2025-VIL-1096-CESTAT-ALH-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise Act 1944 – Limitation, Refund of duty paid under mistake of Law - The assessee, a manufacturer of homoeopathic products, paid duty on its clearances, including those of alcoholic preparations, under the mistaken belief that its turnover had crossed the SSI exemption threshold - After excluding the value of alcoholic products, the assessee's clearance value was found to be within the SSI exemption limit for the relevant period, making the entire duty paid an amount deposited under a mistake of law. A refund claim was filed, which was rejected by the lower authorities as being barred by limitation under Section 11B of the Central Excise Act, 1944 - Whether the statutory period of limitation prescribed under Section 11B of the Central Excise Act, 1944 applies to a claim for refund of an amount that was paid under a mistake of law and was never legally leviable as excise duty - HELD - The amount paid by the assessee under a mistake of law cannot be equated with Central Excise duty and is merely a deposit. As the alcoholic preparations were not within the Central Excise net, the department lacked the authority to levy and collect such an amount. Consequently, the amount paid did not partake the character of excise duty, and thus the trappings applicable to a 'tax', including the limitation period, do not apply - Once the Department could not have Constitutionally demanded the amount, it cannot retain it merely because it was paid by mistake. To do so would violate Article 265 of the Constitution of India. Since the amount was not a 'tax' to begin with, the provisions of Section 11B are not attracted to the refund claim - The refund claim is not barred by limitation and the assessee is entitled to the refund with interest – The appeal is allowed - Unjust Enrichment - Whether the assessee had successfully discharged the burden of proving that the principle of unjust enrichment is not applicable, by demonstrating that the incidence of the erroneously paid duty was not passed on to its buyers - HELD - The bar of unjust enrichment is not applicable as the assessee has successfully proven that the incidence of duty was not passed on. An examination of the assessee's ledger accounts revealed that after discharging the Central Excise duty, specific notings stating "on hold" were appended against the amounts. This indicates that the amounts were not expensed out in the books of accounts, as the assessee was awaiting the outcome of the litigation. This, coupled with the certificate from a Chartered Accountant, sufficiently establishes that the amount of Central Excise paid under mistake of law was borne by the assessee from its own pocket and was not collected from the buyers - The claim is not hit by the bar of unjust enrichment.
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