1984 (6) TMI 261 - AT - Central Excise

Summary

Issues:
Claim for refund of excess duty paid on bituminised water-proof paper due to change in clearance procedure and applicability of Rule 56A of Central Excise Rules, 1944.

Analysis:
The appellant, a manufacturer of bituminised water-proof paper, sought a refund of excess duty paid on the product between 16-3-1976 and 7-12-1976 due to a change in clearance procedure. Initially, the Department rejected the claim but later accepted the excess payment. The Assistant Collector allowed a partial refund, citing that the balance amount paid via debit entries to the RG 23 account could not be refunded in cash post its closure on 1-7-1976. The Appellate Collector acknowledged the excess payment but refused a refund for the amount paid from the RG 23 account in cash.

The appellant contended that there was no prohibition against refunding duty paid on a finished product in cash when excess payment was proven. They argued for a refund of duty paid on the finished product, not from the RG 23 account credit. Conversely, the Senior Departmental Representative highlighted Rule 56A's objective to prevent excess duty set-off on raw materials compared to finished products. Referring to Rule 56A(3)(vi)(b), it was emphasized that a credit in the RG 23 account could only be used for duty payment on finished products, not for cash refunds.

Both parties referred to the third proviso of Rule 56A(2), which allows specific refunds in cash that would have otherwise been credited to the RG 23 account. The appellant saw this as permitting cash refunds from the RG 23 account, while the Department argued it was applicable to raw material duty adjustments, not finished product excess duty. The Tribunal noted the lapse of a credit in the RG 23 account upon discontinuation of Rule 56A procedure in 1976.

The Tribunal upheld the Department's stance, citing Rule 56A(3)(vi)(b) prohibiting cash refunds from the RG 23 account. It emphasized that excess duty on finished products cannot be indirectly refunded in cash, aligning with the rule's objective to prevent excess duty set-off. Rule 11 allowed for excess duty refunds but did not specify the refund method. The Tribunal dismissed the appeal for cash refund of excess payment, directing any due amount to be credited to the RG 23 account for future duty adjustments post-1-7-1976.