Customs, Excise and Gold Tribunal - Delhi
Bakeman'S Home Products Pvt. Ltd. vs Collector Of C. Ex. on 28 February, 1990
Equivalent citations: 1991ECR119(TRI.-DELHI), 1990(48)ELT518(TRI-DEL)
ORDER V. Rajamanickam, Member (T)
1. The facts involved in this appeal are that the appellants manufacture 'Biscuits' falling under Tariff Item 1C of the erstwhile tariff. They use duty paid 'Malt Extract' as one of the inputs which were classified under Item No. 68 of the erstwhile tariff. This Malt Extract was received from M/s. The Malt Company (India) Pvt. Ltd., during the period 1979 to 1984 and credit of duty was availed by the appellants in terms of Notification No. 201/79-C.E., dated 04-06-1979. Subsequently, consequent to the decision of the Delhi High Court completely exempting the product, in the case of M/s. Barmalt (India) Pvt. Ltd., the suppliers M/s. Malt Company (India) Pvt. Ltd. was granted a refund of Rs. 1,24,62,712.25 for the Malt Ex-, tract cleared during the period from 1977 to 1985. In view of the complete exemption granted to the input, the appellants were put on notice by the Assistant Collector of Central Excise, Patiala Division, and the amount of credit of Rs. 41,067.93 availed as setoff by the appellant was demanded and confirmed and the Collector (Appeals) upheld the same in terms of proviso 3 of the Notification No. 201/79-C.E., dated 4-6-1979. The main contention of the appellant is that the demand is hit by limitation under Section 11-A. The notice of demand was issued on 1-9-1987 for the credit of the amount taken from 1979 to 1984.
2. Appearing on behalf of the appellant, Shri C.L. Sawhoy, the Ld. Consultant has contended that he relies on the following decisions of the Tribunal, viz. :-
(i) 1986 (26) ELT 42 (Tribunal) - Premier Tyres Ltd. v. Collr. of Central Excise, Cochin.
(ii) 1987 (31) ELT 781 (Tribunal) - Collr. of Central Excise, Bangalore v. M/s. Falcon Tyres Limited.
(iii) 1988 (38) ELT 523 (Tribunal) - Kusum Products Ltd. v. Collr. of Central Excise.
3. Shri S. Chakraborty, Ld. JDR, however, contested the appeal. He said in terms of proviso 3 of Notification No. 201/79-C.E. the appellants were to pay the amount as the duty paid on the input had been varied subsequently and the appellants were not entitled to the credit taken on the Malt Extract.
4. We have considered the submissions made. The position is that a refund was given to the supplier of Malt Extract viz. M/s. Malt Company (India) Pvt. Ltd., consequent to the Delhi High Court decision which held the same to be non-dutiable. The Assistant Collector having jurisdiction over the appellants' factory, on coming to know that the refund of the duty on Malt Extract had been given, issued the Show Cause Notice to the appellant for demand of credit of duty taken by the appellant in terms of Notification No. 201/79-C.E. Here the Assistant Collector has had no knowledge prior to the taking of credit of the input viz. Malt Extract, that it will be rendered non-dutiable, at the relevant time, the input was duty paid and hence credit was allowed. But consequent on decision, the input was not dutiable and the refund allowed rendered it a non-duty paid item. The proviso 3 of Notification No. 201/79-C.E. is relevant which reads as follows:-
"If the duty paid on the inputs (on which credit has been taken) is varied subsequently due to any reason resulting in payment of refund to, or recovery of more duty from, the manufacturer of the inputs, the credit taken shall be varied accordingly by adjustment in the credit account maintained under paragraph 5 of this Appendix or in the account-current maintained under Sub-rule (1) of Rule 9, or Sub-rule (1) of Rule 173-G, of the Central Excise Rules, 1944 or, if such adjustment be not possible for any reason, by refund to, or, as the case may be, cash recovery from, the manufacturer of the said goods."
5. This being the facts of the matter, we now proceed to examine whether the demand raised in Demand-cum-Show Cause Notice dated 01-09-1987 is a short levy and is amenable to the limitation set forth in Section 11-A of the Central Excise Act. Among the decisions cited, the Ld. Consultant has quoted the Tribunal's decision in the case of Premier Tyres Ltd. v. Collr. of Central Excise, Cochin, reported in 1986 (26) ELT 42 (Tribunal).
This was a specially constituted Bench by the President, consisting of three members to resolve the conflicting decisions for applicability of provisions of Section 11-A, while applying the set-off allowed under Notification 201/79-C.E., which did not contain any inbuilt provision in making adjustment of duty or recovery as per provisos 3 and 4 of the Notification. There the Tribunal held that amounts sought to be recovered would amount to short levy and provisions of Section 11-A will apply.
6. In the case before us, the proviso that would apply is Proviso-3 where consequent to the variation in duty paid on input, there was a case of recovery to be made. At the time when the credit was taken, the department had allowed the same rightly as the input was duty paid. It was only after the decision of the Delhi High Court that the Malt Extract was exempted and a refund of the duty was granted to the manufacturers of the Malt Extract for the period from 1977 to 1985. There arises a peculiar situation that it was not within the knowledge of the department that the input will be exempted. There was neither a wrong or erroneous credit at the time when the credit was availed by the appellant. So when the amount of refund was paid to the input manufacturers, the appellants were not entitled to the credit of duty availed and should have paid back to the department. On the other hand, if the department was to raise the demand, it has to be governed by substantive provisions of limitation for raising such demand under Section 11-A of the Central Excise Act. Eventually the demand being hit by limitation, the appeal succeeds and is allowed.