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TMI Blog1986 (9) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... paper covered copper strips manufactured by M/s. Devidayal Electronics Wires Ltd., on which duty was being charged under Item 68. The amount of duty paid on paper covered copper strips manufactured by M/s. Devidayal Electronics Wires Ltd., was taken as credit under Rule 56A by M/s. Bharat Bijlee Ltd., for paying duty on Transformers manufactured by them and classifiable under Tariff Item 68. As a result of a petition filed by M/s. Devidayal Electronics Wires Ltd., in the Bombay High Court, the High Court decided that paper covered copper strips were classifiable under Item 26A of the Central Excise Tariff and not under Item 68. Due to this change in the classification of the paper covered strips as a consequence of the Bombay High Court s decision it seems M/s. Devidayal Electronics Wires got refund of duty paid by them in the past on the aforesaid strips. In view of this refund, the Assistant Collector, Central Excise, Dn. IV, Thane, seems to have issued the show cause cum demand notice dated 11-7-1984 under Rule 56A(2) proviso 3 to recover the credit already availed of by M/s. Bharat Bijlee Ltd. After holding a due enquiry the Assistant Collector in his order dated 19-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the credit subsequently, the credit allowed shall be varied accordingly, either by adjustment in the credit account or by cash recovery or refund. Section 11-A deals with recovery of duties not levied, short levied, or erroneously refunded from the person chargeable with the duty. The duty is leviable in terms of Section 3 which stipulates that the prescribed duties of excise believed and collected in such manner as prescribed on all excisable goods. Therefore, the duties leviable under Section 3 have to be collected in the prescribed manner. Under Section 2(g) prescribed means prescribed by rules made under the Central Excises and Salt Act, 1944. Rule 7 enjoins levy of duty on every person producing, procuring, manufacturing or storing them in a warehouse without payment of duty on any excisable goods. Similarly, Rule 56A also envisages movement of duty paid materials or component parts used in the manufacture of finished excisable goods and the credit of such duty to be utilised for paying duty on the finished excisable goods. When goods are received by a manufacturer under Rule 56A and he takes credit of the duty paid thereon in the RG 23 account, the goods become non-duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their goods provisionally to obviate any time bar coming in the way of recovery as in a case like the one under consideration. It was therefore in this context that the Bench held in the case of M/s. Finolex Cables Ltd. Pune that the time limit under Section 11A would apply to a case covered by Rule 56A. The ratio of that decision is reiterated forcefully in the present order. Since in the present case, the demand issued by the Assistant Collector of Central Excise Division IV, Thane is time-barred, the order of the Collector (Appeals) is correct. The same is confirmed and the appeal of the Collector of Central Excise, Thane is rejected. [Order per : K. Gopal Hegde, Member (J)]. - 5. I have had the advantage of going through the order of my brother Shri K.S. Dilipsinhji. I respectfully disagree with his view that Section 11A of the Central Excises Salt Act, 1944 is applicable to the facts of the present case. 6. This is an appeal by the Collector of Central Excise, Thane. M/s. Devidayal Electronics Wires Ltd., (who will be hereinafter referred to as M/s. Wires Ltd ) were the manufacturers of paper covered copper strips . The said goods were classified by the Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Being aggrieved by the order of the Collector (Appeals) as stated earlier the Collector has preferred this appeal. 9. Shri N.K. Pattekar appearing or the appellant submitted that 5th proviso to Rule 56A(2) specifically authorised of varying the credit allowed to a manufacturer if the duty paid on material or component parts, in respect of which credit had been allowed was varied subsequently due to any reason. The said proviso further authorised adjustment in the credit account maintained by the manufacturer and for any reason if such adjustment is not possible it authorised cash recovery. Shri N.K. Pattekar also contended that the proviso which provided for variation of the credit and recovery did not prescribe any period of limitation and as such, the order of the Collector (Appeals) is illegal and the same should be set aside. 10. Shri Moti Ajwani, respondents learned Advocate contended to the contra. He urged that the decision of the Bench in the case of M/s. Finolex Cables Ltd., is applicable and that the appeal should be dismissed. 11. There is no controversy between the parties that the 5th proviso to Rule 56A(2) authorises variation of the credit allowed if the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit of the duty paid on the copper strips received by them from M/s. Wires Ltd. By reason of the High Court s order there was variation in the rate of duty which resulted in refund. As stated earlier the 5th proviso to Rule 56A(2) provided for adjustment in credit account and also cash recovery if the duty paid on the inputs was varied subsequently due to any reason. The said proviso not only provided for adjustment and recovery but also provided or refund to the manufacturer if refund became necessitated due to variation in the duty on the inputs. The proviso as such did not prescribe any period of limitation in the matter of refund or recovery. Section 11B provided period of limitation for claiming refund of any duty of excise. The application for refund shall have to be made before the expiry of 6 months from the relevant date and the relevant date has been defined in that Section itself. 16. Section 11A is attracted only when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded. 17. Admittedly, the recovery in the instant case is not because no duty of excise has been levied or paid or has been short levied or short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for recovery of the credit taken due to variation in the rate of duty of the inputs was not considered or dealt with or decided. Therefore, the ratio of the said decision is not applicable to the facts of the present case. In the above view the Collector (Appeals) was not right in holding that the decision of this Bench in M/s. Finolex Cables Ltd, was applicable to the facts of the present case. 19. Brother Shri Dilipsinhji in his order did not record any finding as to whether the ratio of the decision in M/s. Finolex Cables Ltd., is or is not applicable but he had sought to explain the said decision. 20. For the conclusion which he had arrived at brother Shri Dilipsinhji had relied on another decision of this, Regional Bench dated 2-9-1985 in Appeal. No. ED(BOM) No. 134/85. That appeal was filed by M/s. Hindustan Petroleum Corporation against the order levying duty on 6.110 kls. of kerosene oil which was beyond the quantity of 0.5% less: noticed during the storage of the kerosene in the warehouse during the month of January, 1983. M/s, Hindustan Petroleum Corporation had raised two contentions, firstly, that there was violation of the principle of natural justice and sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacturer or importers, and (2) it might also result in recovery of more duty from the manufacturer or importer. During the relevant period and subsequently also the Central Excise Rules and the Act provided a period of 6 months for claiming refund of duty from the date of cause of action for the refund arose. As there is a general provision has been made in the Rules and the Act for claiming refund of duty the Rule Making Authority wisely thought it unnecessary to incorporate any period of limitation in so far as refund is concerned. The other Rules or the provisions in the Act would not strictly apply to the recovery contemplated in the proviso to sub-rule (2) of Rule 56A. Therefore, a separate provision was made in the Rule itself i.e. sub-rule (5). As has been pointed out earlier, it provided for two periods of limitation, 6 months from the date of credit if the credit had been allowed on account of an error, omission or misconstruction on the part of the officer, and 5 years where a credit has been allowed on account of wilful misstatement, collusion or suppression of facts on the part of the manufacturer or the assessee. It is difficult to accept the contention of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be allowed under sub-rule (2) is only the duty suffered by the raw material or component or finished product. The duty paid on the raw material or component or finished product could take within its ambit the varied duty contemplated by the proviso to sub-rule (2). Thus, we are of the considered view that the recovery contemplated by the proviso to sub-rule(2) shall have to be made within the period of limitation prescribed under sub-rule (5) of Rule 56A. 22. Having regard to the above decision the contention of Shri N.K. Pattekar that for the recovery contemplated in the proviso in question, there is no period of limitation cannot be accepted. But then the appellant s contention that whole of the demand is barred by limitation also cannot be accepted. The cause of action for recovery was the refund made to M/s. Wires Ltd. It is because of the refund so made variation in duty occured in respect of the inputs in respect of which the respondents herein availed proforma credit. As the refund according to the statement made by Shri N.K. Pattekar was ordered on 20-3-1984, the cause of action for adjustment or recovery arose on that day. The demand notice in the instant case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is rule. 26. While according to Brother Dilipsinhji limitation under Section 11A of Central Excises Salt Act, 1944 would be applicable to a recovery under the proviso, according to Brother Hegde limitation applicable would be as set out in sub-rule (5) of Rule 56A of Central Excises Rules, 1944. He also held that the time limit would be computed from the date of order 20-3-1984 (from the file it is not clear this date refers to which order). It appears that this date is set out on the basis of information given by Shri Pattekar before the Bench. This date was treated by Brother Hegde as the date of cause of action for adjustment or recovery and in his view limitation of six months should be computed from this date. 27. At the hearing of the matter on 16-6-1986 in spite of notice none appeared before me for the appellant Collector of Central Excise, Thane. Shri J.J. Bhatt with Smt. A.B. Kapadia appeared for the respondent. They were heard and record perused. 28. Shri Bhatt during hearing informed that the Bombay High Court order as to classification and resulting in refund in favour of M/s. Devidayal Electronics Wires Ltd., from whom the respondents had obtained paper cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court. I would, therefore, elect to agree with one of the learned Members. 31. M/s. Finolex Cables Ltd., Pune v. Collector of Central Excise, Pune (1983 ECR 2047D (Cegat) on which Brother K.S. Dilipsinhji relied for holding that limitation under Section 11A of the Act, would be applicable to varying of credit, in my views, is no authority for the position. In that case, it is observed that the review show cause notice issued under, old Section 3.5A was held time barred under Section 35A(3)(b) read with. Section 11A of the Central Excises Salt Act, 1944. In the decision whether the limitation under Section 11A would be applicable to varying of credit was not directly in issue and any observations made as to the same were obiter. On the other hand, from order of Brother Hegde (para 21) it is seen that there is a direct decision on the point of West Regional Bench, Bombay holding limitation under sub-rule (5) or rule 56A being applicable to recovery contemplated in proviso to sub-rule 2 of rule 56A (this decision in spite of search made was not available at Delhi but Brother Hegde has extracted the same in extense). Though I may have my own reservations about the date from whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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