Delhi Cloth and General Mills Co. Limited Vs. Union of India and Others - Court Judgment

Excerpt:
central excise - exemption--refund--exemption to fertilizers in respect of excise duty or countervailing duty paid in respect of base fertilizers--assessed importing rock phosphate, a base fertilizer for manufacture of super-phosphate--assessed paying countervailing duty of customs on imported rock phosphate--assessed entitled to exemption--assessed's claim for exemption rejected on ground that notification did not provide for cash refund but only for set off under rule 56a--notification including tariff item in question for set off issued after import of rock phosphate by assessed--assesses could not have made retrospective application for set off--procedure for set off could not have been followed by assessed--rejection of assessed's claim not justified--revising authority rejecting assessed's claim as being a simple claim for refund of countervailing duty--erroneous--claim was for refund of excise duty--question of limitation not raised at any stage by authorities or in counter affidavit--high court would not consider question--question of unjust enrichment not considered by high court since not raised in counter affidavit--central excises and salt act (1 of 1944), schedule i, item 14hh--central excise rules, 1944, rules 56, 56a--indian tariff act (32 of 1934), section 2a--notfns. nos. 24/69-ce, dated 1-3-1969, 119/69-ce, dated 19-4-1969. - - it is clear from the refund application and the grounds of appeal as well as grounds of revision that the petitioner's stand was that during the period from june 16, 1969 to september 2, 1969, an amount of rs. 24/69 dated march 1, 1969 clearly exempts the super-phosphate manufactured by the petitioner from the rock phosphate base fertilizer, on which countervailing duty had already been paid. the impugned orders being clearly contrary to law are entitled to be quashed.judgment1. this petition under article 226 of the constitution of india seeks the quashing of the orders passed by the excise authorities whereby the petitioner's refund application was rejected in respect of the petitioner's claim for refund of excess excise duty paid in respect of super-phosphate. 2. the facts are not in dispute. the raw material used for the manufacture of super-phosphate is known as 'rock phosphate'. it is mostly imported from middle-east countries. rock phosphate is a chemical fertilizer covered by tariff item 14hh of the central excise tariff and is a base fertilizer. the duty prescribed under the said tariff item 14hh on 'fertilizers all sorts' is at the rate of the 10% ad valorem and as such, countervailing duty at the rate of 10% ad valorem was paid in respect of the base fertilizer i.e. rock phosphate under section 2a of the indian tariff act, 1934. the particulars of the bill of entries, the net quantity shown in the bill of entry and the amount of duty paid is annexed as annexure 'k' to the writ petition. the details of payment of import duty on rock phosphate, receipt of rock phosphate in d.c.m. chemical works, najafgarh road, new delhi have been prepared from the records maintained by the petitioner. it contains an endorsement of the inspector of central excise that they are in accord with the records maintained by the petitioner and the statements are certified. a total quantity of 11,000 m.t. was imported on which a duty of rs. 1,46,911.30 has been paid. in the counter-affidavit, there is a specific admission contained in para 2. 3. under notification no. 24/69 dated march 1, 1969, fertilizers falling under item no. 14-hh and manufactured from duty paid fertilizers (hereinafter referred to as the base fertilizers) are exempt from so much of the excise duty livable thereon as is equivalent to the duty of excise or as the case may be, the additional duty under section 2-a of the indian tariff act, 1934, already paid on the fertilizers. in super-phosphate, rock phosphate is the base fertilizer and if countervailing excise duty has been paid on such rock phosphate, then under this notification, super-phosphate would be exempt from so much of duty of excise livable thereon as is equivalent to the duty aforesaid paid on rock phosphate. 4. initially, the petitioner by letter dated july 9, 1969 requested the assistant collector to allow them proforma credit on the duty they had paid on rock phosphate. as a result of some subsequent discussion, the petitioner then made on january 21, 1970 a claim for refund of rs. 1,46,911.30. the stand was that in view of the notification dated march 1, 1969 which had been operative during the entire period in respect of which the refund was claimed i.e. from march 1, 1969 to september 2, 1969, countervailing duty paid should have been set off from the excise duty paid by the petitioner at the time of clearance of such super-phosphate from the factory, and as that had not been done with the result that an excess of excise duty has been paid and the petitioner, thereforee, claimed for the refund of an amount of rs. 1,40,534.84 being the excess amount of excise paid in the circumstances narrated in the refund application. 5. the claim for refund was considered by the assistant collector and rejected by the first impugned order dated may 30, 1970. one observation made is that the petitioners had asked for the refund of the amount of countervailing duty paid on rock phosphate used in the manufacture of fertilizers. it was conceded that in terms of notification no. 24/69 dated march 1, 1969 fertilizer falling under tariff no. 14hh of the central excise tariff were exempt from payment of central excise duty to the extent of duty already paid on the base fertilizer, yet it is nowhere envisaged that refund in cash or through cheque is admissible. it was held that credit of duty could have been afforded, had the party availed of the provisions of rule 56a which was also extended to this tariff item vide notification no. 110/69 dated april 19, 1969. the appeal of the petitioner was rejected by the appellate collector in the order dated september 15, 1971 with identical reasons. the revision petition of the petitioner was rejected by the central government by order dated march 28, 1973. it would be apposite to reproduce the operative part of the order :- 'government of india observe that the principal issue in this case is that the letter dated 2.9.1969 of the petitioner to the assistant collector of central excise, new delhi should be taken to be a claim for refund of duty paid by the petitioner as countervailing duty in rock phosphate. a countervailing duty is not refundable as such. in terms of notification no. 24/69 dated 1.3.1969 when a fertilizer is manufactured out of a base fertilizer on which excise or countervailing duty has been paid, the product finally manufactured is exempted from payment of that amount as is equal to the excise/countervailing duty paid on the base fertilizer. thus, what is admissible as refund would be excess payment, if established, paid on the final product manufactured and cleared on payment of the full excise duty livable thereon. no data has been presented in respect of clearances of the manufactured fertilizer in which imported rock phosphate has been used. the simple claim for refund of countervailing duty, thereforee, fails for want of legal authority.' 6. in my view, the excise authorities have misdirected themselves in law in considering the claim of the petitioner as simple claim for refund of countervailing duty. it is clear from the refund application and the grounds of appeal as well as grounds of revision that the petitioner's stand was that during the period from june 16, 1969 to september 2, 1969, an amount of rs. 1,40,538.84 was paid as excise duty due to inadvertence and under the erroneous belief that the duty was payable by the petitioner. the notification no. 24/69 dated march 1, 1969 clearly exempts the super-phosphate manufactured by the petitioner from the rock phosphate base fertilizer, on which countervailing duty had already been paid. the exemption is from the excise duty on the basis of countervailing duty paid on rock phosphate i.e. the base fertilizer. it is this excess excise duty amounting to rs. 1,40,538.84 which was not payable in law, was claimed as a refund. there are clear averments in the refund application that during the period from march 1, 1969 to june 19, 1969, 11,000 tonnes of rock phosphate was imported and out of this 11,000 tonnes, 10,813.45 tonnes of rock phosphate was received in the factory on various dates beginning from april 12, 1969 to july 24, 1969. there is further averment that this quantity of rock phosphate was used for the manufacture of 19,491.70 tonnes of super-phosphate and the super-phosphate so manufactured was cleared from the petitioner's factory on various dates from june 16, 1969 to september 2, 1969. the details of clearances were enclosed for the consideration of the excise authorities and that statement was based on rgi register which had been duly audited by the excise authorities. it is strange that the excise authorities had construed this application as a simple claim for refund of the countervailing duty. 7. the other reason given by the assistant collector and the appellate collector is that the credit of the duty could have been afforded to the petitioner, had the party availed of the provisions of rule 56a. i may recall that the petitioner had requested for proforma credit on the duty they had paid on rock phosphate. this could not have been allowed and in my view rightly, with retrospective effect. 8. a consignment of 2,000 m.t. was cleared by the petitioner under the bill of entry 46 dated march 26, 1969 on which a countervailing duty at the rate of 10% ad valorem amounting to rs. 26,455.80 was paid. the same quantities were received prior to the amendment by notification no. 110/69 dated april 19, 1969. an amendment was made in exercise of the powers conferred by sub-rule (1) of rule 56 of the central excise rules, 1944. item nos. 29 and 30 were inserted. item no. 30 relates to fertilizers. it is only thereafter that the procedure laid down in rule 56a could have been availed of by the petitioner. the requirement of rule 56(2) is that an application had to be made to the collector concerned to receive material in the factory for the manufacture of the goods. since the goods have been received prior to april 19, 1969 and the amendment was made on april 19, 1969, this procedure could not have been availed of by the petitioner. under rule 56a(3), a manufacturer had to give prior notice to the proper officer before the excise duty paid or the countervailing duty paid material are received in the factory. if rule 56a was not applicable prior to april 19, 1969, no notice could be given by the petitioner. the impugned orders of the excise authorities, thereforee, suffer from this legal infirmity when they held that the petitioner could have availed the provisions of rule 56a. admittedly, to some of the goods received by the petitioner in the factory, this procedure could not have been availed by the petitioner. 9. the revisional authority accepted in principle the basis of the claim of the petitioner when it observed that what is admissible as refund would be excess payment, if established, paid on the final product manufactured and cleared on payment of the full excise duty livable thereon. the revisional authority, however, proceeds to record that no data has been prepared in respect of clearances of the manufactured fertilizer in which imported rock phosphate has been used. i have already referred in some detail to the material placed before the excise authorities which, prima facie, establishes the amount of duty paid as countervailing duty in respect of the base fertilizer and the excess excise duty paid in respect of the product super-phosphate. 10. mr. misra, the learned counsel for the excise authorities has raised an additional point of the bar of limitation. the bar of limitation was not raised, considered or decided against the petitioner by any of the excise authority. it is also not raised in the counter affidavit. i, thereforee, do not consider it on merits. another argument is that the petitioner is not entitled in equity to the refund as the burden has been passed on to the consumers. again, this question is not raised in the counter-affidavit. reliance on 'hyderabad asbestos cement products ltd. and another v. union of india and others', 1980 e.l.t. 735 and 'madras aluminium co. ltd. v. union of india and others', 1981 e.l.t. 478 is misplaced. the impugned orders being clearly contrary to law are entitled to be quashed. 11. i, thereforee, allow this writ petition and quash the impugned orders. the excise authorities shall determine the refund application of the petitioner on merits in accordance with the observations made in this judgment and in accordance with law. if any additional data is required by the excise authorities, then the petitioner shall be called upon to furnish the same. on the facts and circumstances of the case, i make no orders as to costs.

Judgment:
Judgment

1. This petition under Article 226 of the Constitution of India seeks the quashing of the orders passed by the Excise Authorities whereby the petitioner's refund application was rejected in respect of the petitioner's claim for refund of excess excise duty paid in respect of super-phosphate.

2. The facts are not in dispute. The raw material used for the manufacture of Super-phosphate is known as 'Rock Phosphate'. It is mostly imported from Middle-East countries. Rock Phosphate is a Chemical fertilizer covered by Tariff Item 14HH of the Central Excise Tariff and is a base fertilizer. The duty prescribed under the said Tariff Item 14HH on 'Fertilizers All Sorts' is at the rate of the 10% ad valorem and as such, countervailing duty at the rate of 10% ad valorem was paid in respect of the base fertilizer i.e. Rock Phosphate under Section 2A of the Indian Tariff Act, 1934. The particulars of the bill of entries, the net quantity shown in the bill of entry and the amount of duty paid is annexed as Annexure 'K' to the writ petition. The details of payment of import duty on Rock Phosphate, receipt of Rock Phosphate in D.C.M. Chemical Works, Najafgarh Road, New Delhi have been prepared from the records maintained by the petitioner. It contains an endorsement of the Inspector of Central Excise that they are in accord with the records maintained by the petitioner and the statements are certified. A total quantity of 11,000 M.T. was imported on which a duty of Rs. 1,46,911.30 has been paid. In the counter-affidavit, there is a specific admission contained in Para 2.

3. Under notification No. 24/69 dated March 1, 1969, fertilizers falling under item No. 14-HH and manufactured from duty paid fertilizers (hereinafter referred to as the base fertilizers) are exempt from so much of the excise duty livable thereon as is equivalent to the duty of excise or as the case may be, the additional duty under Section 2-A of the Indian Tariff Act, 1934, already paid on the fertilizers. In Super-Phosphate, Rock Phosphate is the base fertilizer and if countervailing excise duty has been paid on such Rock Phosphate, then under this notification, Super-phosphate would be exempt from so much of duty of excise livable thereon as is equivalent to the duty aforesaid paid on Rock Phosphate.

4. Initially, the petitioner by letter dated July 9, 1969 requested the Assistant Collector to allow them proforma credit on the duty they had paid on Rock Phosphate. As a result of some subsequent discussion, the petitioner then made on January 21, 1970 a claim for refund of Rs. 1,46,911.30. The stand was that in view of the notification dated March 1, 1969 which had been operative during the entire period in respect of which the refund was claimed i.e. from March 1, 1969 to September 2, 1969, countervailing duty paid should have been set off from the excise duty paid by the petitioner at the time of clearance of such Super-phosphate from the factory, and as that had not been done with the result that an excess of excise duty has been paid and the petitioner, thereforee, claimed for the refund of an amount of Rs. 1,40,534.84 being the excess amount of excise paid in the circumstances narrated in the refund application.

5. The claim for refund was considered by the Assistant Collector and rejected by the first impugned order dated May 30, 1970. One observation made is that the petitioners had asked for the refund of the amount of countervailing duty paid on rock phosphate used in the manufacture of fertilizers. It was conceded that in terms of notification No. 24/69 dated March 1, 1969 fertilizer falling under Tariff No. 14HH of the Central Excise Tariff were exempt from payment of central excise duty to the extent of duty already paid on the base fertilizer, yet it is nowhere envisaged that refund in cash or through cheque is admissible. It was held that credit of duty could have been afforded, had the party availed of the provisions of Rule 56A which was also extended to this tariff item vide notification No. 110/69 dated April 19, 1969. The appeal of the petitioner was rejected by the Appellate Collector in the order dated September 15, 1971 with identical reasons. The revision petition of the petitioner was rejected by the Central Government by order dated March 28, 1973. It would be apposite to reproduce the operative part of the order :-

'Government of India observe that the principal issue in this case is that the letter dated 2.9.1969 of the petitioner to the Assistant Collector of Central Excise, New Delhi should be taken to be a claim for refund of duty paid by the petitioner as countervailing duty in rock phosphate. A countervailing duty is not refundable as such. In terms of Notification No. 24/69 dated 1.3.1969 when a fertilizer is manufactured out of a base fertilizer on which excise or countervailing duty has been paid, the product finally manufactured is exempted from payment of that amount as is equal to the excise/countervailing duty paid on the base fertilizer. Thus, what is admissible as refund would be excess payment, if established, paid on the final product manufactured and cleared on payment of the full excise duty livable thereon. No data has been presented in respect of clearances of the manufactured fertilizer in which imported rock phosphate has been used. The simple claim for refund of countervailing duty, thereforee, fails for want of legal authority.'

6. In my view, the Excise Authorities have misdirected themselves in law in considering the claim of the petitioner as simple claim for refund of countervailing duty. It is clear from the refund application and the grounds of appeal as well as grounds of revision that the petitioner's stand was that during the period from June 16, 1969 to September 2, 1969, an amount of Rs. 1,40,538.84 was paid as excise duty due to inadvertence and under the erroneous belief that the duty was payable by the petitioner. The notification No. 24/69 dated March 1, 1969 clearly exempts the Super-phosphate manufactured by the petitioner from the Rock Phosphate base fertilizer, on which countervailing duty had already been paid. The exemption is from the excise duty on the basis of countervailing duty paid on Rock Phosphate i.e. the base fertilizer. It is this excess excise duty amounting to Rs. 1,40,538.84 which was not payable in law, was claimed as a refund. There are clear averments in the refund application that during the period from March 1, 1969 to June 19, 1969, 11,000 tonnes of Rock Phosphate was imported and out of this 11,000 tonnes, 10,813.45 tonnes of Rock Phosphate was received in the factory on various dates beginning from April 12, 1969 to July 24, 1969. There is further averment that this quantity of Rock Phosphate was used for the manufacture of 19,491.70 tonnes of Super-Phosphate and the Super-Phosphate so manufactured was cleared from the petitioner's factory on various dates from June 16, 1969 to September 2, 1969. The details of clearances were enclosed for the consideration of the Excise Authorities and that statement was based on RGI register which had been duly audited by the Excise Authorities. It is strange that the Excise Authorities had construed this application as a simple claim for refund of the countervailing duty.

7. The other reason given by the Assistant Collector and the Appellate Collector is that the credit of the duty could have been afforded to the petitioner, had the party availed of the provisions of Rule 56A. I may recall that the petitioner had requested for proforma credit on the duty they had paid on Rock Phosphate. This could not have been allowed and in my view rightly, with retrospective effect.

8. A consignment of 2,000 M.T. was cleared by the petitioner under the bill of entry 46 dated March 26, 1969 on which a countervailing duty at the rate of 10% ad valorem amounting to Rs. 26,455.80 was paid. The same quantities were received prior to the amendment by notification No. 110/69 dated April 19, 1969. An amendment was made in exercise of the powers conferred by sub-rule (1) of Rule 56 of the Central Excise Rules, 1944. Item Nos. 29 and 30 were inserted. Item No. 30 relates to fertilizers. It is only thereafter that the procedure laid down in Rule 56A could have been availed of by the petitioner. The requirement of Rule 56(2) is that an application had to be made to the Collector concerned to receive material in the factory for the manufacture of the goods. Since the goods have been received prior to April 19, 1969 and the amendment was made on April 19, 1969, this procedure could not have been availed of by the petitioner. Under Rule 56A(3), a manufacturer had to give prior notice to the proper officer before the excise duty paid or the countervailing duty paid material are received in the factory. If Rule 56A was not applicable prior to April 19, 1969, no notice could be given by the petitioner. The impugned orders of the Excise Authorities, thereforee, suffer from this legal infirmity when they held that the petitioner could have availed the provisions of Rule 56A. Admittedly, to some of the goods received by the petitioner in the factory, this procedure could not have been availed by the petitioner.

9. The Revisional Authority accepted in principle the basis of the claim of the petitioner when it observed that what is admissible as refund would be excess payment, if established, paid on the final product manufactured and cleared on payment of the full excise duty livable thereon. The Revisional Authority, however, proceeds to record that no data has been prepared in respect of clearances of the manufactured fertilizer in which imported Rock Phosphate has been used. I have already referred in some detail to the material placed before the Excise Authorities which, prima facie, establishes the amount of duty paid as countervailing duty in respect of the base fertilizer and the excess excise duty paid in respect of the product Super-Phosphate.

10. Mr. Misra, the learned counsel for the Excise Authorities has raised an additional point of the bar of limitation. The bar of limitation was not raised, considered or decided against the petitioner by any of the Excise Authority. It is also not raised in the counter affidavit. I, thereforee, do not consider it on merits. Another argument is that the petitioner is not entitled in equity to the refund as the burden has been passed on to the consumers. Again, this question is not raised in the counter-affidavit. Reliance on 'Hyderabad Asbestos Cement Products Ltd. and Another v. Union of India and others', 1980 E.L.T. 735 and 'Madras Aluminium Co. Ltd. v. Union of India and others', 1981 E.L.T. 478 is misplaced. The impugned orders being clearly contrary to law are entitled to be quashed.

11. I, thereforee, allow this writ petition and quash the impugned orders. The Excise Authorities shall determine the refund application of the petitioner on merits in accordance with the observations made in this judgment and in accordance with law. If any additional data is required by the Excise Authorities, then the petitioner shall be called upon to furnish the same. On the facts and circumstances of the case, I make no orders as to costs.