Excise duty assessment by actual yarn count and limitation for recovery of erroneous refund turn on the refund date.

Cotton yarn under Item 18-A of the First Schedule to the Central Excises and Salt Act, 1944 was assessed on the basis of its actual count, because the tariff classification depended on the yarn itself and not on an average count. For recovery of duty allegedly erroneously refunded, Rule 10 of the Central Excise Rules, 1944 required a written demand within three months from the date the refund was made. The relevant date was the Department's issuance of refund vouchers, not their encashment by the assessee, so the demand relating to the October 1966 refunds was time-barred to that extent and the remainder of the demand survived.

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Issues: (i) Whether the cotton yarn was liable to be assessed on the basis of actual count and not average count for the purpose of duty under Item 18-A of the First Schedule to the Central Excises and Salt Act, 1944; (ii) Whether the demand for recovery of duty allegedly erroneously refunded was barred by limitation under Rule 10 of the Central Excise Rules, 1944.

Issue (i): Whether the cotton yarn was liable to be assessed on the basis of actual count and not average count for the purpose of duty under Item 18-A of the First Schedule to the Central Excises and Salt Act, 1944.

Analysis: The classification under Item 18-A depended on the count of the yarn itself. The duty structure differentiated yarn by count, and the Court found no basis to accept average count as the governing measure. The assessment had been made on the proper tariff basis, and the challenge to the quantitative assessment could not be sustained.

Conclusion: The assessment was correctly made on the basis of actual count, and this contention failed against the assessee.

Issue (ii): Whether the demand for recovery of duty allegedly erroneously refunded was barred by limitation under Rule 10 of the Central Excise Rules, 1944.

Analysis: Rule 10 required a written demand for recovery of duty erroneously refunded to be made within three months from the date of making the refund. The refund was effected by issuance of refund vouchers, and that date was held to be the relevant date for limitation. Since the demand covering the amounts refunded on 21st/24th October 1966 was made beyond three months, that part of the demand was time-barred.

Conclusion: The demand was barred by limitation to the extent of Rs. 2,051.13 and was quashed in part, while the balance demand survived.

Final Conclusion: The petition succeeded only to the extent of the time-barred refund demand, resulting in partial relief and a direction to refund the amount recovered pursuant to the invalid demand.

Ratio Decidendi: For recovery of duty erroneously refunded under Rule 10 of the Central Excise Rules, 1944, limitation runs from the date the refund is made by the Department, not from the date of encashment of the refund voucher by the assessee.

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