2002 (12) TMI 80 - SC - Central Excise

Whether Section 11A was applicable? Held that - Lesser collection of duty because the adjustment of duty paid on inputs is not a case of short-levy as contended by learned Counsel for assessee. The notification in question was issued under sub-rule (1) of Rule 8. Said Rule omitted vide Notification No. 19/88-C.E. dated 1-7-1988 dealt with power to authorize exemption from duty in special cases. If exemption is granted under Rule 8(1) goods do not cease to be excisable goods and levy of duty is not erased. Emphasis was on the duty of excise leviable on the manufactured item and duty of excise paid on the inputs available for adjustment. Therefore Section 11A had no application to such a situation. To that extent the Tribunal was not justified in its conclusions; but that is not the end of the controversy. It appears that the assessee had specifically questioned applicability of the notification after same was rescinded. Tribunal has not recorded any finding in this regard. The effect of Section 38A which was introduced with retrospective effect is also to be considered. We therefore deem it proper to remand the matter back to the Tribunal for consideration of these aspects. If the Tribunal holds that after the notification was rescinded w.e.f. 1-3-1986; Paragraph 3 of the Appendix became inoperative then the position would be different. While considering that aspect the effect of Section 38A has to be kept in view. In case the Tribunal comes to the conclusion that Paragraph 3 of the Appendix was applicable because of Section 38(A)(C) it has to consider the further stand of the assessee about adjustment in the credit account maintained under Paragraph 5 of the Appendix.

Summary

Issues:
Appeal against the judgment of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi involving the interpretation of Notification No. 201/79 and the applicability of Section 11A of the Central Excise Act, 1944.

Detailed Analysis:

1. Background and Notification Interpretation:
The case involved M/s H.M.M. Limited availing set off under Notification No. 201/79 for inputs like Malt and Malt extract. The notification allowed duty set-off equivalent to duty paid on inputs. Dispute arose when sellers of inputs claimed Malt and Malt Extracts were not dutiable under Notification No. 55/75. The High Court accepted the sellers' stand, leading to duty refund by the assessee. The issue revolved around Paragraphs 3 and 5 of the notification concerning duty refund or recovery due to variation in duty paid on inputs.

2. Applicability of Section 11A:
The Tribunal set aside authorities' orders citing that actions were beyond the limitation period under Section 11A of the Act. The appellant argued that Section 11A and Paragraph 3 of the Appendix operate in different fields. The introduction of Section 38A by Act 14 of 2001 was emphasized, stating statutory obligations for duty variations post-rescinding of Notification No. 201/79.

3. Legal Interpretation and Tribunal's Decision:
The Tribunal referred to Bakeman Home Products case and held Section 11A applicable for duty recovery. However, the Supreme Court highlighted that Section 11A deals with recovery of unpaid or short-paid duty, not applicable to duty set-off cases like under Notification No. 201/79. The Court noted the essence of duty collection and machinery under the notification, emphasizing that lesser collection due to duty adjustments is not short-levy. The Court remanded the matter to the Tribunal for further consideration regarding the notification's rescission and the impact of Section 38A.

4. Final Disposition:
The Court directed the Tribunal to reevaluate the case considering the rescission of the notification and the application of Section 38A. The liability of sellers of inputs, except Barmalt, was left unresolved. The judgment was disposed of, leaving the sellers' liability as a separate issue for future consideration.

This detailed analysis provides a comprehensive overview of the legal judgment, focusing on the issues of notification interpretation, applicability of Section 11A, and the Court's decision to remand the case for further review by the Tribunal.