1995 (7) TMI 91 - HC - Central Excise

Summary

Issues Involved:
1. Classification of paper covered copper strips for excise duty.
2. Legality of recovery of proforma credit availed under Rule 56A.
3. Applicability of Section 11A of the Central Excises and Salt Act, 1944.
4. Limitation period for recovery of proforma credit under Rule 56A(5).

Issue-Wise Detailed Analysis:

1. Classification of Paper Covered Copper Strips for Excise Duty:
The primary issue was the classification of paper covered copper strips manufactured by M/s. Devidayal Electronics and Wires Ltd. Initially, the Excise Authorities classified these strips under Tariff Item No. 68, a residuary item. However, a Single Judge of the Bombay High Court held that they should be classified under Tariff Item No. 26, a decision upheld by the Division Bench. Consequently, M/s. Devidayal sought a refund of excise duty paid under the incorrect classification.

2. Legality of Recovery of Proforma Credit Availed Under Rule 56A:
M/s. Bharat Bijlee Ltd., which had availed proforma credit for purchasing paper covered copper strips from M/s. Devidayal, was served a show-cause notice for the recovery of this credit. The credit was initially availed on the basis that the strips were classified under Tariff Item No. 68. The show-cause notice was issued following the court's decision to reclassify the strips under Tariff Item No. 26 and refund the excess duty to M/s. Devidayal.

3. Applicability of Section 11A of the Central Excises and Salt Act, 1944:
The Tribunal had referred the question of whether Section 11A, which deals with the recovery of duties not levied or paid, short-levied, short-paid, or erroneously refunded, was applicable to the recovery of proforma credit under Rule 56A. The court concluded that Section 11A was not strictly applicable to the recovery of proforma credit under Rule 56A, as the conditions for invoking Section 11A were not met in this context.

4. Limitation Period for Recovery of Proforma Credit Under Rule 56A(5):
The court examined whether the recovery of proforma credit was time-barred under sub-rule (5) of Rule 56A, which prescribes a six-month limitation period for recovery if the credit was allowed due to an error, omission, or misconstruction by an officer. The court found that the credit granted to M/s. Bharat Bijlee Ltd. was indeed due to an error in classifying the copper strips under the wrong tariff item. Therefore, the six-month limitation period applied, and the show-cause notice issued to M/s. Bharat Bijlee Ltd. was deemed time-barred as it was not issued within six months from the date of credit.

Conclusion:
The court concluded that the provisions of sub-rule (5) of Rule 56A of the Central Excise Rules, 1944, were applicable to the recovery of proforma credit and not Section 11A of the Central Excises and Salt Act, 1944. The show-cause notice issued to M/s. Bharat Bijlee Ltd. was barred by the limitation period prescribed under sub-rule (5) of Rule 56A. Consequently, the recovery order was not upheld. There was no order as to costs.