Legal principle

Duty is not refundable where the manufacturer has passed on its incidence to another person, and a writ court will not order refund of duty paid under a mistake of law or ignorance of an exemption notification in disregard of the statutory refund conditions and time limit in Section 11B.

Court decision

All the petitions were rejected and no refund was granted. The court held that under Section 11B of the Act, read with its sub-section (2), the petitioners were not entitled to refund because the incidence of the excise duty had been passed on to other persons, following Union of India v. ITC Ltd. Duty paid on the basis of a classification order that remained in force till February 1984 was held non-refundable. Petitioner No. 1 was directed to deposit back the amounts withdrawn under interim orders (Rs. 9,14,704/- and Rs. 5,43,106/- as applicable) with interest at 12% per annum by 1st May 1996, failing which the bank guarantee was to be encashed; the petitions were dismissed, rules discharged with costs.

Facts

Pfizer Ltd. and other petitioners manufactured pharmaceuticals and bulk drugs dutiable under Tariff Item 14E, using guillotine capsules and rubber plugs dutiable under erstwhile Item 68 of the First Schedule. Notification No. 201 of 1979 dated 4-6-1979 exempted goods to the extent of duty on Item 68 inputs, subject to prescribed conditions and procedure. The petitioners paid excise duty of Rs. 1,01,48,300 from July 1979 to February 1986, and by letter dated 17-11-1986 claimed refund from the Collector of Central Excise on the ground that the exemption had been overlooked. The Assistant Collector rejected the claim, holding that the requisite conditions of the Notification (declarations, intimation and procedure) had not been complied with and that there was no condonation of delay, the claims being filed beyond the six-month period under Section 11B of the Central Excises & Salt Act, 1944. In related petitions, buyers (Petitioner Nos. 1 and 2) sought refund of duty recovered by Petitioner No. 3, a manufacturer of alcohol-based products, for periods when an approved classification list was in force.

Key provisions

• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 28D, Customs Act, 1962 — Presumption that incidence of duty has been passed on to the buyer