Taxation Law l Period Spent Before Incorrect Forum Must Be Excluded from Limitation Calculation: Uttarakhand High Court in Refund Claim Case

High Court overturns CESTAT’s rejection of refund claims as time-barred; Orders release of Rs. 21,09,929/- with interest.

The High Court of Uttarakhand, in a landmark judgment, has allowed the appeals of M/s Sara Sae Pvt. Ltd. For the refund of Central Excise Duty under the deemed exports scheme. The judgment, delivered by Chief Justice Ms. Ritu Bahri and Justice Rakesh Thapliyal, emphasized that the period spent pursuing the claim with the incorrect authority (DGFT) must be excluded from the limitation period. This decision overturns the CESTAT’s order which had previously rejected the refund claims as time-barred.

M/s Sara Sae Pvt. Ltd., a manufacturer of oil field equipment, supplied goods under the International Competitive Bidding (ICB) deemed exports scheme, paying the Central Excise Duty initially. The company filed for a refund of Rs. 28,71,563/- with the DGFT on 03.10.2013. Due to a change in refund authority mandated by a notification on 18.04.2013, the company was redirected to the Central Excise Authorities. Subsequent claims were rejected as time-barred under Section 11B of the Central Excise Act, 1944, leading to this appeal.

Applicability of Limitation Period: The court referred to the Supreme Court’s ruling in “M.P. Steel Corporation v. Commissioner of Central Excise” (2017), emphasizing that the Limitation Act, 1963, applies to quasi-judicial authorities. The court observed that the time spent pursuing a remedy before the wrong forum should be excluded from the limitation period.

Relevant Notifications: The notification dated 18.04.2013 shifted the refund jurisdiction from the DGFT to Central Excise Authorities. The court held that the period for filing a refund should be recalculated from the date of this notification.

The court stated, “The period utilized before an incorrect authority cannot be counted against the appellant when calculating the limitation period for filing the refund claim.” It held that the time taken before DGFT must be excluded when determining the one-year limitation period under Section 11B of the Central Excise Act, 1944. Consequently, claims filed within one year from 18.04.2013 are deemed timely.

Chief Justice Ritu Bahri remarked, “The period spent before an incorrect forum, due to the procedural change brought by the notification, must be excluded from the limitation period. This ensures fairness and adherence to the principles of justice.”

The High Court’s decision to allow the refund claims of M/s Sara Sae Pvt. Ltd. Underscores the importance of procedural fairness and the exclusion of time spent before an incorrect forum from the limitation period. This judgment will have significant implications for similar cases, ensuring that procedural changes do not unjustly bar legitimate refund claims. The court directed the respondents to release the refund of Rs. 21,09,929/- with interest under Section 11BB of the Central Excise Act within six weeks.

Date of Decision: 17th May 2024