2024 (8) TMI 200 - AT - Central Excise

Recovery of rebate of duty - eligibility to claim rebate on portion of the value which pertains to the special packing more so when the packing is done overseas - excess payment of duty on the value of additional protective packing in order to avail the rebate of the duty paid in a wrongful manner and the wrongfully claimed rebate - Rule 18 of the Central Excise Rules, 2002 - time limitation - penalties. HELD THAT - On going through the provisions of Rule 18, it appears that there is no ambiguity in the Rule in saying that rebate shall be sanctioned on the duty paid and not on the duty payable . Moreover, there is no distinction made in Section 4 to suggest that expenditure incurred by persons other than the manufacturer/ exporter shall not be included in the assessable value. A perusal of the above indicates that the price paid or payable by the buyer would become the transaction value notwithstanding the fact that the expenditure on such payment is borne by the assessee or somebody else - as the orders sanctioning rebate is not challenged, any demand under Section 11A cannot be sustained. Time Limitation - HELD THAT - The appellants have taken a plea that the demand is time barred; Revenue has not put forth any evidence to show that the appellants have indulged in any omission or commission of suppression of fact, mis-statement, collusion etc. with intent to evade payment of duty other than making a bald statement to the effect that the assessee was under self-assessment regime and the fact of over-valuation was not detectable but for the investigation. It is found that the reasoning given by the Revenue is not acceptable as the Department while sanctioning rebates over a period of time had the opportunity to verify the claims of the appellant and to call for documents, if required - it is not open for them to invoke extended period. Penalties - HELD THAT - The penalties imposed on the appellants, their CFO and DGM are also not maintainable. The impugned order is not sustainable both on merits and limitation - Appeal allowed.

Issues Involved:
1. Eligibility for rebate on duty paid for special protective packing done overseas.
2. Correct interpretation of "duty paid" versus "duty payable" under Rule 18 of Central Excise Rules, 2002.
3. Validity of the Show Cause Notice issued for recovery of rebate.
4. Applicability of extended period for demand and imposition of penalties.

Issue-wise Detailed Analysis:

1. Eligibility for Rebate on Duty Paid for Special Protective Packing Done Overseas:
The appellants, M/s Marathon Electric India Pvt. Ltd., claimed rebate on the duty paid for electric motors and fans, including the cost of special protective packing (firewall packing) done overseas. The Department contended that the appellants paid excess duty on the value of this additional packing to wrongfully avail the rebate. The appellants argued that the transaction value, as defined under Section 4(3)(d) of the Central Excise Act, 1944, includes any amount the buyer pays to the seller by reason of the sale, which encompasses the cost of firewall packing. The Tribunal found no distinction in Section 4 suggesting that expenses incurred by persons other than the manufacturer/exporter should not be included in the assessable value. Thus, the appellants were eligible for the rebate on the duty paid, including the cost of special packing.

2. Correct Interpretation of "Duty Paid" Versus "Duty Payable" Under Rule 18 of Central Excise Rules, 2002:
The appellants argued that Rule 18 categorically states that rebate should be given on the duty paid, not the duty payable. The Department contended that the term "duty" in Rule 18 should be interpreted as "duty payable" under Section 3(1)(a) of the Central Excise Act, 1944. The Tribunal concluded that Rule 18 clearly mentions "duty paid," and there is no ambiguity in the Rule. The Tribunal referred to previous decisions, including the case of Omax Autos Ltd., which upheld that rebate should be granted on the duty paid, not the duty payable.

3. Validity of the Show Cause Notice Issued for Recovery of Rebate:
The appellants contended that the Department had not challenged the orders sanctioning the rebate, and thus, the orders had attained finality. Consequently, no demand could be issued to recover the rebate under Section 11A without challenging the rebate orders. The Tribunal agreed, citing the case of Shreenath Industries, where it was held that if the rebate orders are not challenged, any demand under Section 11A cannot be sustained. Therefore, the Show Cause Notice issued for recovery of the rebate was invalid.

4. Applicability of Extended Period for Demand and Imposition of Penalties:
The appellants argued that the Show Cause Notice issued on 12.07.2011 was time-barred since the issue pertained to the period from 01.04.2005 to 31.03.2010. They also contended that there were no elements of suppression of facts, collusion, etc., with intent to evade duty. The Department argued that the appellants did not disclose the inclusion of packing expenses incurred overseas in the assessable value, justifying the extended period and penalties. The Tribunal found that the Department had ample opportunity to verify the rebate claims over time and failed to do so. Therefore, invoking the extended period was not justified, and the penalties imposed on the appellants, their CFO, and DGM were not maintainable.

Conclusion:
The Tribunal concluded that the appellants were eligible for the rebate on the duty paid, including the cost of special protective packing done overseas. The interpretation of "duty paid" under Rule 18 was upheld, and the Show Cause Notice for recovery of the rebate was deemed invalid. The extended period for demand and imposition of penalties was not justified. Consequently, all three appeals were allowed, and the impugned order was set aside on both merits and limitation grounds.

← Previous Next →