Refund claims under protest and later compulsory debit: limitation did not bar the refund, and time ran from the final debit.

Refund arising from reversal of Modvat credit made under protest was held not to be defeated by limitation under Section 11B because the protest covered the entire sequence of reversal, recredit and subsequent debit. The claim was also treated as timely from the date the recredited amount was again debited under departmental direction, since the refund cause of action arose only at that stage when the appellants were compelled to make the debit and pay interest. The limitation-based rejection was set aside and the matter remitted for adjudication on merits.

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Issues: (i) Whether the refund claim arising from reversal of Modvat credit made under protest was hit by limitation under Section 11B; (ii) whether the claim was within time from the date on which the recredited amount was again debited under the department's direction.

Issue (i): Whether the refund claim arising from reversal of Modvat credit made under protest was hit by limitation under Section 11B.

Analysis: The appellants had intimated the department that any excess debit noticed later would be treated as having been made under protest. The record also showed that the reversal, subsequent recredit, and later debit were part of the same sequence of events and that the protest was maintained throughout. In these circumstances, the statutory limitation for refund was not attracted to defeat the claim merely on the ground of time bar.

Conclusion: The refund claim was not barred by limitation under Section 11B and the objection on that ground was unsustainable.

Issue (ii): Whether the claim was within time from the date on which the recredited amount was again debited under the department's direction.

Analysis: The cause of action for claiming refund arose only when the appellants were required to debit the recredited amount and pay interest pursuant to the departmental direction. Prior to that stage, there was no effective basis for seeking refund of the debited amount because the entry had already been recredited in the statutory records. The claim made thereafter was therefore within time.

Conclusion: The refund claim was within time from 10-2-97.

Final Conclusion: The rejection of the refund claim on limitation was set aside and the matter was sent back for adjudication on merits.

Ratio Decidendi: Where duty-related reversal or debit is expressly made under protest, limitation for refund does not bar the claim on that basis, and the relevant time for computing the claim may run from the later compulsory debit that gives rise to the refund cause of action.

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