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TMI Blog2015 (12) TMI 1641X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be paid back to the exchequer in the same form as they were received. Further retention of amounts not due to them lawfully has placed the amount in the hands of the applicant and the exchequer must be compensated for such deprivation due to cash rebate taken incorrectly by the applicant. The Commissioner (Appeals) has therefore, erred in holding that no interest is chargeable under Section 11AA ibid on the amount erroneously refunded to the applicant. Cash rebate of the excess amount paid was clearly not payable to them and has been allowed as recredit in their Cenvat credit account by the Commissioner (Appeals) relying upon the view taken by the Hon’ble Punjab and Haryana High Court in Nahar Industrial Enterprises Ltd. v. UOI reported in 2009 [2008 (9) TMI 176 - PUNJAB AND HARYANA HIGH COURT ] - Revision application are disposed of. - F. Nos. 198/62/2012-RA and 195/153/2012-RA - 183-184/2015-CX - Dated:- 16-12-2015 - Ms. Rimjhim Prasad, Joint Secretary Shri Sudhir Malhotra, Advocate, for the Assessee. None, for the Department. ORDER These revision applications are filed by the Commissioner of Central Excise, Ludhiana (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng one interconnecting shaft to diesel engine, centrifugal pump and the complete set mounted on one channel frame; (ii) That the principal function of the composite unit in the instant case is handling of water; that the main function is performed by centrifugal pump and the function of diesel engine is to run that pump and that the function of diesel engine is to complement the function of centrifugal pump; (iii) That as such, combination of an engine and centrifugal pump both performing principal function of handling of water, after considering the complete unit as a composite machine, merits classification as centrifugal pumps, which is covered by Tariff Item 8413 70 10; (iv) That as per Section Note 3 to Section XVI of Central Excise Tariff unless the context otherwise requires, composite machines consisting of two or more machines fitted together form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component as being that machine which performs the principal function. That in the present case, the principal function is performed by centrifugal pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified the export goods and has claimed excess amount of rebate in cash by paying duty at higher rate. That the Commissioner (Appeals) has confirmed the recovery of cash rebate paid in excess from the party in cash, under Section 11A of the Act, but on the other hand, the Commissioner (Appeals) has erred in holding that the refund/rebate paid to the party was not erroneous, its mode of payment was, therefore, provisions of Section 11AB (now Section 11AA) are not attracted and interest on the cash rebate given to party is not recoverable. That the observations are in conflict with each other. 4.1.2 That the relevant provisions of the Central Excise Act, 1944 relating to recovery of erroneous refund and interest are reproduced below : Section 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or [erroneously refunded, whether or not such non-levy or non-payment, short-levy or short-paid or erroneous refund; as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord Dictionary is as under :- Erroneous means incorrect, wrong. That keeping in view the above definition, refund/rebate paid to the exporter wrongly or incorrectly on any account shall be erroneous refund. That the payment of rebate claim to the applicant in wrong manner (mode) clearly renders the refund/rebate claim to be erroneous refund/rebate, thus, provisions of Section 11A 11AB shall be attracted in the instant facts of the case. 4.1.4 That the Commissioner (Appeals) while holding that interest on the excess cash rebate given to the applicant is not recoverable, has failed to appreciate that there is material difference between payment of rebate by cash and payment by way of credit. That the payment in cash by the Government for which the party was not entitled lawfully, has increased the power of money flow in the hands of the applicant, at the cost of Government exchequer for which the Government is to be compensated in the form of interest. 4.1.5 That in the case of Garg Associates v. CTT - 2005 139 STC 368 AU HC, it was held that purpose of charging interest is to compensate the revenue for loss caused to it due to the late payment. That similar analog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of F.No. 195/153/12-RA filed by the applicant : 4.2.1 That the applicant are engaged in the manufacture of excisable goods and are registered with central excise. That the applicant cleared goods for export under ARE-1 No. 61/09-10, dated 11-3-2010 on payment of duty under rebate claim under Rule 18 of Central Excise Rules. That the goods have been exported is not disputed. 4.2.2 That the applicant had filed rebate claim of ₹ 4,19,735/-. That the amount of ₹ 4,09,016/- was sanctioned to the applicant by cheque and amount of ₹ 9,819/- by way of Cenvat credit was allowed through RG 23A Pt-II. 4.2.3 That the applicant is a 100% export unit and there is no home sale of finished goods. 4.2.4 That the Cenvat credit accumulated is used only for export. 4.2.5 That whatever Cenvat credit is accumulated in RG 23 A Pt-II the same is taken back from the department by way of rebate claims. 4.2.6 That the consignments are being issued for export either under UT-1 or under the rebate claim only. 4.2.7 That it is 100% revenue neutral exercise because first applicant take Cenvat credit in RG 23A Pt-II then this Cenvat credit is utilized against e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rebate paid is equal to the duty actually paid. 4.2.13 That discharging of duty either 4% or 10% is totally revenue neutral exercise because there is 100% export and whatever Cenvat credit is accumulated while purchasing of raw material used for only Rebate Claim and subsequent clearance is made through UT-1 when balance is not available in the Cenvat account. 4.2.14 That the rebate claim amount has been received by the applicant on those amounts which applicant has already paid at the time of purchase of raw material. That there is no dispute about receipt of goods exported nor about the classification of goods, there is no dispute of foreign payment received thereto. That the applicant has taken rebate claim which he has already paid as a duty at the time of purchase of Cenvatable raw material. 5. Personal hearing in this case was held on 23-6-2015 and was attended by Shri Sudhir Malhtora, Advocate on behalf of the applicant. Nobody attended the hearing on behalf of the Department. The applicant at the time of hearing reiterated the grounds of revision application. A written submission dated 23-6-2015 was also submitted by the applicant. Apart from reiteration of grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (T) - held that Commissioner (Appeals) has no power to travel beyond show cause notice and classify the product under new sub-heading. Tirupati Pipe Allied Indus. Pvt. Ltd. v. CCE - 2008 (227) E.L.T. 147 (T) - held that impugned order not sustainable as Commissioner (Appeals) travelled beyond show cause notice. 5.8 That the appellate authority erred in holding goods exported classifiable under Tariff Item 8413 70 10 by relying upon Section Note 3 to Section XVI of Central Excise Tariff Act, 1985. That he erred in not taking into cognizance of Note 2 to Section XVI and Note 2 to Chapter 84 of Central Excise Tariff Act. 5.9 That internal combustion diesel engine fall under Heading 8408. That the Heading 8413 covers Pumps for liquids whether or not fitted with a measuring device; liquid elevators . That Note 2 to Chapter 84 explained in HSN states that machinery or apparatus falling in two or more heading, one of which is within the first group, i.e., 8401 to 8424 is to be classified in that heading of first group. That motor is always classified in Headings 8406 to 8408 and 8410 to 8412 without regards to their use and same principle applies to pump even if specialize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of rebate in cash by paying duty at higher rate; that the refund/rebate paid to the applicant was not erroneous, its mode of payment was, therefore, provisions of Section 11AB (now Section 11AA) are attracted and interest on the cash rebate given to party is recoverable. 7.2 The applicant has mainly pleaded that the original authority allowed rebate of duty paid on goods exported under Heading 8408 90 90 and neither any show cause notice was issued nor any averments/findings were made by the original authority regarding classification of impugned goods under Tariff Item 8413 70 10. The Commissioner (Appeals) has erred in deciding the case on fresh ground which was not before the original authority and cannot decide the issues which were neither raised/decided by the adjudicating authority nor by assessing authority nor by Customs authority in the instant case. 8. Government notes that the dispute is whether the impugned goods are classifiable under Tariff Item 8408 90 90 attracting 10% rate of duty or under 8413 70 10 attracting 4% rate of duty. If the goods are classifiable under 8413 70 10 then whether the excess rebate paid erroneously in cash is recoverable from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observes that Note 3 to Section XVI states that Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. 9.4 Further, as per HSN Explanatory Note (C) to Chapter Heading 8413 centrifugal pumps may be driven by an electric or internal combusting motor or by a turbine. 10. From the above it is observed that while a diesel engine is a compression ignition engine or an internal combustion engine, a centrifugal pump is a pump, driven by a motor/turbine such as an internal combustion engine, for moving liquids such as water. The centrifugal pumps are, as per HSN Explanatory Notes, appropriately classifiable under Tariff Heading 8413 70 10. In terms of Note 3 to Section XVI where in a composite machine two or more machines are fitted together then the goods will be classifiable under the machine which performs the principal function. In terms of Section Note 3 to Section XVI of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exporter wrongly or incorrectly on any account amount to erroneous refund. Further, the payment of rebate claim to the applicant in excess of what is due or in a wrong manner clearly renders the rebate claim to be erroneous rebate. Thus provisions of Section 11A and Section 11AB (now Section 11AA) are clearly attracted in the present case. Government further notes that the Commissioner (Appeals) while holding that interest on the excess cash rebate given to the applicant is not recoverable, has failed to appreciate that the payment in cash by the Government for which the applicant was not entitled lawfully, has placed amount in the hands of the applicant at the cost of Government exchequer, for which the Government is to be compensated in the form of interest. 14.1 Government further observes that in support of the above contention the department has rightly placed reliance on the following decision of the Apex Court : 14.1.1 In the case of Pratibha Processors v. UOI - 1996 (88) E.L.T. 12 (S.C.), the Hon ble Supreme Court has held that - Interest in tax matters - Meaning of interest is compensatory in character and is imposed on an assessee who has withheld payment of ..... 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