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2010 (9) TMI 859 - HC - Central ExciseRefund - Whether the appellant could be denied the refund on the extended length of galleries despite the judgment of the Supreme Court in the case of Commissioner of Central Excise Jaipur-II v. S.P.B.L. Ltd. 2002 (9) TMI 113 - SUPREME COURT OF INDIA - Held that - Since the law has now been settled by the Apex Court in SPBL Ltd. holding that the length of galleries having no fan or radiator attached to it cannot be taken into consideration while determining the number of chambers. The Adjudicating Authority ought to have considered the applicability of the law laid down by the Apex Court in the case of SPBL Ltd. to the facts of the present case. Since the issue has not yet been finally determined the proceeding remitted back to the Adjudicating Authority to redetermine the capacity of the appellant s Unit by a reasoned order following principles of natural justice. On determination of the capacity of the Unit if the duty is found to be payable the same shall be paid by the appellant in accordance with law. If it is found to be short-paid the respondent shall be free to resort to the provisions of the Act relating to the recovery since refund has already been granted to the appellant.
Issues Involved:
1. Denial of refund based on the extended length of galleries. 2. Denial of refund when the capacity determination order was declared ultra vires by the Madras High Court. Issue-Wise Detailed Analysis: 1. Denial of Refund Based on the Extended Length of Galleries: The appellant, engaged in the manufacture of processed textile fabrics, was required to discharge excise duty liability based on the annual capacity of production as per Rule 96 ZQ of the Central Excise Rules, 1944, and the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998. A provisional order dated 17th December 1998 was issued, followed by a final order on 1st July 1999, determining the annual capacity of production. The appellant filed for a refund, arguing that the length of galleries should not be included in the computation of annual capacity, as per the Supreme Court judgment in Commissioner of Central Excise v. S.P.B.L. Ltd., which held that galleries without fans or radiators should not be counted. The Tribunal initially allowed the refund, but this decision was overturned on appeal, citing that the final order of 1st July 1999 was not challenged and thus remained operative. The appellant argued that the determination of annual capacity was an annual exercise and should be re-evaluated based on the Supreme Court's ruling. The court found that the issue of annual capacity had not been finally determined and remitted the case back to the Adjudicating Authority to redetermine the capacity following the principles of natural justice. 2. Denial of Refund When Capacity Determination Order Was Declared Ultra Vires: The appellant also contended that the capacity determination rules were declared ultra vires by the Madras High Court in the case of M/s. Beauty Dyers. The Madras High Court held that Rule 3 of the Hot Air Stenter Independent Textiles Processors Annual Capacity Determination Rules was ultra vires Section 3A of the Central Excise Act. This decision was upheld by the Supreme Court, rendering the rules invalid. The appellant argued that this judgment should apply to their case, and the refund should not be denied based on the invalidated rules. The court acknowledged that the Madras High Court's decision had attained finality and that the refund granted to the appellant should not be recovered. The appellant had also paid the duty under protest, as evidenced by various submissions and letters, which was not adequately considered by the Tribunal. The court directed the Adjudicating Authority to re-determine the capacity of the appellant's unit and decide on the refund accordingly. Conclusion: The court remitted the matter back to the Adjudicating Authority to re-determine the annual capacity of the appellant's unit, considering the Supreme Court's ruling in S.P.B.L. Ltd. and the Madras High Court's decision in M/s. Beauty Dyers. The Adjudicating Authority was directed to follow the principles of natural justice and issue a reasoned order. If any duty was found to be short-paid, the respondent could resort to recovery provisions under the Act.
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