1990 (2) TMI 187 - AT - Central Excise

Summary

Issues:
- Whether the demand raised for the credit of duty availed by the appellants is hit by limitation under Section 11-A of the Central Excise Act.
- Interpretation of proviso 3 of Notification No. 201/79-C.E. in the context of the duty paid on inputs being varied subsequently.
- Applicability of previous tribunal decisions, specifically M/s. Premier Tyres Ltd. v. Collr. of Central Excise, Cochin, in determining short levy and the application of Section 11-A.

Analysis:

The appeal involved the appellants, who manufactured 'Biscuits' using duty paid 'Malt Extract' as an input. The issue arose when the Malt Extract, classified under Item No. 68 of the tariff, was granted a refund due to a court decision exempting the product. The Assistant Collector demanded the credit of duty availed by the appellants, citing proviso 3 of Notification No. 201/79-C.E. The main contention was whether the demand was barred by limitation under Section 11-A, as the notice was issued in 1987 for credits taken from 1979 to 1984.

The appellant argued that the demand was hit by limitation, relying on tribunal decisions like M/s. Premier Tyres Ltd. v. Collr. of Central Excise, Cochin, to support their case. The respondent contended that the duty paid on the input had been varied subsequently, and the appellants were not entitled to the credit taken on the Malt Extract.

The Tribunal analyzed the situation, noting that the refund granted to the supplier of Malt Extract rendered it non-dutiable, leading to the demand for credit from the appellants. The proviso 3 of the notification specified the adjustment of credit if duty paid on inputs is varied subsequently. The Tribunal examined whether the demand was a short levy and subject to the limitation under Section 11-A, considering the applicability of previous tribunal decisions.

In the case, the Tribunal found that the demand was hit by limitation under Section 11-A. The situation was deemed peculiar as the department was unaware of the exemption when the credit was initially allowed. The appellants were not at fault for availing the credit when the input was duty paid, and the demand should have been governed by the limitation provisions. Ultimately, the appeal succeeded on the grounds of the demand being time-barred under Section 11-A of the Central Excise Act.

This detailed analysis considered the specific facts of the case, the application of relevant legal provisions, and the precedents cited to arrive at the decision that the demand for credit of duty availed by the appellants was indeed hit by limitation under Section 11-A.