1988 (4) TMI 59 - HC - Central Excise

Court grants refund of excise duty to petitioners based on product classification under tariff item 68

The court ruled in favor of the petitioners, granting them a refund of the excise duty paid from September 1981 to February 1986 based on the ... P.V.C. leather cloth - Precedent - 'sub silentio' - Connotation of - Refund Issues Involved:1. Classification of PVC leather cloth under the Central Excises and Salt Act, 1944.2. Eligibility for refund of excise duty paid under a mistake of law.3. Delay in filing the petition and condonation thereof.4. Availability of an alternative remedy by way of appeal.Detailed Analysis:1. Classification of PVC leather cloth under the Central Excises and Salt Act, 1944:The primary issue revolves around whether PVC leather cloth should be classified under tariff item 19 (cotton fabrics) or tariff item 68 (residuary entry). The petitioners argued that their product, PVC leather cloth, which contains only 8% to 15% cotton fabric, should not be classified under item 19. The Supreme Court's judgments in Union of India v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. and Collector of Central Excise v. Multiple Fabrics Pvt. Ltd. were cited to support the argument that the final product's composition is decisive for classification. The court concluded that since the PVC compound constitutes approximately 90% of the final product, it cannot be classified as cotton fabric under item 19. Instead, it falls under the residuary entry 68.2. Eligibility for refund of excise duty paid under a mistake of law:The petitioners realized they had been paying excise duty under the wrong classification after the Supreme Court's judgment in 1985. They applied for a refund in October 1985 and filed a revised classification list. The court acknowledged that the petitioners paid excise duty under a mistake of law and are entitled to a refund for the period from September 1981 to February 1986. The court also noted that from 11th May 1982, an Exemption Notification No. 182/82 exempted the product from excise duty, and the petitioners should benefit from this exemption for the relevant period.3. Delay in filing the petition and condonation thereof:The respondents argued that there was a delay in filing the petition. However, the court found that the petitioners acted promptly upon discovering their mistake in 1985 and applied for a revised classification and refund. The court deemed this a fit case for condonation of delay, allowing the petitioners to claim a refund of the excise duty paid under a mistake of law.4. Availability of an alternative remedy by way of appeal:The respondents contended that the petition should be dismissed because an alternative remedy by way of appeal was available. However, the court decided not to reject the petition on this ground, especially since it involved a substantial point of law regarding classification. The court referenced previous judgments, including Ashok Leyland Limited v. Union of India, M.R.F. Ltd. v. Union of India & Others, and Leukoplant (India) Pvt. Ltd. v. Union of India, to support its decision.Conclusion:The court ruled in favor of the petitioners, granting them a refund of the excise duty paid from September 1981 to February 1986, based on the classification of their product under tariff item 68. The petitioners were also entitled to the benefit of the Exemption Notification No. 182/82 from 11th May 1982. The court directed the respondents to finalize the refund claim within eight weeks and pay interest at the rate of 12% per annum on the refundable amount. The respondents' application for a stay of the order was rejected.