2011 (1) TMI 990 - AT - Central Excise

Classification - AD/DC drives - show-cause notice was issued to classify the product under Chapter Heading 85.37 and 85.43 attracting duty @ 20% and 25% respectively as against Chapter Heading 85.04 attracting Central Excise duty @ 5% as per assessee - maintainability of appeal filed by the Revenue before the Commissioner (Appeals) - Held that - As in this case, the Asst. Commissioner was not the adjudicating authority, who has filed the appeal before the Commissioner (Appeals) and the Commissioner (Appeals) has not dealt the same in accordance to law. Hence, the appeal filed by the Revenue before the Commissioner (Appeals) is not maintainable, following the decision of Maza Cosmetics (2006 (8) TMI 65 - HIGH COURT , DELHI) and Silver Streak Welding Products India Pvt Ltd., (2007 (9) TMI 222 - HIGH COURT BOMBAY). Regarding denial of refund claim - the refund claim has been denied on the presumption that the buyer might have taken credit - Held that - In this case the credit is not available to the buyers on capital goods and if any of the buyer has taken credit of this capital goods, then the liability to recover the amount wrongly availed credit is of the buyers and not of the supplier - in this case, the verification has not been done by the adjudicating authority properly and they have done only on random basis - Decided in favor of the assessee by way of remand

Summary

Issues:
- Appeal against classification of products under Central Excise duty
- Denial of refund claim and appeal before Commissioner (Appeals)
- Maintainability of appeal by Revenue before Commissioner (Appeals)
- Denial of refund claim based on presumption
- Liability for recovery of wrongly availed credit

Analysis:

Issue 1: Appeal against classification of products under Central Excise duty
The appellants contested the department's classification of their products under Chapter Heading 85.37 and 85.43, attracting higher duties. The Commissioner (Appeals) upheld the classification list filed by the appellants under Chapter Heading 85.04, resulting in a refund claim. The department's appeal was based on the classification issue, which was resolved in favor of the appellants.

Issue 2: Denial of refund claim and appeal before Commissioner (Appeals)
Following the favorable classification decision, the appellants filed a refund claim, which was initially rejected but later partially sanctioned. The denial of the balance amount led to appeals by both the appellants and the Revenue before the Commissioner (Appeals), who rejected the appellants' appeal and allowed the Revenue's appeal. This led to the appellants appealing before the Tribunal.

Issue 3: Maintainability of appeal by Revenue before Commissioner (Appeals)
The appellants argued that the Revenue's appeal before the Commissioner (Appeals) was not maintainable as it contravened the provisions of the Central Excise law. They contended that no show-cause notice had been issued for recovery of the refund, making the appeal by Revenue not sustainable. The Tribunal held that the Revenue's appeal was not maintainable as the Commissioner had not authorized the correct adjudicating authority to file the appeal.

Issue 4: Denial of refund claim based on presumption
The denial of a portion of the refund claim was based on the presumption that buyers might have taken credit, which the Tribunal deemed unsustainable. Courts require evidence to decide matters, and the liability to recover wrongly availed credit lies with the buyers, not the supplier. The Tribunal found the denial of the refund claim based on presumption to be invalid and ordered a re-examination by the adjudicating authority.

Issue 5: Liability for recovery of wrongly availed credit
The Tribunal emphasized that if any buyer had wrongly availed credit on capital goods, the responsibility for recovery lies with the buyers, not the supplier. The adjudicating authority's verification process was found to be inadequate, leading to the order of denial of the refund claim being set aside for re-examination.

In conclusion, the Tribunal ruled in favor of the appellants on the issues of maintainability of the Revenue's appeal and denial of the refund claim based on presumption. The case was remanded back to the adjudicating authority for re-examination in accordance with the law, emphasizing the buyers' liability for wrongly availed credit on capital goods.