IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 21/03/2005
Coram
The Hon'ble Mr.Justice MARKANDEY KATJU, Chief Justice
and
The Honourable Mr.Justice F.M.IBRAHIM KALIFULLA
R.C.P.No. 8 of 2003
Commissioner of Central Excise,
Chennai I Commissionerate,
Chennai 34. ::: Applicant
-Vs-
M/s.ITC Ltd.,
Thiruvottiyur,
Chennai 19. ::: Respondent
Petition filed under Section 35 H (1) of the Central Excise
Act, 19 44 against the final order No.522/02 dated 30.4.2002 on the file of
CEGAT, South Zone Bench, Chennai.
!For Applicant ::: Mr.K.Veeragahavan
SCGSC
^For Respondent ::: Ms. L. Mythili
:O R D E R
THE HONOURABLE THE CHIEF JUSTICE
This is a reference application on behalf of the revenue under Section
35 H (1) of the Central Excise Act, 1944, by which the following questions
have been sought to be referred to us for our opinion.
1. Is the Honble Tribunal right in holding that the payment of duty
vide PLA No.580 dated 27.10.92 has not been paid voluntarily?
2. Can the letter OC.No.1124/97 dated 02.09.92 of the Superintendent
of Central Excise asking the assesses to reverse an amount of Rs.5,98,000/-
being irregular Modvat credit availed, and other correspondences in
continuation, be considered to have raised a dispute since it is not a SCN
issued under Section 11 A? Can the Action of the assessee debiting the said
amount vide PLA No.580 dated 27.10.92 be considered payment under protest
since no letter filed on that date giving any grounds for payment under
protest and subsequently also filed no representation for payment made under
protest as per sub-rule 5 of Rule 233B?
3.Can the letter of protest dated 31.10.92 filed by the assessee can
have the retrospective effect of filing protest under Rule 233B?
2. Heard the learned counsel for the parties.
3. The facts of the case have been given in the judgment of CEGAT
dated 26.04.2002, by which the CEGAT set aside the order of the Commissioner
(Appeals), who had rejected the assesses claim for refund. The CEGAT by its
order directed that the refund be given to the assessee, unless the duty has
been passed on to the consumer.
4. The assessee is engaged interalia in the manufacture of Printed
Cartons at its factory at Thiruvottiyur, Chennai. It avails modvat credit on
various inputs used in the manufacture of printed cartons. Some of the
printed cartons are exported without payment of duty under Rule 191BB of the
Central Excise Rules, 1944. The revenue was of the opinion that the assessee
was not entitled to modvat credit on inputs used in the manufacture of printed
cartons, which were removed without payment of duty under Rule 191BB. On
repeated request of the department, the assessee expunged the credit so taken
on 27.10.92, even though it contended that the credit availed by it was in
accordance with law. Within three days thereafter, i.e., on 30.10.92, the
assessee intimated the department that this payment was made under protest.
Subsequently, the department took a view that the inputs used by the assessee
for manufacture of goods cleared under Rule 191 BB for exports were entitled
to modvat credit. Accordingly, the assessee filed a refund claim for
Rs.5,98,944/- on 25.7.95, which had been expunged on 27.10.92. The refund
claim was rejected on the ground that the same was time barred under Section
11B of the Central Excise Act, 1944.
5. Section 11B of the Central Excise Act, 1944, as it stood at the
relevant time, provided for a period of limitation of 6 months for filing
refund claims. However, the proviso to Section 11B (1) states that the above
limitation shall not apply where any duty has been paid under protest.
6. The stand taken by the Department was that since the assessee
expunged the credit on 27.10.92 without any protest on that date, the refund
claim made by it was barred by limitation and the proviso to Section 11B(1)
does not apply.
7. The Tribunal reversed the judgment of the Commissioner (Appeals),
and held that the payment made by the assessee was under protest, and hence
there was no limitation to the claim for refund.
8. The Tribunal on a consideration of the facts observed that the
question whether the payment vide PLA No. 580 dated 27.10.92 was under
protest or not has to be determined after taking into accounts all the facts
and circumstances. From the records it appeared that the amount had not been
paid voluntarily, but only after several correspondences between the assessee
and the revenue in which the assessee had been urging that they are entitled
to the benefit of the notification No.33/90 (NT), and that they were also
entitled to modvat credit against their despatches. The Tribunal had noted
that in similar circumstances, in the case of Sree Baidyanath Ayurved Bhavan
Ltd. v. CCE, 1990 (48) ZELT 606), it was held that the payment in that case
was made under protest, and this verdict was also confirmed by the Supreme
Court. Similarly in Executive Engineer, Workshop Division, Madhya Pradesh
Electricity Board v. C.C.E, Raipur, 1997 (95) ELT 445, the Supreme Court
observed that the earlier letter of protest for taking out the licence could
be considered as a protest for payment of duty.
9. Mr.K.Veeraraghavan, learned senior Central Government Standing
Counsel appearing for the Department, relies on paragraphs 93 & 94 of the
judgment of the Constitution Bench of the Supreme Court in Mafatlal Industries
Limited v. Union of India, 1997 5 SCC 537 . We have carefully perused
paragraph-94 of the judgment, and in our opinion does not help the case of the
Department. The observation in the said paragraph any person paying the duty
under protest has to follow the procedure prescribed by the rule does not
mean that Rule 233-B could be construed in a narrow, pedantic or hyper
technical manner. In our opinion Rule 233-B, as interpreted by the decisions
of the Supreme Court referred to above, only mean that substantively there has
to be a protest in writing. In the present case, the CEGAT has admitted the
correspondences between the assessee and the revenue, and in our opinion that
is the substantive protest in writing.
10. On considering all the circumstances, the CEGAT held that the
payment of duty in the present case in PLA No.580 dated 27.10.92 was under
protest.
11. As regards the plea of unjust enrichment, the Tribunal observed
that if the assessee could show that the duty had not been passed on to the
consumer in this case, it would be entitled to refund.
12. We agree with the view taken by the Tribunal. Whether duty has
been paid under protest or not is basically a question of fact, and this Court
in a reference cannot ordinarily interfere with findings of fact, unless they
are based on no evidence or perverse. In our opinion, the findings of the
Tribunal cannot be said to be based on no evidence or to be perverse.
13. Mr. K.Veeraraghavan, learned senior Central Government Standing Counsel
appearing for the Department has relied on Rule 233-B of the Central Excise
Rules, which states: –
233-B. Procedure to be followed in cases where duty is paid under protest:-
(1)Where an assessee desires to pay duty under protest he shall deliver to the
proper officer a letter to this effect and give grounds for payment of the
duty under protest.
(2)On receipt of the said letter, the proper officer shall give an
acknowledgment to it.
(3)The acknowledgment so given shall, subject to the provisions of sub-rule
(4), be the proof that the assessee has paid the duty under protest from the
day on which the letter of protest was delivered to the proper officer
14. In our opinion Rule 233B cannot control the full effect of the
proviso to Section 11B(1). A rule made under the Act cannot limit a provision
in the Act itself. It is well settled that a rule made under an Act will not
be valid if it conflicts with or is in derogation to a section in the Act vide
(C.I.T v. S. Chinappa Mudaliar, AIR 1969 SC 1068) . Hence a rule should not
be construed in a manner that it conflicts with a Section of the Act.
15. The Supreme Court has been consistently taking the view that the
procedure under Rule 233B should not be treated in an over technical manner.
In India Cements Ltd. v. Collector of Central Excise, 1989 (41) E.L.T. 358
(SC), the Supreme Court observed:-
A perusal of the letter dated June 11, 1974 clearly shows that all possible
contentions which could be raised against the levy of duty on the value of
packing material were raised. If this could not be said to be a protest one
fails to understand what else it could be. It does not require much time to
analyse the contents of the letter. An ordinary reading with common sense
will reveal to anybody that the appellant was not accepting the liability
without protest. We have no hesitation to holding that the letter was in the
nature of protest. That being the position, the question of limitation does
not arise for refund of the duty.
16. In the present case, the Tribunal has found that there were
several correspondences between the assessee and the revenue, in which the
assessee had been urging that they are entitled to the benefit of notification
No.33/90 (NT), and that they are also entitled to modvat credit against their
despatches. Hence, the facts of the decision of the Supreme Court in India
Cements Ltd. v. Collector of Central Excise (supra) are similar to the facts
of the present case.
17. In Indian Pistons Limited v. Collector of Central Excise, 1990
(46) E.L.T. 3 (SC) (vide paragraph-10) the Supreme Court observed that Rule
233B of the Central Excise Rules does not prescribe any particular form of
protest.
18. In Ex.Engr., Workshop Divn., M.P.Electricity Board v. C.C.E.,
Raipur (supra) the facts were that the Inspector of Central Excise wrote a
letter to the Divisional Engineer, Central Workshop of the Electricity Board
stating that since the factory of the Electricity Board had not yet been
licensed under the Central Excise Act and the Rules to manufacture the said
goods the Divisional Engineer at the Central Workshop was requested to supply
the particulars in respect of the goods manufactured in the factory. The said
details was sought in order to enable the Excise authorities to recover the
excise duty on the goods that were being manufactured in the Central Workshop
which according to him were liable for payment of excise duty. In reply to
the said letter, the Divisional Engineer, Central Workshop, in his letter
dated 30.11.1975 took the stand that the Central Workshop at Bhilai was
undertaking the fabrication of transmission line towers and the sub-station
structures and Line Hardware materials in connection with the power supply in
the State of Madhya Pradesh and that the provisions of the Central Excise
Rules regarding obtaining licence and payment of excise duty may not be
applicable to the Central Workshop. On these facts, the Supreme Court
observed:-
A narrow interpretation of the said letter would give the impression that
the Divisional Engineer was only lodging his protest against obtaining a
licence. But, in our opinion, the said letter has to be read as a whole in
the context in which the requirement for obtaining licence was being insisted,
namely, that the goods manufactured at the Central Workshop were leviable to
excise duty under T.I.68, which liability was disputed by the Divisional
Engineer. The letter of the Divisional Engineer dated November 30, 1975 must,
therefore, be construed to mean that protest was lodged in the said letter
both against obtaining the licence as well as against liability to payment of
excise duty. In these circumstances, we are unable to agree with the Tribunal
that payment of duty was not made under protest. On that view of the matter
the impugned judgment of the Tribunal cannot be upheld and has to be set
aside.
19. Thus, it is well settled that the meaning of the words under
protest must not be taken in a narrow and pedantic manner. An overall view
of the matter has to be taken, and hence we are of the opinion that the
Tribunal has taken a correct view considering the facts and circumstances of
the case.
20. In view of the above, we find no merits in this reference
petition and it is accordingly rejected.
Index:Yes
Internet:Yes
21.03.2005
pv/
Copy to:
Commissioner of Central Excise,
Chennai I Commissionerate,
Chennai 34.