Andhra Pradesh H.C : In the facts and circumstances of the case, whether r. 11 of the Central Excises Rules, 1944, as it existed prior to the introduction of s. 11B in the Central Excises and Salt Act, 1944, would apply, or the provision of s. 11B of the Central Excises and Salt Act would apply or neither would apply ?

Counsel Appeared

Y. G. Rama Murthy, for the Applicant : K. Jagannadha Rao, for the Respondent

RAMANUJULU NAIDU, J.:

This reference is made by the Customs, Excise and Gold Control Tribunal, South Regional Bench, Madras, under s. 35G of the Central Excises and Salt Act, 1944 (hereinafter referred to as “the Salt Act”). The reference is made at the instant of “U-Foam (P) Ltd., Hyderabad” (hereinafter referred to as “the assessee”) and the respondent is the Collector of Central Excise, Hyderabad. The question referred for the consideration of this Court is :

“In the facts and circumstances of the case, whether r. 11 of the Central Excises Rules, 1944, as it existed prior to the introduction of s. 11B in the Central Excises and Salt Act, 1944, would apply, or the provision of s. 11B of the Central Excises and Salt Act would apply or neither would apply ?”

We may state the relevant facts. The assessee imports raw materials, processes the same and manufacturers polyurethane foam which is classified under tariff item No. 15A(3) of the central excise tariff as it stood up to 22nd Aug., 1966. The assessee further processes the foam so obtained and manufacturers articles of polyurethane foam and such articles are liable to central excise duty under tariff item 15A(4).

The Central Government issued a Notification No. 69 of 1971, dt. 29th May, 1971. The notification is extracted below : “GSR : In exercise of the powers conferred by sub-r. (1) of r. 8 of the Central Excise Rules, 1944, the Central Government hereby exempts articles made of polyurethane foam, falling under sub-item (4) of item No. 15A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), other than those specified in the schedule hereto annexed, from the whole of the duty of excise leviable thereon : Provided that : (a) such articles are produced out of polyurethane foam falling under sub-item (3) of the said item on which the duty of excise or the additional duty under s. 2A of the Indian Tariff Act, 1934 (32 of 1934), as the case may be, had already been paid; or (b) such articles are produced out of scrap of polyurethane foam. The Schedule Sheets and sheeting Mattresses and the like Quilts and the like Pillows Cushions Mats (in any shape or size) The effect of the abovesaid notification is that where articles are produced out of scrap of polyurethane foam, such articles, other than those articles mentioned in the schedule, would be exempt from the levy of central excise duty. It is not in dispute that the assessee manufacturers articles out of scrap of polyurethane foam and these articles include dutiable articles in the schedule to the notification and also articles outside the schedule entitled to exemption. The assessee claimed that it was not liable to pay duty in respect of articles manufactured out of scrap of polyurethane foam, not being any one of the six scheduled items specified in Notification No. 69 of 1971. While so, the exemption under Notification No. 69 of 1971 was further enlarged by Notification No. 108 of 1973, dt. 28th April, 1973. The notification is extracted below for ready reference : “The Central Government hereby exempts all articles of polyurethane foam falling under sub-item (4) of item No. 15A of the First Schedule to the Central Exercises and Salt Act, 1944 (1 of 1944), manufactured from waste or scrap of polyurethane foam, or from waste or scrap of articles of polyurethane foam, from the whole of the duty of excise leviable thereon.”

From the above notification, it would be seen that it enlarged the scope of exemption of all articles manufactured from waste or scrap of polyurethane foam. While pursuing the claim for exemption, the assessee continued to pay the central excise duty on all articles manufactured out of such scrap falling under the old tariff item No. 15A(4). It is urged that the assessee addressed numerous representations to the Department seeking benefit under the above notifications reiterating the claim that pursuant to the above notifications, no duty is payable and the Departmental authorities were collecting the duty illegally in respect of articles manufactured out of scrap of polyurethane foam. It does appear that the assessee was in correspondence with the local officials of the Department and also the Central Board of Excise and Customs. Although some kind of clarifications were issued, they were either unhelpful or were not implemented the local officials. Disputes also arose as to whether the articles manufactured doubt of waste of polyurethane foam should be classified under tariff item No. 15A(3) or 15A(4). The assessee claimed that the articles have to be classified under tariff item No. 15A(4). The Asstt. Collector of Central Excise, in his order dt. 2nd Jan., 1975, held that the articles manufactured doubt of waste of polyurethane foam fall under tariff item No. 15A(3). Regarding the value for the purposes of assessment, the Asstt. Collector held that it would be the value of the polyurethane foam blocks which are classified under item No. 15A(3) from which the goods in question were manufactured. The Asstt. Collector declined to accept that the value of articles manufactured would be anything less than the value of the foam blocks themselves. Against the aforesaid order, an appeal was filed before the Appellate Collector of Central Excise who, by his order dt. 5th Sept., 1975, affirmed the order of the Asstt. Collector and rejected the appeal. Against that order, the assessee filed a revision application before the Ministry of Finance, Department of Revenue, Government of India. This revision petition was disposed of by Order No. 2122 of 1977 dt. 14th Dec., 1977. The order was passed by Sri C. P. R. Pillai, Addl. Secretary, and Sri D. N. Lal, Joint Secretary. The order of the Government of India is extracted below for convenient reference : “Government of Indian have considered the points raised by the petitioners in the revision application and those urged during the personal examination of the records of the case. Government observed that it is unreasonable to conclude that the shreddings and scrap obtained from foam blocks while cutting the same to usable shapes, will continue to be of the same value as the original foam blocks.

The foam in which this product is cleared has to be taken into consideration for the purpose of determination of the assessable value of the same and not the form of the original material from which it is produced. Rule 56A of the Central Excise Rules, 1944, simply provided that waste arising from the process of manufacture where pro forma credit has been availed of in respect of materials or component parts used should be removed on payment of duty. It does not put any type of restriction or limitation regarding the assessment of such waste.

In view of the above, the Government of India set aside the order in appeal and allow the revision application.” Thereafter, the assessee filed a classification list in 19th Dec., 1978, before the Asstt. Collector, Central Excise, claiming exemption under Notification No. 108 of 1973, dt. 28th April, 1973, in respect of 26 items of articles manufactured doubt of polyurethane foam waste. The Asstt. Collector of Central Excise passed and order, dt. 16th March, 1979, determining the classification of each one of the items. It is not necessary to deal with the classification determined by the Asstt. Collector of Central Excise in respect of each item. Suffice it to state that the Asstt. Collector accepted the classification under tariff item No. 15A(4) in respect of some articles and rejected the classification in respect of some other articles.

Before submission of the classification lists in 19th Dec., 1978, to the Asstt. Collector of Central Excise, the assessee filed an application dt. 26th Oct., 1978, before the Asstt. Collector of Central Excise for refund of the central excise duty paid on articles manufactured out of waste or scrap of polyurethane foam, pursuant to the two notifications above referred to. The assessee claimed refund of an aggregate duty of Rs. 53,16,683.74 paid during the period 21st Aug., 1971, to 31st Aug., 1978. This is classified as under :

The assessee also stated in the application that the claim for refund is based on the notifications above referred to and the duty hence forward on the articles would be paid under protest. This application for refund reached the office of the Asstt. Collector on 3rd Nov., 1978. While the claim for refund was receiving the attention of the Asstt. Collector, the order dt. 16th March, 1979, to which a reference has been made above was passed by the Asstt. Collector determining the classification of each one of the items specified in the classification list filed by the assessee in December, 1978. We have already pointed out that the Asstt. Collector admitted some of the items in the classification list as falling under item No. 15A(4). After the order dt. 16th March, 1979, was passed, the Superintendent of Central Excise, Bala Nagar, addressed a communication to the petitioner bearing C.C. No. 428 of 1979, dt. 20th April, 1979, referring to the application for refund dt. 26th Oct., 1978. In this communication, the Superintendent of Central Excise advised the assessee to rework the claim for refund on the basis of the order bearing C. No. V/15-A-17/41/ 78V-C dt. 16th March, 1979, of the Asstt. Collector. Accordingly, the assessee reworked the claim for refund with reference to the items accepted by the Asstt. Collector of Central Excise as falling under item No. 15A(4). The claim for refund was revised to Rs. 29,87,905.66 for the period from 21st Aug., 1971 to 28th Feb., 1978. The last period 1st March, 1978, to 31st Aug., 1978, was omitted obviously for the reason that the refund for this period was considered by the Asstt. Collector in his order dt. 17th June, 1979. This revised claim was made in the assessee’s dt. 21st Sept., 1979, addressed to the Asstt. Collector. The Asstt. Collector passed an order on 17th June, 1979. The order is extracted below :

“C No. V-15A-18-28/1979

Dated : 17-6-1979.

Sub : Central Excise-Refund claim of M/s U Foam for Rs. 4,14,081.09 Regarding.

“M/s U Foam has preferred a refund claim of Rs. 3,13,081.09 for the excess payment of duty paid by them between 1-3- 1978 to 31-8-1978 on the articles made out of waste and scrap of polyurethane foam which are exempt from duty. The party has been paying duty on the articles made out of waste or scrap of polyurethane foam till 31st Aug., 1978. In this connection, the Asstt. Collector, Hyderabad-I Division, also issued an order clarifying that the articles made out of waste or scrap of polyurethane foam are exempt from payment of duty. It is on the authority of the Asstt. Collector’s order that the party had put in the claim from 1st March, 1978 to 31st Aug., 1978 on 17th May, 1979.

I have gone through the claim and found it is barred by limitation of six months under r. 11 of the Central Excise Rules, 1944. Therefore, I reject the claim.” Now, the order of the Asstt. Collector of Central Excise refers to the assessee’s claim for refund for the period 1st March, 1978, to 31st Aug., 1978, only. Although the application for refund was made for the period commencing from 21st Aug., 1971 onwards, the order of the Asstt. Collector does not refer to the claim for refund of duty paid during the period 21st Aug., 1971, to 28th Feb., 1978. That apart, the refund of duty claimed for the period 1st March, 1978, to 31st Aug., 1978, was shown at Rs. 3,13,081.09 whereas, according to the application of the assessee dt. 26th Oct., 1978, the claim for refund of duty was shown at Rs. 4,20,128.25. Apart from these shortcomings, it would be seen that the Asstt. Collector rejected the claim for refund on the ground that it was barred by limitation under r. 11 of the Central Excise Rules, 1944.

The assessee filed an appeal against the aforesaid order of the Asstt. Collector. The Appellate Collector of Customs disposed of the appeal by his order No. 478 of 1979, dt. 4th Oct., 1979. The following extracts from the order of the Appellate Collector may be referred to : “2. The Asstt. Collector rejected the claim on the ground that it suffered from time-bar in the light of the provisions of r. 11 of the Central Excise Rules, 1944. Prior to the rejection of the claim, the appellants were asked through the concerned Superintendent of Central Excise to resubmit the refund claims on the basis of the orders in C. No. V-15A-17-41-78V-C, dt. 16th March, 1979.

In this letter dt. 16th March, 1979, the then Asstt. Collector of Hyderabad-I Division listed the articles which, according to him, merited to be exempted from duty in the light of the provisions of the Notification No. 108 of 1973, dt. 28th April, 1973. The appellants’ representatives who attended the hearing informed that the articles listed in the Asstt. Collector’s letter were being exempted from duty after 16th March, 1979. It is not the claim of the appellants that they were not aware of the provisions of the Notification No. 108 of 1973 prior to 26th Oct., 1978. Although they were aware of the provisions of this notification, they have not, prior to 26th Oct., 1978, claimed exemption earlier and this has to be attributed to error, inadvertence, etc., on their part. Further, their failure to claim exemption from duty earlier has resulted in failure of the Department to ascertain which of the articles that had been cleared by them were manufactured from waste or scrap of polyurethane foam. In view of the foregoing, the provisions of r. 11 of the Central Excise Rules, 1944, would be attracted to their claim for refund. Since this claim had been received in the Asstt. Collector’s office on 3rd Nov., 1978, it would be within time in respect of the goods which had been cleared within a period of six months prior to 3rd Nov., 1978. In other words, the claim would be valid for the period from 3rd May, 1978, to 3rd Nov., 1978.”

In view of the above findings, the Appellate Collector modified the Asstt. Collector’s order and directed that the assessee’s claim for refund was valid and within time in respect of the goods cleared by them during the period 3rd May, 1978, to 3rd Nov., 1978. The Appellate Collector further directed that the claim for refund should be re- examined on merits. It is stated that after receiving the Appellate Collector’s order, the Asstt. Collector granted refund claimed by the assessee in respect of the goods cleared during the period 3rd May, 1978, to 3rd Nov., 1978. Thus, eventually it turned out that the assessee’s claim for refund of duty paid in respect of the goods cleared during the period 21st Aug., 1971, to 2nd May, 1978, was rejected. Against the order of the Appellate Collector, the assessee carried the matter on further appeal to the Customs, Excise and Gold Control Tribunal. The Tribunal disposed of the appeal on 25th May, 1983. The Tribunal upheld the order of the Appellate Collector and dismissed the appeal. On an application made by the assessee for reference under s. 35G of the Act, the Tribunal referred the question of law already mentioned in para 1 (at p. 328) for consideration of this Court. Confining first our attention to the question referred by the Tribunal, we may notice the provisions of r. 11 of the Central Excise Rules, 1944 : “Rule 11. 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 Asstt. Collector of Central Excise before the expiry of six months from the date of payment of duty : Provided that the limitation of six months shall not apply where any duty has been paid under protest. Explanation. Where any duty is paid provisionally under these rules on the basis of the value or the rate of duty, the period of six months shall be computed from the dt. on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be… (4) Save as otherwise provided by or under these rules, no claim for refund of any duty shall be entertained.”

The above rule was substituted by s. 11B of the Act w.e.f 17th Nov., 1980. From the date when s. 11B came into force, r. 11 was omitted. We may also state that r. 11, as it stood above, was operative from 6th Aug., 1977, to 16th Nov., 1980. Sec. 11B inserted w.e.f. 17th Nov., 1980, is more or less on the same lines as r. 11. The reason for omitting r. 11 and inserting s. 11B in the Act appears to be to give statutory sanction to the provisions of subordinate legislation contained in r. 11. It is, therefore, enough if we notice that s. 11B of the Act is substantially on terms analogous to the old r. 11.

We are unable to understand the relevant of the Tribunal referring the question whether r. 11 is applicable or s. 11B is applicable, for we notice that the dispute before the Tribunal or, for that matter, before the lower authorities, was not in that regard. Indeed, it does not appear to be anybody’s case that s. 11B of the Act was applicable and no arguments were advanced on that basis either before the Tribunal or before the appellate authorities below. There was no discussion in the order of the Tribunal, as far as we could see, on the question of applicability of either old r. 11 or new s. 11B of the Act. Obviously, s. 11B can have no application in the present case, because it came into force on 17th Nov., 1980, whereas the application for refund was made by the assessee in this case on 26th Oct., 1978. On the date when the application for refund was made, old r. 11 was in existence and the question of considering whether s. 11B of the Act would be applicable never arose. We may straightway point out that s. 11B of the Act can have no application in the circumstances of the case and, if anything the only question is whether the time-limit specified under old r. 11 is applicable in the facts and circumstances of the assessee’s case. The contention of the assessee has been that the time-limit specified in old r. 11 is not applicable to a case where duty was illegally and un-authorisedly collected, without the sanction of law. The assessee’s case has been that r. 11 can have application only in respect of the duty paid in accordance with the provisions of the Act which became refundable subsequently for any reason whatsoever. It was urged that the time-limit of six months specified in r. 11 did not apply to cases where the duty was unauthorisedly collected without the sanction of law. It was for that reason that the assessee’s claim for refund, it is urged, must be considered without applying the time-limit under r. 11. We shall, therefore, address ourselves to this question, namely, whether the time-limit specified in old r. 11 is applicable in the facts and circumstances of the assessee’s case and, if not, whether the refund application can be entertained on any other legal principle ?

We may refer to the decision of the Supreme Court in D. Cawasji & Co. vs. State of Mysore (1978) ELT (J. 154), wherein the scope of r. 11 of the Excise Rules was considered by the Supreme Court. Referring to the earlier judgment of the Supreme Court in State of Madhya Pradesh vs. Bhailal Bhai (1964) 6 SCR 261, the Supreme Court held that the period of limitation within which the application is to be made for securing refund of duty paid under a mistake of law is three years from the dt. when the mistake is known. It is stated that r. 11 of the Excise Rules will have no application in a case where money was paid under a mistake of law. The proposition that if recovery of duty is illegal and without jurisdiction, the claim for refund is not governed by statute is clearly well settled and was given effect to in a number of decisions (See the decision in Shalimar Textile Mfg. P. Ltd. vs. Union of India (1986) 25 ELT 625 (Bom), Maharashtra Vegetable Products P. Ltd. vs. Union of India (1981) ELT 468 (Bom), Wipro Products Ltd. vs. Union of India (1981) ELT 531 (Bom), Associated Bearing Co. Ltd. vs. Union of India (1980) ELT 415 (Bom), Conterman Peipers (India) Ltd. vs. Addl. Secretary (1986) 26 ELT 471 (Cal) and L.D.Textile Industries Ltd. vs. Union of India (1987) 28 ELT 36 (Bom).

We may refer to the latest decision of the Supreme Court in Salonah Tea Co. Ltd. vs. Superintendent of Taxes (1988) 69 STC 290. The question that arose for consideration in this case was whether the refusal to refund the tax illegally collected under the Assam Taxation (on Goods Carried by Road and Inland Waterways) Act, 1954, was justified. Sabyasachi Mukharji J. observed : “Normally speaking, in a society governed by rule of law, taxes should be paid by citizens as soon as they are due in accordance with law. Equally, as a corollary to the said statement of law, it follows that taxes collected without the authority of law, as in this case, from a citizen should be refunded because, no State has the right to receive or retain taxes or monies realised from citizens without the authority of law.” Sec. 23 of the Assam Taxation (on Goods Carried by Road and Inland Waterways) Act, 1954, provided that the CIT shall, in the prescribed manner, refund to the purchaser or dealer any sum paid or realised in excess of the sum due from him under the Act. It was, therefore, claimed that the refund could be granted only within the period prescribed and not beyond. Repelling this contention, the Supreme Court pointed out that s. 23 of the Assam Taxation Act applies only in a case where money is paid under the Act. If there is no provision for realisation of the money under the Act, the act of payment was ultra vires, the money had not been paid under the Act and in that view of the matter, s. 23 would not apply. The same principle, in our opinion, holds good for r. 11 of the Central Excise Rules.

The time-limit specified in r. 11 for securing refund of duty paid applies only to a case where duty was paid in accordance with the provisions of the Act and that duty becomes refundable subsequently for one reason or the other. If the duty is paid under a mistake of law and without the sanction of law, it cannot be said that the duty was paid in accordance with law. Therefore, the time-limit specified in r. 11 for the grant of refund can have no application to a case where duty was paid by mistake by an assessee and collected illegally and unauthorisedly and without the sanction of law by the authorities.

After referring to the various cases bearing on the point, the Supreme Court held in Salonah Tea Co. Ltd.’s case (supra), that the assessee was entitled to seek refund of the tax or duty paid under a mistake by preferring a claim within three years from the date when it came to the knowledge of the assessee or when the mistake was discovered. It was further observed by the Supreme Court in Salonah Tea Co. Ltd.’s case (supra), that although it is true that in some cases the period of three years is normally taken as a period beyond which the Court should not grant relief, that is not an inflexible rule.

Learned standing counsel for the Central Government raised a twofold plea against extending the assessee’s claim beyond the period specified in r. 11. Firstly, it is stated that the question of applying the period of limitation under the general law may be relevant in a writ proceeding under Art. 226 of the Constitution, but not in a reference arising under the Act. Learned counsel claimed that the present question arose during the course of statutory remedies availed of by the assessee by filing an appeal to the Appellate Collector and to the Tribunal and in the present reference made by the Tribunal under s. 35G of the Act, it is not open to this Court to go beyond the provisions of the Act and determine a period of limitation different from the one specified in r. 11. The second plea of learned standing counsel is that whether the duty is collected legally or illegally, the limitation provided by the Act and the rules must be applied. Learned standing counsel relied on the decision of the Supreme Court in Burmah Construction Co. vs. State of Orissa (1961) 12 STC 816, in support of this proposition. We shall examine the tenability of these pleas presently.

The assessee in this case claimed that the duty was illegally and unauthorisedly collected in respect of the goods manufactured from out of the scrap or waste of polyurethane foam. The assessee’s case was that pursuant to the notifications above referred to, the articles which fell under tariff item No. 15A(4) earned exemption. There was continuing correspondence between 1971 and 1978, when eventually an application was made for refund. The application for the refund was rejected by the Asstt. Collector on the ground that it was barred by limitation. Obviously, the order passed by the Asstt. Collector was appealable and the assessee carried the matter in appeal to the Appellate Collector as well as the Tribunal, availing of the statutory remedies. The contention urged was that the time-limit specified in r. 11 was not applicable and the application filed for refund in October, 1978, was perfectly valid, and the Asstt. Collector of Central Excise was under an obligation to allow the refund pursuant to the application made. The question considered by the appellate authorities was whether the time-limit specified in r. 11 was or was not applicable in the facts and circumstances of the case. If the settled legal principle is that when money is paid by an assessee under a mistake of law, the limitation according to the general law is applicable, we do not see how that legal principle undergoes a change if the matter fell to be considered in the course of statutory remedies availed of by the assessee. We are unable to accept the proposition that legal principles could differ with reference to the nature of proceedings. Learned standing counsel for the Central Government does not deny that if a writ petition is filed invoking article 226 of the Constitution, then, the period of limitation could be determined in accordance with the settled judicial pronouncements without reference to r. 11. We do not see how that principle undergoes a change because the matter happens to be considered and decided during the course of statutory remedies availed of by the assessee. It should be clearly borne in mind that the assessee never purported to make an application for refund under r. 11 of the Rules. Indeed, the assessee’s case was that the application for refund was filed without reference to r. 11 and it was filed before the limitation had run out under the general law. No authority has been cited before us by learned standing counsel for the Central Government in respect of the plea that the legal principles to be applied vary with reference to the nature of the proceeding. In our opinion, whether the assessee was pursuing the remedy by filing a writ petition under Art. 226 or was availing of the statutory remedies available under the Act by way of appeal and reference to the High Court, the same legal principles would govern the matter. Just because the present proceeding is a reference proceeding, we are unable to state that the assessee is bound by r. 11 and r. 11 alone and the various judicial pronouncements which fairly settled the issue should be ignored, because those pronouncements are made in exercise of the jurisdiction under Art. 226 of the Constitution. In our opinion, the period of limitation will have to be determined on the basis of settled principles, whether those principles are settled under statutory remedies availed of by the assessee or in the course of writ jurisdiction of the Courts invoked. We are, therefore, unable to accept the first contention of learned standing counsel for the Central Government.

As regards the second contention of learned standing counsel that the same period of limitation would operate whether duty is legally collected or illegally collected, we feel that the reliance placed on the Supreme Court’s decision in Burmah Construction Co.’s case (supra), is misplaced. That case turned on entirely different facts. In that case before the Supreme Court, an application for refund was made under s. 14 of the Orissa Sales Tax Act. Once the application was made under s. 14 of that Act, there could be little scope for arguing that the provisions of s. 14 fell to be ignored. What the Supreme Court pointed out was that when an application is made for refund of duty collected illegally under the Orissa Sales Tax Act, then the time-limit specified in s. 14 of the Act r/w the rules will have to be followed, because the application for refund itself was made under s. 14 r/w the rules. In the present case, the application for refund was not made under r. 11 of the Excise Rules. In our opinion, therefore, the principle emerging from the decision of the Supreme Court in Burmah Construction Co.’s case (supra), is not applicable to the present case. We may also point out that this principle has not been applied by the Supreme Court while dealing with a host of other cases, because of the essential difference in facts.

We are astonished at the plea of learned standing counsel that the application for refund in this case should have been made within the period of six months specified in r. 11 and because of the assessee’s failure to do so, the refund application could not be entertained. We have referred to the correspondence between the assessee and the authorities starting from 1971 commencing immediately after Notification No. 69 of 1971 dt. 29th May, 1971 was issued. The assessee honestly felt that under the notification dt. 29th May, 1971, the goods manufactured out of scrap or waste of polyurethane foam are exempt from the levy of duty. After the exemption was enlarged by Notification No. 108 of 1973, dt. 28th April, 1973, the assessee thought that the claim for refund was more fortified. But then the Department turned the assessee out stating clearly that it is not entitled to claim refund under the two notifications. The officials expressed the view that the articles manufactured out of scrap or waste of polyurethane foam fell under tariff item No. 15A(3) itself and, therefore, duty is leviable. This controversy dragged on without any certainty about the real effect of the notifications until the Government of India disposed of the revision petition by its Order No. 2122 of 1977 dt. 14th Dec., 1977, to which we have made a reference in para 7 (p. 330). In the revision order, the Government of India settled the controversy and upheld the assessee’s claim that in respect of the articles manufactured out of scrap or waste of polyurethane foam, exemption is available under the two notifications above referred to. In our opinion, there is no substance in the assertion of the Department that the assessee should have made an application for refund within the period of six months specified in r. 11. It would be a meaningless ritual on the part of the assessee to file a refund application while the Department was denying the claim for refund and the matter was under consideration by the higher authorities. Even if the assessee had filed a formal application under r. 11, the fate of such an application would be too well- known. The assessee cannot be accused that, with the awareness of the events, it should still have filed an application for refund within the period of six months specified in r. 11 only to invite an order of rejection from the Department. The assessee was engaged in the task of convincing the authorities that its claim for exemption was tenable and it could be stated that these matters came to a state of finality only on the Government of India passing the revision order dt. 14th Dec., 1977, and not a day before. Even after the Government of India had passed the revision orders, still the classification made by the assessee of the goods sold had to be effected. But then it could positively be said that after the Government of India passed its revision order dt. 14th Dec., 1977, there could be no mistake in the mind of the assessee that the duty in respect of the articles falling under tariff item No. 15A(4) is not payable pursuant to the two notifications above referred to. Having regard to these facts, we reject the second contention urged by learned standing counsel.

Our discussion till now would show that, in the facts and circumstances of this case, it is neither r. 11 nor s. 11B of the Act that is applicable. If that is so, the question to be asked is whether, on the facts and in the circumstances, the application for refund filed by the assessee on 26th Oct., 1978, is within the period of limitation under the general law. Indeed, this is the real controversy between the parties and the Tribunal should have referred this question to this Court for consideration. We, therefore, consider that the question referred for consideration by the Tribunal in this case should be reframed as under in order to bring out the real controversy between the parties “Whether, on the facts and in the circumstances of the case, the assessee’s application for refund dt. 26th Oct., 1978, of duty paid in respect of the goods manufactured from out of the scrap or waste of polyurethane foam, is in accordance with law, and, if so, whether the assessee is entitled to the refund of the duty paid during the period 21st Aug., 1971, to 2nd May, 1978 ?”

As we have already pointed out that, in the facts and circumstances, the period of limitation to be applied is three years from the date when the assessee discovered the mistake in the payment of duty or from the date when it came to the knowledge of the assessee that it is entitled to the refund. In Cawasji & Co.’s case (supra), the Supreme Court observed that the period of limitation prescribed for recovery of money paid under a mistake of law is three years from the date when the mistake is known, be it 100 years after the date of payment. On the facts stated above, the entire matter was in a fluid state till the Government of India passed orders on the revision dt. 14th Dec., 1977. The mutually contradictory claims of the assessee and the Department were, for the first time, settled when the Government of India allowed the revision petition stating that the articles manufactured by the assessee out of scrap or waste of polyurethane foam, fell under tariff item No. 15A(4) and earned exemption from the payment of duty under the two notifications. It cannot be said that prior to 14th Dec., 1977, the assessee was consciously aware that it was paying the duty by mistake or that the Department was collecting the duty otherwise

than under the Act. If anything, it could only be said that the assessee entertained a feeling that duty is not leviable. But then the authorities did not uphold the assessee’s contention and, therefore, the assessee could have no reason to believe that it was paying the duty under a mistake. The position firmly came to the knowledge of the assessee only through the revision order of the Government of India dt. 14th Dec., 1977. If the crucial date, therefore, is 14th Dec., 1977, then, it is open to the assessee to file an application for revision within three years from that date and the application filed on 26th Oct., 1978, claiming refund of duty paid from 21st Aug., 1971, is perfectly valid.

We may, for the sake of completeness, place on record that learned standing counsel did not argue that the revised working of the refund by the assessee of Rs. 29,87,905.66 was incorrect or needed verification. On the contrary, the argument proceeded on the basis that the quantification is correct. We may, however, point out that the sum of Rs. 29,87,905.66 worked out by the assessee relates to the period 21st Aug., 1971, to 28th Feb., 1978. Inasmuch as the assessee is entitled to claim refund till 2nd May, 1978, the amount of refund due for the period 1st March, 1978, to 2nd May, 1978, has also to be quantified and the amount refunded to the assessee.

In the result, we answer the question as reframed by us in para 23 (p. 340) in the affirmative, that is to say, the application filed by the assessee on 26th Oct., 1978 claiming refund of duty paid in respect of the goods manufactured from out of scrap or waste of polyurethane foam, commencing from the period 21st Aug., 1971, is within the period of limitation and, consequently, the assessee is entitled to the refund of the duty collected by the Department. The reference is answered accordingly in favour of the assessee and against the Revenue. There shall be no order as to costs.

An oral application for leave to appeal to the Supreme Court against the order just now pronounced by us is made by Shri Jagannadha Rao, senior standing counsel to the Union Government. We are, however, unable to certify that this is a fit case for grant of the certificate asked for. Leave asked for is accordingly refused.

[Citation : 175 ITR 326]