Supreme Court clarifies refund claims under Section 11B of the Central Excise Act: Western Coalfields Ltd. vs. Commissioner of Central Excise (20 February 2019)

Introduction

Date of the Judgment: 20 February 2019
Citation: Not Available
Judges: A.M. Khanwilkar, J. and Ajay Rastogi, J.
Can a buyer claim a refund of excise duty paid under protest by the manufacturer, even if the buyer’s refund application is filed after the standard six-month limitation period? The Supreme Court of India addressed this question in a batch of appeals concerning claims under the Central Excise Act, 1944. The core issue was whether the limitation period for refund claims applies to buyers when the manufacturer paid the duty under protest. The judgment was delivered by a two-judge bench comprising Justice A.M. Khanwilkar and Justice Ajay Rastogi, with the opinion authored by Justice Rastogi.

Case Background

Western Coalfields Ltd., a public sector undertaking involved in coal mining, purchased conveyor beltings from M/s. Fenner (India) Ltd. 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, had classified their conveyor beltings under sub-heading 3920.12 of the Central Excise Tariff Act, 1985, as suggested by the department, and paid the duty under protest. This classification dispute reached the Supreme Court, which, in a judgment dated 28th March 1995, 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 the later period. M/s. Fenner (India) Ltd. never applied for a refund after the classification dispute was settled. Western Coalfields Ltd., the buyer, filed a refund application on 20th December 1996 for the period 20th July 1988 to 15th January 1994, arguing that since the duty was paid under protest by the manufacturer, the limitation period should not apply.

Timeline

Course of Proceedings

The appellant, Western Coalfields Ltd., filed a refund application which was rejected by the Authority on 4th August 1997, citing limitation and unjust enrichment. The Appellate Authority in Chennai rejected the appeal on 18th January 1999, based on limitation. The Customs, Excise and Service Tax Appellate Tribunal upheld the rejection on 8th August 2005, relying on the Supreme Court’s judgment in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34]. This led to the present appeal before the Supreme Court.

Legal Framework

The case revolves around Section 11B of the Central Excise Act, 1944, which deals with refund claims. The relevant portion of Section 11B(1) states:

“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]… Provided further that the limitation of [six months] shall not apply where any duty has been paid under protest.”

Section 11B(2)(e) allows a refund to the buyer if they have borne the duty and not passed it on. Section 11B(5)(B)(e) defines the relevant date for a buyer as the date of purchase.

Arguments

Appellant’s Arguments:

• The appellant argued that since the manufacturer paid the duty under protest, the six-month limitation period should not apply to the buyer’s refund claim.
• The appellant contended that the key factor should be whether the excise duty was paid under protest, regardless of who made the claim.
• The appellant submitted that the protest made by the manufacturer should be considered when determining if the buyer’s refund claim is within time.
• The appellant argued that when the duty paid by the manufacturer is permitted to be claimed by the buyer, the protest made by the manufacturer should extend to the buyer.

Respondent’s Arguments:

• The respondent argued that while a buyer can claim a refund under Section 11B, they must prove they bore the duty and did not pass it on and must file the application within six months of the purchase date.
• The respondent submitted that the rights of the manufacturer and the buyer to claim a refund are separate and distinct.
• The respondent argued that the buyer’s application was filed well after the six-month limitation period from the date of purchase and was therefore time-barred.
• The respondent relied on the judgment in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34], which held that the buyer must comply with Section 11B independently.

Issues Framed by the Supreme Court

The main issue before the Supreme Court was:

1. 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 Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

✓ M/s. Fenner (India) Ltd. Vs. Collector of Central Excise, Madurai [1995 (Suppl.) 2 SCC 567]*: The Court referred to this case to establish the background of the classification dispute that led to the payment of duty under protest by the manufacturer.
✓ Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34]*: The Court relied heavily on this case, stating that it clearly established that the rights of the manufacturer and the buyer to claim a refund are separate and distinct, and the buyer must comply with the limitation period under Section 11B independently.
✓ National Winder Vs. Commissioner of Central Excise, Allahabad [2003(11) SCC 361]*: The Court noted that this earlier view was held to be per incuriam in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34].

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the interpretation of Section 11B of the Central Excise Act, 1944, and the precedent set by Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34]. The Court emphasized the distinct rights and obligations of manufacturers and buyers regarding refund claims. The fact that the manufacturer paid the duty under protest did not extend the limitation period for the buyer. The Court also considered that the buyer’s claim was filed well beyond the six-month period from the date of purchase, making it time-barred.

The Court’s reasoning was based on a strict interpretation of the law and adherence to established precedent. The Court did not find any ambiguity in the legal provisions or any reason to deviate from the previous ruling in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd. [2004(4) SCC 34].

The Court stated: “The scheme of Section 11B makes a distinction between right of the manufacturer to claim refund from right of the buyer to claim refund treating them separate and distinct for making an application for refund exercising their right under Section 11B of the Act.”

The Court further observed: “In the instant case, indisputedly the application was filed by the appellant as a buyer of the goods (conveyor belts) from M/s. Fenner (India) Ltd. who paid the duty under protest much after a period of limitation (six months) as prescribed under the mandate of law disentitles the claim of refund to the appellant as prayed for.”

The Court also noted: “the purchaser of the goods was not entitled to claim refund of duty made under protest by the manufacturer without complying the mandate of Section 11B of the Act, 1944.”

The Court did not consider any alternative interpretations, as the legal position was clear and unambiguous.

Key Takeaways

• A buyer cannot claim a refund of excise duty paid under protest by the manufacturer if the buyer’s refund application is filed after the six-month limitation period from the date of purchase.
• The rights of a manufacturer and a buyer to claim a refund under Section 11B of the Central Excise Act, 1944, are separate and distinct.
• The protest made by the manufacturer at the time of payment of duty does not extend the limitation period for the buyer.

Directions

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

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 separately, 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. [2004(4) SCC 34] and clarifies that the protest by the manufacturer does not extend the limitation period for the buyer. The Supreme Court has upheld the view that the rights of the manufacturer and the buyer to claim a refund are separate and distinct.

Conclusion

The Supreme Court dismissed the appeals, holding that the buyer’s refund claim was time-barred. The Court reiterated that the limitation period of six months applies to the buyer’s claim separately, regardless of the manufacturer’s protest. This ruling reinforces the distinct nature of refund rights for manufacturers and buyers under the Central Excise Act, 1944.