Rohtas Industries Ltd. v. Union Of India — 1967 DIGILAW 25 (PAT)

Judgment A.B.N.Sinha, J. 1. This appeal by the plaintiff arises out of a suit for recovery of Rs. 15,296 paid by the plaintiff to the defendant. Union of India, on account of excess Excise Duty on soap in respect of the year 1966-57. 2. Briefly stated, the case of the plaintiff is that though by satisfaction No. S.R.O./ 500, dated the 1st March. 1956 (Ext. D), the Central Government in exercise of the powers conferred on them by rule 8 of the Central Excise Rules, 1944, had exempted the first one hundred twenty-five tons of soap of all kinds cleared for home consumption by any manufacturer on or after the 1st day of April from any duty, the plaintiff had no knowledge of the said exemption, and it, therefore, paid Excise Duty even on the first one hundred twenty-five tons of washing soap cleared for consumption during the financial year 1966-67. When the plaintiff came to know of the aforesaid exemption on the 8th January, 1958, it applied for refund of Rs. 15,296, the sum of money which had been paid by the plaintiff to the defendant as Excise Duty by mistake, to the Assistant Collector, Central Excise, Patna. The plaintiffs application for refund of the aforesaid amount was rejected by the Assistant Collector. Central Excise, Patna, and its appeal to the Central Excise Collector, Patna, and the revision application before the Joint Secretary. Ministry of Finance, having also failed, the plaintiff was compelled to institute the suit for recovery of Rs. 18,296, as aforesaid, after due service of notice under Section 80 of the Code of Civil Procedure. 3. Central Excise, Patna, and its appeal to the Central Excise Collector, Patna, and the revision application before the Joint Secretary. Ministry of Finance, having also failed, the plaintiff was compelled to institute the suit for recovery of Rs. 18,296, as aforesaid, after due service of notice under Section 80 of the Code of Civil Procedure. 3. The suit was resisted by the defendant on the grounds, inter alia, that the allegation of the plaintiff that it did not know of the notification exempting first 125 tons of soap was wrong, that the plaintiff was a very big concern and produces many commodities chargeable to the Central Excise Duty and maintains a regular office and that the plaintiff had full knowledge of the exemption and was fully aware of the same when it paid the Excise Duty, it was further pleaded on behalf of the defendant that Sec. 40(1) of the Central Excises and Salt Act, 1944 (hereinafter referred to us "the Act" was a bar to the maintainability of the suit and that, in any event, the cause of action for the suit, as stated in paragraph 12 of the plaint being the adverse order passed against the plaintiff by the Joint Secretary, Ministry of Finance, on the 27th October, 1959, the suit was covered by Sec. 40(2) of the Act; and, it having been instituted after an expiry of six months from the date of the said order, that is from the 27th October, 1959, it was barred under the special law of limitation provided therein. The claim for refund of the Excise Duty was also resisted on the ground that it had not been made within three months from the date of payment as required by Rule 11 of the Central Excise Rules 1944. 4. The trial Court has held that the suit was not barred under Sec. 40(1) of the Act, that notice under Section 80 of the Code of Civil Procedure had been duly served on the defendant that there was no defect in the frame of the suit and that Rule 11 of the Central Excise Rules had no application to a suit of any such legal proceeding. It has however, found that the suit was barred by limitation under Sec. 40(2) of the Act and that the plaintiff had knowledge of the exemption in February, 1956, and it could not be said that he had paid the duty under any mistake, because the payment for which reliefs were sought were all made after February, 1956. In its view, therefore, Article 96 of the Indian Limitation Act, 1908, which was meant for cases where relief was sought on the ground for mistake, was not applicable to the facts of the present case. In substance, the plaintiffs suit has failed on ground of limitation. 5. The learned Advocate-General, who appeared for the plaintiff-appellant, has urged, firstly, that the finding of the trial Court that the plaintiff had knowledge of the exemption in February, 1956, and had paid the duty sought to be recovered in this case even though it knew about the exemption was wrong and should, therefore, be set aside and, secondly, that Sec. 40(2) of the Act and the limitation provided therein did not apply to the present case which was governed by Article 96 of the Indian-Limitation Act, 1908, and the suit having been filed well within three years from the 8th January, 1968, the date on which the mistake became known to the plaintiff, was not barred by limitation and should have been therefore, decreed in full. Mr. K. P. Verma, who appeared for the defendant, on the other hand, contended that the findings of the trial Court, both on the question of the plaintiffs knowledge of the exemption as also on the question of limitation, were correct and should not be interfered with. 6. The question arises for determination: (1) Is the plaintiffs case true that it came to know about the exemption of first 125 tons of soap granted under the notification, dated the 1st March, 1966, on or about the 8th January, 1968, as alleged by it?, and (2) whether the suit was governed by Sec. 40(2) of the Central Excises and Salt Act. 1944, or else by Article 96 of the Indian Limitation Act, 1908. 7. The case of the plaintiff, as indicated above, is that the duty sought to be recovered was paid under a mistake and that the said mistake was discovered for the first time in January, 1968. 1944, or else by Article 96 of the Indian Limitation Act, 1908. 7. The case of the plaintiff, as indicated above, is that the duty sought to be recovered was paid under a mistake and that the said mistake was discovered for the first time in January, 1968. P.W. 1, who has been working in the vegetable and soap department of the plaintiff since 1945 and was the go-down-in-charge and who has claimed to be dealing with the duty on soap and vegetable only, has stated in paragraph 12 of his deposition that he came to know of the exemption in November, 1957, Ext. B. dated the 28th November, 1967, is a letter from the Commercial Manager, Vanaspati, to the Inspector of Central Excise. It reads as under: "We have come to know that 126 tons of Washing Soap can be manufactured free of duty in one year. Please let us know the full details in this connection at a very early date " Ext. 1, dated the 8th January, 1968, is the reply to Ext. B. This reply is in the following terms: "Please refer to your letter No. S.L. V.E.G. 351, dated 28-11-1957. In this connection, I like to inform you that 1st 126 tons of household and laundry soap is exempted from duty during one financial year. This is for your information and needful." D.W. 1, the Inspector of Central Excise, who was posted at Dalmianagar from January, 1956 to January, 1959, has, however, stated that the plaintiff had knowledge of the exemption in the beginning of the year 1966-67. He has admitted in paragraph 5 of his deposition that he had not told any employee of the plaintiff that they were entitled to exemption for 125 tons, because no one had asked him. I am inclined to accept the evidence of P.W. 1 which finds ample support from Exts. B and 1, referred to above. Moreover, the very fact that the plaintiff went on paying excess duty during the year 1956-57 is by itself a very strong circumstance to show that it had no knowledge of the exemption. The trial Court has, however, on the basis of Exts. A to A/4, come to the conclusion that the plaintiff had knowledge of the exemption in February, 1956. P.W. 1 has admitted that these A.R. forms (Exts. The trial Court has, however, on the basis of Exts. A to A/4, come to the conclusion that the plaintiff had knowledge of the exemption in February, 1956. P.W. 1 has admitted that these A.R. forms (Exts. A to A/4) were written by him and they bore the signature of Mr. M. R. Seth, one of the persons, who held power of attorney from the plaintiff for dealing with excise duty matters. In all these, A.R. forms in the column meant for writing in the amount of duty, the words "free from duty" are mentioned. In my opinion, however, these A.R. forms (Exts. A to A/4) are of no assistance on the question under consideration. All these forms are of the month of February, 1956, Ext. A being dated the 15th February, 1956, Ext. A (1), dated the 17th February, 1958, Ex. A(2), dated the 18th February, 1966, Ext. A (3), dated the 22nd February, 1966, and Ext. A(4), dated the 23rd February, 1956. The order of exemption for the year 1956-57 (Ext. D) itself was published in the Gazette of India, dated the 1st of March, 1956. Accordingly, the entry in the A.R. forms (Exts. A to A/4), all of February, 1956, of the words "free from duty" is no indication whatsoever about the plaintiffs knowledge of an exemption which admittedly came into existence later. I, therefore, hold that the plaintiffs case that it came to know about the exemption in or about January, 1958, and, in any case, not before November, 1957, is true and must be accepted. 8. On the second question, the trial Court without practically any discussion has expressed the opinion that the suit was covered under Sec. 40(2) of the Central Excises and Salt Act, 1944, and that it, having been filed beyond the period of limitation prescribed therein, was not barred by limitation. In regard to Article 96 of the Limitation Act, it has held that the plaintiff having knowledge of the exemption in February, 1966, the payment of duty was not under a mistake at all and, as such. Article 96 was inapplicable; and, even if it were assumed that Article 96 was applicable, the suit having bean filed beyond three years from the last payment made by the plaintiff was barred under that article as well. Article 96 was inapplicable; and, even if it were assumed that Article 96 was applicable, the suit having bean filed beyond three years from the last payment made by the plaintiff was barred under that article as well. In my opinion, on an appreciation of the facts of this case the trial Court should have held that Sec. 40(2) of the Act had no application to the present suit. Sec. 40(2) reads as under: "No suit, prosecution or other legal proceeding shall be instituted for anything done or ordered to be done under this Act after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of." It is clear that Sub-section (2) of Sec. 40 bars the institution of any suit or legal proceeding only when such a suit or legal proceeding relates to or is directed against anything done or ordered to be done under the Act. On the finding reached above that the plaintiff for the first time came to know about the exemption in November, 1957, or there-about and that it thus paid the duty in question on the first 126 tons of soap manufactured by it from the 1st April. 1966 to the 4th of July, 1966, totalling Rs. 15,296 (vide Ext. 1/c, the letter from the Commercial Manager. Vanaspati, to the Assistant Collector, CENtral Excise, Patna, dated the 21st March, 1968), under a clear mistake, no question of the plaintiff availing of the provisions of Rule 11 of the Central Excise Rules, 1944, providing for claims for refunds of duties erroneously paid within three months from the date of payment could arise, and, in the circumstances, the letter of the Commercial Manager, Vanaspati, on behalf of the plaintiff to the Assistant Collector, Central Excise, Patna, on the 21st March, 1968 (Ext. 1/c), praying for refund of the excise duty paid in ignorance of the exemption and the subsequent reminders (Exts. 1/b and 1/d) were, quite clearly, applications for refund outside the purview of the Act or the rules thereunder It may be mentioned that there is no provision either in the Act or in the Rules made under Sec.37 and published in accordance with Sec.38 of the Act for any application for refund to be made other than Rule 11 of the Central Excise Rules, 1944, referred to above. In other words, the statute or the rules made thereunder provide no machinery whatsoever for recovery of duty paid under a mistake when the mistake itself was discovered more than three months after the payment was actually made. The application for refund (Ext. 1/c), dated the 21st March, 1958, was in fact and in substance an application for an equitable relief at the hands of the authority to whom the aforesaid sum of Rs. 15,296 had been paid under a mistake. In the aforesaid context, neither the order of the Assistant Collector rejecting the claim of plaintiff as time-barred (vide Ext. 1(i), dated 23rd July, 1958), nor, the order of the Collector. Central Excise dated the 10th January, 1959 (Ext. 6) declining, to interfere, with the order passed by the Assistant Collector, Central Excise, or, the order of the Joint Secretary, Ministry of Finance, Government of India, dated the 27th October, 1959 (Ext. 6/a), finally rejecting the plaintiffs prayer for refund, were orders passed under the Act. Indeed, if the original order passed by the Assistant Collector of Central Excise, Patna, dated the 23rd July, 1958 (Ext. 1/1), was not an order passed under the Act, no appeal, as provided for under Sec.36 or revision at provided for under Sec.36 of the Act were permissible, and, any order, therefore, passed either by the Collector, Central Excise, or by the Joint Secretary, Government of India, could not be said to be orders passed under Sec.36 or Sec.36 of the Act which confer appellate and revisional jurisdiction on the authorities named therein respectively. It follows, therefore, that the present suit cannot be said to be a suit in respect of anything done or ordered to be done under the Act. I am, accordingly, of the opinion that Sec. 40(2) does not operate as a bar to the present suit, and, consequently, the special period of limitation provided therein has no application to the present case. 9. It is well settled (vide Sales Tax Officer, Banaras V/s. Kanhaiya Lal Mukund Lal, AIR 1969 SC 136) that where it is once established that payment of tax has been made by a party who was labouring under a mistake of law the party is entitled to recover the same and the party receiving the same was bound to repay or return it. Article 96 of the Limitation Act, 1908, is quite general in its terms, and, in my opinion, a mistake, whether of fact or of law, is within its purview. The terminus a quo under Article 96 is the date on which the mistake became known to the plaintiff and that date has to be determined upon the materials and evidence on the record. I have already held above that the mistake became known to the plaintiff in no case earlier than November, 1957. The suit, out of which this appeal arises, was instituted on the 30th June, 1960, which is well within three years of the date on which or the time from which the mistake became known to the plaintiff. It may be mentioned that under Article 96 of the Limitation Act time runs from the plaintiffs knowledge and there is no express requirement of diligence on his part, vide Kaikhusroo Manekshah V/s. Gangadas Dwarkadas, 38 Bom LR 712=(AIR 1936 Bom 822). It follows that Article 96 of the Limitation Act is applicable and the suit is not barred by limitation 10. In the result, this appeal is allowed and the plaintiffs suit is decreed. The judgment and the decree of the trial Court are set aside In the circumstances of this case, however, there will be no order as to costs of this appeal. A.Ahmad, J. 11 I agree.