, does not call for any interference in these proceedings.
This judgment of the learned single judge was affirmed by the Division Bench in Sivanandha Pipe Fittings Ltd., case (16 supra). We may notice that the judgment of the Tribunal in Re Rolling Mills Vs. Collector of Central Excise , was elaborately dealt with and distinguished. Unfortunately, as pointed out supra the Supreme Court dismissed the appeal of the department against the order of the Tribunal in Rerolling Mills case (17 supra) on the concession made by the Department and in that process the judgment of the learned single Judge of the Madras High Court in Madras Rubber Factory Ltd., case (3 supra) and the Judgment in Sivananda Pipe Fittings Ltd., case (16 supra) both single Judge and Division Bench was not brought to the notice of the Supreme Court.
Section 11A of the Act as amended by the Finance Act with retrospective effect may be noticed. By the time the appellate authority came to consider the appeal the amended provision came into existence. A careful reading of the amended provision sets out the scope of Section 11A of the Act. The short levy or short payment or erroneous refund, as the case may be, should be on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the Rules made thereunder. In the facts of the case the refund order was granted ignoring the fact that the duty payable as per the approved list became final on account of not pursuing the protest petition. In other words the grant of refund was not the result of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods. The Tribunal failed to notice the statutory provision in making applicable to the present case. The Supreme Court while interpreting Section 28 of the Act, which was in pari materia to the unamended Section 11 of the Act, interpreted the word erroneously refunded as meaning The expression erroneously refunded means refunded by means of an order which is erroneously made in Geep Flashlight Industries Ltd., Vs. Union of India and Others .
In view of the above, the appeal is allowed.