2016 (7) TMI 228 - CGOVT - Central Excise

Recovery of Rebate/ refund granted earlier - input stage rebate under Rule 18 had been granted to the respondent based on input output declaration which was subsequently found to be incorrect - respondent had mis-declared that the waste obtained would not be reprocessed/recycled further to obtain menthol which led to wrong fixation of the input output norm 1.250 kg DMO 1.000 kg menthol by the Division Office which effect was required to be fixed as 1 1 as the respondent was recycling/reprocessing the mother liquor and other wastes to obtain further menthol. Held that - the Commissioner (Appeals) has erred in holding that revenue has also not appealed against the fixation of norms dated 19.08.2009. He has overlooked the fact that the respondent suppressed the fact of recycling/reprocessing of the mother liquor and other wastes to obtain further menthol from the department since 2008 and mis-declared which led to wrong fixation of the input output norm which were subsequently correctly re-fixed as 1 1 to which the respondent had agreed vide letter dated 17.02.2011. Thereafter, the rebate sanctioned on the basis of the earlier fixation of norms has been appealed against. Thus the order of appellate authority is not proper as it did not take into consideration the mis-representation of facts by the respondent to avail excess monetary benefit and subsequent re-fixing of input output norms. Commissioner (Appeals) has passed the impugned Order-in-Appeal without taking into consideration the admission statement of Shri Ram Ashish Yadav, Deputy Manager (Production) who was in charge of production of the unit and Shri Vinod Rana, Deputy Manager (Commercial) under whose supervision record of production and clearance was maintained, dated 09.02.2011 recorded under Section 14 of the Central Excise Act, 1944 as these were not placed before him. He has also ignored the fact that the respondent vide letter dated 17.02.2011 had voluntarily agreed to re-fixing of norms. Matter remanded back to Commissioner (Appeals) for fresh consideration - Decided in favor of revenue.

Issues Involved:
1. Mis-declaration by the respondent regarding the recycling of mother liquor.
2. Wrong fixation of input-output norms.
3. Rebate claims based on incorrect input-output norms.
4. Voluntary agreement by the respondent to re-fix norms.
5. Consideration of statements and evidence by the Commissioner (Appeals).

Issue-wise Detailed Analysis:

1. Mis-declaration by the respondent regarding the recycling of mother liquor:
The respondent, M/S Ind-Swift Laboratories Limited, had initially declared that the waste (mother liquor) obtained during the manufacturing process would not be reprocessed or recycled to obtain menthol. However, a subsequent inspection by preventive officers revealed that the respondent had been recycling the mother liquor to extract more menthol. This mis-declaration led to the wrong fixation of input-output norms by the Division Office.

2. Wrong fixation of input-output norms:
The Division Office had fixed the input-output norms as 1.250 kg DMO (Deterpenated Mentha Oil) to 1.000 kg menthol based on the respondent's declaration. However, upon discovering the recycling of mother liquor, it was determined that the correct ratio should be 1:1. The respondent voluntarily agreed to this re-fixation of norms in their letter dated 17.02.2011.

3. Rebate claims based on incorrect input-output norms:
The respondent filed rebate claims for the duty paid on excisable materials used in the manufacture of export goods. These claims were sanctioned based on the initially declared input-output norms of 1.250 kg DMO to 1.000 kg menthol. The department later appealed against these sanctioned rebate claims, arguing that they were based on incorrect norms due to the respondent's mis-declaration.

4. Voluntary agreement by the respondent to re-fix norms:
The respondent, in their letter dated 17.02.2011, agreed to the re-fixation of input-output norms as 1 kg DMO to 1 kg menthol. This agreement was made after the department issued a Show Cause Notice regarding the eligibility of rebate claims. The respondent requested the immediate allowance of rebate claims based on the re-fixed norms to avoid delays and prejudice to their commercial interests.

5. Consideration of statements and evidence by the Commissioner (Appeals):
The Commissioner (Appeals) rejected the department's appeal, holding that the ground taken by the Revenue regarding the use of mother liquor to obtain menthol was not corroborated by evidence. The Commissioner (Appeals) relied on scientific literature and did not consider the voluntary statements of the respondent's officials, which admitted the recycling of mother liquor. The Government observed that these statements, recorded under Section 14 of the Central Excise Act, 1944, have evidentiary value and were not retracted at any stage. The Government also noted that the Commissioner (Appeals) erred in holding that the Revenue had not appealed against the fixation of norms dated 19.08.2009, overlooking the fact that the respondent's mis-declaration led to the wrong fixation of norms.

Conclusion:
The Government set aside the impugned Order-in-Appeal and remanded the case back to the Commissioner (Appeals) for fresh consideration. The Commissioner (Appeals) is directed to take into account the voluntary statements of the respondent's officials and the respondent's agreement to the re-fixation of norms. A reasoned order in accordance with the law is to be passed, and a reasonable opportunity of hearing will be afforded to both the applicant and the respondent. The revision application is disposed of in these terms.

← Previous Next →