1996 (10) TMI 329 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 196 and Rule 196A of the Central Excise Rules, 1944.
2. Applicability of duty on excisable inputs brought to the factory without payment of duty.
3. Assessment of duty on surplus inputs removed at higher prices.
4. Judicial review of demand under Section 11A of the Central Excise Act, 1944.

Analysis:

The case involved the interpretation of Rule 196 and Rule 196A of the Central Excise Rules, 1944, concerning the duty leviable on excisable inputs brought to the factory without payment of duty and subsequently removed. Rule 196 pertains to duty on inputs not accounted for as per the Chapter X Procedure or not shown to have been lost or destroyed. On the other hand, Rule 196A deals with the removal of surplus goods with the approval of the proper officer. The key distinction lies in the assessment of duty based on the date of actual removal under Rule 196A, as opposed to other circumstances outlined in Rule 196. The respondent in this case had obtained permission and paid duty on surplus inputs, making Rule 196 inapplicable.

The issue of assessing duty on surplus inputs removed at higher prices was raised when the department demanded differential duty under Section 11A of the Central Excise Act, 1944. The respondent had been selling surplus goods at prices higher than the original purchase prices, prompting the demand for additional duty. However, the Collector (Appeals) determined that the demand could not be sustained under Section 11A and directed a reassessment under Rule 196 or Rule 196A. Subsequently, a fresh show cause notice was issued under Rule 196A, alleging similar violations, but the Collector (Appeals) again set aside the demand, ruling that Rule 196A did not support duty assessment based on the assessable value at the time of removal.

The judgment emphasized that Rule 196A does not enable the department to demand duty on the assessable value at the time of removal for cases like the present one. The duty payable should align with the rate applicable at the time of actual removal, unless there are changes in duty rates or tariff valuations. Therefore, the court found no grounds to interfere and dismissed the appeal, upholding the Collector (Appeals) decision.