M.R.F. LTD.versusCOLLECTOR OF CENTRAL EXCISE, MADRAS.

                                       M.R.F. LTD.                                        A
                                             V.

                   COLLECTOR OF CENTRAL EXCISE, MADRAS.

                                   JANUARY 27, 2004

                [P. VENKATARAMA REDD! AND S.H. KAPADIA, JJ.]                              B


..\·         Central Excise and Salt Act, 1944; Section 35-l and 11(8)(3)/Central
       Excise and Tariff Act: sub heading 4005.00 and 4006.90/Central Excise Rules,
       1944; Rule 2338/Notification No. 377186:
                                                                                          c
              Classification--Payment of excise duty on vulcanizing solution as per
       approved classification list under sub-heading 4006.90-ls.rnance of Show
       cause notice by Revenue Department demanding ·excise duty as per re-
       class//ication under sub-heading 4005.00-Payment thereof by the assessee
       under protest-Revenue Department confirmed the demand--On appeal,                  D
       reversed by the Appellate authority-Refund claims-A/I the claims except
       one allmred by the authority holding that differential 0111011111 of du(v in one
       of the claims was not under protest in terms of Rule 2338-Appeals dismissed
       by the Appellate Authority and thereafter by the Tribunal-On appeal, Held:
       since assessee succeeded before the Appellate Authority in the re-classification
       dispwe, Assessee entitled to claim refund of differential amount of duty in        E
       terms ofSection 118(3) of the Act-Revenue directed to refund the differential
       amount of duty with interest thereon--Directions issued.

             Appellant-assessee manufactures "vulcanizing solution". It filed a
       classification list under sub-heading 4006.90 in respect of the product. The       F
       list was approved by the Revenue Department. Later, the Department had
       asked the assessee to submit revised classification list as the product was
       classifiable under sub-heading 4005.00 and thereby directed him to pay
       differential amount of duty for the relevant period. The Department also
       issued a show cause notice to him. Assessee paid the differential amount
       of duty under protest by endorsing the protest on the challan. Later, he           G
       filed a formal letter of protest stating that the product was classifiable
       under sub-heading 4005.00 r/w exemption Notification No.377/86.
       However, Department rejected his claim and confirmed the demand. On
       appeal, Appellate Authority reversed the order. Consequently, assessee
       preferred 3 refund claims. Allowing all except one refund claim, Assistant
                                            1117                                          H
    1118                   SUPREME COURT REPORTS                  [2004] I S.C.R.

A Collector, held that since duty was not paid "under protest in terms of Rule
    233(B) of the Central Excise Rules, appeals filed by the aggrieved assessee
    were dismissed by the Appellate Authority and thereafter by CEGAT.
    Hence the present appeal.

           It was contended for the appellant-assessee that the differential
B amount of duty was paid by the assessee under protest by making an
    endorsement on the challan to that effect and subsequently a protest letter
    had also been forwarded to the Department; that since the disputes in
    regard to payment of duty under the appropriate sub-heading of Central
    Excise and Tariff Act was resolved in his favour, refund claim thereto
C   should have been allowed; that in the facts and circumstances of the case,
    relevant provision of limitation could not have been applied; and that since
    differential amount of duty was paid much after the clearance of the goods,
    it was not possible to comply strictly with the provisions of Rule 2338 of
    the Rules.

D         On behalf of the Revenue, it was submitted that since the provisions
    of Rule 2338 of the Rules have not been complied with, there was no
    protest h)' the assessee, and so the refund claim was not maintainable; and
    that since the refund claim was not made within 6 months from the date
    of payment of duty, it was barred by time.

E          Allowing the appeal, the Court

          HELD: I. I. Tribunal has relied upon Rule 2338 of the Central Excise
    Rules in support of its view that in order to put a protest payment the
    conditions and circumstances mentioned in Ruic 2338 should be complied
    with, otherwise there could be no protest payment under the Central Excise
F   and Salt Act. On this reasoning the Tribunal denied refund to the
    appellants. However, there was one more reason for denying the refund.
    According to the Tribunal the differential payment was not the result of
    demand or legal compulsion. 11123-E-FI

G          1.2. The decision on the larger issue of compliance of Rule 2338 as
    condition precedent to the applicability of the proviso to Section l IB(l),
    as it stood at the material time, need not be gone into as the appellants
    are entitled to relief of refund on the facts of the case in terms of Section
    118(3) of the Act, as it stood at the material time. (1123-G(

H          1.3. The show cause notice issued by the Assistant Collector
                               M.R.F. LTD. v. C.C.E. [KAPADIA, J.]                  1119

         demanding reclassification was in relation to the past clearances and when        A
         the appellants succeeded in the reclassification dispute before the Collector
         (Appeals), the appellants were entitled to refund of the differential amount
         of duty under Section 118(3) of the Act. Hence, the Department is directed
         to refund the differential amount of duty for the period 1.3.86 to 31.10.86
         with interest at 9% per annum till payment. 11124-A-D)
                                                                                           B
                 CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 9044 of
         1996.

              From the Judgment and Order dated 5.1.96 of the Central Excise Customs
         and Gold (Control) Appellate Tribunal, South Regional Bench at Madras in          C
         A.No.E/436/90/MAS.

              Joseph Vellapally, S.lgnatius, Krishnan Venugopal, ThomasVellapally
         and K.R. Nambiar for the Appellant.

                 R.P. Bhat, Rajiv Nanda and B.K. Prasad for the Respondent.
                                                                                           D
                 The Judgment of the Court was delivered by
' ....
                KAPADIA, J. 1. Being aggrieved by majority decision dated 5th January
         1996 of the Customs, Excise and Gold (Control) Appellate Tribunal South
         Regional Bench at Madras in Appeal No. E/436/90/MAS, the original assessee
         has come by way of appeal under Section 35-L of Central Excise and Salt E
         Act, 1944. By the impugned judgment and order, the assessee's claim for
         refund of Rs. 13, 18, 184.88 paid as differential duty on 6th April, 1987 in
         relation to period 1.3.1986 to 31.10.1986 came to be dismissed on the ground
         that it was paid voluntarily and suo mo/o and that the alleged protest was not
         in terms of Rule 233 B of Central Excise Rules, 1944.                          p
               2. Appellants manufacture "Vulcanising Solution" at their factory in
         Madras. On 3rd March, 1986, appellants filed the classification list under
         sub-heading 4006.90 carrying rate of duty at 15%. The said list approved on
         10.7.86. Appellants paid the duty at 15% accordingly from 1.3.86 onwards.
         However, on 28.10.86 the Assistant Collector visited the appellant's factory G
         and directed the appellants to give a revised classification list for the aforestated
         product under sub-heading 4005.00 carrying the rate of 40% advalorem and
         further directed the appellants to pay the differential duty for the past period
         i.e. 1.3.86 to 31.10.86. On 31.3.87, the Department issued a show cause
         notice alleging that said product was classifiable under sub-heading 4005 of H
    1120                    SUPREME COURT REPORTS                   [2004] I S.C.R.

A Central Excise Tariff and further that exemption Notification No. 377/86 was
    not applicable. By the show cause notice issued by the Assistant Collector,
    the appellants were asked to show cause why duty for their past clearances
    should not be demanded at 40% advalorem under Section I IA of Central
    Excise Act, 1944. On 6.4.87 the appellants paid the differential duty of Rs.
B   13, 18, 184 .88 with the endorsement on the Challan stating that it was paid
    under protest. Thereafter on I 0.4.87 the appellants filed a letter of protest
    with the Assistant Collector. In the said protest letter the appellants claimed
    that the product was classifiable under sub-heading 4005.00 read with
    exemption Notification No. 377186 dated 29.7.86 at 15%. The show cause
    notice resulted in the order of adjudication by the Assistant Collector dated
C   10.1.88 wherein he confirmed the demand only from 1.11.86 to 30.9.87
    amounting to Rs. 25,61,791.72 as the appellants had paid Rs. 13,18,184.88
    on 6.4.87. Being aggrieved, the appellants preferred an appeal to the Collector
    (Appeals). By order dated 30.6.88, the Collector (Appeals) set aside the
    impugned adjudication order and allowed the classification at 15% as prayed
    for by the appellants. After the classification dispute ended in favour of the
D   appellants. they preferred 3 refund claims for the excise duty paid and the
    Assistant Collector while permitting refund of the differential duty paid by
    the appellants in Rs. 25.61,792/- for the period I.I 1.86 to 30.9.87 and further
    sum of Rs. 10,78,485.76 for the period 1.2.88 to 20.7.88 rejected claim for
    refund for Rs. 13,18,184.88 for the period 1.3.86 to 31.10.86 on the ground
E   that duty was not paid under protest in terms of Rule 233 B of Central Excise
    Rules, 1944. The appeals preferred by the appellants were dismissed by the
    Collector (Appeals) and by the majority view of Central Excise & Gold
    (Control) Appellate Tribunal (in short 'CEGA T'). Hence the appellants have
    come by way of appeal under Section 35L of the Central Excise Act, 1944.

F        3. Mr. Joseph Vellapally, learned senior counsei appearing on behalf of
  the appellants contended that the appellants had been paying excise duty @
  15% till 31st October, 1986 based on an approved price list. However, on a
  visit by the Assistant Collector on 28th October, 1986, the appellants were
  informed that they were required to pay excise duty@ 40% and accordingly
G the appellants were directed to pay the differential duty. That thereafter on
  31st March, l 987 the Assistant Collector had issued a show-cause notice
  asking the appellants to show cause why duty @40% should not be demanded
  denying the benefit of Notification No. 377/86 for all past clearances. That
  consequently the assessee paid the duty amount on 6.4.87, pending conclusion
  of adjudication proceedings initiated vide show-cause notice dated 31st March,
H 1987. That the differential duty was paid accordingly on 6.4.87 amounting to
                          M.R.F. LTD. v. C.C.E. [KAPADIA, J.]              1121
     Rs. 13,18,184.88 forthe period 1.3.86 to 31.10.86 and while making the said A
      payment an endorsement was made on the challan indicating payment under
     proiest. It was further pointed out that after making payment under protest on
     6.4.87, a letter was also addressed by the appellant to the Assistant Collector
      in reply to the show-cause notice dated 31st March, 1987. In the said letter
     the appellants indicated the ground of protest. Learned counsel for the
     appellants contended that ultimately the appellants succeeded in their case B
     before the Collector (Appeals) and the adjudication order was set aside and
     the case of the appellants that their product was subject to levy of duty @
      15% advalorem was accepted by the appellate authority. It was argued that
     once the matter was resolved in favour of the appellants, their claim for
     refund for the period in question should have been allowed without applying C
     the limitation of 6 months as the duty was paid under protest. It was argued
     that in the facts and circumstances of this case Rule 233 B was not applicable
     as the said Rule contemplates that where the assessee wants to pay the duty
     under protest, he shall deliver a letter to the competent authority giving
     grounds for payment of duty under protest and once the said letter was
     afknowledged, it constituted a proof that the assessee had paid the duty under D
     protest. It was argued that although Rule 2338(3) was contingent upon
     compliance of sub-Rule (4) which requires an endorsement of duty paid
     under protest on copies of gate passes and RT 12 forms, in this case, such
     endorsement could not have been made because the differential duty has
     been paid much after the clearance of the goods. It was further argued on E
     behalf of the appellants that there was substantial compliance of the Rule 233
     B as the duty under protest was paid by making an endorsement on the
     chall;;m. He contened •hat the appellants paid duty after they were asked to
     do so by the Assistant Collector that goods were required to be classified
     otherwise than what was approved in the classification list. He, therefore,
     contended that the Tribunal erred in coming to the conclusion that the protect F
-(   was not in terms of Rule 233 B of the Central Excise Rules.

           4. Per contra, Mr. R.P. Bhatt, learned senior counsel for the Department
     pleaded that under Section 11 B(l) of the. Central Excise Act, 1944, any
     person claiming refund of any duty of excise may make an application for G
     refund of such duty to the Assistant Collector of Central Excise before the
     expiry of 6 months from the relevant date. That under the proviso to Section
     11 B(l) an exception is culled out to the effect that the limitation of6 months
     shall not apply where any duty has been paid under protest. Learned counsel
     for the Department submitted that the appellant in this case seeks to fall
     under the proviso to Section 1 IB(l). He submitted that on their own showing H
    1122                   SUPREME COURT REPORTS                   [2004] I S.C.R.

A the appellant applied for refund of differential duty for the period 1.3.86 to
  31. l 0.86 vide refund application dated I 0th August, 1988 purporting to comply
  with Rule 2338. He contended that in this case Rule 233 8 has not been
  complied with by the appellants as the payment was made on 6.4.87 for the
  period 1.3.86 to 31.10.86 whereas Rule 2338 required payment of duty
B proceeded by a letter of protest. It was pointed out that in the present case
  payment was made on 6th April, 1987 and it was no preceded by protest
  letter. That on the contrary the letter of protest was lodged after payment on
  6.4.87, hence there was non compliance of Rule 2338(1). That on the date
  of payment there was no protest. It was further argued on behalf of the
  Department that under Rule 233 8(4), the duty paid under protest shall be
C endorsed on the copies of the gate passes and on RT-12 returns. That in the
  present case since the clearance have been made there was no question of
  endorsement of the gate passes and RT-12 returns and, therefore, there was
  no non-compliance of Rule 233 8(4). That since there was non-compliance
  of Rule 233 8(4), there was no protest which is the consequence indicated
  in Rule 233 8(8). It was argued that payment of duty under protest was
D required to be made only in terms of Rule 233 8 so that an assessee is not
  required to file refund claims on an ongoing basis and and his protest under
  that rule would absolve the appellants from filing refund claims for every
  clearance. That Rule 233 8(4) was procedural and mandatory and that it
  excluded all other forms of payment under protest except the one mentioned
E in the said rule. It was argued that in the present case there was no demand
  from the Department calling upon the assessee to make payment of the
  differential duty for the period 1.3.86 to 31.10.86. That the assessee had
  made the payment suo moto on 6.4.87 in respect of the products cleared in
  the past during the period 1.3.86 to 31.10.86. Learned counsel for the
  Department submitted that claim of the appellant-assessee was time barred as
F the claim was not made within six months from the date of payment and
  therefore the appellant has invoked the proviso to Section 11 8( I) which
  proviso would stand attracted only if the appellant satisfies the provisions of
  Rule 233 8. That the said Rule was applicable only to concurrent and future
  clearances and not to past clearances and hence Rule 2338 was not applicable
G and therefore the Assistant Collector was right in rejecting the claim of the
  appellant as not maintainable.

          5. In rejoinder, learned counsel for the appellants raised an alternative
    contention, which in our view, merits acceptance. It was argued that ultimately
    in the classification dispute, the appellant-assessee has succeeded and the
H   case of the ·appellant has been accepted by the appellate authority and duty
                    • M.R.F. LTD. v. C.C.E. [KAPADIA, J.]                1123

has been levied @ 15% as contended by the appellant It was argued that A
under the circumstances the appellant-assessee was entitled to refund of duty
paid after the classification dispute cropped up .

      .6. Learned counsel on both sides agreed that compliance of Rule 233
B as condition precedent to the proviso to Section 11 B( I) of the Act is not
required in cases falling under Section 11 8(3) of the Central Excises & Salt     B
Act, 1944. In such cases the Assistant Collector is bound to give effect to the
orders passed in appeal or revision under the Act while granting refund of
excise duty which becomes due and payable to the applicant without his
having to make any claim in that behalf.

      7. In the normal course, two points would have fallen for determination- C
Whether in the facts and circumstances of the case, the Tribunal was justified
in holding that the payment of differential duty of Rs. 13,18,184.88 cannot
be regarded as payment made_ under protest and therefore, the refund was not
admissible by virtue of the time bar under Section 11 B of the Act and
whether in the fact and circumstances of the case, the Tribunal was right in D
holding that compliance of Rule 233 B of Central Excise Rules, 1944 was a
condition precedent to the applicability of the proviso to Section 11 B( I) of
Central Excises & Salt Act, 1944 (as it stood at the relevant time)?

      8. The above two points are inter-linked and it has bearing on the core
issue whether the duty was paid under protest. In this case the Tribunal has      E
relied upon Rule 233 B in support of its view that in order to put a protest
payment the conditions and circumstances mentioned in Rule 233 B should
be complied with, otherwise there could be no protest payment under the
Act. On this reasoning the Tribunal denied refund to the appellants. However,
there was one more reason for denying the refund. According to the Tribunal       F
the differential payment was not the result of demand or legal compulsion.

      9. In our view the decision on the larger issue of compliance of rule
233 B as condition precedent to the applicability of the proviso to Section
118(1) need not be gone into as the appellants are entitled to relief of refund
on the facts of this case in terms of Section 1IB (3)                             G
        which reads as follows:-

        "(3). Where as a result of any order passed in appeal or revision
        under this Act refund of any duty of excise becomes due to any
        person, the Assistant Collector of Central Excise may refund the H
    I 124                    SUPREME COURT REPORTS                     [2004] I S.C.R.

A            amount to such person without his having to make any claim in the
             behalf."

          10. In the present case the show cause notice issued by the Assistanl
    Collector demanding reclassification was in relation to the past clearances
    and when the appellants succeeded in the reclassification dispute before the
B   Collector (Appeals) on 30th June, 1988, the appellants were entitled to refund
    of the differential amount of Rs. 13, 18, 184.88 under Section 11 8(3) of the
    Act.

           It is not in dispute that cases falling under Section 11 8(3) refer to
    consequential relief which an assessee is entitled to on his succeeding in
C   appeal/revision. In the present case the appellants have succeeded before the
    Collector (Appeals) on 30th June, 1988 and consequently the appellants herein
    were entitled to refund under Section 11 8(3) of the Central Excise & Salt
    Act, 1944. Therefore, on facts of this case we are not required to examine the
    aforestated larger question arising in the matter since the appellants are entitled
D   to relief under Section 11 8(3) of the said Act of 1944.

           11. In the circumstances, Civil Appeal No. 9044 of 1996 stands allowed
    and the judgment and order of CEGAT dated 5.1.1996 in Appeal No. E/436/
    90/MAS is hereby set aside with a direction to the Department to refund the
    differential duty of Rs. 13, 18, 184.88 for the period 1.3.86 to 31.10.86 with
E   interest at 9% per annum from date of the receipt of the copy of this judgment
    by the Competent Authority till payment.

         However in view of the facts and circumstances of this case there will
    be no order as to costs.

    S.K.S.                                                         Appeals allowed.