Customs, Excise and Gold Tribunal - Delhi
Lakshmi Sugar And Oil Mills Ltd. vs Cce on 5 April, 1991
Equivalent citations: 1991(37)ECR104(TRI.-DELHI)
ORDER V.T. Raghavachari, Member (J)
1. The appellants M/s. Lakshmi Sugar & Oil Mills Limited had been granted rebate in terms of Notification No. 257/76-CE dated 30.9.1976 and No. 108/78-CE dated 28.4.1978 in respect of their excess production of sugar during the 1976-77 and 1977-78 seasons. Part of the said sugar had been reprocessed by them in December 1977 and December 1978 respectively. In the course of such reprocessing part of the sugar had been lost. Notice dated 15.1.1980 was issued to the appellants calling upon them to show cause why a sum of Rs. 24,687.26 paise should not be recovered from them being equivalent to rebate granted on the sugar lost in reprocessing as mentioned above. The appellants denied liability. The Assistant Collector under his order dated 19.12.1980 confirmed the demand. The appeal against the same was dismissed by the Collector (Appeals) under his order dated 22.9.1983. This appeal is against the said order.
2. We have heard Shri Y.N. Chopra, consultant for the appellants and Shri K.C. Sachar, JDR for the department.
3. Shri Chopra submits that the question whether the rebate granted as earlier noted could be required to be repaid (on the ground that part of the sugar had been lost in reprocessing subsequently) was the subject matter of decision by this Tribunal in (i) Collector Central Excise, Allahabad v. M/s. Tulsipur Sugar Company Limited 1987 Vol. 13 ECR 265, (ii) Collector of Central Excise, Allahabad v. M/s. Tulsipur Sugar Company Limited 1987 (12) ECR 1210 and (iii) M/s. South India Sugar Limited v. Collector Central Excise, Madras 1987 Vol. 12 ECR 868. It has been held by the Tribunal in the said decisions that the department was not entitled in such circumstances to call upon the assessee to repay the rebate already granted. Following the said decisions we hold that the demand in the present case is also not justified.
4. It is further contended by Mr. Chopra that the demand was in any event barred by time. The reprocessing had occurred in December 1977 and December 1978. Credit had been taken before these dates. The show cause notice was issued on 15.1.1980. The Assistant Collector did not go into this question of time bar except stating that the plea of time bar was not tenable. The Collector (Appeals) held that as this is not a case of grant of refund or raising a demand, the time limit for raising demands would not apply. Shri Chopra contended that the said reasoning is not proper. If, as he held by the Collector (Appeals), the amount granted was not a refund, then the department cannot take proceedings under the Central Excise Rules for recovery thereof but would have to take proceedings through a Civil Court only for recovery of the money granted to the appellants. On the other hand if what had been granted was in the nature of refund then the proceedings for recovery should be commenced within the time limit prescribed under Rule 10. In the present case the demand was raised after expiry of the period of limitation prescribed therefor. We, therefore, agree that the demand was in any event barred by time.
5. For both the above reasons this appeal is allowed and the orders of the lower authorities are set aside with consequential relief, if any.
P.C. Jain, Member (T)
1. I have carefully perused the orders passed by my learned brother. I regret with respect that I am unable to persuade myself to agree with the said prder. Accordingly, I am passing the following order:
2. Facts of the case are that the appellant mills had been granted rebate in terms of notification No. 257/76-CE dated 30.9.1976 and 108/78-CE dated 28.4.1978 in respect of their excess production of sugar during the sugar year 1976-77 and 1977-78 respectively. Part of the said sugar had been reprocessed by them in December 1977 and December 1978 respectively. In the course of such reprocessing part of the sugar had been lost. Notice dated 15.1.1980 was issued to the appellants calling upon them to show cause why a sum of Rs. 24,687.20 p. should not be recovered from them being equivalent to rebate granted on the sugar lost in reprocessing as mentioned above. The lower authorities confirmed the demand against the appellants. The appellants appealed in vain to the Collector of Central Excise (Appeals) whose order is impugned now before the Tribunal.
3. The learned consultant for the appellants now submits that this issue has been decided by the following decisions of the Tribunal:
(i) Collector of Central Excise, Allahabad v. M/s. Tulsipur Sugar Company Limited 1987 (13) ECR 265.
(ii) Collector of Central Excise, Allahabad v. M/s. Tulsipur Sugar Company Limited 1987 (12) ECR 1210.
(iii) M/s. South India Sugar Limited v. Collector of Central Excise, Madras 1987 (12) ECR 866.
It has been held by the Tribunal in the said decisions that the department was not entitled in such circumstances to call upon the assessee to repay the rebate already granted.
4. It is observed that the decision in the case of M/s. South India Sugar Ltd. is the leading decision and the remaining two decisions have been based on the said decision. The reasoning which has favoured with the Tribunal in the case of South India Sugar Ltd. is given in para 18 of the report and is as follows:
18. Shri Lakshmikumaran on the other hand relies on the words in Sub-clause (c) of 2nd proviso to notification 203/72 dated 28.9.1972 and the corresponding proviso in notification 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 not 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.
The crux of the reasoning of the Bench in that case is that "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". There appears to be fallacy in this reasoning. It appears to have been made out as if the appellants would lose twice in respect of brown/damaged sugar if the reasoning of the department for claiming back the credit in respect of the losses occurring during the reprocessing is accepted; there is no double loss at all to the appellants. The department is only seeking to retrench credit in respect of sugar which has not been cleared (not even produced) at all and which would not have, therefore, been eligible for the benefit of exemption notification, had the normal procedure of giving the benefit of exemption at the time of clearance of the sugar been applied?
5. It also appears that the contention of the learned advocate which ultimately found favour with the Tribunal in the case of M/s. South India Sugar Ltd., as extracted above, appears to have been based on a wrong reading of Clause (c) of 2nd proviso to notification 203/72 dated 28.9.1972 and the corresponding clause in para 2 of notification 189/73 dated 4.10.1973 Clause (b)(ii) of para 2 of this notification. The learned advocate therein has added certain words to the proviso of the said notification. This point is better appreciated if the arguments of the learned advocate and the exact wording of the clause of the proviso to notification 203/72 are placed side by side as below:
Contention of the learned advocate. Actual words in the notfn.
It has been specifically stipulated that any sugar obtained by reprocessing of defective, damaged or brown sugar should not be gain 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. Provided further that in computing the production of sugar during the periods mentioned in col. 2 of the said table, (c) any sugar obtained by refining gur or khandsari sugar or any sugar obtained by reprocessing of defective damaged sugar or brown sugar, if the same has already been included in the quantity of sugar produced shall not be taken into account.
Col. 2 of the table referred to in the 2nd col. above refers to both incentive period as well as base period; it does not refer to incentive period alone as is sought to be made out by the underlined portions in col. 1 above by the learned advocate in his contention and accepted by the Tribunal. The purpose of Clause (c) of 2nd proviso to notification 203/72 dt. 28.9.1972 (and the corresponding Clause of notification 189/73 dt. 4.10.1973) is merely to avoid duplication of accounting of sugar--whether relating to incentive period or base period-once it has been taken into computation by the assessee. Option is entirely of the assessee whether to count the brown sugar in excess production or not. If he felt that brown sugar/damaged/defective sugar as such was not to be cleared he had the option not to count it as a production of the incentive period of 1972-73 sugar year to which notification 230/72 applied; he could count it as a production of the subsequent year if he wanted to clear the sugar after reprocessing.
6. The fact that the sugar loss in reprocessing of damaged/defective sugar is not to be counted as production of sugar is also recognised in Rule 86 of the Central Excise Rules, 1944 pertaining to damaged sugar taken to the factory for refining. According to this Rule sugar which has been damaged after depositing in the store-room on the approved premises, or after its delivery on payment of duty may be returned to the factory to be again refined and where duty had been paid on such sugar only its equivalent in refined sugar based on the actual weight and polarisation of damaged sugar can be delivered without payment of duty and not the quantity equal to damaged/defective quantity of sugar. This means in effect that the sugar lost in reprocessing is not to be given any benefit of duty even though entire sugar before reprocessing had borne duty. It is nothing but this principle, recognised in Rule 86, which has to be applied to the analogous situation in the instant case and which has been done so by the department.
7. The fact that notifications giving rebate of excess production of sugar is an exemption under Rule 8(1) of the Central Excise Rules is not in dispute. It is also axiomatic that the power to issue exemption notification with the Government under the said rule cannot exceed the levy which is otherwise leviable under the First Schedule. On a quantity of sugar which is not produced at all and therefore could not have been cleared, there is no question of collecting duty of excise at all. Therefore, giving of any advance credit before clearance of sugar in terms of a procedure followed by the trade has to be applied subject to the conditions to which that procedure had been made applicable. The foremost condition in the procedure is that 'excess production sugar' on which rebate is given in advance in terms of the procedure is to be cleared from the factory. This condition is in consonance with the provisions of Rules 9 and 49 of the Central Excise Rules because duty is chargeable on the excisable goods at the time of their clearance from the factory. After having availed of advance credit in terms of the procedure prescribed by the Government in consultation with the industry the sugar factories cannot turn around and say that the credit given to them in terms of that special procedure is final and cannot be taken back even if they do not observe the condition laid down in the said procedure, namely that the entire excess production of sugar is to be cleared from the factory.
8. I had occasion to deal with this point, namely whether the credit given by the department before clearance of the excess production of sugar is advance credit or whether it is duty, in appeal No. E/1424/83-D in the case of M/s. Cawnpore Sugar Works Ltd., Kanpur v. Collector of Central Excise, New Delhi. My views in that order are extracted below:
The relevant condition referred to by the respondent in the so-called cross-objection is condition No. 2 i.e. the quantity produced during the month May 1978 to June 1978 should be cleared from the factory and if there is any loss due to any reason, the quantity of the rebate as an advance credit to the appellants which would get finalised only on clearance of the sugar produced in the months May 78 to June 78. On the other hand, it has been urged by the appellants that this does not mean that the refund/rebate was provisional. In support, the appellants have cited two authorities based on the decisions of the Tribunal, namely (i) Jagajit Sugar Mills Co. (1985 ECR 746) and (ii) Malwa Sugar Mills Co. Ltd. (1986 ELT 144).
I have carefully considered the aforesaid plea of the appellant. The authorities of the Tribunal's decision mentioned supra or relied upon in learned brother's order do not help the appellant In the decision reported at 1985 ECR 746, the Tribunal has observed that a strict legal position is that there is no provision for any advance deposit or credit in the notification. In the normal course the reduced duty, as against the normal higher duty was payable when the eligible sugar was cleared from the factory. It is thus apparent that the Tribunal has recognised that the benefit of exemption under notification under Rule 8(1) for excess production of sugar is available only at the time of clearance of such excess production and there is no provision for any advance credit. Yet it remains a fact that the advance credits are given to facilitate the working of the sugar industry and well laid down procedure has been adopted in consultation with ISMA (Indian Sugar Mills Association)--a body representing the Sugar Industry--which is working for over two decades. Although I have not been able to lay my hands on the initial order of the Board, a gist of it is available in para 4 of a trade notice based on Board's letter at page 327- A of Cen-Cus Vol. III 1975 which is reproduced below:
Regarding the operation of the rebate scheme is concerned, the benefit of the exemption is being given not as usual in the case of such notifications at the time of clearance of the goods, but an advance credit to the extent of the concession admissible under the notification is given as soon as excess production is determinable, in anticipation of the clearance of such sugar. It is an essential part of the scheme of grant of advance credit that all sugar in respect of which such advance credit is allowed should be cleared on payment of duty at the full rates. This ensures that the benefit that accrues to the Sugar Mills is limited to the extent provided under the notification.
This Procedure can be deemed to be a supplemental instruction issued by the Board under Rule 233 of the Central Excise Rules, 1944. Having taken advantage of a part of these supplemental instruction, sugar factories cannot turn around and say that the other part of the said instruction or the whole of the instruction is illegal. Nature of the credit i.e. that it is advance credit, cannot be disputed. Finality of the credit is subject to clearance of the excess production of sugar. Therefore, any time limit for the purpose of claiming any refund or recovery should be reckoned from the date of clearance of the excess production of sugar or the date of credit of the rebate sanctioned whichever is later. Since the relevant fact in the instant case as to when the excess production of sugar was cleared is not available, the Collector (Appeals) was quite justified in remanding the matter. It is also worth noting here that in the two cases relied upon by the learned Consultant mentioned supra, the Tribunal has found or assumed that excess production rebate was credited after the clearance of excess production sugar. Therefore, it was rightly held that computation of time limit of six months under Rule 11 (or Section 11B) would reckon from the date of credit in the PLA. In the instant case however, the date of clearance of excess production sugar is not known.
9. Based on the above reasoning, it can be said that the advance credit on excess production sugar is a refund of duty which gets finalised on clearance of such sugar. Therefore, in calculating any time limit for recovery or refund of duty on such excess production sugar, one is dependent upon the date of clearance of excess production sugar if the credit has been given in advance. In the instant cases it is not known as to when were the credits of duty on excess production sugar given in PLA in terms of the exemption notifications and as to when such reprocessing losses were made known to the department. The department is entitled to recover in my view by issuing show cause notices within six months of any of the two dates mentioned above whichever is later. In view of the clear facts not being available on record, the matter is fit for remand to the original authority to decide the question of time bar whether the demand made in terms of the show cause notice dated 15.1.1980 is within time or not. So far as the liability to demand is concerned, the department has a categorical right to demand inasmuch as no exemption notification can be read as exempting something which is not liable to duty at all as discussed earlier.
10. Hence the appeal is disposed of by way of remand to the original authority as mentioned in para 9.
V.T. Raghavachari, Member (J)
1. In view of the difference of opinion arising out of the orders of the two members constituting the Bench the following questions are referred to the President for his decision:
(1) Whether the Department is competent to retrench the credit in respect of excess production sugar lost in reprocessing of sugar in subsequent years (Seasons) in terms of notification Nos. 257/76-CE dated 30.9.1976 and 108/78-CE dated 28.4.1978.
(2) Whether the period of six months for demand or recovery of such credit on such sugar lost in reprocessing is to be counted from
i) the date of such credit, or
ii) the date of such credit or the date of reprocessing made known to the Department whichever is later.
G. Sankaran, Member (T)
1. I have heard Shri Y.N. Chopra, Consultant, for the appellants and Shri L.C. Chakraborty, DR, for the respondent. The matter was taken up on 27.7.1990 and adjourned to 4.10.1990 to enable both sides to study the final order in a similar appeal No. E/1424/83-D--M/s. Cawnpore Sugar Works Ltd. v. Collector of Central Excise, New Delhi and make further submissions. That case related to a demand by the Assistant Collector for repayment of a part of the rebate that had been earlier allowed to the appellants (in that case) in terms of Central Excise Notification No. 108/78 dated 28.4.1978. The basis for the demand was that the actual amount of duty paid on free sale sugar was less than the amount of credit allowed. However, the demand was made long after the expiry of the normal period of limitation from the date of the credit in the P.L.A. Since the assessments were not provisional with reference to the said dispute, the Tribunal held that the demand was barred by limitation.
2. Shri Chopra, Learned Consultant, did not make any submissions before me with reference to the aforesaid order but relied on the three decisions mentioned in Shri Raghavachari's order. He also submitted that the reference to Central Excise Rule 86 in Shri Jain's order was not relevant since it applied to duty-paid sugar cleared from the factory but returned for reprocessing. As regards limitation, he has furnished details regarding the number and date of the Assistant Collector's orders allowing rebates for the seasons 1976-77 and 1977-78 and of the credit entry in the P.L.A., in support of the plea hat the demand was hit by limitation.
3. Shri Chakraborty, Learned D.R., on the other hand, reiterated the submissions made on behalf of the Department in the Cawnpore Sugar Works case (supra). On point of difference (1), he submitted that the Department would certainly be competent to retrench erroneous credits if the necessary conditions were present and the requirements of law were complied with. In the Cawnpore Sugar Works case, no question regarding sugar lost in reprocessing was in issue. Therefore, the decision was not relevant. The 'relevant date for computation of limitation would be the date of debit of the P.L.A. towards payment of duty on clearance of the reprocessed sugar. Since this information was not available on record, the matter should be remanded to the lower authority, as opined by Member Shri P.C. Jain.
4. I have carefully considered the rival submissions. In South India Sugars Limited v. Collector of Central Excise, Madras--1987 (12) ECR 868 the Tribunal noticed the words used in the notifications (No. 203/72-CE dated 28.9.1972 and 189/73-CE dated 4.10.1973) which stipulated 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. (The words used in notification Nos. 257/76-CE dated 30.9.1976 and 108/78-CE dated 28.4.1978 under consideration in the present disputes are similar). It was held that this would clearly establish that damaged or brown sugar would be sugar eligible for rebate. It is nobody's case in the present dispute that the subject quantity of brown sugar was not eligible for the duty rebate when the rebate was sanctioned. If, as a result of reprocessing, a quantity of the brown sugar was lost and was, therefore, not available for clearance on payment of duty and the quantum of rebate initially allowed on the said quantity is sought to be recovered, then, it has, in any view, to be shown by the Department that the initial assessments were provisional or that the sanction of rebate was subject to explicit condition that it was liable to be altered in the event of any part of the sugar in respect of which the rebate was sanctioned being not actually cleared on account of any reason including loss or destruction. The Department has not shown that such is the case herein. In that case, the normal period of limitation would apply. In the present instance, the limitation will run from the date of the credit in the P.L.A. of the rebate sanctioned.
5. Central Excise Rule 86 referred to by Learned Member Shri Jain in his order reads as follows:
Rule 86. Damaged sugar may be returned to factory for refining. Sugar which has been damaged after depositing in the store-room on the approved premises, or after its delivery on payment of duty, may be returned to the factory to be again refined, and where duty has been paid on such sugar its equivalent in refined sugar based on the actual weight and polarisation of the damaged sugar may be delivered without payment of duty.
It is clear from the plain language of the rule that it covers a situation entirely different from that in the present case. The rule does not spell out any provision with reference to the rebate already sanctioned in respect of damaged sugar which may be subsequently reprocessed. In my view, this rule is not relevant to the present dispute.
6. Nor do I see how any question of double benefit arises. The Department had, after scrutiny, sanctioned rebate in respect of excess production of sugar. This included, as it turned out later, some damaged sugar. This included, as it turned out later, some damaged sugar. When the reprocessed sugar arising out of this damaged sugar was cleared, it would presumably have been subjected to the appropriate rate of duty. The Department has not contended that the benefit of a reduced rate of duty (reduced on the ground of excess production) was extended to this sugar. That would have been against the scheme of the notification which specifically provided that in computing the production of sugar during the periods mentioned in Col. 2 of the table to the notification any sugar obtained by reprocessing of defective, damaged, or brown sugar shall not be taken into account if the same had already been included in the quantity of sugar produced.
7. In the result, I would answer the 2 points of reference as follows:
(i) The Department would be competent to retrench the credit in respect of excess production sugar lost in the reprocessing of sugar in subsequent years (seasons) in terms of notification Nos. 257/76-CE dated 30.9.1976 and 108/78-CE dated 28.4.1978 provided the requirements of the law inter alia, in respect of provisionality of assessments/limitation are complied with.
(ii) The period of 6 months for demand or recovery of such credit on such sugar lost in reprocessing is to be counted from the date of such credit. This is subject to what is stated in respect of point (i).
8. The case will now go back to Special Bench 'D' for final disposal of the appeal.