Refund of excess excise duty allowed where payment was made under mistake of fact or law, despite limitation objection.

Excess central excise duty paid under a classification was held refundable where the payment was made under a mistake of fact and/or law, and such money is recoverable under Section 72 of the Indian Contract Act, 1872. Rule 11 of the Central Excise Rules, read with Rule 173-J, was treated as confined to accounting errors, inadvertence or misconstruction and not as barring a refund claim founded on legal mistake. The Court also held that the department could not retain duty collected without authority of law, that the writ petition had been filed within a reasonable time after discovery of the mistake, and that the petitioner need not be relegated to a civil suit. The refund claim was therefore maintainable.

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Issues: Whether excess central excise duty paid on fork-lift truck tyres under a classification was refundable despite the one-year limitation in Rule 11 of the Central Excise Rules, and whether the petitioner could obtain relief in writ jurisdiction on the footing of mistake of law under Section 72 of the Contract Act.

Analysis: The petitioner had paid duty on the mistaken assumption that fork-lift truck tyres fell under the higher-rated tariff item applicable to motor vehicle tyres. The Court held that this was a mistake of fact and/or law and that money paid under such mistake is recoverable under Section 72 of the Indian Contract Act, 1872. Rule 11 of the Central Excise Rules, read with Rule 173-J, was treated as confined to inadvertence, error, or misconstruction in the accounting sense and not as controlling a claim based on payment made under a legal mistake. The Court further held that the department could not retain excess duty collected without authority of law, that the petition was filed within a reasonable time after discovery of the mistake, and that no triable issue was disclosed to justify relegating the petitioner to a civil suit.

Conclusion: The refund claim was maintainable and the limitation objection under Rule 11 failed. The petitioner was entitled to refund of the excess duty in writ jurisdiction.

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