Customs, Excise and Gold Tribunal - Delhi
South India Sugars Limited vs Collector Of Central Excise on 14 May, 1987
Equivalent citations: 1987(13)ECC201, 1987(12)ECR868(TRI.-DELHI), 1987(30)ELT509(TRI-DEL)
ORDER K. Prakash Anand, Member (T)
1. This is a revision application filed before the Government of India against the orders of the Appellate Collector of Central Excise, Madras. On the setting up of this Tribunal it is transferred here and is being treated as an appeal before us.
2. Briefly the facts of the case are that the appellants claimed incentive rebate for excess production achieved by them during the various sugar seasons from 1971-72 to 1974-75 under different notifications. The rebate claims were sanctioned and the manufacturer was allowed to take credit of the rebate allowed in the personal ledger account. Later on, it transpired that the rebate had been allowed on excess production which included certain quantities of brown sugar and damaged sugar containing more than 90% sugar content which was later re-processed by the appellants company. In the course of such reprocessing there were certain losses of sugar obtained. The Department, therefore, issued show cause notices to the appellants asking them as to why incentive rebate allowed by way of credit in the PL A for the quantities lost during re-processing are debited in their personal ledger account. In the Order-in-Original, the Assistant Collector held that the aforestated excess of incentive rebate allowed was recoverable and should be debited in the PLA of the appellants company. When the party went in appeal before the Appellate Collector, the Assistant Collector's order was confirmed. It is against this order of the Appellate Collector that the appellants have come up before us.
3. Shri V. Lakshmikumaran, advocate, appeared on behalf of the appellants and submits first of all that the period for which the rebate is actually claimed is for sugar season 1971-72 to 1974-75 and the show cause notices which were issued on the 16th 3uly 1979 and 18th September 1979 were clearly barred by limitation. When asked about the precise date of adjustment of the incentive rebate in personal ledger account, the learned advocate stated that the precise dates are not with him. But in view of the time that has elapsed between the period for which rebate was granted and the date of the issue of the show cause notice, it is clear that the demand for duty was raised far beyond the period prescribed under the rules. It is submitted that if the appeal is not allowed on merits, then, at least, on the issue of time bar, it should be remanded to the lower authorities for de novo decision after taking into account the precise dates of adjustment of incentive rebate in the PLA. Shri Lakshmikumaran, submitted that the rebate in duty was granted, as per notification, on production of sugar in a particular season while the losses in re-processing arose subsequently and that the incentive rebate concession authorised grant of rebate on the entire quantities of sugar produced and there was no authority for the Department to claim for adjustment of credit allowed on any sugar which is lost in processing a part in the next season.
4. It is further submitted that the Appellate Collector confused the issue by assuming that the appellants were claiming incentive rebate on what he called "Dirty Sugar". It is submitted that the rebate was claimed and allowed on sugar which was produced and fit for human consumption.
It is emphasised on behalf of the appellants that the grant of rebate under the relevant notification is for excess production in a particular season and has not been related to its sale, disposal or reprocessing.
5. Responding Shri Sachar, SDR, emphasises that the grant of rebate is under an exemption notification and such exemption can be availed of only in respect of goods which are cleared and not on production. It is submitted on behalf of the Department that if actual quantum of production is reduced as a result of re-processing then incentive rebate would be payable only in terms of the production which is finally cleared.
6. The learned SDR strongly relied on the decision of the Andhra Pradesh High Court in the case of Collector of Central Excise, Hyderabad v. Nizam Sugar Factory (WP 221/71) (which has also been relied upon by the Appellate Collector) in which it was held that it is only sugar which is fit for consumption that can be called sugar for the purpose of grant of rebate on excess production and that the dirty sugar, being non-excisable, would not be entitled to any rebate or duty on excess production. Shri Sachar also submits that the Appellate Collector rightly relied on the decision in the case of Rohtas Industries Limited, Dalmianagar : 1972 TLR 2309 in which it was held that sugar produced in 1972-73 season which was re-processed in 1974 could not be treated as manufactured in 1972-73.
7. We have carefully considered the facts of the case and submissions made before us. The first point on which a decision is necessary is whether the orders of the Department relating to the making -of adjustment in the personal ledger account with a view to recover excess incentive rebate allowed is barred by limitation. The grant of advance credit of admissible rebate for duty has been allowed by the Department as an extra legal concession. Actually at the time when such credit is allowed in the PLA there has been no payment of duty and therefore, strictly speaking, it cannot be said that the credit allowed is a refund of duties paid, because, after all, refund can only be of actual payment and not of future payment. On the other hand, when an extra legal concession of this nature has been provided for the benefit of the assessee, a realistic view' has to be taken on the nature of such adjustment. The fact is that as per the procedure governing the grant of rebate, the excess production of sugar is required to be cleared on payment of full duty, the rebate of amount due being payable, however, not on payment of such full duty but prior to such payment of duty, prior even to the clearance of the goods, at the time of the production of such excess sugar. Taking totality of the scheme it is not possible to take any view other than that the grant of such advance adjustment in PLA is actually an advance refund of duties.
8. We find that this issue has come in for consideration before this Bench in the case of Shree Una Taluka Khedut Sahakari Khand Udyog Mandali Ltd. v. Collector of Central Excise, Bombay : 1984 (15) ELT 183. In this case it was held that the rebate claimed with reference to-a notification conferring duty concession allowed by adjustment in PLA virtually amounts to refund of duty paid and would be covered under Rule 10 of the Central Excises Rules 1944. In the light of the foregoing discussion, we fully concur with this view.
9. It does not appear that the plea of time bar which has been made before us has been made before the lower authorities because neither the order of the Assistant Collector nor that of the Appellate Collector deals with the issue. However, this is a point of law the raising of which has to be allowed even at this stage.
10. Keeping in view that the period to which the excess production relates is 1971-1975 and the show cause notices for demand of duty have been issued only on 16th 3uly and 18th September 1979, it would appear that the demand of duty may be barred by limitation.
11. There is no argument from the Department side that Rule 10 is not attracted.
12. In the light of the foregoing, the matter is remanded back to the Assistant Collector for de novo consideration and order after taking into account the actual dates from which the adjustment of rebate had been allowed.
13. In allowing the remand of the matter on the issue of time bar, we feel it unnecessary to go into the merits of the case.
Appeal is allowed by remand.
V.T. Raghavachari, Member (J)
14. I have carefully perused the order dictated by brother Shri K. Prakash Anand. Since I am unable to persuade myself to agree with the conclusion reached in that order it has become necessary for me to record a separate order.
15. In respect of their production during the years 1971-72 to 1974-75 the appellants, M/s. South India Sugar Ltd. had been granted incentive rebate under the notifications providing therefor, the rebate having been granted in respect of brown sugar and damaged sugar also produced during the respective years. Subsequently two show cause notices dated 16-7-1979 and 18-9-1979 were issued to the appellants calling upon them to show cause why the incentive rebate earlier granted should not be reduced to the extent indicated in the notices and the balance recovered from them. This was on the basis that subsequent to the close of the respective years the appellants had processed the brown/damaged sugar to produce white sugar and in that process of re-processing the quantities as indicated in the show cause notices had been lost and therefore the rebate granted in respect of the quantities so lost was liable to be repaid. The appellants resisted the demand. The Assistant Collector under order dated 30-11-1980 over-ruled their defence and directed re-deposit of the amount of Rs. 8000.27 P demanded under the two show cause notices. The said order was confirmed by the Appellate Collector under order dated 14-8-1981. The appellants had preferred a revision petition to the Government against the said order. The same is the present deemed appeal before us.
16. The contention of the appellants before the Assistant Collector was that they were entitled to claim incentive rebate on the quantity in stock (inclusive of the brown/damaged Sugar also) at the time of their claiming the rebate and that any subsequent loss during reprocessing should not be taken into account for reducing the rebate already allowed. In rejecting this contention the Assistant Collector held "the quantity of sugar not eventually cleared from the factory due to storage loss or other reasons will not cover any rebate and that the amount of proforma credit should be reduced suitably by deposits to the extent the excess production of sugar not cleared from the factory." Thus the reason that evidently prevailed with the Assistant Collector was that the rebate should be calculated with reference to the sugar finally cleared from the factory and not merely with reference to the sugar initially produced, inclusive of the brown/damaged sugar. The Appellate Collector in his order pointed out that though called an incentive rebate it was really an exemption from duty and the contention of the appellants cannot be accepted since the levy on the sugar produced during the season has not been discharged until clearances during the next season and the reprocessing showed a very high shortage. He further relied upon a decision of the Andhra Pradesh High Court in the case of Collector of Central Excise v. Nizam Sugar Factory and Anr. decision in the case of Rohtas Industries Ltd. v. Union of India (1972 TLR 2309). Shri Sachar for the Department relies upon the same reasoning (as mentioned by the Assistant Collector and Appellate Collector) in defending this appeal.
17. The decision of the Andhra Pradesh High Court held that dirty sugar unfit for human consumption would not qualify for rebate. But brown/ damaged sugar would not be sugar unfit for human consumption. This would be evident even from the words of the notification which stipulate that white sugar obtained out of reprocessing of defective, damaged or brown sugar should not be taken into consideration if such defective, damaged or brown sugar had already been included in quantifying sugar produced for the purpose of granting rebate. That would clearly establish that damaged or brown sugar would be sugar eligible for rebate. Hence the ratio of the above decision would not apply to our case. The other case of Rohtas Industries Ltd. only laid down that sugar produced in one season and later reprocessed in the next season cannot be treated as sugar manufactured in the next season. Therefore that would also not govern the present issue.
18. Shri Lakshmikumaran on the other hand relies on the words in Sub-clause (c) of 2nd proviso to notification No. 203/72, dated 28-9-1972 and the corresponding proviso in notification No. 189/73, dated 4-10-1973. He points out that under the said provisos it has been specifically stipulated that any sugar obtained by reprocessing of defective, damaged or brown sugar should not be again taken into account for claiming rebate, if the said defective, damaged or brown sugar has already been included in the quantity of sugar produced for deciding the quantum of excess production. He, therefore, contends that while it is permissible under the scheme of the notifications to take into account the brown/damaged sugar produced during the relevant period for claiming rebate thereon also, it is not permissible to take into account the quantity of reprocessed sugar obtained later out of such brown/damaged sugar and this would indicate that the rebate already granted on the brown/damaged sugar should be allowed to continue. I am convinced that this reasoning is correct. The factory should not be denied its claim for rebate on the brown/damaged sugar lost during the reprocessing and at the same time be denied under the notification the benefit of rebate on the reprocessed sugar arising out of the said brown/damaged sugar.
19. In this connection Shri Lakshmikumaran further incidentally relies on the fact that in another appeal arising under exactly similar circumstances the same Appellate Collector had in his earlier order dated 19-2-1981 set aside another order of the Assistant Collector wherein, in respect of the very same appellants, a similar demand for recrediting a part of the rebate already granted had been upheld by the Assistant Collector., The Appellate Collector had in that earlier order held that the brown sugar is also a part of the total sugar produced during the particular season and the rebate as applicable to the excess total production during the season and that the processing of brown sugar and recovery of fine sugar there from during the next season is outside the scope of the incentive rebate granted already.
20. In the above circumstances I hold that the order of the Appellate Collector dated 14-8-1981 is liable to be set aside. Shri Lakshmikumaran raised a further contention that in any event the demands under the notices dated 16-7-1979 and 18-9-1979 were barred by time since they related to the rebate granted during the years 1971-72 to 1974-75. The contention of Shri Sachar in this connection is that there is no information as to when this fact of reprocessing of the brown/damaged sugar, and the consequent loss, was made known to the Department and that if this information had been suppressed that would be a ground for invoking the larger period of limitation. Hence if it is to be held that the demands were sustainable in law this would be a proper case where the matter will have to be remitted to the Assistant Collector for a finding on this issue whether the demands were within time.
21. But in view of my findings earlier, this appeal is allowed and the orders of the lower authorities are set aside with consequential relief.
G. Sankaran, Vice-President
22. I have carefully perused the orders proposed by Brothers K. Prakash Anand and V.T. Raghavachari. I agree with the order proposed by Shri V.T. Raghavachari.
FINAL ORDER
23. In view of the majority opinion, the appeal is allowed, and the orders of the lower authorities are set aside with consequential relief to the appellants.