2003 (12) TMI 60 - SC - Central Excise

Denial of refund claim - Exemption from payment of duty under Notification No. 68/71-C.E. dated 25th May 1971 - Captive consumption - As such clearance - Tribunal dismissed claim holding that assessee was manufacturing sheets and not tapes - Held that - It is not acceptable that in view of the order of the Appellate Collector dated 18th February 1982 it was not open to the Department to raise a contention that the appellants were manufacturing sheets and not tapes. As has been set out herein above the Appellate Collector left this question open. Merely because the appellants had claimed exemption from duty also on the ground that they were entitled to the benefit of Notification would not entitle them to avail of such benefit unless the question was specifically decided in those proceedings. As the question was left open the Department could continue to contend that what was being manufactured was sheets and not tapes - No infirmity in order passed - Decided against assessee.

Summary

Issues:
- Exemption from payment of duty under Notification No. 68/71-C.E.
- Claim of exemption based on captive consumption under Rules 9 and 49 of the Central Excise Rules
- Amendment of Rules 9 and 49 retrospectively
- Refund claim filed by the appellants
- Department's contention on manufacturing sheets instead of tapes
- Benefit of Notification availability
- Show cause notice and its applicability

Exemption from payment of duty under Notification No. 68/71-C.E.:
The appellants applied for exemption under Notification No. 68/71-C.E., which exempted certain articles made of plastics from excise duty. The Appellate Collector partially accepted the contention that tapes used for captive consumption within the factory were not subject to duty. However, the Collector did not conclusively determine if the appellants were entitled to the Notification's benefit, as it would only apply if tapes were cleared for sale, not for captive use.

Claim of exemption based on captive consumption under Rules 9 and 49 of the Central Excise Rules:
Following a retrospective amendment to Rules 9 and 49 of the Central Excise Rules in 1982, duty became payable even on goods consumed within the factory. The appellants filed a refund claim, contending that the earlier order of the Appellate Collector entitled them to a refund. The Department rejected this claim, asserting that the appellants were manufacturing sheets, not tapes, and thus not eligible for the Notification's benefit.

Amendment of Rules 9 and 49 retrospectively:
The retrospective amendment of Rules 9 and 49 mandated duty payment on goods consumed within the factory, leading to the rejection of the refund claim by the Department despite the earlier partial acceptance by the Appellate Collector.

Refund claim filed by the appellants:
The appellants filed a refund claim following the retrospective amendment of Rules 9 and 49, which was contested by the Department on the grounds that the appellants were manufacturing sheets, not tapes, disqualifying them from the Notification's exemption.

Department's contention on manufacturing sheets instead of tapes:
The Department contended that the appellants were manufacturing sheets, not tapes, and therefore, the benefit of the Notification did not apply to their products, leading to the rejection of the refund claim and the subsequent dismissal of the appeal by CEGAT.

Benefit of Notification availability:
The availability of the benefit of the Notification was a crucial aspect of the case, with the Department arguing that the appellants were not entitled to it due to manufacturing sheets instead of tapes, despite the appellants' claim for exemption based on captive consumption.

Show cause notice and its applicability:
The show cause notice issued to the appellants raised questions regarding the retrospective applicability of the amended Rules 9 and 49, as well as the eligibility for the Notification's benefit. The Department's contention that the benefit was not available to the appellants was deemed valid, leading to the dismissal of the appeal by CEGAT, with the Supreme Court upholding the decision.