1977 (12) TMI 32 - HC - Customs

Court rules recovery of excess duty without authority, grants refund under Section 72 of Indian Contract Act.

The court ruled in favor of the petitioners, concluding that the recovery of duty in excess of 50% was without the authority of law. It recognized the ... Classification - Exemption - Greaseproof paper - Mistake - Tariff ruling - Refund - Writ petition - Writ jurisdiction - Existence of Issues Involved:1. Refund of excess customs duty paid.2. Classification of imported paper under exemption notification.3. Timeliness of refund applications under Section 27 of the Customs Act.4. Jurisdiction of Civil Courts versus Customs Authorities.5. Application of Section 72 of the Indian Contract Act for recovery of mistaken payments.Detailed Analysis:1. Refund of Excess Customs Duty Paid:The petitioners sought a refund for customs duty paid in excess of 50% on the importation of Vegetable Parchment paper and Glassine paper. Initially, they were charged 100% duty, which they later discovered was incorrect as these papers should have been classified under the exemption notification as Greaseproof paper, thereby attracting only 50% duty.2. Classification of Imported Paper Under Exemption Notification:The petitioners argued that Vegetable Parchment paper and Glassine paper should be classified as Greaseproof paper under Item 5 of the Customs Notification dated 28th February 1965, which exempts such papers from paying duty in excess of 50%. The Central Board of Excise and Customs eventually accepted this classification on 15th June 1967, issuing instructions to charge only 50% duty on these papers.3. Timeliness of Refund Applications Under Section 27 of the Customs Act:The petitioners filed refund applications on 9th August 1967, which were rejected as time-barred under Section 27 of the Customs Act. The appeals and revisions against this decision were also rejected. The petitioners contended that the recovery was without the authority of law, and thus, the limitation under Section 27 should not apply. They argued that they discovered the mistake in September 1966, making their petition within the three-year limitation period for civil actions.4. Jurisdiction of Civil Courts Versus Customs Authorities:The respondents maintained that the Customs Authorities acted within their jurisdiction under the Customs Act and that any refund claims must comply with Section 27. They argued that the petitioners should file a civil suit if they believed the recovery was without the authority of law. The court, however, noted that if the recovery was indeed without the authority of law, the petitioners could seek relief under Article 226 of the Constitution.5. Application of Section 72 of the Indian Contract Act for Recovery of Mistaken Payments:The court acknowledged that payments made under a mistake of fact or law are recoverable under Section 72 of the Indian Contract Act. The petitioners claimed that they paid the excess duty under a mutual mistake, which they only realized in September 1966. The court accepted this argument, noting that the respondents did not provide sufficient evidence to dispute the petitioners' claim of when the mistake was discovered.Conclusion:The court concluded that the recovery of duty in excess of 50% was without the authority of law. It recognized the petitioners' right to a refund under Section 72 of the Indian Contract Act, as the payments were made under a mistake of fact and law. The court ruled that the writ petition was filed within the three-year limitation period from the discovery of the mistake and thus was not time-barred. Consequently, the court made the rule absolute in terms of prayers (a) and (b) of the petition, ordering the respondents to refund the excess duty collected and awarded costs to the petitioners.