K.C.A. Ltd. Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. the present appeal is directed against the order-in-appeal no.ppm-326/rk-57/87 dated 16-12-1987 passed by the collector of central excise (appeals), bombay rejecting the appeal filed against the memorandum issued in file no. v-14d(18)-l/mn/85/rec dt. 29-8-1988, issued by the additional collector of central excise, jamnagar, so far as it relates to the intimation given thereunder, regarding adjustment of the sum of rs. 8643.13 held as recoverable from the appellants, out of the amount of the refund admissible to them on some other count.2. the appellants, who are engaged in manufacturing synthetic organic dyes, were availing of credit of countervailing customs duty on import of the intermediates vide rule 56a of the central excise rules as permitted under notification no. 103/61-c.e., dt 20-4-1961, which however came to be rescinded vide notification no 209/84-c.e., dt 16-10-1984. the supdt. of central excise, jamnagar, vide his letter no.ari/kca/ae/181/85 dt 25-6-1985, informed the appellants that since gama acid and alpha napthalmine were lying unutilised in balance as on 16-10-1984, they were not eligible to claim credit on the said quantity and directed them to make payment of rs. 8643.13. the appellants, vide their letter dated 21-8-1985 however objected to the said direction, and pleaded that they were entitled to utilise the said credit towards the duty on any finished product. the same was however not replied, and instead, vide memorandum mentioned hereabove, the assistant collector ordered the adjustment of the said amount against the amount due as refund to the appellants. the appellants challenged the said direction before the collector (appeals), who rejected the said appeal.3. shri dd gwalani, the ld. advocate for the appellants submitted that there is no dispute over the issue that the appellants were eligible to get the proforma credit vide rule 56a, vide notification no. 103/61, and that the subject inputs were received in the factory prior to rescinding of the said notification. he also pleaded that the appellants were eligible to avail of the instant credit and were not required to have one to one co-relation. he further pleaded that the impugned direction as also the direction from the supdt. were given without issue of any show cause notice, and that, no personal hearing was also given. relying on the decision of cegat srb in beehive foundry engineering works v. cce, - 1986 (7) etr 141, he submitted that the letter from the supdt. could not be considered as an order confirming demand and order of the assistant collector, adjusting the said amount against the other refund claimed sanctioned was not correct, and the same has to be set aside.4. shri cp arya, the ld. sdr for the department, however, supported the order and pleaded that the appellants had not preferred any appeal against the directions from the supdt. and as such the same had assumed finality, and subsequent action of the assistant collector was simply an act for recovery of the dues which he was authorised to do.5. going through the papers, and considering the submissions made, the appellants' eligibility to avail of the credit, when the subject goods were received, is not disputed. the only ground on which the alleged demand is made, is that the goods were lying unutilised, when the said notification no. 103/61 was withdrawn.6. besides the issue, whether such reversal of the credit and consequent demand thereof is called for, the main issue for determination here is, whether the supdt. could have demanded such an amount, and that too, without issue of any show cause notice and without hearing the party in that regards.7. demand for such credit, even assuming to have been wrongly availed of, can be raised as provided for in rule 56a(5) of the central excise rules, and as per the provisions of the said rule, the authority competent to raise such a demand is assistant collector, and not the supdt. even the assistant collector, before confirming such a demand is required to issue a show cause notice, and give hearing to the party.here, however, is the case, where only the supdt. has issued the letter directly demanding the amount, without issue of show cause notice. on all the counts, therefore, the alleged demand by the supdt is in non-compliance with the legal provision and the alleged demand by the supdt. being without jurisdiction and beyond the powers of the supdt.is void ab initio and cannot be enforced.8. when the demand raised by the supdt. being void ab initio, the memorandum of the assistant collector adjusting the said recovery against the refund ordered, is also not sustainable.9. the decision of the south regional bench of the tribunal, beehive foundry engineering works v. cce - 1986 (7) etr 141, referred to by the ld. advocate for the appellants, though not directly on the point at issue here, also taken the same view.10. when the appeal has to be allowed on this count, it does not appear necessary to deal with other issue as to whether demand on the grounds raised in the letter of the supdt. is legally sustainable.11. under the circumstances, the appeal is allowed. it is clarified that the order shall not operate as a bar in the department demanding the subject amount, by following proper course if, and, as, may be permissible under the law.

Judgment:
1. The present appeal is directed against the order-in-appeal No.PPM-326/RK-57/87 dated 16-12-1987 passed by the Collector of Central Excise (Appeals), Bombay rejecting the appeal filed against the Memorandum issued in File No. V-14D(18)-l/MN/85/REC dt. 29-8-1988, issued by the Additional Collector of Central Excise, Jamnagar, so far as it relates to the intimation given thereunder, regarding adjustment of the sum of Rs. 8643.13 held as recoverable from the appellants, out of the amount of the refund admissible to them on some other count.

2. The appellants, who are engaged in manufacturing synthetic organic dyes, were availing of credit of countervailing customs duty on import of the intermediates vide Rule 56A of the Central Excise Rules as permitted under Notification No. 103/61-C.E., dt 20-4-1961, which however came to be rescinded vide Notification No 209/84-C.E., dt 16-10-1984. The Supdt. of Central Excise, Jamnagar, vide his letter No.ARI/KCA/AE/181/85 dt 25-6-1985, informed the appellants that since Gama Acid and Alpha Napthalmine were lying unutilised in balance as on 16-10-1984, they were not eligible to claim credit on the said quantity and directed them to make payment of Rs. 8643.13. The appellants, vide their letter dated 21-8-1985 however objected to the said direction, and pleaded that they were entitled to utilise the said credit towards the duty on any finished product. The same was however not replied, and instead, vide memorandum mentioned hereabove, the Assistant Collector ordered the adjustment of the said amount against the amount due as refund to the appellants. The appellants challenged the said direction before the Collector (Appeals), who rejected the said appeal.

3. Shri DD Gwalani, the Ld. Advocate for the appellants submitted that there is no dispute over the issue that the appellants were eligible to get the proforma credit vide Rule 56A, vide Notification No. 103/61, and that the subject inputs were received in the factory prior to rescinding of the said notification. He also pleaded that the appellants were eligible to avail of the instant credit and were not required to have one to one co-relation. He further pleaded that the impugned direction as also the direction from the Supdt. were given without issue of any show cause notice, and that, no personal hearing was also given. Relying on the decision of CEGAT SRB in Beehive Foundry Engineering Works v. CCE, - 1986 (7) ETR 141, he submitted that the letter from the Supdt. could not be considered as an order confirming demand and order of the Assistant Collector, adjusting the said amount against the other refund claimed sanctioned was not correct, and the same has to be set aside.

4. Shri CP Arya, the Ld. SDR for the Department, however, supported the order and pleaded that the appellants had not preferred any appeal against the directions from the Supdt. and as such the same had assumed finality, and subsequent action of the Assistant Collector was simply an act for recovery of the dues which he was authorised to do.

5. Going through the papers, and considering the submissions made, the appellants' eligibility to avail of the credit, when the subject goods were received, is not disputed. The only ground on which the alleged demand is made, is that the goods were lying unutilised, when the said Notification No. 103/61 was withdrawn.

6. Besides the issue, whether such reversal of the credit and consequent demand thereof is called for, the main issue for determination here is, whether the Supdt. could have demanded such an amount, and that too, without issue of any show cause notice and without hearing the party in that regards.

7. Demand for such credit, even assuming to have been wrongly availed of, can be raised as provided for in Rule 56A(5) of the Central Excise Rules, and as per the provisions of the said Rule, the authority competent to raise such a demand is Assistant Collector, and not the Supdt. Even the Assistant Collector, before confirming such a demand is required to issue a show cause notice, and give hearing to the party.

Here, however, is the case, where only the Supdt. has issued the letter directly demanding the amount, without issue of show cause notice. On all the counts, therefore, the alleged demand by the Supdt is in non-compliance with the legal provision and the alleged demand by the Supdt. being without jurisdiction and beyond the powers of the Supdt.

is void ab initio and cannot be enforced.

8. When the demand raised by the Supdt. being void ab initio, the memorandum of the Assistant Collector adjusting the said recovery against the refund ordered, is also not sustainable.

9. The decision of the South Regional Bench of the Tribunal, Beehive Foundry Engineering Works v. CCE - 1986 (7) ETR 141, referred to by the Ld. Advocate for the appellants, though not directly on the point at issue here, also taken the same view.

10. When the appeal has to be allowed on this count, it does not appear necessary to deal with other issue as to whether demand on the grounds raised in the letter of the Supdt. is legally sustainable.

11. Under the circumstances, the appeal is allowed. It is clarified that the order shall not operate as a bar in the Department demanding the subject amount, by following proper course if, and, as, may be permissible under the law.