2011 (6) TMI 582 - AT - Central Excise

Notification No. 178/77-C.E - Cenvat credit - respondent had availed set-off of duty paid - Notification No. 178/77-C.E. did not have any provision for recovery of the set-off of duty wrongly availed. - Section 11A provided for issue of a show-cause notice for duty short levied or short paid or erroneously refunded within a period of six months from the date of payment/refund of duty in normal cases and within a period of five years in cases where suppression of fraud collusion etc. were involved Held that - set-off of duty paid was taken under Notification 178/77-C.E. from 1-8-1978 to 3-6-1979 whereas the demand for recovery thereof was initiated from November 1987 to February 1988 i.e. after lapse of more than eight years. demand for recovery of set-off of duty taken under Notification No. 178/77-C.E. is clearly time-barred and is therefore not sustainable. Cenvat credit - set-off of duty availed under Notification No. 201/79-C.E. dated 4-6-1979 - notification No. 201/79-C.E. was rescinded in 1986 without any savings clause and the recovery notice was issued after a lapse of more than a year of the rescission of the notification Held that - provisions of said Section 38A the department s right of recovery of credit of duty availed as well as respondent s obligation/liability to pay or to reverse the credit availed are not vitiated and action taken under Notification 201/79 dated 4-6-1979 survives even after its recession. demand for recovery of set-off/credit of duty paid on inputs taken under Notification No. 201/79-C.E. dated 4-6-1979 is sustainable in law.

Issues Involved:
1. Time-barred demand for recovery of set-off duty under Notification No. 178/77-C.E.
2. Validity of demand for recovery of set-off duty under Notification No. 201/79-C.E.
3. Retrospective effect of Section 38A of the Central Excise Act, 1944.

Detailed Analysis:

1. Time-barred demand for recovery of set-off duty under Notification No. 178/77-C.E.:
The respondent, M/s. Ceat Ltd., availed set-off duty under Notification No. 178/77-C.E. from 1-8-1978 to 3-6-1979. The jurisdictional Superintendent issued demand notices for the recovery of this set-off duty in November 1987 to April 1988, more than eight years after the set-off was availed. The respondent contended that the demands were time-barred under Section 11A of the Central Excise Act, 1944, which prescribed a six-month limitation period for normal cases and five years for cases involving suppression, fraud, etc. The Tribunal agreed, stating that the demand for recovery of set-off duty under Notification No. 178/77-C.E. was clearly time-barred and not sustainable.

2. Validity of demand for recovery of set-off duty under Notification No. 201/79-C.E.:
For the period from 4-6-1979 to September 1980, M/s. Ceat Ltd. availed set-off duty under Notification No. 201/79-C.E. This notification included a specific provision in paragraph 3 of the Appendix for the recovery of credit wrongly availed, without prescribing a time limit. The Tribunal noted that the cause of action for recovery arose when the refund of duty paid on inputs was granted to M/s. National Rayon Corporation, following a Supreme Court judgment. The jurisdictional Superintendent issued demand notices immediately after receiving information about the refunds. The Tribunal held that these demands were issued within a reasonable period, as per the Supreme Court's judgment in the Citedal Fine Pharmaceuticals case. Therefore, the demand for recovery of set-off duty under Notification No. 201/79-C.E. was valid and sustainable.

3. Retrospective effect of Section 38A of the Central Excise Act, 1944:
The respondent argued that Notification No. 201/79-C.E. was rescinded in 1986 without a saving clause, making the recovery notice invalid. However, the Tribunal referred to Section 38A of the Central Excise Act, 1944, which was inserted with retrospective effect from 1944 by the Finance Act, 2001. Section 38A ensures that the rescission of a notification does not affect any rights, obligations, or liabilities incurred under it. Thus, the Tribunal concluded that the department's right to recover the credit of duty availed and the respondent's obligation to reverse the credit were not vitiated by the rescission of Notification No. 201/79-C.E. in 1986.

Conclusion:
The Tribunal held that the demand for recovery of set-off duty under Notification No. 178/77-C.E. was time-barred and unsustainable. However, the demand for recovery of set-off duty under Notification No. 201/79-C.E. was valid and sustainable. The adjudicating authority was directed to quantify the revised amount of demand accordingly. The impugned order was set aside, and the appeal was partly allowed. The cross-objection filed by the respondent was also disposed of.

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