2009 (8) TMI 664 - HC - Central Excise

Personal ledger account- The petitioner is a limited company engaged in manufacture and sale of sugar. From time to time, the Central government granted incentive rebate with regard to the central excise duties on the excess sugar provided by the sugar factory during the lean periods of low recovery as well as low supply of the cane. Held that- petitioner failed to refer to specific order of Supreme Court, Tribunal or Finance Ministry authorizing credit petitioner not having statutory power to take credit on its own without specific executive order. Impugned credits in PLA not authorized by competent authority.

Issues Involved:
1. Legality and timeliness of the show cause notice dated 5-6-1992.
2. Entitlement to take credit in the Personal Ledger Account (PLA) without specific authorization.
3. Applicability of Rule 56A of the Central Excise Rules, 1944.
4. Validity of the extended limitation period under Section 11A of the Central Excise Act, 1944.
5. Allegations of fraud, collusion, and suppression of facts.

Detailed Analysis:

1. Legality and Timeliness of the Show Cause Notice:
The petitioner argued that the show cause notice issued on 5-6-1992 was time-barred as it was beyond the six-month period stipulated under Section 11A of the Central Excise Act. The court, however, rejected this contention, stating that the notice was issued within the extended five-year period provided under the proviso to Section 11A due to allegations of fraud, collusion, and suppression of facts.

2. Entitlement to Take Credit in the PLA Without Specific Authorization:
The petitioner claimed that the credit was taken in the PLA based on the Supreme Court's orders and in accordance with Rule 56A of the Central Excise Rules, 1944. The court found that the petitioner had taken credit without any specific executive order from the competent authority. The Supreme Court had not quantified the amount of rebate, and thus, the petitioner had no statutory power to take credit on its own.

3. Applicability of Rule 56A of the Central Excise Rules, 1944:
The petitioner contended that the incentive rebate scheme was analogous to Rule 56A, which allows for proforma credit. The court disagreed, stating that Rule 56A pertains to the movement of duty-paid materials for manufacturing finished excisable goods and does not authorize self-credit in the PLA. The court emphasized that the detailed procedure for granting incentive rebates, as mentioned in the relevant notifications, was not provided by the petitioner, thereby failing to substantiate their claim.

4. Validity of the Extended Limitation Period Under Section 11A:
The petitioner argued that the show cause notice was invalid as it was issued beyond the six-month limitation period. The court held that the extended five-year period was applicable due to the petitioner's willful misstatement and suppression of facts, which justified invoking the extended limitation period under the proviso to Section 11A.

5. Allegations of Fraud, Collusion, and Suppression of Facts:
The court found that the petitioner had taken unauthorized credit in the PLA by misrepresenting that the credit was based on Supreme Court orders. The petitioner failed to provide any specific order authorizing such credit. The court concluded that the petitioner had contravened the provisions of the Act and the Rules with the intent to evade payment of duty, thereby justifying the show cause notice and the imposition of penalties.

Conclusion:
The writ petition was dismissed, and the court upheld the legality and timeliness of the show cause notice issued by the respondent. The petitioner was found to have taken unauthorized credit in the PLA without specific authorization and had misrepresented facts, thereby justifying the extended limitation period and the allegations of fraud, collusion, and suppression of facts.

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