Refund of unlawfully collected excise duty allowed where Revenue could not rely on a different tariff item after invalid demand failed.

Where central excise duty is collected under an unlawful demand, the Revenue cannot later justify retention by invoking a different tariff item that was neither validly applied nor recoverable within the limitation period. Payments made under protest during pending proceedings are not voluntary excess payments, and the refund limitation rule does not bar recovery in that situation. The operative principle is that duty collected without a lawful assessment or timely demand cannot be appropriated against a liability that was never validly raised. The assessee is therefore entitled to refund of the additional duty recovered.

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Issues: Whether the Revenue could retain additional central excise duty collected from the assessee by supporting the levy under a different tariff item after the original demand had been held illegal, and whether the assessee's refund claims were barred by limitation.

Analysis: The additional duty had been recovered pursuant to demands raised on the footing that the goods fell under the relevant exemption notifications and tariff classification. Those demands had already been struck down, and the Revenue's attempt to sustain retention by invoking Item 18 of the tariff was rejected. The goods were not properly brought within that item on the scheme of the tariff then in force, and in any event no lawful demand had been raised under that item within the period prescribed for recovery. Amounts paid under protest during the pendency of proceedings could not be retained by appropriating them against a demand which was never validly made and had become time-barred. The limitation rule for refund did not assist the Revenue because the payments were not voluntary excess payments on account of inadvertence or error.

Conclusion: The Revenue could not justify retention of the collected duty under Item 18, and the refund claims were not barred. The assessee was entitled to refund of the additional duty recovered.

Ratio Decidendi: Where excise duty is collected under an unlawful or ultra vires demand, the Revenue cannot retain the amount by later asserting liability under a different tariff entry that was neither validly assessed nor recoverable within limitation; duty paid under protest pursuant to such invalid demands must be refunded.

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