2014 (11) TMI 77 - AT - Central Excise

Recovery of amount collected u/s 11D - amount collected from customers despite availing benefit of exemption (Set off) notification Notification No. 432/86-CE dated 06.08.1986 - whether or not set-off claimed by the appellant as per Notification No. 432/86-CE dated 06.08.1986 is a duty assessed and paid on the gate passes - Held that - notification is issued under Rule 8(1) of the Central Excise Rules, 1944 and exempts certain final products to an extent equivalent to duty of excise already paid on the input Naphthalene. There is no indication that duty paid on Naphthalene is eligible as credit and this notification is also does not prescribe any register to be maintained by the manufacturers of the finished goods for availing any credit. However, there is definitely an indication that duty equivalent to the duty paid on inputs (Naphthalene) is required to be set-off while arriving at the duty payable on the finished goods. As there is one-to-one correlation with respect to inputs used, duty paid on such inputs and the extent of exemption, therefore, this has to be considered only an exemption notification in which the extent of exemption is determined by the duty paid on the inputs. The extent of set-off available shows that there is no payment of duty and the same is not required to be paid on the finished products manufactured by the appellant. Demand period is April 1990 to April 1992 and the show cause notice has been issued on 01.11.1993 therefore, the same is issued within reasonable period. So far as addition of the excess amount in the invoices from the customers in the guise of duty paid as set-off it is also observed that the fact of set-off being recovered from the customers was not brought to the notice of the Revenue and accordingly, show cause notice has to be considered as issued in reasonable time as held by the Hon ble High Court in the case of Inductotherm (I) Pvt. Limited (2012 (12) TMI 856 - GUJARAT HIGH COURT). Further the additional consideration so received/ recovered has to be included in the assessable value under Section 4 of the Central Excise Act, 1944 - Decided against assessee.

Summary

Issues:
1. Whether set-off claimed under Notification No. 432/86-CE dated 06.08.1986 is recoverable from customers and should be added to assessable value.
2. Whether the demand issued after a year is time-barred.

Issue 1: Set-off Claimed Under Notification No. 432/86-CE:
The appellant claimed set-off under Notification No. 432/86-CE, but a demand was confirmed against them for recovering the set-off from customers. The appellant argued that the set-off was not separately recovered as duty in the invoices, thus Section 11D of the Central Excise Act was not applicable. The appellant cited various case laws to support their contention. The Revenue argued that the set-off scheme was an exemption notification, not a credit scheme like modvat/CENVAT. They claimed that the set-off recovered from customers was an additional consideration to be added to the assessable value under the Central Excise Act. The tribunal analyzed the notification and concluded that the set-off claimed was not payable as duty on the finished products, and thus, the recovery from customers was rightly held as recoverable.

Issue 2: Time-Barred Demand:
The appellant contended that the demand issued after a year was time-barred, citing relevant case laws. However, the Revenue argued that Section 11D does not prescribe a rigid time limit for recovery. The tribunal referred to a judgment by the Hon'ble High Court of Gujarat, which stated that as long as the recovery proceedings are initiated within a reasonable period, they cannot be struck down as time-barred. In this case, the demand period was considered reasonable (April 1990 to April 1992, with a show cause notice issued on 01.11.1993). The tribunal also noted that the recovery of excess amount from customers in the guise of duty paid as set-off was not previously brought to the Revenue's notice, justifying the issuance of the show cause notice within a reasonable time. The tribunal upheld the demand and rejected the appeal.

This judgment by the Appellate Tribunal CESTAT AHMEDABAD dealt with the recovery of set-off claimed under Notification No. 432/86-CE dated 06.08.1986 from customers and the time-barred nature of the demand. The tribunal analyzed the legal provisions, arguments presented by both parties, relevant case laws, and the specifics of the notification to reach a decision. The tribunal concluded that the set-off claimed was not payable as duty on the finished products, and thus, the recovery from customers was deemed correct. Additionally, the tribunal found the demand period and the issuance of the show cause notice to be within a reasonable timeframe, upholding the demand and rejecting the appeal.