2006 PLP (Trib (PTD)

MEHMOOD ALAM, MEMBER (TECHNICAL).

Brief facts giving rise to this appeal are that Messrs Avari, Lahore preferred a refund claim of R. 55,69,128 before the central excise authorities on 7-6-1994. The management of the Hotel appended a statement of accounts since 1 of 1991 to 6 of 1993 showing the refundable amount of central excise duty on account of sale of liquor. This claim had been lodged by Messrs Avari relying on a decision of the Deputy Collector issued vide Order-in-Original No.246, dated 28-8-1993. The aforesaid. decision of the Deputy Collector was based on judgment of the Honourable Supreme Court of Pakistan, dated 7-10-1991 in Civil Appeals Nos. 101-K to 107-K of 1982 holding inter alia that "while computing the amount under section 4(3) of the act, the cost of alcoholic liquor should be excluded".

2. The claim was scrutinized by the adjudicating officer after issuing a show cause notice to the claimants. The arguments and records put forth by Messrs Avari were examined at length. It was consequently observed that:-- (i) the claim was time-barred under rule 11 of the Central Excise Rules, 1944;? (ii) the claimants had not been able to show that the incidence of subject central excise duties had not been passed on to the consumers; and (iii) the refund was not due in terms of section 3-D of the Central Excise Act, 1944. Pursuant to these observations the refund claim was rejected by the Adjudicating Officer vide Order-in-Original No. 11 of 2003, dated 21-3-2003. Hence this appeal.

3. Learned counsel of the appellants, to the best of our observation, has raised the same points of law and merits which had been agitated before the learned adjudicating officer. A gist of his arguments is as follows:-- (a) That, the claim was preferred on 7-6-1994 relying on decision of the Deputy Collector in Order-in-Original No.246, dated 28-8-1993. As such the claim was lodged within one year of the period of limitation. (b) That, the impugned amount of excise duty was paid by the claimants under misperception and by mistake of law. In judgment of the Honourable Lahore High Court in Messrs Koh?i-Noor Industries v. Govt. of Pakistan (1994 CLC 994) it was held that "Rule 11 does not apply to a case where the amount of tax is paid under a mistake of law or fact or compulsion.... The claim of refund of the amount of duty or tax received without authority of law can be made within 3 years computable from the date on which the mistake was discovered". Refund claim of the appellants is therefore not barred by the limitation period of one year under the aforesaid judgment. (c) That section 3-D was inserted into the Central Excise Act with effect from 1-7-1993 through the Finance Act, 1993. This legislation had no retrospective effect whereas it was applied by the adjudicating officer retrospectively to a refund claim that relates to the period from January,. 1991 to June, 1993. (d) That, even otherwise the claim of refund was admissible under the provisions of section 3-D ibid because the incidence of excise duty was not passed on to the 'consumers and documentary evidence in support thereof was produced before the adjudicating officer. (e) That, the claim was therefore in order and it was rejected by the learned adjudicating officer on flimsy grounds.

4. These averments were opposed by the representative of the respondent department by reiterating respective parts of the impugned orders. His main contentions were that the facts, merits and law-points involved in the case had been duty examined by the adjudicating officer at considerable length; that the claim was within the purview of the rule 11 of Central Excise Rules and section 3-D of the Central Excise Act; that there was nothing on the records to suggest that the incidence of excise duty was not passed on the consumers; that the claim was time-barred; that it was not admissible and was therefore rightly rejected.

5. The fate of this appeal thus hinges upon a satisfactory explanation of two points as to:-- (a) whether or not the provisions of 3-D of the Act of 1944 could be applied to the subject claim ;and (b) Whether or not the claim was time-barred. We address these questions in the fore-gong paras.

6. Section 3-D of the Central Excise Act of 1944 relates to the collection of excess duty etc. It comprises of subsections (1), (2) and (3) which respectively read as follows:-- "(1) Every person who has collected or collects any duty, whether under misapprehension of any provision of this Act or otherwise, which is not payable as duty or which is in excess of the duty actually payable and the incidence of which has been passed on to the consumer, shall pay the amount so collected to the Federal Government. (2) Any amount payable to the Federal Government under subsection (1) shall be deemed to be an arrear of duty payable under this Act and shall be recoverable accordingly and no claim for refund in respect of such amount shall be admissible. (3) The burden of proof that the incidence of such duty has not been, or is not, passed on to the consumer shall be on the person collecting the duty." The provisions of section 3-D were inserted into the Central Excise Act since July, 1993 by the Finance Act, 1993 (X of 1993). Obviously these provisions were not on the statutes before that date. We have looked into the mode and manner of insertion of section 3-D under the respective provisions of the Finance Act, 1993. To the best of our observation, the language and expression used in the enactment does not suggest its application with a retrospective effect. Section 3-D is prospective in nature and it cannot be applied retrospectively to the excess payments of excise duties prior to 1-7-1993. This proposition was fully supported by the Honourable Lahore High Court in Rupaly Polyester v. Federation of Pakistan (PLJ 1986 Lah. 848-1997 PTD 54). The Honourable High Court was inter alia pleased to hold that in matters of central excise duty, section 3-D of the 1944 Act can only be made applicable from the date from which such provision was introduced. It was observed that the said section 3-D of1944 Act was introduced through the Finance Act, 1993, hence it was operational with effect from 1-7-1993 and not earlier. The Court maintained that for period prior to 1-7-1993 refund could not be declined to the assessee on his failure to establish that the burden of excise duty had not been passed on to the consumer.

7. We have therefore no hesitation in holding that the application of section 3-D, on part of the learned adjudicating officer, to the subject claim was in-appropriate so for as it relates to the period prior to 1-7-1993 and the claim in question should have been examined without recourse to the provisions of section 3-D.

8. Next comes the proposition relating to the bar of limitation under rule 11 of the Central Excise Rules, 1944. This rule categorically states that "No duty which has been paid, or has been adjusted in an account-current maintained with the Collector under Rule 9, and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error or misconstruction, shall be refunded and no abatement in duty shall be allowed, unless a written claim is lodged with the proper officer within one year from the date of such payment or adjustment as the case may be". As such there is no suo motu power vested with the Central Excise Officer to grant refund. A refund can only be granted if an application is made by the person claiming refund within time of one year. The refund claim of Messrs Avari relates to the period 1 of 1991 to 6 of 1993 and it was lodged long after the expiry of the prescribed period of one year. The Central Excise Officer, obviously, had no discretion to condone the prescribed limit.

9. In para. 19 of the impugned judgment learned adjudicating officer has rightly observed that:

"Messrs Avari Lahore collected and paid central excise duty on liquor during 1991 to 1993 not due to mistake of law or fact or compulsion. The case law referred as 1994 CLC 994 by the learned counsel titled Messrs Kohinoor Industries Faisalabad v. Government of Pakistan is distinguishable from the instant case. In para 5 of the reported judgment the learned counsel for the petitioner submitted that central excise duty for the entire period that is, May 1968 to June, 1978 was paid under' compulsion as the man-made yarn could only be removed from the factory after making payment of the excise duty as otherwise goods in question were not being allowed to be moved out of the Mills. Such was not the case with regard to services provided or rendered by Messrs Avari Lahore as neither advance duty was required to be paid prior to rendering and providing such services nor any prior permission was required for providing such services. The central excise duty claimed as refund was collected by Messrs Avari Lahore with the authority of law and paid voluntarily and not under compulsion. The learned counsel is not correct in saying that mistake of making excess payment was discovered on 28-8-1993 when the Order-in-Original No.246 was issued by the Deputy Collector on the said date. Therefore, the refund claim falls within the ambit of rule 11 of Central Excise Rules, 1944."

10. We agree that the facts and merits of the claim of Messrs Avari are not analogous to the case reported in 1994 CLC 994 (Messrs Koh-i-Noor Industries v. Government of Pakistan). There was no mistake of law or compulsion involved in the case of Messrs Avari because the law had been clarified by the Honourable Supreme Court of Pakistan in its judgment, dated 7-10-1991 in Civil Appeals Nos. 101-K to 107-K of 1982 whereas Messrs Avari were paying central excise duty under the self clearance procedure without any compulsion. It could only be argued that Messrs Avari continued to collect and pay the central excise duty during 1991 to 1993 on account of in-advertence or error in which case their refund claim attracts the limitation bar of rule 11 of the Central Excise Rules.

11. We further agree with the learned adjudicating officer that the refund claim of Messrs Avari was hopelessly time-barred under rule 11 ibid and being so it was liable to rejection. We uphold the impugned orders on this ground and accordingly this appeal is disposed of. C.M.A./548/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Appeal rejected.