By TIOL News Service

CHENNAI, SEPT 26, 2018: THE respondent assessee cleared bulk quantities of Scented Supari on payment of duty under protest to the job workers for packing the same into unit containers; job workers took credit of the duty paid on the supari and after packing, cleared the same back to M/s. S.A. Safiullah & Co. on payment of duty under protest. Thereafter, the dealer sold the supari to various customers. 

The assessee and other group concerns filed writ petitions in the year 1994 praying for issuance of Writ of Declaration to declare that the betel nut powder (scented supari) is not an excisable commodity under the CESA, 1944 and consequently, forbear the Revenue authorities from demanding any central excise duty from the petitioners pursuant to the notice dated 02.03.1994.

The assessee contended that the scented betel nut cannot be considered as Pan Masala, as it does not contain tobacco.

The Court, by common order dated 29.06.1999, held that the petitioners are not liable to pay excise duty for the betel nut powder known as "supari", treating the same as Pan Masala. In respect of the consequential relief sought by the assessee, the matter was remanded to the authorities to consider whether or not the duty paid by the assessee had been passed on to the consumers and if the assessee had passed on the duty to the consumers, they are not entitled for any refund.

Thereafter, the assessee filed an application for refund on 24.11.1999.

This application was held to be time barred on the ground that it had been filed after six months from the relevant date and there was no specific direction in the order passed by the High Court exempting the assessee from the limitation aspect stipulated under Section 11B(3) of the Act.

The Commissioner(A) allowed the assessee appeal and the aggrieved Revenue took up the matter before the CESTAT.

The CESTAT, by the impugned order - 2009-TIOL-1986-CESTAT-MAD held that the claim made by the assessee is not hit by limitation in view of the apex court decision in National Winder - 2003-TIOL-43-SC-CX where it is held that the limitation of six months would not apply even to a purchaser for refund of duty paid under protest by the manufacturer. It was also observed by the CESTAT that the aspect of unjust enrichment has to be examined by the adjudicating authority and, therefore, the matter was remanded.

Revenue is now in appeal before the Madras High Court.

The appeal was admitted vide order dated 05.10.2017.

The High Court primarily observed that the question to be decided is whether the claim filed by the assessee seeking refund of the central excise duty paid by them is barred by limitation, as it has been filed beyond the statutory period of six months as provided u/s 11B of the CEA, 1944.

The counsel for the Revenue referred to the decision in Allied Photographic India Ltd. -   2004-TIOL-27-SC-CX where it is held that the criteria that the limitation of six months shall not apply where duty had been paid under protest will not be applicable to the case of the assessee, as they are not a manufacturer; that the plea of limitation was erroneously decided in favour of the assessee by the Tribunal.

The respondent relied upon the decision in Mafatlal Industries Ltd.  -  2002-TIOL-54-SC-CX-CB .

After going through the submissions, the High Court observed that examining the issue of limitation is uncalled for as the Writ Court had granted a declaratory relief in favour of the assessee holding that the assessee is not liable to pay excise duty for the betel nut powder known as "supari".

And insofar as the consequential relief is concerned, the Writ Court had remanded the matter to the authorities to consider whether or not the duty paid by the assessee had been passed on to the consumers, the High Court added.

The High Court, therefore, observed -

+ In our view, the proper manner of interpreting the direction issued by the Court is to give relief to the order and not to render the order passed by the Court unworkable. The attempt of the Revenue in this appeal to do so, cannot be permitted.

+ The Writ Court has granted declaratory relief holding that the assessee is not liable to pay excise duty on betel nut powder.

+ The necessary consequence that has to follow from it is as to what would be the relief that the assessee is entitled to after it has been declared that they are not liable to pay excise duty. There is no need for interpretation or speculation in this regard, since the High Court itself has issued appropriate direction with regard to the consequential relief.

+ The Writ Court, for such purpose, has remanded the matter to the authorities to consider whether or not the duty paid by the assessee had been passed on to the consumers and if the assessee had passed on the duty to the consumers, they are not entitled for the refund.

+ The authorities of the appellant-Department cannot sit in judgment over the orders passed by the Writ Court. Thus, any interpretation, which makes the order passed by the Writ Court as unworkable, has to be construed as disobedience of order and consequently, may call for an action under the Contempt of Courts Act.

+ The scope of remand cannot be altered by the Department. There is no requirement for the assessee to file an application for refund on the matter being remanded to the Assessing Officer. All that is required to be done is to issue a notice to the assessee calling upon him to establish that they have not passed on the duty to the consumers. Thus, the Department mis-directed itself in agitating the case as a fresh case.

The Revenue appeal was dismissed.

(See 2018-TIOL-1991-HC-MAD-CX)