1989 (7) TMI 197 - AT - Central Excise

Issues Involved:
1. Interpretation of Notification No. 108/78-C.E. regarding rebate on excess production.
2. Limitation period for issuing a show cause notice.
3. Provisional nature of rebate and its impact on the limitation period.
4. Applicability of judgments from higher courts on the case.

Detailed Analysis:

1. Interpretation of Notification No. 108/78-C.E. regarding rebate on excess production:
The respondents, M/s. Ganesh Sugar Mills Ltd., were granted a rebate of Rs. 3,63,094.80 on 29-12-1978 under Notification No. 108/78-C.E. for the season 1977-78. The department later noticed that the actual amount of duty paid on free sale sugar was less than the credit allowed, leading to a demand of Rs. 65,759.87. The respondents argued that the rebate was on excess production and not on the actual duty paid. However, the department rejected this plea, stating that the exemption under Rule 8(1) of the Central Excise Rules, 1944, cannot exceed the duty liability. The department also dismissed the respondents' argument that combining the duty paid on both levy and free sale sugar would exceed the rebate, as the notification prescribed different rates for each. The respondents' plea regarding the inclusion of both basic and additional excise duty was also rejected, as the notification did not mention additional excise duty.

2. Limitation period for issuing a show cause notice:
The respondents raised a ground of limitation against the demand, arguing that the show cause notice dated 10-8-1979 was issued beyond six months from the grant of rebate on 29-12-1978, thus barred by time under Rule 10 (now Section 11A). The Tribunal allowed this ground to be raised at this stage, citing that limitation is a question of law and can be raised at any stage. The Tribunal referenced its judgment in the case of Cable House Hyderabad v. CCE, Hyderabad, and the Gujarat High Court's judgment, which supported the respondents' right to raise new legal questions in support of their claim.

3. Provisional nature of rebate and its impact on the limitation period:
The learned DR argued that the rebate was provisional, and thus the recovery was not hit by limitation, referencing the Bombay High Court's judgment in Someshwar Sahakari Sakhar Karkhana Ltd. The Tribunal, however, noted that the limitation period should be considered from the date of clearance of the incentive sugar, as duty was paid on that date. Since the exact dates of clearance were not available, the Tribunal remanded the matter to the original adjudicating authority to determine if the show cause notice was within the six-month limitation period from the date of clearance.

4. Applicability of judgments from higher courts on the case:
The Tribunal considered the Bombay High Court's judgment in the case of Someshwar Sahakari Sakhar Karkhana Ltd., which held that the exemption under Notification No. 108/78 could not exceed the duty paid. This judgment was crucial in determining the interpretation of the notification and the legality of the department's demand. The Tribunal also referenced various judgments to support the respondents' right to raise new legal grounds and the scope of the Tribunal's powers.

Conclusion:
The appeal was allowed by way of remand to the original adjudicating authority to reconsider the matter in light of the observations on the limitation period and any possible general instructions from the Central Board of Excise & Customs. The Tribunal emphasized the need to determine if the show cause notice was issued within six months from the date of clearance of the incentive sugar.

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