Refund of duty paid under mistake survives retrospective limitation and runs from discovery of the mistake.

A refund claim for excise duty paid under mistake was held to accrue when the duty was paid, so the amended Rule 11 refund period could not retrospectively extinguish that vested right absent clear statutory language. The six-month limitation under the amended rule therefore did not bar claims based on earlier payments. In mistake-based refund proceedings, limitation was held to run from discovery of the mistake, subject to reasonable diligence under section 17 of the Limitation Act, 1963. On the facts, the claimant acted promptly after discovering the mistake, and the refund claims were not rejected for delay or laches.

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Issues: (i) whether the amended refund provision in rule 11 of the Central Excise Rules, 1944 applied retrospectively so as to govern refund claims arising from duty paid before its commencement; (ii) whether the refund claims were barred by limitation, delay, or laches in proceedings under Article 226 of the Constitution of India.

Issue (i): whether the amended refund provision in rule 11 of the Central Excise Rules, 1944 applied retrospectively so as to govern refund claims arising from duty paid before its commencement.

Analysis: The right to recover duty paid under mistake was treated as an existing and vested right that arose when the duty was paid. The amended rule prescribing a six-month period from the date of payment was held to be prospective, because nothing in its language showed an intention to take away accrued rights or to apply it to earlier payments. The earlier rule did not create a complete code barring other remedies for refund of duty illegally or wrongly collected.

Conclusion: The amended rule did not apply retrospectively, and the refund claims were not barred on that ground.

Issue (ii): whether the refund claims were barred by limitation, delay, or laches in proceedings under Article 226 of the Constitution of India.

Analysis: In claims for refund based on mistake, limitation was held to run from discovery of the mistake, subject to reasonable diligence under section 17 of the Limitation Act, 1963. On the facts, the petitioner was found to have learned of the mistake only when informed by the bottling formula source and then acted with due diligence. The Court also held that a genuine claim should not be rejected on technical objections of delay or limitation where the claim was otherwise just and undisputed on merits.

Conclusion: The claims were within time and were not liable to be rejected for delay or laches.

Final Conclusion: The petitioner was entitled to refund of the excess excise duty paid, and the impugned limitation-based rejections could not be sustained.

Ratio Decidendi: A refund claim for duty paid under mistake is governed by the law in force when the right to refund accrues, and an accrued right cannot be taken away retrospectively unless the statute clearly so provides; in such claims, limitation runs from discovery of the mistake with reasonable diligence.

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