2006 (11) TMI 506 - AT - Central Excise

Summary

Issues:
Interpretation of an incentive scheme for sugar factories under the Central Excise Tariff Act, 1985.

Analysis:
The case involved a dispute regarding an incentive scheme introduced by the Ministry of Food & Consumer Affairs for sugar factories. The scheme allowed sugar factories to clear a certain quota of sugar at levy sugar rates and sell it in the open market as free sale sugar. The government was to reimburse the factories with a differential central excise duty of Rs. 33 per quintal. However, the respondents cleared levy sugar by paying central excise duty at Rs. 52 per quintal instead of the correct rate of Rs. 85 per quintal. A show cause notice was issued for recovery of the duty collected incorrectly, along with interest and penalties. The Joint Commissioner of Central Excise confirmed the demand under Section 11D, which requires any amount collected representing excise duty to be paid to the Central Government immediately.

Upon appeal, the Commissioner (Appeals) set aside the order, arguing that the reimbursement of Rs. 33 per quintal could not be considered as representing the differential duty of excise since the effective rate was Rs. 52 per quintal, which had already been paid. The Tribunal, however, disagreed with this interpretation. The Tribunal noted that the incentive scheme clearly stated that the amount of Rs. 33 per quintal represented the differential duty of excise. The correct effective rate of duty on free sale sugar was Rs. 85 per quintal, not Rs. 52 per quintal as contended by the lower authority. Therefore, the respondents were obligated to pay the amount collected from the government, which indeed represented the differential duty. Consequently, the Tribunal set aside the impugned order and allowed the appeal of the Revenue.

In conclusion, the Tribunal's decision clarified the correct interpretation of the incentive scheme for sugar factories under the Central Excise Tariff Act, 1985. The judgment emphasized the importance of adhering to the specified duty rates and obligations outlined in such schemes to avoid discrepancies and ensure compliance with excise regulations.