2005 (98) ECC 165 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(B)

Shri V.K. Agrawal, Member (T) and Shri P.S. Bajaj, Member (J)

GTC Industries Limited

Versus

CCE, Vadodara-I

Appeal No. E/2024/2003-B

[Arising out of Order-in-Appeal No. Commr(A)/249/VDR/2003 dated 11.8.03 passed by the Commissioner(Appeals), Central Excise & Customs, Vadodara]

Final Order No. 453/2004-B, dt. 9.6.2004, Certified on 23.6.2004

Show Cause Notice (C. Excise)

Limitation -- Additional excise duty (AED) -- Recovered by the assessee from the customers and the same was sought to be recovered and show cause notice was issued under section 11-D. No limitation has been prescribed for the recovery of the amount collected in excess. It would certainly lead to miscarriage of justice resulting in huge loss of revenue to the Government and wrongful gain to the appellants who will become enrich from both ends one by availing benefit under the exemption notification in question and second by collecting excess duty from the customers -- Sec. 11D of CEA.

Appeal is rejected

PRESENT :

Shri M. Chandrashekharan, Senior Adv. for the appellant.

Smt. C. Barnwal, SDR for the respondent.

Cases Cited :

1. Atul Products Ltd v. CCE Surat, 2000 (123) ELT 697 ....................................... [Para 2]

2. Bripanil Industries Ltd. v. Commissioner of Central Excise, Bangalore, 2000 (83) ECC 461 (T) [Para 2]

3. Good Year India Ltd. v. Union of India, 1990 (28) ECC 22 (Del).......................... [Para 2]

4. Government of India v. Citadel Fine Pharmaceuticals, 1989 (23) ECC 307 (SC)... [Para 3]

5. J.K. Synthetics, 1996 (81) ELT 648................................................................. [Para 2]

Per : P.S. Bajaj

In this appeal which has been preferred against the impugned order in appeal, the controversy relates to the interpretation of Notification No. 355/86-CE dated 24.6.86 on the strength of which the appellants had paid less duty on the final product (Machine Rolled Cigarettes) but recovered more during the period in dispute from the customers and the Commissioner (Appeals) through the impugned order, has reversed the order-in-original of the adjudicating authority who dropped the proceedings for recovery of excess amount collected as duty by the appellants, under Section 11-D of the Act.

2. The learned Counsel has contended that Notification No. 355/86-CE dated 24.6.86 allowed only set off of the duty paid by the appellants on the input cut tobacco used in the manufacture of cigarettes, towards the duty payable on the final product i.e. cigarettes and as such, they should be deemed to have paid full duty on the final product and thus were within their right to recover the full duty from the customers. He has also contended that on the final product i.e. cigarettes, the amount of duty payable by the appellants did not change, only mode of payment of duty was altered through the above-said notification by allowing the appellants to claim set off on the duty already paid on input (cut tobacco) used in the manufacture of the final product. Therefore, the appellants having paid full duty on the final product, had rightly recovered the same from the customers. The provisions of Section 11-D could not be invoked against them. To substantiate his contentions, the Counsel has placed reliance on the law laid down in Bripanil Industries Ltd. v. Commissioner of Central Excise, Bangalore, 2000 (83) ECC 461 (T) : 2002 (144) ELT 391, J.K. Synthetics, 1996 (81) ELT 648, Atul Products Ltd. v. CCE Surat, 2000 (123) ELT 697 and Good year India Ltd. v. Union of India 1990 (28) ECC 22 (Del) : 1990 (49) ELT 39.

3. Another contention raised by the appellants is that the demand is time barred as show cause notice was served on the appellants on 5.12.2000 whereas the fact of the appellants having recovered the duty from the customers came to the knowledge of the department much earlier to that when letter dated 1.11.94 was sent by the Assistant Commissioner to them. In this regard, the Counsel has placed reliance on the law laid down in Government of India v. Citadel Fine Pharmaceuticals, 1989 (23) ECC 307 (SC) : 1989 (42) ELT 515.

4. On the other hand, the learned DR has reiterated the correctness of the impugned order and contended that the notification in question is an exemption notification issued under Rule 8(1) of the Central Excise Rules allowing exemption of payment of duty on the final product of the amount equal to the amount paid as duty on the input cut tobacco and did not speak of any set off or taking of any credit on the duty paid on the inputs towards the discharge of duty on the final product. Therefore, the appellants could not collect the duty more that what they had paid on the final product and as such, are liable to deposit the excess duty with the Government under Section 11-D of the Act. Regarding the limitation, the learned DR has contended that no limitation has been prescribed under the law/rules for effecting recovery under Section 11-D of the Act and as such, the demand cannot be said to be time-barred.

5. We have heard both the sides. In order to appreciate the respective contentions of both the sides, it would be beneficial to reproduce the notification in question (No. 355/86-CE dated 24.6.86) which reads as under:

--In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts cigarettes, falling under sub-heading No. 2403.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944) as is equivalent to the duty of excise leviable under the said Central Excise and Salt Act already paid on "cut tobacco" falling under sub-heading No. 2404.90 of the said Schedule and used in the manufacture of such cigarettes.

--Explanation: For the purpose of this notification, the expression "cut tobacco" means the prepared or processed cut-to-size tobacco which is generally blended or moisturized to a desired extent, for use in the manufacture of machine-rolled cigarettes."

6. Regarding the interpretation of the Notification, the law is well settled. It can hardly be denied that such notifications by which exemption or other benefits are provided by the Government in exercise of its statutory powers, normally for some purpose behind it, such purpose cannot be allowed to be defeated but at the same time, those who may be entitled for it, cannot be allowed to enrich themselves from both ends i.e. from the Government as well as consumers. The Notification has to be interpreted in a manner that it neither deprives the benefit to the persons entitled to nor enables those persons to misuse the benefit. Where there is no ambiguity in the wording of the exemption notification, the same has to be given effect to. It has to be interpreted keeping in mind its plain wording.

7. In the instant case, the wording of the above-said notification is quite plain, clear, unambiguous and leaves no doubt to hold that it is a notification issued under Rule 8(1) of the Central Excise Rules allowing exemption from payment of duty on the final product i.e. Cigarettes, to a manufacturer to the extent to which he had paid the duty on the input i.e. cut tobacco. It no where speaks of allowing the manufacturer to claim set off or modvat credit against duty paid on the inputs utilized in the manufacture of the final product. The notification cannot be said to be akin to the modvat credit scheme or allowing set off of the duty. It simply allows exemption from payment of duty on the final product to certain extent and not on the input.

8. We find that when the manufacturers faced some difficult in claiming the exemption for payment of duty on the final product, to the extent of the duty paid by them on the input cut tobacco used therein, on account of some mis-interpretation of the notification by the field officers of the Central Excise by taking the view that benefit of only that such duty incurred on the input which had actually gone into the manufacture of the final product would be available, the Board issued circular dated 6.7.90 clarifying that allowance of the entire duty paid on the cut tobacco irrespective of the quantity of the input actually gone into the manufacture of the final product, would be available to the manufacturer but from this circular, it is difficult to interpret that the notification in question, provided/allowed credit on the input and utilization of that credit towards the discharge of duty on the final product. Similarly, the Trade Notice issued by the Collector of Central Excise Hyderabad, No. 174/86 dated 8.8.86 that in order to avail the set off, the duty amount taken as credit in the register, shall be utilized for payment of duty on the cigarettes cleared from the factory, cannot said to have changed the basic character of the notification. In fact, trade Notice could not alter the plain wording of the notification in any manner. What had not been provided in the notification could not be substituted/replaced through a Trade Notice. Therefore, no capital out of this Trade Notice can be claimed by the appellants for contending that the notification is akin to the modvat credit scheme.

9. Similarly, the Circular of the Board dated 1.4.81 which contained only instructions to the field officers and prescribed procedure to be followed for claiming set off under various exemption notifications, is also of not much avail to the appellants. It is a general circular laying down the procedure to be followed for claiming set off and it was issued much prior to issuance of the exemption notification in question. As observed above, the notification in question is a simple exemption notification allowing exemption of duty on the final product i.e. cigarettes, to the extent to which the duty was paid on the input cut tobacco by a manufacturer.

10. We also find from the record that earlier on the basis of this notification in question, the appellants staked their claim for the modvat credit on the inputs but their claim was rejected by the Tribunal as is evident from the Tribunal's earlier judgment in appellants own case reported in [2004 (163) ELT 438]. In that case, the Tribunal had taken the view that notification in question only exempted cigarettes from so much of duty of excise leviable under the Act as was equivalent to the duty of excise already paid on cut tobacco and that the notification could not be classified to be notification permitting credit of duty paid on inputs. This judgment of the Tribunal in appellants own case has attained the finality as there is nothing on record to suggest that it had been modified or set aside by the higher Forum.

After availing the benefit of notification in question, the appellants could not recover any amount more than what they had paid by way of duty on the final product from their customers. They cannot be permitted to take double advantage under this notification, one of exemption from payment of duty to the extent to which they had paid the duty on inputs, and another of collection of full duty from the customers. Having recovered the amount by way of duty, more than duty paid by the appellants, they are liable to deposit the same with the Government. The case of the appellants stand squarely covered by the provisions of Section 11-D of the Act. The ratio of law laid down in Britain Industries Limited (supra) is not attracted to the case of the appellants. That was a case wherein additional excise duty (AED) was recovered by the assessee from the customers and the same was sought to be recovered and show cause notice and issued under Section 11-D. The duty paid on the inputs and collected from the buyers of final product was shown separately by the assessee. Under these circumstances, the Tribunal took the view that Section 11-AD is not applicable to the recovery of additional excise duty. Similarly, law laid down in JK Synthetics (supra) is not applicable to case of the appellants. In that case, the exemption Notification No. 225/86 provided set off of the duty and it was observed that the set off was not required to be utilized for payment of duty on final product produced from those very inputs on which credit was taken. But such is not the position in the present case. Similarly, the law laid down in Atul Product Ltd. case (supra) is of no help to the appellants. In that case, the notification involved was No. 432/86-CE and the Tribunal took the view that assessee was eligible to the utilization of set off of the entire accumulated amount towards payment of duty on the specified goods. The law laid down in Goodyear India Ltd. (supra) is also of no avail to the appellants. In that case, the notification involved was 201/79-CE and the question involved was as to whether under Section 50 of the Finance Act, exemption of set off, granted under the aforesaid notification should be availed first and the special duty is to be calculated thereafter or the special duty is to be calculated in accordance with the directive issued by the Board. But no such issue is involved in the present appeal.

11. On a question of limitation, in our view, the contention of the Counsel also cannot be accepted. It has not been disputed before us that no limitation has been prescribed for the recovery of the amount collected in excess, by an assessee, by representing as duty from the customers under Section 11-D. The Apex Court has, in para 6 of the Government of India v. Citadel Fine Pharmaceuticals case (supra) observed that in the absence of any period of limitation, it is settled that every authority is to exercise the power within a reasonable period. But what is a reasonable time is to be decided by keeping in view the facts and circumstances of each case. In the instant case, the department no doubt wrote letter of 1.11.94 to the appellants bringing to their notice that they were wrongly charging full duty from the customers after availing the benefit of notification in question and that they should deposit the excess amount with the Government. The appellants vide their letter dated 8.12.94 alleged that their assessment had not been finalized and that the amount payable by them under Section 11-D will have to be adjusted against dues payable by them if any, on final assessment. Therefore, the Department gave ample time to the appellants for depositing the payment and on their ultimate failure to do so, issued shows cause notice on 5.12.2000 to them.

12. It is also well settled that technicalities of law cannot be permitted to stand in the way of administration of justice. It would certainly lead to miscarriage of justice resulting in huge loss of revenue to the Government, and wrongful gain to the appellants who will become enrich from both ends one by availing benefit under the exemption notification in question and second by collecting excess duty from the customers, if the claim of the Department under Section 11-D of the Act is rejected on technical ground of limitation especially when no period of limitation for recovery of the amount under said section is prescribed and proceedings had been taken by the Department within reasonable time after making attempts to recover the amount from the appellants amicably without resorting to the adjudication proceedings.

13. In the light of the what has been discussed above, we do not find any illegality in the impugned order of the Commissioner (Appeals) and the same is upheld. The appeal of the appellants is dismissed.

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