2010 (10) TMI 399 - AT - Central Excise

Exemption - whether the appellant is eligible for the benefit of concessional rate of duty in respect of EBMS cleared by them - This issue had come up before the Tribunal in the case of same assessee and while considering the application for stay, this Tribunal held that, duty payment by the due date as per Rule 8 of the Central Excise Rules, 2002 would be sufficient and goods have to be treated as duty paid though the same was not paid at the time when it was cleared and used - Held that it cannot be said that the MS used in the manufacture of EBMS is to be treated as non-duty paid subject to the condition that appellants have discharged the liability before the due date for payment of duty on said MS - Therefore, the Commissioner s order that appellants are not eligible of exemption notification, cannot be sustained. Limitation - Demand and penalty - There is no mention about the invocation of extended period in the show cause notice and whether there was any suppression of fact/mis-declaration/fraud or collusion and there is no discussion available in the show cause notice or in the order in original - The demand is for the period April 2003 to June 2003, whereas the show cause notice was issued on 19-4-2005 - Extended period is not invoked in the show cause notice or in the order in original and hence the demand cannot be confirmed. Further, no penalty has been imposed under Section 11AC of Central Excise Act, 1944 - Thus, the demand is required to be set-aside. Refund claim - where the sale price of end product is controlled by the Government, assumption that assessee would have passed on the incidence of duty to the customer, is neither reasonable nor logical - Under these circumstances find that the appellant is eligible for the refund claimed by them.

Issues Involved:
1. Applicability of Section 11D of the Central Excise Act, 1944.
2. Eligibility for concessional rate of duty on Ethanol Blended Motor Spirit (EBMS).
3. Demand for short payment of duty under Section 11A of the Central Excise Act, 1944.
4. Rejection of refund claim on grounds of unjust enrichment and duty payment before blending.

Detailed Analysis:

1. Applicability of Section 11D of the Central Excise Act, 1944:
The department argued that the appellants should pay Rs. 6,000/- per kilo litre on MS contained in EBMS as the invoices showed Rs. 6,000/- as excise duty paid, despite the duty assessed being Rs. 5,700/- per kilo litre. Under Section 11D, any excess amount collected as excise duty must be paid to the credit of the Central Government. The appellants contended that the price of EBMS was controlled by the Ministry of Petroleum and Natural Gas, hence the excess collection of excise duty did not arise. However, the Tribunal held that Section 11D applies to any person liable to pay duty, including the appellants, and the excess amount collected must be deposited with the Government. The demand of Rs. 42,12,030/- was upheld, and interest was demanded under Section 11DD.

2. Eligibility for Concessional Rate of Duty on EBMS:
The Commissioner denied the benefit of concessional duty on the ground that the appellants failed to produce proof of appropriate duty payment on 95% of MS used in blending. The Tribunal considered Rule 8 of the Central Excise Rules, 2002, which deems duty liability discharged if paid by the specified dates. The Tribunal ruled that goods cleared under an invoice showing duty liability should be treated as duty paid if the duty is paid before the due date. The Tribunal referenced past decisions supporting this view and held that the appellants were eligible for the exemption notifications, provided they met the duty payment conditions before the due date.

3. Demand for Short Payment of Duty under Section 11A:
An amount of Rs. 1,36,622/- was demanded for the period April 2003 to June 2003, due to a discrepancy between the excise duty calculated and paid. The appellants argued that the demand was time-barred as the show cause notice was issued on 19-4-2005 without invoking the extended period or alleging suppression of facts. The Tribunal found no mention of extended period invocation or penalty imposition in the show cause notice or order in original. Consequently, the demand was set aside on the grounds of limitation.

4. Rejection of Refund Claim on Grounds of Unjust Enrichment and Duty Payment Before Blending:
The refund claim was rejected due to unjust enrichment and non-payment of duty on MS before blending. The Tribunal, having already ruled that the appellants were eligible for exemption, addressed the unjust enrichment claim. Given that the price of MS and petroleum products was controlled by the Government, the Tribunal found that the clause of unjust enrichment did not apply. The Tribunal cited relevant case law supporting this view and ruled that the appellants were eligible for the refund, subject to verification of the amount.

Conclusion:
(a) The duty demand of Rs. 42,12,030/- with interest under Section 11D(3) of the Central Excise Act, 1944, was upheld, but the appellants were found eligible for the benefit of exemption notifications.
(b) The appellants were eligible for a refund, subject to verification of the amount.
(c) The demand for Rs. 1,36,622/- under Section 11A was set aside on the grounds of limitation.

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