Excise Duty Refund Claim: Buyer’s Rights and the Limitation Under Section 11B

The present case deals with the question of whether a buyer of goods can claim a refund of central excise duty paid under protest by the manufacturer and whether the six-month limitation period under Section 11B of the Central Excise Act, 1944, is applicable to such a claim. This legal issue arose in the case of Western Coalfields Ltd. versus Commissioner of Central Excise, Trichy/Madurai, where the Supreme Court of India examined the matter in depth.

The dispute originated from the excise duty levied on feneplast PVC impregnated conveyor beltings, which were manufactured by M/s. Fenner (India) Ltd. and purchased by Western Coalfields Ltd. The manufacturer, Fenner India, had classified the goods under sub-heading 3920.12 of the Central Excise Tariff Act, 1985, as suggested by the department, and paid excise duty under protest. The classification dispute was eventually settled by the Supreme Court, ruling that the conveyor beltings should be classified under different headings for different periods.

Following this judgment, Western Coalfields Ltd. filed a refund application for the excise duty that had been paid by the manufacturer under protest. The application, however, was rejected by the Department and subsequently by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) on grounds of limitation and unjust enrichment. The matter was then brought before the Supreme Court.

Background of the Dispute

Western Coalfields Ltd., a public sector undertaking engaged in coal mining, procures various goods, including conveyor beltings, for its operations. The pricing of coal is regulated by the Coal Ministry, and the company sells coal at the government-fixed price. The issue in the present case arose when M/s. Fenner (India) Ltd. classified its conveyor beltings under a disputed tariff heading and paid excise duty under protest while awaiting judicial determination on the correct classification.

Eventually, in a judgment dated March 28, 1995, in the case of M/s. Fenner (India) Ltd. Vs. Collector of Central Excise, Madurai, the Supreme Court ruled on the proper classification of the conveyor beltings, concluding that they should be classified under different sub-headings for different periods. After this ruling, Western Coalfields Ltd. sought a refund of the duty paid under protest by the manufacturer.

Legal Provisions Involved

The crux of the case revolves around the interpretation of Section 11B of the Central Excise Act, 1944, which governs claims for refunds of excise duty. The relevant provisions of Section 11B state:

“Any person claiming refund of any duty of excise may make an application for refund of such duty before the expiry of six months from the relevant date in such form and manner as may be prescribed.”

The provision also includes a second proviso which states:

“The limitation of six months shall not apply where any duty has been paid under protest.”

Western Coalfields Ltd. argued that since the duty was paid under protest by the manufacturer, the limitation period of six months should not be applicable to the buyer’s refund claim.

Arguments by the Petitioner

The petitioner, Western Coalfields Ltd., made the following arguments in support of its refund claim:

• The duty was paid under protest by the manufacturer, and under Section 11B, limitation does not apply to such payments.
• Since the buyer ultimately bears the burden of excise duty, the refund claim should be entertained even if filed beyond six months.
• Refund claims should be assessed based on whether the duty was paid under protest, not on the identity of the applicant.
• The Tribunal erred in rejecting the refund claim based on limitation and unjust enrichment.

Arguments by the Respondent

The respondent, Commissioner of Central Excise, Trichy/Madurai, countered these arguments by stating:

• The buyer and manufacturer are separate entities under excise law, and their rights to claim refunds are distinct.
• Under Section 11B, refund claims by buyers must be filed within six months from the date of purchase.
• Since Western Coalfields Ltd. filed the claim beyond six months, it was time-barred.
• The claim was also liable for rejection under the doctrine of unjust enrichment.

Supreme Court’s Observations

The Supreme Court examined the scheme of Section 11B and made the following observations:

“The entire scheme of Section 11B shows the difference between the rights of a manufacturer to claim a refund and the right of the buyer to claim a refund as separate and distinct.”

The Court referred to its previous judgment in Commissioner of Central Excise, Mumbai-II Vs. Allied Photographics India Ltd., which clarified that a buyer’s refund claim is independent of the manufacturer’s claim and is subject to a six-month limitation period.

The Court emphasized:

“There is no merit in the argument that a distributor is entitled to claim a refund of duty paid under protest by the manufacturer without complying with Section 11B.”

Judgment

Based on the above observations, the Supreme Court ruled:

• The refund claim by Western Coalfields Ltd. was filed beyond the six-month limitation period prescribed under Section 11B.
• The buyer and manufacturer have separate and distinct rights to claim refunds.
• The application was time-barred and could not be entertained.
• The appeals lacked merit and were dismissed.

Conclusion

This judgment reinforces the principle that refund claims under the Central Excise Act must be filed within the prescribed limitation period. Even if the duty was paid under protest by the manufacturer, the buyer must independently comply with the limitation provisions. The decision serves as a precedent in cases involving excise duty refunds, clarifying the distinction between a manufacturer’s and a buyer’s rights under the excise law.

Petitioner Name: Western Coalfields Ltd..
Respondent Name: Commissioner of Central Excise, Trichy/Madurai.
Judgment By: Justice A.M. Khanwilkar, Justice Ajay Rastogi.
Place Of Incident: India.
Judgment Date: 20-02-2019.

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