Legal principle

A refund claim founded on excess payment due to misinterpretation or misapplication of an exemption notification must be adjudicated under Section 11B, and even a favourable Tribunal order does not entitle the claimant to refund unless he rebuts the Section 12B presumption that the incidence of duty was passed on to buyers, failing which the amount is credited to the Consumer Welfare Fund.

Court decision

The Court did not quash the impugned notice or order immediate refund; it disposed of the writ petition directing that if the petitioner establishes before the Assistant Commissioner that Rs. 1,41,670.74 or any part thereof was not passed on to its buyers, the Assistant Commissioner shall forthwith refund that amount or part. The petitioner was to reply to the show-cause notice dated 25.4.97 as soon as possible, and the Assistant Commissioner was to pass final orders within two months of receipt of the reply, with parties bearing their own costs. The legal position urged by the Department thus prevailed, subject to the petitioner's opportunity to prove non-passage of duty.

Facts

The petitioner, a small-scale manufacturer of conductors and P.V.C. wires, paid Central Excise duty during 1985-86 and later claimed a refund of Rs. 1,50,762.34 as excess duty, invoking exemption notification No. 85/85-CE dated 17.3.85 applicable to small-scale industries. The Assistant Collector rejected the refund claim; the Collector of Central Excise (Appeals), Calcutta set aside that rejection, and on the Department's appeal the Tribunal by order dated 1.4.97 found no ground to interfere. When the petitioner sought the balance refund of Rs. 1,41,670.74 with interest, the Assistant Commissioner, Central Excise Division, Shillong instead issued show-cause notice dated 25.4.97 proposing to credit the amount to the Consumer Welfare Fund under Section 12C of the Central Excise & Salt Act, 1944. The petitioner then approached the Gauhati High Court under Article 226 seeking quashing of the notice and a mandamus for refund with interest.

Key provisions

• Section 27(2), Customs Act, 1962 — Claim of refund duty
• Section 28B(2), Customs Act, 1962 — Duties collected from the buyer to be deposited with the Central Government