The writ petitioner, a company incorporated under the Companies Act, 1956 and holder of Central Excise Registration Certificate for the manufacture of Linear Alkyl Benzene ( LAB ) falling under Chapter Heading No.3817.00 of the Central Excise Tariff Act, 1985. Kerosene from which paraffin was extracted, the main raw material for the manufacture of LAB was drawn from the adjacent Madras Refineries Ltd (MRL) by pipe line transfer basis. The petitioner extracted paraffin from the kerosene supplied by MRL which in turn was used for the manufacture of LAB . The kerosene so received by the petitioner after being subjected to the process of hydro-generation for extraction of paraffin was returned to MRL through another pipe line. The kerosene received back by MRL was supplied to the Indian Oil Corporation under bond without payment of duty. IOC sold the kerosene so received on payment of duty at the price applicable to kerosene supplied under the Public Distribution System.
During the relevant time, i.e., prior to the budget year 1994- 95 in terms of Notification No.29/89-CE dated 01-03-1989 excise duty was chargeable on the net quantity of kerosene consumed in the extraction of paraffin. The quantity of kerosene returned by the petitioner to MRL was exempt from excise duty. The quantity of kerosene consumed in the manufacture of paraffin was calculated at 15% by subtracting from the quantity of kerosene received by the petitioner, the quantity of kerosene returned by the petitioner to MRL. Consequent upon the extension of MODVAT to petroleum products including kerosene, exemption Notification No.29/89-CE dated 01.03.1989 was rescinded by Notification No.64/94 CE dated 01.03.1994, thereby the petitioner was forced to pay excise duty for the entire quantity of kerosene received despite the fact 85% of the kerosene was returned back and made available for public distribution system on payment of excise duty by IOC.
The petitioner made several representations against the withdrawal of the exemption to the effect that because of the withdrawal of the benefit of the notification No.29 of 1989 dated 01.03.1989 excise duty became payable on the full quantity supplied by MRL to the petitioner which included the returned quantity of kerosene to MRL. Upon examining the possibility and having regard to the difficulties faced by the consumer, the Government restored the exemption by Notification No.116/1994 CE dated 24.06.1994. Thus, the position which was prevailing prior to 01.03.1994 was restored on and from 24.6.1994. But for the period from 01.03.1994 to 23.06.1994 the petitioner paid full incidence of excise duty on the kerosene received from MRL in spite of the fact that 85% of the total quantity has been returned back to MRL. Hence, the petitioner and MRL have represented to the Government that in as much as the returned kerosene was cleared on payment of the appropriate duty by the Indian Oil Corporation, the returned quantity of kerosene becomes subjected to excise duty twice, i.e., once when received from MRL and again when cleared by the Indian Oil Corporation under Public Distribution System and the petitioner consumed only 15% of the kerosene for extraction of paraffin it would be unbearable for them if the duty was to be borne by them on the entire quantity of kerosene received. In addition to the representation, the petitioner also filed a claim for refund to the Assistant Commissioner claiming refund of the amount of the excise duty paid by MRL the incidence of which has been passed on to the petitioner on the quantity of kerosene returned back to MRL. Having regard to the circumstances stated above and in particular the fact that the returned quantity of kerosene has ultimately been cleared on payment of appropriate duty by IOC, the Central Government got satisfied that the burden of excise duty on the returned quantity of kerosene has fallen on the petitioner which was much more than excise duty payable on the quantity of kerosene actually consumed by them.
Accordingly, having regard to the circumstances of the exceptional nature and in exercise of the power conferred by sub section (2) of section 5A of the Central Excise and Salt Act, 1944, the Central Government being satisfied that it was necessary in the public interest so to do, by an order, exempted the quantity of kerosene falling under the heading No.27.10 of the Schedule to the Central Excise and Tariff Act, 1985 supplied by MRL to the petitioner during the period from 01.03.1994 to 23.06.1994, intended for use in the manufacture of LAB from so much of the duty of excise leviable thereon as is in excess of duty leviable on the quantity of kerosene consumed for the manufacture of LAB . The Government also indicated in the exemption order that the quantity of kerosene consumed in the manufacture of paraffin should be calculated by subtracting from the quantity of kerosene received by the petitioner, the quantity of kerosene returned back. Further, the authorities under the Central Excise Act were directed to consider the refund application filed by the petitioner in the light of the exemption contained in the adhoc exemption order subject to the provisions of Section 11B of the Act and also subject to the condition that no credit of duty paid on the quantity of kerosene supplied by MRL to the petitioner during the period from 01.03.1994 to 23.06.1994. The said adhoc exemption order was passed on 10.11.1994.
Even prior to the passing of the order dated 10.11.1994, when the representations were pending consideration, on the hope that the Government would positively consider its case, the petitioner filed the refund application on 28.09.1994 for a sum of Rs.8,29,43,110/- for the period from 01.03.1994 to 23.06.1994 to the Assistant Commissioner of Central Excise. That application dated 28.9.1994 was taken up for consideration after the order dated 10.11.1994 was passed. The Assistant Commissioner has granted the refund barring a sum of Rs.1,92,04,127/- pertaining to the month of March, 1994 on the ground that the claim in respect of that month was barred by the period of six months contemplated under section 11-B of the Central Excise and Salt Act, 1944 on 20.01.1995. That order was carried on appeal to the Commissioner of Central Excise. The Commissioner by his order dated 18.04.1995 remitted the matter back to the Assistant Commissioner as there was no detail in the order of the Assistant Commissioner as to how he considered the claim as time barred, as to what was the relevant date from which the limitation was reckoned and as to whether the duty has been paid under protest or not.
The Assistant Commissioner by his order dated 05.09.1995 has confirmed his original order on the ground that the date of payment of duty by consignor MRL was taken as the relevant date under section 11B of the Act. On further appeal, the Commissioner by order dated 22.11.1995 confirmed the order of the Assistant Commissioner on the premise that the relevant date could only be the date of payment of duty in terms of sub-clause (f) of Explanation B to Section 11-B of the Act, which order was confirmed by the CEGAT by order dated 23.12.1997.
The petitioner not satisfied with the order of CEGAT made an application for reference of question of law to the High Court which has been dismissed on 03.06.1999. The petitioner filed writ petition No.5049 of 2000 challenging the order of the Assistant Commissioner confirmed by the appellate authority including that of the CEGAT non suiting the petitioner for refund for the month of March 1994 and writ petition No.5050 of 2000 against the rejection of the reference application by the CEGAT.
The single Judge by his order dated 20.11.2001 allowed the writ petition No.5049 of 2000 on the ground that only on 10.11.1994 the Government passed exemption order for the period from 01.03.1994 to 23.06.1994. Unless such exemption was granted the petitioner was not entitled for refund though it made a claim on 28.09.1994. So the finding of the authorities that the application made on 28.09.1994 was beyond the period contemplated under section 11B of the Act could not be sustained. By so holding the single Judge set aside the orders impugned therein and allowed the writ petition. The other writ petition in W.P.No.5050 of 2000 was dismissed as unnecessary in view of the order made in W.P.No.5049 of 2000. The department has filed this writ appeal against the order of the single Judge on 20.11.2001 made in writ petition No.5049 of 2000.
The points that arise for consideration in this case are as follows :
1. Whether the petitioner unjustly enriched because of the refund and thereby rendering itself not entitled to refund as provided under Section 11-B of the Act?
2. Whether in the facts and circumstances of the case, the payment of the excise duty made by the petitioner would amount to payment under protest thereby proviso to section 11B of the Act would get attracted to the case?
3. Whether the payment of duty in respect of the month of March 1994 is hit by limitation prescribed under section 11B of the Act?
Point No.1 : The High Court observed, "When the explanation so offered by the petitioner was accepted and not been disputed by any of the authorities below and even before the learned Single Judge it was not disputed, it is not correct on the part of the appellant to contend that the question of unjust enrichment has not been considered by the learned single Judge. Hence, the contention of the counsel for the Department that the learned single Judge has not taken into consideration the aspect of unjust enrichment as stated in the larger Bench decision of the apex Court in the case of Mafatlal Industries Ltd. v. Union of India. Hence, this contention is rejected."
Point No.2: The High Court observed, "we are of the considered view that the payments were made only under protest. Borrowing the words of the Supreme Court, if these letters could not be said to be a protest, one fails to understand what else they could be? we are of the considered view that the payment of duty made by the petitioner in respect of the disputed period was made only under protest and as such the second proviso to Section 11B would definitely get attracted and on that score, the order of the authorities including that of the Tribunal non-suiting the petitioner for refund in respect of March 1994 is not in accordance with law."
Point No.3: The High Court held, "As we have come to the conclusion that the petitioner paid the duty for the disputed period only under protest, as such the period of limitation prescribed would not apply as per the second proviso to Section 11B of the Act, this point i.e., the claim of refund for the month of March 1994 is barred by limitation or not is paled in thin air and requires no further consideration in our view. We are conscious of the fact that the learned single Judge has granted the relief to the petitioner by holding that the period of limitation has to be reckoned from the date of adhoc order. Even assuming for a moment that we are taking a contrary view on this point by holding clause (f) of Explanation B to Section 11B as it stood during the relevant time was a residuary clause encompassed within it all other contingencies which are not stated in clauses (a) to (e), the result of this case would be no different than one of dismissal, , as the claim of the petitioner cannot be denied".
(See 2008-TIOL-09-HC-MAD-CX in 'Excise' + 2008-TIOL-09-HC-MAD-CX in 'Legal Corner')
