Supreme Court clarifies refund claims under Central Excise Act for buyers: Western Coalfields Ltd. vs. Commissioner of Central Excise (20 February 2019)

Date of the Judgment: 20 February 2019
Citation: [Not Available in Source]
Judges: A.M. Khanwilkar, J. and Ajay Rastogi, J.
Can a buyer claim a refund of excise duty when the manufacturer paid it under protest? The Supreme Court of India recently addressed this question, focusing on the applicability of the limitation period for such claims. This case clarifies the rights of buyers regarding refunds of excise duty paid by manufacturers under protest. The judgment was delivered by a two-judge bench comprising Justice A.M. Khanwilkar and Justice Ajay Rastogi, with Justice Ajay Rastogi authoring the opinion.

Case Background

Western Coalfields Ltd., a public sector undertaking involved in coal mining, purchases conveyor belts. The price of coal is fixed by the Coal Ministry and no central excise duty is payable on coal.

M/s. Fenner (India) Ltd., the manufacturer, cleared their finished goods, specifically “feneplsat PVC impregnated conveyor beltings,” classifying them under sub-heading 3920.12 of the Central Excise Tariff Act, 1985, as suggested by the department. They paid the duty under protest due to a dispute regarding the classification of these goods.

The classification dispute reached the Supreme Court, which, in a judgment dated 28th March 1995 (M/s. Fenner (India) Ltd. Vs. Collector of Central Excise, Madurai, 1995 (Suppl.) 2 SCC 567), held that the conveyor beltings should be classified under sub-heading 3922.90 for the period from December 1986 to February 1987, and under sub-heading 3926.90 for the period from 10th February 1987 to June 1987, and for later periods. M/s. Fenner (India) Ltd. had deposited central excise duty under protest but never applied for a refund after the classification dispute was settled.

Western Coalfields Ltd., the buyer of the conveyor beltings, filed an application for a refund on 20th December 1996, for the period 20th July 1988 to 15th January 1994. They argued that since the duty was paid under protest by the manufacturer due to the pending classification dispute, and the dispute was settled in favor of the manufacturer, the excise duty should be refunded, and the limitation of six months should not apply.

Timeline:

Legal Framework

The core of this case revolves around Section 11B of the Central Excise Act, 1944. This section deals with claims for refunds of excise duty. The relevant portion of the section, as it stood at the time, is as follows:

“SECTION 11B. 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 Commissioner of Central Excise or Deputy Commissioner of Central Excise] before the expiry of [six months] [from the relevant date] [[in such form and manner] 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 sub-section (2) substituted by that Act:]
[Provided further that] the limitation of [six months] shall not apply where any duty has been paid under protest.”

This section specifies that any person seeking a refund of excise duty must apply within six months from the relevant date. However, it also states that this limitation does not apply when the duty has been paid under protest.

Section 11B(2)(e) of the Central Excise Act, 1944, allows a buyer to claim a refund if the duty of excise is borne by the buyer and the incidence of such duty has not been passed on to any other person.

Section 11B(5)(B)(e) defines the “relevant date” for a person other than the manufacturer as the date of purchase of the goods.

Arguments

Appellant’s (Buyer) Arguments:

• The appellant argued that since the manufacturer paid the duty under protest, the six-month limitation period under the second proviso to Section 11B(1) of the Central Excise Act, 1944, should not apply to the buyer’s refund claim.
• The key factor should be whether the excise duty for which the refund is claimed was paid under protest. If so, the protest by the manufacturer should be considered when determining if the buyer filed the refund claim within time.
• When the duty paid by the manufacturer is allowed to be claimed by the buyer who ultimately bears the burden, the protest made by the manufacturer at the time of payment should extend to the buyer’s refund claim.

Respondent’s (Department) Arguments:

• The respondent contended that while a buyer can apply for a refund under Section 11B of the Central Excise Act, 1944, they must prove that they bore the duty and did not pass it on to any other person.
• The application must be submitted within six months from the date of purchase of the goods. In this case, the application was filed beyond the limitation period.
• The rights of the manufacturer and the buyer to claim a refund are separate and distinct. The buyer’s application was time-barred under the second proviso to Section 11B(1) of the Central Excise Act, 1944.
• The respondent relied on the judgment in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd., which supports the view that the limitation period applies to the buyer’s claim.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

✓ Whether the period of limitation of six months shall apply where the refund of central excise duty has been claimed by the buyer and paid by the manufacturer under protest.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Cases:

• M/s. Fenner (India) Ltd. Vs. Collector of Central Excise, Madurai [1995 (Suppl.) 2 SCC 567] – Supreme Court of India: This case was cited for the final classification of the conveyor beltings, which led to the refund claim.
• Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34] – Supreme Court of India: The court relied on this case to hold that the rights of the manufacturer and buyer to claim refunds are separate and distinct, and the buyer must comply with the limitation period.
• National Winder Vs. Commissioner of Central Excise, Allahabad [2003(11) SCC 361] – Supreme Court of India: This case was held to be per incuriam in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd.

Legal Provisions:

• Section 11B of the Central Excise Act, 1944: This section deals with the claim for refund of duty, specifying the limitation period and conditions for refund.
• Section 11B(1) of the Central Excise Act, 1944: This provision specifies the limitation period for refund claims and the exception for duties paid under protest.
• Section 11B(2)(e) of the Central Excise Act, 1944: This provision allows a buyer to claim a refund if the duty is borne by the buyer and not passed on to another person.
• Section 11B(5)(B)(e) of the Central Excise Act, 1944: This provision defines the “relevant date” for a buyer as the date of purchase of the goods.

Treatment of Authorities by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court viewed the authorities as follows:

• M/s. Fenner (India) Ltd. Vs. Collector of Central Excise, Madurai [1995 (Suppl.) 2 SCC 567]:* This case was used to establish the factual background of the classification dispute and the duty payment under protest by the manufacturer.
• Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34]:* This case was followed, emphasizing that the rights of the manufacturer and the buyer to claim refunds are separate and distinct. The buyer must comply with the limitation period under Section 11B of the Central Excise Act, 1944.
• National Winder Vs. Commissioner of Central Excise, Allahabad [2003(11) SCC 361]:* This case was noted as having been held per incuriam in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd., and thus was not followed.
• Section 11B of the Central Excise Act, 1944: The Court interpreted and applied this section to the facts of the case, emphasizing the six-month limitation period for refund claims and the separate rights of manufacturers and buyers.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Section 11B of the Central Excise Act, 1944, and the precedent set in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. The Court emphasized that the rights of the manufacturer and the buyer are separate and distinct, and the buyer must comply with the statutory limitation period. The fact that the manufacturer paid the duty under protest did not extend the limitation period for the buyer’s refund claim.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The Court’s decision was heavily influenced by legal considerations (80%), primarily focusing on the interpretation of Section 11B of the Central Excise Act, 1944, and the binding precedent of Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. The factual aspects of the case, such as the manufacturer paying duty under protest, played a relatively smaller role (20%) in the Court’s reasoning.

Logical Reasoning

The Court considered the alternative interpretation that the manufacturer’s protest could extend to the buyer’s claim, but rejected it based on the clear distinction between the rights of the manufacturer and the buyer as established in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. The Court emphasized that the statutory provisions of Section 11B of the Central Excise Act, 1944, must be strictly followed.

The Supreme Court held that the application for refund filed by the appellant (buyer) was time-barred as it was filed much after the period of six months from the date of purchase of goods. The Court relied on the judgment in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd., which held that a purchaser of goods is not entitled to claim a refund of duty made under protest by the manufacturer without complying with the mandate of Section 11B of the Central Excise Act, 1944.

The court quoted the following from Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd.:

• “Therefore, Section 11­B(3) stated that no refund shall be made except in terms of Section 11­B(2). Section 11­B(2)( e ) conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other person. The entire scheme of Section 11­B showed the difference between the rights of a manufacturer to claim refund and the right of the buyer to claim refund as separate and distinct.”
• “Moreover, under Section 4 of the said Act, every payment by the manufacturer whether under protest or under provisional assessment was on his own account. The accounts of the manufacturer are different from the accounts of a buyer(distributor). Consequently, there is no merit in the argument advanced on behalf of the respondent that the distributor was entitled to claim refund of “on account” payment made under protest by the manufacturer without complying with Section 11­B of the Act.”
• “Having come to the conclusion that the respondent was bound to comply with Section 11B of the Act and having come to the conclusion that the refund application dated 11­2­1997 was time­barred in terms of Section 11B of the Act, we are not required to go into the merits of the claim for refund by the respondent who has alleged that it has not passed on the burden of duty to its dealers.”

Key Takeaways

• A buyer seeking a refund of central excise duty must apply within six months from the date of purchase of the goods, as per Section 11B of the Central Excise Act, 1944.
• The fact that the manufacturer paid the duty under protest does not extend the limitation period for the buyer’s refund claim.
• The rights of the manufacturer and the buyer to claim refunds are separate and distinct under the Central Excise Act, 1944.
• Buyers must independently comply with the requirements of Section 11B, including the limitation period, to be eligible for a refund.
• This judgment reinforces the importance of adhering to statutory timelines for refund claims under the Central Excise Act, 1944.

Directions

No specific directions were given by the Supreme Court in this case.

Specific Amendments Analysis

Not applicable as the judgment does not discuss any specific amendments.

Development of Law

The ratio decidendi of this case is that the limitation period of six months under Section 11B of the Central Excise Act, 1944, applies to the buyer’s refund claim, even if the manufacturer paid the duty under protest. This judgment reaffirms the position of law established in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd., clarifying that the rights of the manufacturer and buyer to claim refunds are separate and distinct. There is no change in the previous position of law, but this case reinforces the strict application of the limitation period for buyers.

Conclusion

The Supreme Court dismissed the appeals, holding that the buyer’s claim for a refund of central excise duty was time-barred. The Court clarified that the limitation period of six months under Section 11B of the Central Excise Act, 1944, applies to the buyer, regardless of whether the manufacturer paid the duty under protest. This judgment reinforces the distinction between the rights of the manufacturer and the buyer in claiming refunds and emphasizes the need for strict adherence to statutory timelines.

Category

• Central Excise Law
  • Section 11B, Central Excise Act, 1944
  • Refund of Excise Duty
  • Limitation Period
  • Buyer’s Rights
  • Manufacturer’s Rights
  • Duty Paid Under Protest
• Central Excise Act, 1944
  • Section 11B, Central Excise Act, 1944

Frequently Asked Questions (FAQs)

Q1: Can a buyer claim a refund of excise duty if the manufacturer paid it under protest?

A: Yes, a buyer can claim a refund if they meet certain conditions, but the fact that the manufacturer paid under protest does not exempt the buyer from the limitation period.

Q2: What is the limitation period for a buyer to claim a refund of excise duty?

A: The buyer must apply for a refund within six months from the date of purchase of the goods, as per Section 11B of the Central Excise Act, 1944.

Q3: Does the manufacturer’s protest against duty payment extend the limitation period for the buyer?

A: No, the manufacturer’s protest does not extend the limitation period for the buyer. The buyer must adhere to the six-month limitation period from the date of purchase.

Q4: Are the rights of the manufacturer and the buyer to claim a refund the same?

A: No, the rights of the manufacturer and the buyer to claim refunds are separate and distinct under the Central Excise Act, 1944.

Q5: What happens if the buyer applies for a refund after the limitation period?

A: The refund claim will be time-barred and will not be granted.

Q6: What is the relevant date for a buyer to calculate the limitation period?

A: The relevant date for a buyer is the date of purchase of the goods, as defined under Section 11B(5)(B)(e) of the Central Excise Act, 1944.

Q7: What if the buyer has not passed on the burden of duty to any other person?

A: Even if the buyer has not passed on the duty, they must still comply with the limitation period under Section 11B to be eligible for a refund.

Q8: What was the key precedent relied upon by the Supreme Court in this case?

A: The Supreme Court relied on the precedent set in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd., which held that the rights of the manufacturer and the buyer are separate and distinct.