Refund of excise duty collected on exempt goods cannot be denied as time-barred where the levy lacked authority of law.

Excise duty collected on goods exempt from duty was treated as a recovery without authority of law, because a levy made despite exemption is in excess of jurisdiction and cannot be recharacterised as payment made by inadvertence, error, or misconstruction. The refund was therefore not defeated on that ground. Rule 11 of the Central Excise Rules also did not bar the claim, because its limitation applied to duties paid through inadvertence, error, or misconstruction and not to amounts recovered without jurisdiction. The refund rejection orders were quashed and the duty was directed to be refunded with costs.

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Issues: (i) Whether excise duty collected on goods exempt from duty was recoverable by the department as a lawful levy or was a recovery without authority of law; (ii) Whether the claim for refund was barred by limitation under Rule 11 of the Central Excise Rules.

Issue (i): Whether excise duty collected on goods exempt from duty was recoverable by the department as a lawful levy or was a recovery without authority of law.

Analysis: Where goods are exempted from excise duty, any collection of duty on such goods is not a lawful recovery. A levy made in the face of exemption is in excess of jurisdiction and cannot be characterised merely as payment made through inadvertence, error, or misconstruction for the purpose of denying refund.

Conclusion: The recovery was without authority of law and the refund could not be defeated on that basis.

Issue (ii): Whether the claim for refund was barred by limitation under Rule 11 of the Central Excise Rules.

Analysis: Rule 11 was relied upon to contend that the claim was time-barred. However, that limitation provision applied to duties paid through inadvertence, error, or misconstruction and did not govern amounts recovered without jurisdiction. The refund claim therefore could not be rejected as time-barred on the facts found.

Conclusion: The claim for refund was not barred by limitation under Rule 11.

Final Conclusion: The orders rejecting the refund claim were quashed and the excise duty amount was directed to be refunded with costs.

Ratio Decidendi: Duty collected on goods exempt from excise is a levy without authority of law and, where the collection is without jurisdiction, the refund cannot be denied by invoking the limitation applicable to payments made through inadvertence, error, or misconstruction.

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