2010 (4) TMI 520 - AT - Central Excise

Demand - Limitation - Dispute arose as to the determination of capacity of production and in particular whether gallery portion of a stenter be counted for capacity. Held that- rebate sanctioned only when manufacturer gives declaration that no refund claimed on this account earlier not true. Extended period invokable.

Issues:
1. Claim of refund under compounded levy scheme based on capacity of production including the gallery portion.
2. Dispute on determination of capacity of production and whether the gallery portion should be counted.
3. Issuance of show cause notice for erroneous refund and penalty under Section 11AC of Central Excise Act, 1944.
4. Invocation of suppression in the case due to mis-declaration in the claim of refund.
5. Interpretation of Rule 12 of Central Excise Rules, 1944 regarding the responsibility for erroneous rebate claims.
6. Requirement of filing an appeal against the refund sanctioning order and the sufficiency of review under Section 35E.
7. Appellant's knowledge of export and rebate claims by the merchant exporter.
8. Responsibility of the appellant in the refund claim process and the invocation of the extended period for scrutiny.
9. Correct procedure for handling refund claims and the consequences of mis-declaration.

Analysis:
1. The appellant claimed a refund under the compounded levy scheme based on production capacity, which included the gallery portion. There was a dispute over whether the gallery portion should be considered in determining the capacity of production, which was eventually settled in favor of trade.

2. A show cause notice was issued for an erroneous refund and penalty under Section 11AC of the Central Excise Act, 1944, concerning the amount paid on the gallery portion for exports made under a rebate claim.

3. The appellant argued against the invocation of suppression, stating that there was no mis-declaration in their refund claim. They emphasized that the declaration made was regarding not receiving any refund on that account earlier.

4. The interpretation of Rule 12 of the Central Excise Rules, 1944 was discussed, highlighting the responsibility of the exporter to pay back erroneous rebates claimed. The appellant suggested that the merchant exporter, not them, should refund the erroneous rebate.

5. The appellant contended that the department should have filed an appeal against the refund sanctioning order, emphasizing the need for review under Section 35E. The sufficiency of a show cause notice alone was questioned.

6. The department argued that the appellant made a mis-declaration by claiming a refund on duty already passed on to the merchant exporter for rebate claims. They asserted that the appellant should not have claimed a refund in such a scenario.

7. The judgment emphasized the appellant's knowledge of the export and rebate process, stating that the appellant's declaration in the refund claim was misleading given the circumstances of the rebate claim by the merchant exporter.

8. The responsibility of the appellant in the refund claim process was scrutinized, leading to the invocation of the extended period for examination due to the misleading declaration made by the appellant.

9. The correct procedure for handling refund claims was discussed, highlighting the consequences of mis-declaration and the importance of following the prescribed rules to avoid erroneous claims and subsequent penalties. The appeal filed by the appellant was rejected based on these considerations.

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