Gokulchand & Sons vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/452/07

(Arising out of Order-in-Appeal No.SVS/345/NGP-I/2006 dated 31/10/2006 passed by Commissioner of Central Excise & Customs (Appeals), Nagpur)

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Gokulchand & Sons Appellant Vs. Commissioner of Central Excise, Respondent Nagpur

Appearance: Shri.Bharat Raichandani Ms.Purnima Singh, Advocate for appellant Shri.H.M.Dixit, Asst. Comm. (AR), for respondent

CORAM: Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 11/09/2015 Date of Decision : 11/09/2015 ORDER NO

Per: Raju

1. The appellants are purchasing Cupro Nickle Swarf (CNS) from the ordinance factory located at Nagpur. The ordinance factory at Nagpur was clearing the said material at nil rate of duty availing exemption under the Notification13/94-CE(NT) and 8/96. The said notifications exempted Unrefined copper and unwrought copper, intended for use in the manufacture of utensils or handicrafts falling under heading 74.02 or 74.03 from whole of Central Excise duty subject to the condition that the exemption shall not apply to a manufacturer who produces or manufactures copper from copper or copper concentrate. The ordinance factory in December 1996 had doubt regarding classification of the material being cleared by them to the appellants. They were of the opinion that the material being cleared by them is not unwrought copper and therefore would not be correctly classifiable under heading 74.03. The revenue clarified that they should immediately file a revised classification and also pay applicable Central Excise duty. The ordinance factory later on paid the Central Excise duty on the said material cleared to the appellants.

2. The ordinance factory recovered this amount of duty paid from the appellant in 1997 by adjustment against the future tenders during the period February 1997 to May 1997. The appellants opposed this demand and approached the arbitrator in May 1997. The ordinance factory refused to appoint the arbitrator and in November 1998 the appellants sent a notice to ordinance factory for recovery of the disputed amount. After certain correspondence in 1998  1999 in December 1999 the appellants file a suit against the ordinance factory. In January 2003 this suit was dismissed on the ground that the Court has no jurisdiction. In February 2003 the appellants filed review petition which was allowed. The ordinance factory in September 2003 filed a revision petition in the Honble High Court of Madhya Pradesh. The Honble High Court allowed the revision petition filed by the ordinance factory in June 2005. Thereafter in December 2005 the appellants file a refund claim before the Department. The refund claim was rejected on 2 counts. Firstly it was held to be barred by limitation as the duty was paid in 1996 whereas the refund was filed in 2005. It was held that the duty was not paid under protest and hence the limitation provided under the act would apply. Secondly it was held that the exemption was not available to the material cleared by the ordinance factory as the same was not unwrought copper (heading 74.03) but copper scrap falling under heading 74.04. The Commissioner (Appeals) held that since the ordinance factory had not protested while paying the duty it cannot be said that the duty was paid under protest. He did not give any findings on the issue of classification.

3. Learned Counsel for the appellants argued that the exemption has been correctly availed by the ordnance factory as material cleared by them was classifiable under heading 74.03. He also argued that the ordinance factory may not have filed protest but the appellants have been protesting from the day the duty was recovered from them. They had tried arbitration, filed suit in the court and even contested in the High Court. The protest was clear and apparent. The appellant relied on the decision of Tribunal in case of Kota oxygen Limited 2001(130)ELT889, the decision of Tribunal in case of Hutchinson Max Telecom 2004 (165) ELT 175 and the decision of Honble Supreme Court in case of M.P. steel Corporation 2015 (319) ELT 373.

4. Learned AR reiterated the arguments made in the impugned order.

5. We have examining the arguments made by both parties. There are 2 issues that need to be decided:

i) If the refund claim is barred by limitation or can it be considered that duty has been paid under protest.

ii) If the exemption notification is available to the material cleared by the ordinance factory.

5.1 It is seen that no protest has been filed by the ordinance factory while paying duty. They have simply paid duty and recovered it from the appellant. The appellant protested the recovery of duty by the ordinance factory from him and later contested the claim right up to the Honble High Court. It is only when High Court decided that the civil Courts did not have jurisdiction in the matter they approached the department with a refund application. There is no doubt that the appellants have been protesting against recovery of this amount right from the day the same was recovered from them. However can this be considered a valid protest for the purpose of section 11 B. Tribunal in the case of Kota Oxygen Limited 2001(130)ELT889 has ruled that the duty paid while contesting the said payment before appellate forum is to be considered as duty paid under protest. For this the tribunal relied on the decision of Honble Supreme Court in case of Mafatlal Industries 1997 (89) E.L.T. 247 (S.C.). The para 107 of the said decision reads as under:

107.?On the issue of the retrospective application of the amended provisions of the Excise Act, I wish to emphasise one practical difficulty that may arise. Reddy, J. has held that in respect of proceedings that have been finally culminated, there is no question of reopening proceedings, and retrospectively applying the amended Section 11B. However, in respect of decrees and orders that have become final but have not been executed, the non obstante clause, Section 11B(3), provides as follows :

(3)?Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2). (Emphasis added) It is, therefore, clear that in respect of such decrees and orders, the procedure and conditions prescribed in Section 11B will have to be complied with. However, under the scheme of the amended Excise Act, the application for refund which is a pre-requisite for invoking Section 11B(2), is required to be made within six months from the payment of duty. It is obvious that this requirement cannot be complied with in respect of pending decrees and orders. But it must at the same time be realised that in such a case, the assessee was protesting against the recovery of the excise duty from him for which he had even initiated legal proceedings. It would therefore be in order to assume that he had paid the duty even though he was protesting its recovery. To ensure that such orders and decrees are not frustrated, it must be deemed that the duties of excise in such cases were paid under protest within the meaning of the second proviso to Clause (1) of Section 11B. This would enable the assessees in such cases to file fresh applications under Section 11B(2), thereby complying with the scheme of the amended Excise Act.

Thus it is settled by the Honble Apex Court that contesting the liability before the appellate forum can be considered as a protest against such liability. Moreover Section 14 of the Limitation Act, 1963:

14 Exclusion of time of proceeding bona fide in court without jurisdiction. 

(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation. For the purposes of this section,

(a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;

(b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;

(c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction.

5.2 There is no evidence that the delay or litigation was deliberate. In the instant case it is apparent that the appellants were contesting the liability right from the date of payment of duty before various forums. Thus it can be considered that the duty was paid by them under protest. In view of above the refund claim cannot be considered as time-barred.

5.3 The 2nd issue that needs were decided is if the classification of the material cleared and consequential availability of the exemption notification. It is seen that the impugned order does not deal with the same. No findings have been given on the matter of classification in the impugned order and to that extent it is a non-speaking order.

6. In view of above the appeal is allowed on the issue of limitation. However on the issue of classification and availability of exemption the appeal is allowed by way of remand. The learned Commissioner (Appeals) is directed to hear the appellant on the classification issue and availability of exemption and record his findings, preferably from receipt of a copy of this order. The appellant is also directed to appear before the Commissioner (Appeals) and seek opportunity of hearing.

(Pronounced in Court)

(Anil Choudhary) Member (Judicial) (Raju) Member (Technical) pj

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Appeal No.E/452/07