1991 (4) TMI 229 - AT - Central Excise

Issues Involved:
1. Rebate Repayment on Sugar Lost During Reprocessing
2. Time Bar for Demand Recovery

Issue-wise Detailed Analysis:

1. Rebate Repayment on Sugar Lost During Reprocessing:

The appellants, M/s. Lakshmi Sugar & Oil Mills Limited, were granted rebates under Notification No. 257/76-C.E., dated 30-9-1976 and No. 108/78-C.E., dated 28-4-1978 for excess sugar production in the 1976-77 and 1977-78 seasons. Part of this sugar was reprocessed in December 1977 and December 1978, during which some sugar was lost. A notice dated 15-1-1980 demanded repayment of Rs. 24,687.26, equivalent to the rebate on the lost sugar. The Assistant Collector confirmed the demand on 19-12-1980, and the Collector (Appeals) upheld this on 22-9-1983. The appellants contested this, citing Tribunal decisions in similar cases (Collector of Central Excise, Allahabad v. M/s. Tulsipur Sugar Company Limited and M/s. South India Sugar Limited v. Collector of Central Excise, Madras), which held that the department could not demand repayment of the rebate under such circumstances. The Tribunal agreed with the appellants, ruling that the demand was unjustified.

2. Time Bar for Demand Recovery:

The appellants argued that the demand was time-barred. The reprocessing occurred in December 1977 and December 1978, and the show cause notice was issued on 15-1-1980. The Assistant Collector dismissed the time-bar plea without detailed reasoning, and the Collector (Appeals) ruled that the time limit for raising demands did not apply as it was not a case of refund or demand. The appellants contended that if the rebate was not a refund, recovery should proceed through a Civil Court, not under Central Excise Rules. If it was a refund, the proceedings should commence within the prescribed time limit under Rule 10. The Tribunal agreed that the demand was time-barred.

Separate Judgments Delivered:

[Per: P.C. Jain, Member (T)]:

Dissenting from the majority, P.C. Jain argued that the factory should not be denied its rebate on brown/damaged sugar lost during reprocessing while also being denied the benefit of rebate on reprocessed sugar. He emphasized that the department was justified in retrenching credit for sugar not cleared and not eligible for exemption, aligning with Rule 86 of the Central Excise Rules, 1944. He also stated that the advance credit on excess production sugar is a refund that finalizes on clearance. Therefore, the time limit for recovery should be reckoned from the date of clearance or credit, whichever is later. He recommended remanding the matter to the original authority to decide on the time bar.

[Per: V.T. Raghavachari, Member (J)]:

V.T. Raghavachari disagreed with P.C. Jain, maintaining that the department was not entitled to demand repayment. He referred to previous Tribunal decisions supporting this view and argued that the demand was time-barred.

[Per: G. Sankaran, President]:

The President, G. Sankaran, resolved the difference of opinion by affirming that the department could retrench credit if the requirements of provisional assessments and limitation were met. The period for demand recovery should be counted from the date of credit. He remanded the case to the original authority to determine the provisionality of the assessments and decide accordingly.

Final Order:

The case was remanded to the Assistant Collector of Central Excise to decide on the provisionality of the assessments and pass appropriate orders after hearing the appellants. The department was deemed competent to retrench credit for excess production sugar lost during reprocessing, provided legal requirements were met.

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