Payment under protest in excise refund disputes excludes limitation when disputed duty is appropriated during an appellate stay.

Disputed excise duty appropriated by the Department while recovery was stayed in appeal was treated as payment under protest, so the ordinary one-year limitation under Section 11B did not apply. The refund claim was therefore not time-barred, because the appropriation occurred during subsistence of the stay and the proviso to Section 11B excluded limitation. Explanation (ec) to Section 11B was held inapplicable on these facts, as the claim did not arise merely from an appellate order granting refund. Earlier closure of writ petitions challenging the appropriation order did not prevent consideration of the refund issue in the appeal, and refund was held payable.

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Issues: (i) Whether the amount appropriated by the Department during the pendency of the appeal, when a stay of recovery was operating, was to be treated as payment under protest so as to exclude the limitation under Section 11B of the Central Excise Act, 1944. (ii) Whether the refund claim was barred by limitation under Explanation (ec) to Section 11B of the Central Excise Act, 1944. (iii) Whether the earlier closure of writ petitions challenging the appropriation order prevented examination of the refund claim in the present appeal.

Issue (i): Whether the amount appropriated by the Department during the pendency of the appeal, when a stay of recovery was operating, was to be treated as payment under protest so as to exclude the limitation under Section 11B of the Central Excise Act, 1944.

Analysis: The demand had already been carried in appeal and recovery was stayed by the appellate tribunal. The Department nevertheless adjusted the disputed amount while the stay order remained in force. The appropriation was made against a contested demand during the pendency of the appeal, which the Court treated as payment made under protest. In such a situation, the statutory bar of one year does not apply by virtue of the proviso to Section 11B.

Conclusion: The appropriation was treated as payment under protest and not as an ordinary final payment.

Issue (ii): Whether the refund claim was barred by limitation under Explanation (ec) to Section 11B of the Central Excise Act, 1944.

Analysis: Explanation (ec) applies where duty becomes refundable as a consequence of an appellate judgment, decree, order, or direction, but the Court held that the present claim did not arise in that manner. Since the amount had been appropriated during the subsistence of the stay and was therefore treated as paid under protest, the second proviso to Section 11B excluded the limitation period. The refund could not be denied as time-barred merely because the tribunal order setting aside the demand was passed earlier.

Conclusion: The refund claim was not barred by limitation.

Issue (iii): Whether the earlier closure of writ petitions challenging the appropriation order prevented examination of the refund claim in the present appeal.

Analysis: The earlier writ proceedings were closed on a different footing and did not determine the present controversy. The Court held that it was not re-testing the validity of the appropriation order in isolation, but only its legal effect for deciding limitation and refund entitlement. The prior closure of writ petitions therefore did not preclude consideration of the issue in the appeal.

Conclusion: The earlier writ proceedings did not bar the present refund claim.

Final Conclusion: The appeal succeeded, the denial of refund was set aside, and the appellant was held entitled to refund of the appropriated amount arising from the earlier demand.

Ratio Decidendi: Where disputed excise duty is appropriated during the subsistence of an appellate stay against the very demand, such appropriation is to be treated as payment under protest, thereby attracting the proviso to Section 11B and excluding the ordinary limitation for refund.

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