2001 (7) TMI 400 - AT - Central Excise

Issues Involved:
1. Refund claim of Rs. 3.60 lakhs for the period from 1-4-1985 to 7-1-1986.
2. Refund claim of Rs. 6 lakhs for the period from 1-4-1986 to 13-2-1987.
3. Demand of Rs. 4,13,816.97 for the period from 1-4-1987 to 30-12-1987.
4. Allegations of collusion and fraud between the appellants and the Asstt. Collector.
5. Imposition of penalty under Rule 173Q of Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Refund claim of Rs. 3.60 lakhs for the period from 1-4-1985 to 7-1-1986:
The appellants filed a Classification List (C.L.) on 18-3-1985, indicating a duty rate of 12% ad valorem without claiming the Small Scale Industries (SSI) Exemption under Notification No. 77/85, despite being eligible. They later filed a refund claim of Rs. 3.60 lakhs on 17-9-1986. The Assistant Collector sanctioned this refund on 2-7-1987. However, a show cause notice dated 26-10-1990 alleged that the refund claim was time-barred under Section 11B of the Central Excise Act, 1944, as it was filed beyond the six-month period. The duty was not paid under protest and was realized from the buyers, leading to unjust enrichment. The Tribunal upheld that the refund claim was inadmissible due to being time-barred and the principle of unjust enrichment.

2. Refund claim of Rs. 6 lakhs for the period from 1-4-1986 to 13-2-1987:
The appellants filed another C.L. on 20-2-1986 and 15-9-1986, again not claiming the SSI Exemption under Notification No. 175/86, and continued to pay the duty at 12% ad valorem. They later filed a refund claim of Rs. 6 lakhs on 14-4-1987, which was sanctioned on 28-5-1987. This claim was also partially time-barred and hit by the doctrine of unjust enrichment. The Tribunal found that the refund was inadmissible under Section 11B and upheld the show cause notice issued on 26-10-1990 for invoking the extended period under Section 11A due to alleged fraud and collusion.

3. Demand of Rs. 4,13,816.97 for the period from 1-4-1987 to 30-12-1987:
The appellants were charged with fraudulently availing the SSI exemption under Notification No. 175/86, despite being a DGTD registered unit and not an SSI unit. They obtained the SSI registration certificate on 30-12-1987. The Tribunal found that the amendment to Notification No. 175/86, excluding DGTD units, was made on 30-10-1987. Therefore, the imposition of duty for the period from 1-4-1987 to 30-12-1987 was not justified. The demand of Rs. 4,13,816.97 was set aside.

4. Allegations of collusion and fraud between the appellants and the Asstt. Collector:
The Tribunal found sufficient evidence of collusion between the appellants and the Assistant Collector in sanctioning the ineligible refund claims. The Assistant Collector was aware that the appellants had realized the duty amounts from their buyers and did not send the papers for post-audit. The Tribunal held that the collusion clause was rightly applied for invoking the extended period for recalling the refund amounts.

5. Imposition of penalty under Rule 173Q of Central Excise Rules, 1944:
The Collector imposed a penalty of Rs. 10 lakhs on the appellants. However, the Tribunal reduced the penalty amount to Rs. 2 lakhs, considering the partial setting aside of the demand.

Conclusion:
The confirmation of the demand of Rs. 9.60 lakhs was upheld, and the appeal in this respect was rejected. The order of confirmation of demand of Rs. 4,13,816.97 was set aside, and the appeal in respect of this amount was allowed. The penalty amount was reduced to Rs. 2 lakhs. The appeal was disposed of accordingly.

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