1991 (1) TMI 302 - AT - Central Excise

Summary

Issues:
1. Eligibility of appellants to claim credit under Rule 56A of Central Excise Rules.
2. Validity of demand made by the Supdt. without show cause notice and hearing.
3. Authority competent to raise demand for credit under Rule 56A.
4. Sustainability of Assistant Collector's memorandum adjusting the recovery against the refund.

The judgment involves an appeal against an order rejecting a challenge to a memorandum issued by the Additional Collector of Central Excise, Jamnagar, regarding the adjustment of a sum of Rs. 8643.13 against a refund due to the appellants. The appellants, engaged in manufacturing synthetic organic dyes, were informed by the Supdt. of Central Excise that they were not eligible to claim credit on certain intermediates due to them lying unutilized after a specific date. The appellants objected, stating they were entitled to use the credit on any finished product. The Assistant Collector then ordered the adjustment of the amount against the refund due to the appellants, leading to the appeal. The key issue was the validity of the demand made by the Supdt. without issuing a show cause notice or providing a hearing to the appellants.

The Ld. Advocate for the appellants argued that the demand and subsequent adjustment were improper as the appellants were eligible for the credit under Rule 56A and were not required to show a one-to-one correlation. He highlighted that the demand was made without due process, citing a relevant decision. On the other hand, the Ld. SDR for the Department contended that since no appeal was filed against the Supdt.'s directions, they had finality, and the Assistant Collector was authorized to act for recovery.

The Tribunal examined the legal provisions governing the demand for credit under Rule 56A and concluded that the Supdt.'s demand, made without a show cause notice or hearing, was beyond jurisdiction and void ab initio. It emphasized that only the Assistant Collector could raise such a demand after due process. As a result, the Assistant Collector's memorandum adjusting the recovery against the refund was deemed unsustainable. The Tribunal referenced a prior decision supporting this view.

Ultimately, the appeal was allowed based on the invalidity of the Supdt.'s demand, rendering the Assistant Collector's adjustment unsustainable. The judgment clarified that the Department could pursue the subject amount through proper channels in compliance with the law. The Tribunal did not delve into other issues raised, given the primary ground for allowing the appeal.