2010 (4) TMI 878 - CGOVT - Central Excise

Government Upheld Recovery of Excess Rebate & Penalties for Erroneous Claims

The Government upheld the demand for recovery of excess rebate and penalties in a case involving erroneous rebate claims due to a tariff rate discrepancy. ... Rebate claims - rebate claim for the duty so paid were sanctioned by the Lower Authority in full and paid in cash – tariff rate of the goods exported was prescribed @8% adv. w.e.f. 1-3-06, however the applicant continued to assess their goods Central Excise Duty @16% adv. - applicant wrongly assessed their goods and thereby took advantage of excess rebate which was admissible upto 8% - Held that:- Duty was required to be paid @ 8% whereas applicant paid duty @ 16% - excess paid amount which was not payable as duty becomes a mere voluntarily deposit made by the applicant - rebate claim is admissible to the extent of duty legally payable. The excess paid amount is required to be allowed re-credit in the Cenvat account from where it was originally paid Issues Involved:1. Excess rebate claim under Rule 18 of the Central Excise Rules, 2002.2. Applicability of Section 11D of the Central Excise Act, 1944.3. Penal action under Rule 27 of the Central Excise Rules, 2002.4. Review of rebate sanctioning orders.5. Precedents and Board Circulars.Issue 1: Excess Rebate Claim under Rule 18 of the Central Excise Rules, 2002The applicant, engaged in the manufacture of HDPE rope and PP Baler Twines, filed rebate claims under Rule 18 for the export of goods. The goods were cleared for export by paying duty at 16% + education cess, and the rebate claims were sanctioned by the Lower Authority. However, it was later found that the tariff rate was 8%, and the applicant had erroneously claimed a rebate at 16%. The Lower Authority issued Show Cause Notices proposing recovery of the excess rebate.Issue 2: Applicability of Section 11D of the Central Excise Act, 1944The Lower Authority argued that under Section 11D, the excess duty collected and deposited was earned back by way of rebate, making it recoverable. The applicant knowingly paid excess duty to encash the excess Cenvat Credit available, thus making them liable under Section 11A read with Section 11D.Issue 3: Penal Action under Rule 27 of the Central Excise Rules, 2002The Lower Authority imposed penalties under Rule 27 for the applicant's willful and knowing payment of excess duty to claim higher rebates. The Commissioner (Appeals) upheld the orders but set aside the penalties.Issue 4: Review of Rebate Sanctioning OrdersThe applicant contended that once the rebate was sanctioned and paid, it could not be demanded back without reviewing the rebate sanctioning orders. They argued that the excess duty paid should be rebated as per Rule 18 and Section 11B, which allow for the rebate of 'duty paid' without distinguishing between duty required and actually paid. They cited Board Circular No. 510/06/2000 and various precedents supporting their claim.Issue 5: Precedents and Board CircularsThe applicant relied on precedents like Bharat Chemicals v. CCE and M/s. Belapur Sugar & Allied Ind. Ltd. v. CCE, which support the rebate of duty paid, including excess duty. They argued that the Department should have filed an appeal against the initial rebate sanctioning orders instead of issuing Show Cause Notices. The Lower Authority's reliance on the Bombay High Court's judgment in M/s. Indian Dye Stuff Ind. Ltd. v. UOI was upheld, which stated that Section 11A is an independent substantive provision for recovering erroneously refunded duty without the need for reviewing the initial orders.Conclusion:The Government observed that the rebate claim was initially sanctioned but later found to be erroneous as the duty rate was 8%, not 16%. The demand for recovery of excess rebate and penalties was upheld. The applicant's contention that the Department should have filed an appeal against the initial orders was dismissed based on the Bombay High Court's judgment, which was upheld by the Supreme Court. The Government found no infirmity in the impugned order-in-appeal and upheld the recovery proceedings under Section 11A. The revision application was rejected, and the excess duty paid was deemed a voluntary deposit, not eligible for rebate beyond the legally payable amount.