KHALIL-UR-REHMAN KHAN, J.--The petitioner is running a textile mills by the name of Kohinoor Textile Mills at Faisalabad wherein yarn and cloth is manufactured on spindles and looms. The mills was subject to payment of excise duty since 1st of May, 1968 in accordance with Production Capacity (Cotton Yarn) Rules, 1968 and 1975 on manufacture of cotton yarn and in accordance with the Production Capacity (Cotton Fabrics) Rules, 1968 on production of cotton fabrics. The duty was charged and paid on various qualities of yarn and cotton fabrics.
2. The case of the petitioner is that a number of spindles were exclusively engaged and utilized for the purpose of manufacture of yarn of man-made (Synthetic) fibre as distinct from natural cotton fibre and that these spindles which were already taxed under the Production Capacity (Cotton Yarn) Rules, 1968 as well as Production Capacity (Cotton Yarn) Rules, 1975 were there-after not utilized or engaged for the purpose of manufacturing cotton yarn to- the knowledge of respondents. According to the petitioner the yarn of man-made (Synthetic) fibre was subject to levy of excise duty in accordance with section 3(1) of the Central Excises and Salt Act, 1944 read with item 40 of the First-Schedule of the Act and the petitioner company duly paid excise duty on such yarn which was manufactured on spindles already assessed to duty under section 3(4) of the Act and that double duty was being charged on the same spindles. The petitioner company, therefore, approached the respondents to refund the excess amount charged as double duty could not legally be charged and recovered under the law.
3. The petitioner company made application dated 15th February, 1977 seeking refund of the central excise duty on man-made fibre for the period May, 1968 to January, 1977 amounting to Rs.
1,01,53,941.27. The second request of refund was made vide letter dated 3rd May, 1977 for the period .
February, 1977 to April, 1977 and the third request for refund was made vide letter dated 7th February, 1978 for the excise duty paid for the period May, 1977 to December, 1977 and January, 1978 to June, 1978. The total amount, thus, claimed as refund amounting to Rs. 1,10,85,241.97. The Collector, Central Excise and Land Customs in response to one of the letters of the petitioner company, on 18th September, 1978 advised the petitioner company to approach the Assistant Collector, Central Excise and Land Customs, Faisalabad to whom, it was stated, instructions have already been sent. The matter remained in correspondence between the petitioner company and the Assistant Collector of Customs till March, 1989 and as the amount had not been refunded, the petitioner company instituted the present petition seeking declaration that the action of respondents charging duty in excess of the duty chargeable under the law be declared as without lawful authority and of no legal effect and the respondents be directed to refund the excess amount of duty charged by them.
4. The main plea that where man-made (Synthetic) yarn and fabrics are manufactured on the same spindles and looms utilized by a company for the production of its cotton yarn and fabrics, on which it had paid the excise duty on the basis of Production Capacity, the excise duty under section 3(1) of the Act cannot be charged without granting abatement of duty on that part of the plant and machinery on which such yarn or fabrics have been produced and duties have been levied under section 3(4) of, the Act stands answered in favour of the petitioner in Writ Petition No. 2635 of 1975 and Writ Petition No. 1720 of 1977 decided on 3rd December, 1988. This view has also been upheld and maintained by the Hon'ble Supreme Court in Civil Appeal No. K-86 of 1978 (Pakistan versus Diwan Textile Mills Limited) decided on 23rd June, 1991.
Sh: Maqbool Ahmed-II, learned Deputy Attorney General appearing for the respondents, therefore, did not dispute the aforenoted proposition and fairly conceded that excise duty on man-made fabrics was not legally chargeable. He, however, argued that refund of central excise duty paid cannot legally be claimed as claim of the refund made vide letter dated 15th February, 1977 for the duty paid for the period May, 1968 to January, 1977 is barred by time as Rule 11 of the Central Excise Rules, 1944 prescribed a period of one year for seeking refund of excess duty paid, if any. He submitted that the petitioner company can claim refund for one year only, that is, from May, 1977 to July, 1978 and the amount of central excise duty charged for that period will be refunded to the petitioner company.
5. Mr. S.M. Zafar, 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. It was argued that any amount paid under mistake of law is refundable and the Government is bound to refund the same and Rule 11 of the Central Excise Rules does not apply to refund of the amount received under mistake of law and compulsion. Learned counsel for the petitioner added that Rule 11 does not apply as the excise duty was paid under compulsion of law as well as under mistaken view of law that excise duty was legally due and payable (as otherwise goods in question were not being allowed to be taken out of mills) and that the excise duty was neither paid through inadvertence nor through error nor through any misconception. In support of this plea, learned counsel for the petitioner relied on M/s. Shiv Shanker Dal Mills etc. Vs. State of Haryana and others (A.I.R. 1980 Supreme Court 1037), Ceat Tyres of India Limited versus Union of India and others (1980 E.L.T. 563 (Bom)., Dilichand Shreelal versus Collector of Central Excise and others (1986 (26) E.L.T. 298 (Cal.) and Khardah Company Ltd. Versus Union of India (1983 E.L.T. 2159 (Cal.). Learned counsel argued that there is no law 6f limitation especially for public bodies. On the virtue of returning what was wrongly recovered under colour of public laws and that in democratic set up it does not behove of the public authorities to refuse to return the money illegally recovered.
6. The learned Deputy Attorney General, in reply, submitted that in the judgments cited by learned counsel for the petitioner claim of refund has been held to be enforceable in law, if';he same was not barred by any specific statutory provision. He argued that the present claim of refund pertaining to the period falling beyond the period of one year is barred by time in view of the provisions contained in rule 11 of the Central Excise Rules, 1944. Rule 11 reads as under:-- "11. No refund of charges erroneously levied or paid, unless claimed within one war.-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.".
7. In order to appreciate the respective pleas it appears necessary to examine the decisions relied upon by the learned counsel for the petitioner. In the case of M/s. Shiv Shanker Dal Mills, the dealers had paid market fees at the increased rate and the excess amount became refundable to the dealers from whom these were recovered by the market committee concerned. The demand for refund of the excess amount illegally recovered from them not having been complied with, direction was sought under the Constitutional jurisdiction. The question whether claim of refund has become barred by time under the general law of limitation or under any specific provision of law was not involved in the case, rather the observations made are to the effect:-- "Indeed, if they file suits within the limitation period, decrees must surely follow. What the period of limitation is and whether Art. 226 will apply are moot as is evident from the High Court's judgment, but we are not called upon to pronounce on either point in the view we take. Where public bodies under colour of public laws recover people's money, later discovered to be erroneous levies, the Dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongfully recovered to whom it belongs. Nor is it palatable to our jurisprudence to turn down the prayer for high prerogative writs, on the negative plea of "alternative remedy" since the root principle of law married to justice, is ubi jus ibidremedium,.".
It will be seen that the question of limitation was not in issue in this case rather the suits, if filed, it was conceded would be within time. Again if any person desires to pay a time barred debt obviously no law prohibits him from returning what is due to the other. Law of limitation bars the remedy only, it does not extinguish the right.
8. The second decision relied upon is that of Bombay High Court in the case of Ceat Tyres of India Limited. In this case, the petitioner company under a mistake of law and misapprehension of the correct legal position submitted classification list showing the tyres for fork-lift trucks which were being manufactured by them as being assessable to duty under item 1.6(1) which was applicable to tyres for motor vehicles and not under 16(3) which was the item applicable to all other tyres and the petitioner from time to time cleared these tyres and paid excise duty payable thereon under item 16(1) whereas duty should have been paid under item 16(3). The refund application was made on 19th April, 1974 claiming refund of the excess amount so paid under mistake of law for the period from 14th June, 1971 to 5th March, 1974. This mistake of law came to their notice as one of their customers, Messers Voltas Limited informed the petitioner company that in the case of Voltas Limited, a decision to that effect had been given on 21st September, 1971 by the Appellate Collector of Customs, namely, that fork-lift tyres could not be classified as motor vehicles tyres. By this letter Voltas Limited requested the petitioner company to arrange refund of the difference between the higher incidence or excise duty which the petitioner had been charging from them and the rate of duty as per the proper classification. The petitioner thereafter obtained from Voltas Limited a copy of the order of Appellate Collector of Customs and then on 29th November, 1973 applied to the Authority for a re-classification of the said tyres. This application was approved by the Excise Authority on 1st March, 1974 and on 19th April, 1974, the petitioner submitted the refund application.
On 24th May, 1975, the Assistant Collector allowed petitioner's application in so far as it pertained to the fork-lift tyres cleared by the petitioner for the period of 12 months prior to 15th April, 1974 and accordingly granted a refund but rejected the application for refund for the periods prior thereto relying on rule 11 of the Central Excise Rules. In this case the main plea urged was that the department had no right or authority to retain the amounts illegally collected as taxes without any authority of law with the result that appropriate writ lay for the refund of such money and a duty paid under mistake of law is recoverable under section 72 of the Contract Act specially when there was no triable issue. The case of the departmental representative was that the impugned orders are legal and valid inasmuch as under rule 11 refund could be granted only for one year which was done and that the proper remedy for the petitioner was to have filed a substantive suit, as a triable issue had arisen whether the amounts were in fact paid by the petitioner under mistake and also as to when the petitioner came to have the knowledge of its mistake. Rule 11 of the Central Excise Rules, 1944 was examined in the light of judgment already rendered by the Indian Supreme Court in the case of Sales Tax Officer v. Kanhaiya Lal (A.I.R. 1959 Supreme Court 135) and State of Madhya Pradesh v. Bhailal Bhai (A.I.R. 1964 Supreme Court 1006). In the first case it was held that the term 'mistake' used in section 72 of the Contract Act has been used without any qualification or limitation whatever and comprises within its scope a mistake of law as well as a mistake of fact. It was further held that there was no warrant for ascribing any limited meaning to the word 'mistake' as has been used therein and that the true principle is that if any party under a mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise, that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitles the party receiving it. It was further held that where it is once established that the payment, even though, it be of a tax, has been made by the party labouring under a mistake of law, the party is entitled to recover the same and the party receiving it is bound to repay or return it. No distinction can be made in respect of a tax liability and any other liability on a plain reading of the terms of section 72 of the Contract Act. To hold that tax paid by mistake of law cannot be recovered under section 72 will be not to interpret the law but to make a law by adding some such words as "otherwise" than by way of taxes after the word "paid". It was also observed that the notion of 'mistake' is materially different from that of inadvertence, error or mis-construction. Error is not synonymous with mistake. In rule 11, it obviously means some clerical or arithmetical error. The word 'misconstruction' also is not to be understood in the technical sense of misconstruction or misinterpretation of a provision of law or notification. Occurring as it does in Rule 11 in the context of inadvertence or error, it obviously connotes an erroneous building up or compiling and calculating in the arithmetical sense only. It is merely intended to resolve or finalise disputes as to accounting. This rule is, therefore, of no avail to the department before us.
9. The term 'mistake' used in section 72 of the Contract Act was examined by the Indian Supreme Court in the case of Sales Tax Officer v. Kanhaiya Lal. In this judgment, the judgment of the Privy Council in the case of Shiva Prasad Sigh v. Shirish Chandra Kandi (A.I.R. 1948 P.C. 297) was noted and the following observations of the Privy Council were quoted with approval:-- "Payment by mistake" in S. 72 (Contract Act) must refer to a payment which was not legally due and which could not have been enforced; that 'mistake' is in thinking that the money paid was due when in fact it was not due".
Learned Judges in this case further observed that:- "The department cannot collect amounts without the authority of law and then be heard to say, that it will not refund and that looked from any angle the present petition has been filed within three years from the discovery of mistake".
It is also to be noted that in this very case, the plea of the learned counsel for the respondents that the petitioner should have filed the constitution petition within period of one year from the discovery of mistake was also repelled observing:- "This contention of Mr. Dalai cannot be entertained. If section 72 of the Contract Act is attracted, which it is, it would be open to the petitioner to file a petition within three years from the discovery of mistake. That the petitioner has done.".
10. Next comes the case of Khardah Company (1983 E.L.T. 2159 Cal). In this case, it was held that it is settled principle that if claim of refund of any amount realized without any authority of law is not barred by any specific statutory provision, it is enforceable under law. It was further held that excess duty not paid through any inadvertence, error or misconstruction but under compulsion due to the assessing authorities demanding the higher rate of duty pending finalisation of the classification by the Government itself was liable to be refunded being unauthorised in law, rule 11 of the Central Excise Rules being not applicable. In this case the petitioner on 4th June, 1965 and 25th July, 1965 lodged their claims for refund of excise duty paid in excess by them between the period May 1962 and February 1964 on their products. The claim was rejected by the Assistant Collector by his. Order dated 24th September, 1965 solely on the ground that such a claim was not laid within three months from the date of payment of the duty. The matter of finalisation of classification Undisputedly remained pending. It was also not disputed by the Authorities that after finalisation of the classification by the Central Government by their order conveyed on 29th April, 1964 the excise duty levied at excess rate was un-authorised and excess amount was liable to be refunded. It will, therefore, be seen that in this case again the question of limitation was neither involved nor was raised. It will be appreciated that reference made by the learned Judges to the observations of the Supreme Court of India in the case of Shiv Shankar Dal Mills (supra) and Aluminium Corporation of India Limited v. Union of India (A.I.R. 1975 S.C. 2279) is to be understood in the context of aforenoted facts and circumstances. The observation in the case of Aluminium Corporation reads:-- "To return what has been taken wrongly is as much a duty and grace of the Government as to levy relentlessly and fully what is due. Default in either, not altogether unfamiliar brings down the confidence of the community in the administration.".
11. The next decision referred to was that of Dilichand Shreelal v. Collector of Central Excise and others (1986 E.L.T. 298 Cal.), wherein it was observed: "that if tax is levied by mistake of law, it is ordinarily the duty of the State subject to any provision of law relating to such tax, to refund the tax. If refund is not made remedy through Court is open, subject to the same restriction and also to the bar of limitation under Article 96 of the Limitation Act, 1908, namely, three years from the date. When the duty becomes known to the person who has made the payment by mistake.".
12. The examination of these judgments show that rule 11 of Central Excise Rules does not apply to a case where the amount of tax is paid under a mistake of law or fact or under compulsion; that the claim of refund of any amount realized without any authority of law, if is not barred by any specific statutory provision enforceable in law; that the order rejecting claim of refund was a quasi judicial order and its validity can be challenged in writ jurisdiction and that where the Authorities retained the money illegally realized the petitioner can in a writ petition ask for refund of the money so collected by way of duty or otherwise without any authority of law when there is no triable issue and that the claim of refund of the amount or duty or tax received without authority of law can be made within three years computable from the date on which the mistake was recovered. The view that the word 'error' is not synonymous with 'mistake' and that the term 'misconstruction' also is not to be understood in the technical sense of misconstruction or misinterpretation of a provision of law or notification is sound. The words 'used in a statute' are to receive the meaning which the context in which they appear admits. Maxwell on interpretation of Statutes 12th Edition at page 289 explains the principle of "Noscitur a sociis":- "Where two or more words which are susceptible of analogous meaning are coupled together, noscuntur a sociis. They are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general.".
The term 'misconstruction' appearing after the words 'inadvertence' or 'error' in Rule 11 connotes an erroneous building up, or compiling and calculating in the arithmetical sense. Rule 11 obviously is not applicable. It is not a case of error, misconstruction or inadvertence. The duty was charged and recovered under mistake of law during all this period and as such it is recoverable under section 72 of the Contract Act but provision of Article 96 of the Limitation Act applies to the claim of refund. In the instant case the petitioner company made the refund application on 15th February, 1977 seeking refund of the excess amount for the period from May 1968 to June, 1978. The respondent department as per the learned Deputy Attorney General is ready to refund the excess duty received for the period of one year prior to the date of application for refund as according to the respondent the duty paid for the period May, 1968 to February, 1976 has become barred by time.
The claim for refund of the duty which falls within three years, from the date of demand as that date can be taken to be the date of discovery of mistake is, however, refundable. It is, therefore, declared that the excise duty on clearance of man-made fabrics in the relevant period was levied and recovered without lawful authority and that the claim for refund of excess duty is enforceable in law for the period of three years only prior to the date of demand that is 15th February, 1977. The respondents shall refund to the petitioner all the amount of excess duty recovered for the said period of three years within eight weeks.