2013 (6) TMI 118 - HC - Central Excise

Court Determines APC Not Appealable; Clarifies Gallery Exclusion. Refund Claims Allowed. Burden of Proof Addressed.

The court held that the determination of Annual Production Capacity (APC) by the Deputy Commissioner is not appealable as it is an administrative ... Refund - payment of excess duty - Compounded Levy Scheme - wrong determination of Annual Production Capacity - independent textile processors - held that:- If the determination was not appealable, in our view, it would be incorrect to hold that without challenging such an order, the manufacturer cannot claim refund of duty erroneously collected. The fact that the galleries were included while determining the Annual Production Capacity and as such, the galleries were otherwise not required to be included by virtue of the decisions of the Tribunal and the Apex Court, there is no dispute. In our view, therefore, the petitioners were justified in filing refund claims in terms of Section 11B of the Central Excise Act claiming refund of excess duty collected on the basis of such consideration of galleries in determining Annual Production Capacity and collecting corresponding excise duty on such capacity. In the show cause notice, three objections were raised. The refund claims were declined only on one ground, namely, that without challenging the determination of annual capacity of production, the processor could not have sustained refund claim. In that view of the matter, the Deputy Commissioner did not go into other aspects. Therefore, even while setting aside the orders passed by the Tribunal and the central excise authorities and holding that the refund claims were maintainable without challenging the determination of Annual Production Capacity, we would still like to remand the proceedings to the Deputy Commissioner for further consideration and adjudication on other two issues raised in the show cause notice. - matter remanded back to original authority - decided partly in favor of assessee. Issues Involved:1. Determination of Annual Production Capacity (APC) and its appealability.2. Inclusion of 'galleries' in the calculation of APC.3. Refund claim based on erroneous inclusion of galleries.4. Limitation period for filing refund claims under Section 11B.5. Burden of proof regarding the passing of duty to consumers.Issue-wise Detailed Analysis:1. Determination of Annual Production Capacity (APC) and its Appealability:The core issue was whether the determination of APC by the Deputy Commissioner under the Rules of 1998 or 2000 is an appealable order. The court examined the relevant rules and concluded that the determination of APC is an administrative exercise, not a judicial or quasi-judicial order. The court noted, 'The determination which is arrived at cannot be termed as a judicial or even a quasi-judicial order.' Consequently, such determination does not give rise to an appealable order under Section 35 of the Central Excise Act, 1944.2. Inclusion of 'Galleries' in the Calculation of APC:The ambiguity regarding the inclusion of 'galleries' in APC calculations under the Rules of 1998 was clarified in the Rules of 2000, which explicitly excluded galleries. The court observed, 'The legal position, thus, is amply clear and stands concluded right up to the stage of the Apex Court.' The Tribunal in the case of M/s. R.M. Gupta Textiles P. Ltd. held that the exclusion of galleries is clarificatory and applies retrospectively, a view upheld by the Apex Court.3. Refund Claim Based on Erroneous Inclusion of Galleries:The petitioners claimed a refund based on the erroneous inclusion of galleries in APC calculations. The court held that since the determination of APC was not appealable, the petitioners were justified in filing refund claims under Section 11B. The court stated, 'The petitioners were justified in filing refund claims in terms of Section 11B of the Central Excise Act claiming refund of excess duty collected.'4. Limitation Period for Filing Refund Claims Under Section 11B:The show cause notice issued by the Deputy Commissioner also raised the issue of the refund claim being beyond the limitation period prescribed under Section 11B. However, the court did not delve into this aspect as the primary ground for rejecting the refund claim was the non-challenge of the APC determination.5. Burden of Proof Regarding the Passing of Duty to Consumers:Another ground in the show cause notice was the lack of evidence that the burden of duty had not been passed on to consumers. The court remanded the case to the Deputy Commissioner to address this and other unresolved issues, stating, 'We would still like to remand the proceedings to the Deputy Commissioner for further consideration and adjudication on other two issues raised in the show cause notice.'Conclusion:The court set aside the orders of the Tribunal and excise authorities, remanding the matter to the Deputy Commissioner for further consideration on the unresolved issues. The court directed that this exercise be completed expeditiously, preferably within six months. The petitions were disposed of, and the rule was made absolute accordingly.