1986 (9) TMI 199 - AT - Central Excise

Proforma credit - Calcined alumina received for manufacture of fused alumina grains and mullite grains

Summary

Issues:
1. Recovery of duty on calcined alumina credited in proforma credit account.
2. Recovery of duty on final products dispatched without payment.
3. Applicability of Rule 9A(3A) in determining duty rate.
4. Time-barred review show cause notice.

Analysis:
The case involves a revision application transferred to the Appellate Tribunal as an appeal under Section 35P of the Central Excises & Salt Act, 1944. The appellant received calcined alumina for manufacturing fused alumina and mullite grains, with duty paid and credited in a proforma credit account. Subsequently, final products were dispatched without duty payment, resulting in the recovery of duty paid on the input by the Department. The Collector of Central Excise issued a show cause notice for underpayment of duty on a specific quantity of the input, contending that duty should have been charged at 8% instead of 5%. The impugned order confirmed the recovery, citing a discrepancy in the duty rate calculation by the Asstt. Collector.

The appellants argued that all necessary formalities were complied with, and if informed by the authorities, they would have paid duty on the final products to avoid loss. They contended that Rule 9A(3A) was inapplicable as duty was not payable on the input, and even if it was, the time limit under Rule 10 and 11 should apply. They also cited a judgment to support their position. The Department supported the Collector's decision.

The Tribunal noted that the initial recovery was not under appeal, and the focus was on the subsequent order. The key issues were whether the additional duty levy based on Rule 9A(3A) was correct and whether the review show cause notice was time-barred. The Tribunal found that the notice was timely served, and Rule 9A(3A) applied only to recover wrong credits allowed on the input, not an extra amount. As the credit allowed was deemed wrong due to the transferability of the final product without duty payment, the Tribunal allowed the appeal, setting aside the impugned order.