2004 (3) TMI 537 - AT - Central Excise

Summary

Issues:
Refusal of refund claim based on failure to seek prior permission under Rule 96ZC(3) of the Central Excise Rules, 1944.

Analysis:
The appellants, steel rolling mills operating under a compounded levy scheme, sought permission to utilize only four rolling machines out of five, with one machine transferred for hot rolling. The Commissioner granted permission for the special procedure for four machines from 21-7-96 to 21-7-97. The appellants paid duty for five machines under protest and later requested a refund for the fifth machine. The refund claim of Rs. 41,250 was rejected for not seeking prior permission under Rule 96ZC(3). The Tribunal noted that Rule 96ZC(3) requires written approval before changing the number of machines. However, the appellants informed the Commissioner about the change, which was accepted through communication on 10-10-96. The Tribunal found no evidence that the fifth machine was utilized in production, and the denial of the claim was solely due to the lack of permission.

The Tribunal emphasized that duty liability is based on the number of machines installed. Since the capacity change was accepted by the Commissioner, fixing liability based on a higher capacity would be unjustified. The Commissioner, under Rule 96ZG, has the power to condone failures to comply with procedures. The permission granted to the appellants for operating four machines from 21-7-96 to 31-10-96 effectively condoned any violation of Rule 96ZC(3). The absence of a specific clause restricting the permission from 10-10-96 indicates that duty paid on the fifth machine should be refunded. The Tribunal allowed the appeal, granting consequential relief as per the law.

In conclusion, the Tribunal held that the denial of the refund claim solely based on the failure to seek prior permission under Rule 96ZC(3) was unjustified. The acceptance of the capacity change by the Commissioner and the permission granted for operating four machines condoned any procedural violation. Therefore, the appellants were entitled to the refund of duty paid on the fifth machine, and the appeal was allowed with consequential relief.