1987 (5) TMI 140 - AT - Central Excise

Issues Involved:
1. Limitation period for issuing show cause notices.
2. Eligibility for incentive rebate on reprocessed sugar.
3. Interpretation of relevant notifications and rules regarding incentive rebate.
4. Applicability of judicial precedents on eligibility for rebate.

Detailed Analysis:

1. Limitation Period for Issuing Show Cause Notices:

The appellants argued that the show cause notices issued on 16th July 1979 and 18th September 1979 were barred by limitation since the rebate claims pertained to the sugar seasons from 1971-72 to 1974-75. The Department had issued the notices far beyond the period prescribed under the Rules. The Tribunal noted that the grant of advance credit of admissible rebate for duty was an extra-legal concession and, therefore, should be treated as an advance refund of duties. The Tribunal acknowledged that the issue of time bar was a point of law that could be raised at any stage. Given the significant time lapse between the rebate period and the issuance of the show cause notices, the demand for duty appeared to be barred by limitation. The matter was remanded to the Assistant Collector for de novo consideration to take into account the actual dates from which the adjustment of rebate had been allowed.

2. Eligibility for Incentive Rebate on Reprocessed Sugar:

The appellants claimed incentive rebate on the entire quantity of sugar produced, including brown and damaged sugar, during the relevant seasons. The Department contended that the rebate should be recalculated based on the quantity of sugar finally cleared from the factory, not merely produced. The Tribunal considered the notifications which stipulated that sugar obtained by reprocessing defective, damaged, or brown sugar should not be taken into account again if it had already been included in the quantity of sugar produced for deciding the quantum of excess production. The Tribunal found that the appellants were entitled to rebate on the brown/damaged sugar initially produced and that subsequent losses during reprocessing should not affect the rebate already granted.

3. Interpretation of Relevant Notifications and Rules Regarding Incentive Rebate:

The appellants argued that the notifications allowed for rebate on the entire quantity of sugar produced in a season, irrespective of its subsequent reprocessing. The Tribunal examined the provisions of the relevant notifications and concluded that the brown/damaged sugar produced during the relevant period was eligible for rebate. The Tribunal held that the factory should not be denied its claim for rebate on the brown/damaged sugar lost during reprocessing while also being denied the benefit of rebate on the reprocessed sugar arising out of the said brown/damaged sugar.

4. Applicability of Judicial Precedents on Eligibility for Rebate:

The Department relied on the decision of the Andhra Pradesh High Court in the case of Collector of Central Excise, Hyderabad v. Nizam Sugar Factory, which held that only sugar fit for consumption could be considered for rebate. The Tribunal distinguished this case, noting that brown/damaged sugar was not unfit for human consumption and was eligible for rebate. The Tribunal also considered the decision in Rohtas Industries Limited, which held that sugar produced in one season and reprocessed in the next could not be treated as manufactured in the next season. The Tribunal found that these precedents did not apply to the present case.

Separate Judgments:

Majority Opinion:

The majority of the Tribunal, comprising V.T. Raghavachari and G. Sankaran, agreed that the appeal should be allowed. They held that the appellants were entitled to the rebate on the brown/damaged sugar initially produced and that the subsequent reprocessing losses should not affect the rebate already granted. They also noted that the show cause notices were barred by limitation.

Dissenting Opinion:

K. Prakash Anand dissented, arguing that the matter should be remanded for de novo consideration on the issue of time bar without delving into the merits of the case.

Final Order:

In view of the majority opinion, the appeal was allowed, and the orders of the lower authorities were set aside with consequential relief to the appellants.

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