2005 (6) TMI 386 - AT - Central Excise

Summary

Issues Involved:
Appeal against appropriation of rebate amount, violation of principles of natural justice, applicability of stay order, interpretation of Section 35C(2A) of the Central Excise Act, 1944.

Analysis:

1. Appropriation of Rebate Amount:
The appellant filed an appeal against the appropriation of a rebate amount by the Deputy Commissioner of Central Excise. The appellant contended that the appropriation was contrary to established legal principles and the stay granted by the CESTAT Chennai. The Commissioner (Appeals) upheld the appropriation. The appellant argued that no coercive action should be taken during the pendency of a stay application, as per various legal precedents. The lower authority's action was deemed incorrect as it violated the principles of natural justice by not issuing a show cause notice before the appropriation.

2. Interpretation of Stay Order:
The Dy. Commissioner justified the appropriation by claiming that the stay granted by CESTAT Chennai was vacated as per Section 35C(2A) of the Central Excise Act, 1944. However, the Tribunal disagreed with this interpretation. Citing the case of Polyfill Sacks v. UOI, the Tribunal clarified that the stay granted by the Tribunal would continue beyond 180 days unless explicitly vacated. Therefore, the Order-in-Appeal had no merit, and the appeal was allowed with consequential relief.

3. Legal Precedents and Circulars:
The appellant relied on legal precedents such as National Steel Industries Ltd. v. UOI and CCE, Jaipur v. Instrumentation Ltd. to support their argument against the appropriation. They also highlighted that the recovery proceedings were against Board Circular No. 396/29/98-C.E. and that the Department should have filed a miscellaneous application to vacate the stay as per the circular dated 22-9-2003. The learned DR argued that the lower authority acted in accordance with the law by appropriating the rebate amount towards the recovery of the confirmed demand.

In conclusion, the Tribunal found the appropriation of the rebate amount to be incorrect, considering the stay granted by CESTAT Chennai and the interpretation of Section 35C(2A) of the Central Excise Act, 1944. The appeal was allowed, and consequential relief was granted to the appellant.