Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3039 OF 2011
COMMISSIONER OF CENTRAL EXCISE,
MUMBAI – 1 ..APPELLANT(S)
VERSUS
M/S. MORARJEE GOKULDAS
SPG. & WVG. CO.LTD. .. RESPONDENT(S)
J U D G M E N T
M. R. Shah, J.
1.
Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 24.09.2008 passed by the
High Court of Judicature at Bombay in Central Excise
Signature Not Verified
Digitally signed by
Neetu Sachdeva
Date: 2023.03.24
16:35:12 IST
Reason:
Appeal No.186 of 2008 by which the Division Bench of
the High Court has dismissed the said appeal preferred
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by the Revenue and has affirmed the judgment and order
passed by the Appellate Tribunal by which the Appellate
Tribunal held that the show cause notice under Section
11A of the Central Excise Act, 1944 is required to be
issued in case of erroneous refund of the duty, the
Revenue has preferred the present appeal.
2.
The short question which is posed for consideration
before this Court is whether the separate notice under
Section 11A of the Central Excise Act is necessary for the
recovery of the amount when an erroneous refund is
granted through the speaking order is reviewed under
Section 35E of the Act?
2.1
The facts leading to the present appeal in nutshell are as
under:
2.2
The respondent herein was at the relevant time a
manufacturer of cotton yarn which it consumed captively
in its composite mills for weaving of fabric. In October,
1980 vide judgment in the case of M/s. J.K. Cotton
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Spinning & Weaving Mills Company Ltd. vs. Union of
India 1981 (8) ELT 887 , the Delhi High Court held that
removal of yarn which was consumed within the factory
for production did not amount to removal within the
meaning of Rules 9 & 49 of the erstwhile Central Excise
Rules, 1944 and hence set aside the duty demand made
on such captively consumed yarn. That the respondent
company filed a revised classification list wherein, they
declared that no duty was payable on the yarn captively
consumed. By an order issued in April, 1981 the
classification list was rejected by the Department and the
respondent – company was directed to file a fresh
classification list. The respondent – company filed a writ
petition before the Delhi High Court being Writ Petition
No.1190 of 1981 inter alia challenging the levy and
collection of duty on the said yarn captively consumed by
them. By judgment and order dated 11.01.1983 the High
Court disposed of the said writ petition upholding the
validity of Rules 9 and 49 and holding that the recovery
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could only be done as per the time limit prescribed in
Section 11A. That in the year 1983 the respondent –
company filed a civil appeal against the said judgment
before this Court being Civil Appeal No.320 of 1983. The
Company also files application for stay of the operation of
the judgment. On 15.03.1983, this Court passed an
interim order in the following terms:
"In respect of future payment of Excise Duty there
will be no stay. In so for as the post dues are
concerned, 50% of the past dues shall be paid to
the authority concerned within a period of 3
months from today. In regard to the balance 50%
the appellants shall give bank Guarantee to the
satisfaction of the Registrar of this Court within
the same period. If the Bank Guarantee have
already been given in any case in pursuance of
the directions of the Delhi High Court it will
continue in operation and shall be kept alive from
time to time."
2.3
In pursuance to the interim directions granted by this
Court on 15.03.1983, the bank guarantee given by the
respondent – company was kept alive from time to time.
By final judgment and order dated 17.01.1995 this Court
decided the case and inter alia directed that if notice
under Section 11A has not been served the Revenue
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would be entitled to do so within the time limit prescribed
by Section 11A of the Act. On the basis of the judgment
and order passed by this Court, the Divisional Assistant
Commissioner issued a show cause notice on 07.04.1995
demanding a duty amounting to Rs.2,96,14,265.05.
Subsequently by passing O-I-O dated 27.03.1996, the
Assistant Commissioner confirmed the demand. Out of
the amount demanded, Rs.1,48,07,132.84 was paid on
different dates between 18.04.1983 to 28.12.1984, as per
the directions of this Court. Balance of
Rs.1,48,07,132.91 was recovered on 28.03.1996 by
encashing bank guarantees executed by the respondent –
company. Being aggrieved with the decision of the
Assistant Commissioner dated 27.03.1996, the
respondent assessee/company went in appeal before the
Commissioner (Appeals). The Commissioner (Appeals)
dismissed the said appeal and upheld the decision of the
Assistant Commissioner by order dated 13.06.1996.
Thereafter the respondent – assessee went in appeal
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before the Tribunal against the order of the
Commissioner (Appeals). The Tribunal set aside the
order passed by the Commissioner (Appeals) by order
dated 15.05.2000 on the ground that there was no
demand issued by the Department under Section 11A of
the Central Excise Act. The Revenue challenged the
order passed by the Commissioner (Appeals) dated
15.05.2000 which came to be dismissed by order dated
17.02.2005. In the meantime, since the company filed a
refund claim it was found that the refund claim was not
sustainable. A show cause notice dated 19.09.2000 was
issued for deciding the issue of Section 11B of the
Central Excise Act. Notice dated 19.09.2000 came to be
adjudicated by the Deputy Commissioner of Central
Excise who vide his order dated 21.12.2000 set aside the
show cause notice and ordered refund of the entire
amount to the respondent – assessee/company. The said
order held that the amounts were paid under the protest
by the party and therefore the time limit will not apply.
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The issue of unjust enrichment was not examined in the
order. That thereafter the Revenue in exercise of powers
conferred under Section 35E(2) of the Central Excise Act,
preferring an appeal before the Commissioner (Appeals)
prayed for setting aside the order passed by the Deputy
Commissioner dated 21.12.2000 sanctioning the refund,
on the grounds set out therein including that there was
unjust enrichment and that the refund claimed was time
barred under Section 11B of the Central Excise Act. By
order dated 13.05.2005 the Commissioner Central Excise
(Appeals), Mumbai allowed the appeal filed by the
Revenue by inter alia upholding grounds of unjust
enrichment and time bar under Section 11B of the
Central Excise Act.
2.4
Being aggrieved, the assessee filed the appeal before the
Tribunal challenging the points of the merits upheld by
the Commissioner Central Excise (Appeals) vide order in
appeal dated 13.05.2005. Pending the said appeal and
consequent to the order dated 13.05.2005, setting aside
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the Order-in-Original sanctioning the refund claim of
Rs.2,96,14,264/- and in absence of specific stay against
the said order in appeal, the Revenue proceeded with
recovery of an amount of Rs.20,00,000/- by way of
appropriation of refund claims payable to the assessee
under O-I-O dated 04.01.2007. Therefore, in the pending
appeal on 25.01.2007, the respondent assessee filed an
application seeking directions to the Department to
refund the said sum of Rs.20,00,000/- sanctioned to it
by way of refund. That before the Tribunal, the assessee
filed an application for additional grounds seeking to
amend the appeal against the order in appeal dated
13.05.2005 on the following points of law:
“(i) No notice under Section 11A of Central
Excise Act, 1944 is issued to the applicants
seeking to recover the refund granted
pursuant to the Order in Original dated
19.12.2000.
(ii) The order of the Commissioner of Central
Excise (Appeals), impugned in the above
Appeal, without issuing notice under
Section l1A of the Act, is therefore not
capable of being implemented and liable to
be set aside on this ground alone.”
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2.5
That the Tribunal by its Order dated 12.10.2007
considered and decided only the points of law raised vide
Misc. Application for additional grounds and vide order
dated 12.10.2007 allowed the said appeal and set aside
the order in appeal with consequential relief to the
assessee. Against the order passed by the Tribunal dated
12.10.2007, the Revenue preferred the present appeal
before the High Court. By the impugned judgment and
order the High Court has dismissed the said appeal
relying upon the decision of the Division Bench of the
High Court in the case of Bajaj Auto Ltd. vs. UOI, 2003
(151) ELT-23 (Bom) . At this stage it is required to be
noted that before the High Court the Revenue strongly
relied upon the decision of this Court in the case of Asian
Paints (India) Ltd. vs. CCE, Bombay 2002 (142) ELT-
522 (SC)
2.6 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court, the
9
Revenue has preferred the present appeal.
3.
Ms. Aishwarya Bhati, learned ASG and Ms.
Ameyavikrama Thanvi, learned counsel have appeared on
behalf of the appellant and Mr. V. Sridharan, learned
Senior Advocate has appeared on behalf of the
respondent.
4. Ms. Aishwarya Bhati, learned ASG appearing on behalf of
the Revenue has vehemently submitted that in the facts
and circumstances of the case the High Court has
materially erred in relying upon the judgment of the
Bombay High Court in the case of Bajaj Auto Ltd (supra)
which was delivered on 15.02.2002.
4.1 It is submitted that before the High Court the Revenue
heavily relied upon the decision of this Court in the case
of Asian Paints (India) Ltd. (supra) which was
subsequent to the decision of the Bombay High Court in
the case of Bajaj Auto Ltd (supra) . It is submitted that
therefore, the decision of this Court in the case of Asian
10
Paints (India) Ltd. (supra) was binding on the High
Court. It is submitted that as such the impugned order
passed by the High Court is silent on the reasoning as to
why the reliance placed by the Revenue on the decision of
this Court in the case of Asian Paints (India) Ltd.
(supra) was misplaced.
4.2 It is submitted by Ms. Bhati, learned ASG that in the
case of Asian Paints (India) Ltd. (supra), this Court has
specifically observed and held that Sections 35E and 11A
of the Central Excise Act operate in different fields and
are invoked for different purposes. It is submitted that it
is observed that different time limits are, therefore, set
out therein. It is submitted that in the said decision this
Court has not accepted the submission on behalf of the
assessee that the recovery of the excise duty cannot be
made pursuant to an appeal filed after invoking the
provisions of Section 35E if the time limit provided in
Section 11A has expired. It is observed to so read the
provisions would be to render Section 35E virtually
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ineffective, which would be impermissible. It is
submitted that therefore the present case as such is
clearly covered by the decision of this Court in the case of
Asian Paints (India) Ltd. (supra).
4.3 It is further submitted by Ms. Bhati, learned ASG that
even otherwise from the Scheme of the Central Excise
Act, 1944, it is quite apparent that where the proceedings
under Section 35E are initiated and the appeal is filed
against the order sanctioning refund, there is no need to
issue any notice under Section 11A. It is submitted that
a notice under Section 11A would be meaningless with a
review under Section 35E, of the order sanctioning the
refund. It is submitted by the interpretation given by the
Revenue affirmed by the High Court that without notice
under Section 11A, amount becoming due to proceeding
under Section 35E cannot be recovered, renders Section
35E ineffective and redundant. It is submitted that
therefore, the correct position of law has been laid down
by this Court in the case of Asian Paints (India) Ltd.
12
(supra) which has been subsequently followed by the
Chennai Bench of the Tribunal in the case of CCE,
Chennai vs. Sha Harakchand Samanthmal, 2004 (177)
ELT 990 (T).
4.4 It is further submitted by Ms. Bhati, learned ASG that as
such the Tribunal has not at all considered the grounds
on merits against the order passed by the O-I-O that the
assessee shall be entitled to refund or not. It is
submitted that as such number of grounds were raised
before the Tribunal on the ground that the refund was
not payable to the assessee including the unjust
enrichment as envisaged in Section 11B of the Central
Excise Act. It is submitted that question of unjust
enrichment has not at all been examined by the Tribunal
and the Tribunal only considered the grounds set out in
the additional grounds which was by way of
amendment/raising the additional grounds.
4.5 It is further submitted that neither the Tribunal nor even
the High Court has considered the fact that while
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claiming the refund the assessee had claimed that the
initial payment was under protest or while contesting the
demand that the assessee took the stand that
assessment was final and without notice under Section
11A amount cannot be recovered. It is submitted that
however while claiming the refund the assessee claimed
that payment was under protest so that the refund claim
was not time barred. It is therefore submitted that the
assessee is approbating and reprobating the issue
whether the initial payment of duty was final or not.
4.6 It is submitted that in any case when the Department
preferred an appeal under Section 35E against the order
in original sanctioning the refund and when the said
proceedings under Section 35E terminated in favour of
the Revenue thereafter the necessary consequences shall
follow and for recovery of any amount pursuant to the
order passed under Section 35E of the Act there shall not
be any separate notice issued under Section 11A of the
14
Act as observed and held by the High Court as well as the
Tribunal.
Making above submissions it is prayed to allow the
appeal.
5.
While opposing the present appeal learned Senior
Counsel appearing on behalf of the assessee has
vehemently submitted that as such the Tribunal heavily
relied upon the earlier decision in the case of Collector
of Central Excise, Bhubaneshwar vs. Re-Rolling Mills,
reported in 1997 (94) ELT 8 . It is submitted that in the
case of Re-Rolling Mills (supra) the Tribunal specifically
observed and held that the time limit of Section 11A
governs the issue of the demand under that Section and
that Section alone and therefore if no demand in
accordance with Section 11A is issued, nothing else can
take its place. It is submitted that therefore the
Tribunal took the view that the demand has to be issued
for the erroneously refunded money within the time limit
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prescribed by Section 11A.
5.1 It is submitted that subsequently the same question
Bajaj Auto Ltd.
arose before the Bombay High Court in
(supra) and after referring to the Board’s Circular No.
423/56/98-CX, dated 22-9-1998 and the case of Re-
Rolling Mills (supra) it was held that the erroneous
refund cannot be recovered by mere filing an application
under Section 35E(2) of the Central Excise Act, unless
the notice under Section 11A is issued within the
stipulated time.
5.2 It is submitted that therefore in absence of any notice
under Section 11A of the Central Excise Act which was
required to be issued within six months from the date of
actual refund, the Tribunal as well as the High Court has
rightly set aside the demand and passed an order of
refund. It is submitted that since the time limit for filing
the appeal under Section 35E(2) is longer than the time
limit prescribed under Section 11A, the show cause
notice should precede the proceedings under Section
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35E(2).
5.3 It is submitted that therefore the issue of show cause
notice under Section 11A of the Central Excise Act is a
condition precedent for recovery of the alleged erroneous
refund within the normal period of limitation prescribed
under Section 11A of the Act notwithstanding
proceedings under Section 35E being initiated by the
Revenue against the order granting refund.
Making above submissions it is prayed to dismiss the
present appeal.
6. We have heard learned counsel appearing on behalf of
the respective parties at length.
7. The short question which is posed for consideration
before this Court is whether Notice under Section 11A of
the Central Excise Act is necessary for the recovery of the
amount when the refund granted is reviewed under
Section 35E of the Act and whether a separate notice
under Section 11A of the Act to be issued within the time
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limit prescribed under Section 11A and before the
proceedings under Section 35E of the Act are initiated
and/or the notice under Section 11A of the Act shall
precede the proceedings under Section 35E of the Act?
7.1 While considering the aforesaid issue it is required to be
noted that as such in the present case the original
authority while passing the O-I-O allowed the refund.
That the order-in-original sanctioning the refund was the
subject matter of review under Section 35E of the Act.
On merits the Reviewing Authority set aside the order-in-
original sanctioning the refund. Therefore, as such
stricto sensu it can be said to be giving effect to the order
passed under Section 35E of the Act. As such the
assessee is claiming the refund on the basis of O-I-O
sanctioning the refund which as such has been set aside
in the proceedings under Section 35E of the Central
Excise Act.
7.2 Now so far as the submissions made on behalf of the
Assessee relying upon the decisions of the Tribunal in the
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case of Re-Rolling Mills (supra) and Bajaj Auto Ltd
(supra) that for refund of the duty a separate show cause
notice under Section 11A of the Act is reviewed and that
too within the time limit prescribed under Section 11A
and that as such notice under Section 11A must precede
within the time limit prescribed under Section 11A before
the notice under Section 35E of the Act is concerned, as
such the aforesaid issue is now not res integra in view of
the direct decision of this Court in the case of Asian
Paints (India) Ltd. (supra) .
7.3 In the case of Asian Paints (India) Ltd. (supra), the
decision which has been rendered subsequent to the
decision of the High Court in the case of Bajaj Auto Ltd
(supra) it is observed and held as under:
"We have read the judgments of the larger
Bench of the Customs, Excise and Gold (Control)
Appellate Tribunal, which are impugned in these
appeals. We are of the view that the judgments
viewed Section 35-E and 11-A of the Central
Excise Act in the proper perspective. The two
sections operate in different fields and are invoked
for different purposes. Different time-limits are,
therefore, set out therein. We do not accept the
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contention that recovery of excise duty cannot be
made pursuant to an appeal filed after invoking
the provisions of Section 35-E, if the timelimit
provided in Section 11-A has expired. To so read
the provisions, would be to render Section 35-E
virtually ineffective, which would be
impermissible.”
7.4 Before this Court in the case of Asian Paints (India) Ltd.
(supra) the judgments of the larger Bench of the Tribunal
were under challenge. The Special Bench of the Tribunal
took the view that Section 35E and Section 11A operate
in different fields and are invoked for different purposes
and different time limits are therefore set out therein.
This Court in the case of Asian Paints (India) Ltd.
(supra) specifically negated and/or did not accept the
submission on behalf of the assessee that the recovery of
excise duty cannot be made pursuant to an appeal filed
invoking the provisions of Section 35E if the time limit
under Section 11A has expired.
7.5 The law laid down by this Court in the case of Asian
Paints (India) Ltd. (supra) as such was binding on the
High Court and despite the same was pointed out and
20
pressed into service by the Revenue before the High
Court, the High Court has without giving any reasons
how the same is misplaced has ignored to follow the
decision of this Court in the case of Asian Paints (India)
Ltd. (supra) and rather has followed its earlier decision
in the case of Bajaj Auto Ltd (supra) which admittedly
was prior to the decision of this Court in the case of
Asian Paints (India) Ltd. (supra) .
8. As observed hereinabove, once the order in original
sanctioning the refund came to be set aside in a
proceeding under Section 35E of the Act and the
proceedings under Section 35E was initiated within the
time prescribed under Section 35E of the Act, thereafter
there is no question of any further notice under Section
11A of the Central Excise Act as observed by the Tribunal
affirmed by the High Court on quashing and setting aside
the order in original sanctioning the refund in exercise of
powers under Section 35E of the Act which otherwise is
prescribed under the Act within the time stipulated
21
under Section 35E of the Act, thereafter necessary
consequence shall follow and thereafter there is no
question of any refund pursuant to order in original.
9. In view of the above and for the reasons stated above,
present appeal succeeds. The impugned judgment and
order passed by the High Court and that of the Tribunal
are hereby quashed and set aside and the order passed
by the Commissioner (Appeals), Mumbai dated
13.05.2005 is hereby restored.
However, in the facts and circumstances of the case there
is no order as to costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(KRISHNA MURARI)
New Delhi,
March 24, 2023
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