Refund of duty paid under mistake held recoverable; limitation ran from discovery of the exemption, not from payment.

Money paid under a mistake of law was held recoverable where the plaintiff proved it learned of the excise exemption only in late 1957 or early 1958; the contemporaneous forms relied on by the defence did not establish earlier knowledge because they pre-dated the exemption notification. The refund suit was held not barred by Section 40(2) of the Central Excises and Salt Act, 1944, because that bar applied only to proceedings concerning acts or orders done under the Act, while this claim arose from payment under mistake and was outside the statutory refund machinery. Article 96 of the Limitation Act, 1908 applied, so limitation ran from discovery of the mistake, and the claim was within time.

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Issues: (i) Whether the plaintiff had knowledge of the excise exemption before the alleged discovery in November 1957 to January 1958, so as to negative payment of duty under mistake; (ii) whether the suit for refund of excise duty was barred by Section 40(2) of the Central Excises and Salt Act, 1944, or was governed by Article 96 of the Indian Limitation Act, 1908.

Issue (i): Whether the plaintiff had knowledge of the excise exemption before the alleged discovery in November 1957 to January 1958, so as to negative payment of duty under mistake.

Analysis: The evidence of the plaintiff's witness was accepted as being supported by the correspondence showing that the exemption was only later brought to the plaintiff's notice. The contemporaneous forms relied upon by the defence were found to be of no assistance, because they pre-dated the exemption notification and could not prove prior knowledge of an exemption that came into existence later. The surrounding circumstances also showed continued payment of duty despite lack of awareness of the exemption.

Conclusion: The plaintiff's case that it learnt of the exemption only in late 1957 or early 1958 was accepted, and the duty was held to have been paid under mistake.

Issue (ii): Whether the suit for refund of excise duty was barred by Section 40(2) of the Central Excises and Salt Act, 1944, or was governed by Article 96 of the Indian Limitation Act, 1908.

Analysis: Section 40(2) was held to apply only to proceedings in respect of acts or orders done under the Act. Since the refund claim arose from money paid under mistake and the refund applications were outside the statutory machinery, the proceedings were not treated as a suit in respect of anything done under the Act. Rule 11 was also found inapplicable because the claim was not one within the three-month refund procedure. The applicable provision was Article 96, under which limitation runs from the date the mistake became known to the plaintiff; on the facts, the suit was filed within three years of that date.

Conclusion: The suit was not barred by Section 40(2), Article 96 applied, and the claim was within limitation.

Final Conclusion: The plaintiff was entitled to recover the excise duty paid under mistake, and the decree of the trial court was set aside.

Ratio Decidendi: Money paid under a mistake of law is recoverable, and where the claim is for refund on that basis, limitation runs from the date the mistake becomes known to the payer rather than from the date of payment; a special statutory bar applies only where the proceeding relates to an act or order done under the statute.

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