1987 (5) TMI 264 - AT - Central Excise

Summary

Issues Involved:

1. Eligibility for the benefit of Notification No. 201/79 for different types of refractories.
2. Applicability of the time limit under Section 11A for recovery of wrong credit taken.

Issue-Wise Detailed Analysis:

1. Eligibility for the Benefit of Notification No. 201/79 for Different Types of Refractories:

The respondents, who manufactured steel ingots, availed of the benefit of Notification No. 201/79 for refractories used in their factory during specified periods. The refractories were categorized as follows:

- Steel clad chrom mag. bricks and other high-grade refractories: No set-off was taken on this item.
- Ordinary magnasite and high Alumina refractories: The benefit was availed as these were used in the ladle and furnace shell covering, protecting the original ladle and furnace lining, and were replaced after a few heats.
- Fire clay refractories (B.P. sets, fire bricks, nozzle, ladle sleeves, etc.): The benefit was taken as these were used for forming molds for filling molten metal in C.I. Ingot Molds and required breaking to remove runners and risers.

The Assistant Collector initially held the respondents eligible for the benefit. On appeal, the Collector (Appeals) partially allowed the appeal, referencing the Appellate Tribunal's judgment in the case of Rockdril (India), Jodhpur v. CCE, Jaipur, which held that graphite molds, which were broken and could not be reused, entitled the manufacturer to the benefit of Notification No. 201/79 before its amendment on 28-2-1982. The Collector (Appeals) concluded that the respondents were entitled to the benefit for fire clay refractories used for filling molten metal in C.I. Ingots, subject to verification by the jurisdictional Assistant Collector.

The Revenue appealed against this decision, arguing that the legislative intent of Notification No. 201/79 was to provide a set-off for inputs used directly or indirectly in the manufacturing process to form part of the finished product, and that machinery and equipment used in the manufacturing process should not be entitled to the benefit.

The Tribunal observed that the notification, before its amendment, did not restrict the benefit to inputs used as raw materials or component parts. The Tribunal cited its decision in the case of Rockdril (India), Jodhpur, which supported a broader interpretation of the notification, allowing the benefit for items like molds used in the manufacturing process. The Tribunal upheld the Collector (Appeals)'s decision, stating that the benefit was correctly extended for inputs used in the manufacturing process as per the notification's wording at the relevant time.

2. Applicability of the Time Limit under Section 11A for Recovery of Wrong Credit Taken:

The Revenue contended that the limitation period under Section 11A of the Central Excise Act was not applicable for the recovery of wrong credits taken under Notification No. 201/79. The Tribunal, however, held that the wrong availment of credit ultimately results in short collection of duty on the finished goods for which the credit was utilized. Therefore, the time limit prescribed under Section 11A is applicable for the recovery of such duty.

The Tribunal referenced its decision in Finolex Cables v. Collector of Central Excise, Pune, to support this view. It concluded that the absence of a time limit in the notification does not override the substantive law, and the time limit under Section 11A would apply. The Tribunal found no infirmity in the Collector (Appeals)'s order, which left the issue of the applicability of the shorter limit of six months or the longer limit of five years depending on whether the appellant had applied for the benefit of the notification.

Conclusion:

The Tribunal upheld the Collector (Appeals)'s decision regarding the eligibility for the benefit of Notification No. 201/79 for certain refractories and the applicability of the time limit under Section 11A for the recovery of wrong credits. The appeal by the Revenue was dismissed, and the respondents' appeal was partially allowed to the extent of the relief granted by the Collector (Appeals).