Bona fide wrong payment of duty: refund not barred by limitation where excess tax was paid under mistake of law.

Refund of duty paid twice through Cenvat credit and later in cash was held not to be barred by limitation under Section 11B read with Section 142(3), because tax paid under a mistake of law cannot be retained merely on expiry of the refund period and such retention would offend Article 265. The appellant's use of Cenvat credit was treated as a bona fide inadvertent error, not a wilful contravention of Rule 3(4) of the Cenvat Credit Rules, since no material showed deliberate misuse and the payment was corrected after audit. The refund rejection was set aside and consequential relief granted.

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Issues: (i) Whether the refund claim was barred by limitation under Section 11B of the Central Excise Act, 1944 read with Section 142(3) of the CGST Act, 2017; (ii) Whether the appellant's payment through Cenvat credit amounted to contravention of Rule 3(4) of the Cenvat Credit Rules, 2004 or was a bona fide wrong payment of duty.

Issue (i): Whether the refund claim was barred by limitation under Section 11B of the Central Excise Act, 1944 read with Section 142(3) of the CGST Act, 2017.

Analysis: The refund arose from duty paid twice, once through Cenvat credit and again in cash after audit pointed out the mistake. The claim was rejected below as time-barred, but the governing principle applied was that tax paid under a mistake of law is not to be denied merely because the period under Section 11B has expired. The decision relied on the view that limitation under Section 11B does not defeat refund of duty paid by mistake, and that retention of such excess tax would be inconsistent with Article 265 of the Constitution of India.

Conclusion: The refund claim was not barred by limitation and was admissible.

Issue (ii): Whether the appellant's payment through Cenvat credit amounted to contravention of Rule 3(4) of the Cenvat Credit Rules, 2004 or was a bona fide wrong payment of duty.

Analysis: The record showed that the appellant had availed the benefit of Notification No. 01/2011-CE dated 1st March, 2011 and, by mistake, paid duty from the Cenvat account instead of cash. The mistake was corrected after audit by cash payment, resulting in double payment. No material showed a deliberate or wilful misuse of credit; the payment from credit account was treated as an inadvertent error rather than a contravention attracting adverse consequences.

Conclusion: The payment from Cenvat credit was a bona fide mistake and not a contravention of Rule 3(4) of the Cenvat Credit Rules, 2004.

Final Conclusion: The impugned rejection of refund was set aside and the refund claim was allowed with consequential reliefs.

Ratio Decidendi: Refund of duty paid under a bona fide mistake cannot be denied on the ground of limitation under Section 11B when the excess payment is shown to be inadvertent and its retention would amount to collection without authority of law.

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