2008 (5) TMI 47 - AT - Central Excise

Rule 223A Demands Not Bound by Section 11A Limitation Period

ROURKELA STEEL PLANT Versus COMMISSIONER OF C. EX., BHUBANESWAR

The Tribunal ruled that demands under Rule 223A of the Central Excise Rules, 1944 are not subject to the limitation period prescribed under Section 11A of ... Storage loss - Whether demand u/r 223A of the erstwhile CER is governed by Section 11A of CEA - allegations of clandestine removal invoking Sec. 11A – appellants plea is Sec. 11A cases are different from Rule 223A cases - Rule 223A itself provides for permissible losses – held that Section 11A & Rule 223A deal with different situations and that the period of limitation prescribed u/s 11A is not applicable to a situation contemplated u/r 223A - demand u/r 223A is not governed by Sec. 11A Issues Involved:1. Applicability of Section 11A of the Central Excise Act, 1944 to demands under Rule 223A of the erstwhile Central Excise Rules, 1944.2. Jurisdiction of the Tribunal to hear the appeal.3. Reconciliation of stock shortages and the necessity of the reference to the Larger Bench.Issue-wise Detailed Analysis:1. Applicability of Section 11A to Rule 223A Demands:The central issue addressed was whether demands under Rule 223A are governed by the limitation period prescribed under Section 11A of the Central Excise Act, 1944. The Tribunal examined the distinct purposes and contexts of Section 11A and Rule 223A. Section 11A deals with recovery of duties not levied or paid, short-levied, short-paid, or erroneously refunded, with specific time limits for such recoveries. Conversely, Rule 223A pertains to the accounting of goods in a factory or warehouse and demands duty on unaccounted-for goods, with its own provisions for penalties and permissible losses.The Tribunal noted that Rule 223A has no machinery provision for time limits, unlike Section 11A. The decision of the Hon'ble Madras High Court in Carborundum Universal Ltd. v. Union of India was cited, which held that Section 11A and Rule 223A address different situations and objectives, and the limitation under Section 11A does not apply to Rule 223A. The Tribunal agreed with this view, emphasizing that the relevant dates for limitation under Section 11A have no bearing on the situations covered by Rule 223A.Furthermore, the Tribunal referenced the Supreme Court's decision in Collector of Central Excise, Jaipur v. Raghuvar (India) Ltd., which clarified that the limitation under Section 11A is not a catch-all provision for all actions under the Act or Rules but is specific to cases of duty not levied or paid, short-levied, short-paid, or erroneously refunded. Consequently, the Tribunal concluded that demands under Rule 223A are not governed by Section 11A's limitation period.2. Jurisdiction of the Tribunal:The Tribunal confirmed its jurisdiction to hear the appeal, as it was against an order passed by the Jurisdictional Commissioner. This was contrasted with earlier appeals related to storage loss cases, which were dismissed by the Larger Bench for lack of jurisdiction. The Tribunal thus proceeded to consider the reference made to the Larger Bench.3. Reconciliation of Stock Shortages and Necessity of Reference:The appellant argued that the stock shortages found during self-conducted stock-taking could be reconciled based on the procedures for recording hot ingots and subsequent removal at room temperature. They also contended that the reference to the Larger Bench was unnecessary, as this was not a case under Rule 223A due to the lack of a stock-taking order by the Jurisdictional Commissioner and the invocation of Section 11A for allegations of clandestine removal.The Tribunal, however, pointed out that the Larger Bench was constituted to answer the specific question referred by the Referral Bench, and the appellant's advocate was present when the referral order was dictated. Thus, the reference had to be considered and answered before the case could be sent back to the Referral Division Bench.Conclusion:The Tribunal held that Section 11A and Rule 223A deal with different situations, and the limitation period prescribed under Section 11A is not applicable to demands under Rule 223A. The appeal was sent back to the Referring Division Bench for a decision on merits. The judgment emphasized the distinct legal frameworks and objectives of Section 11A and Rule 223A, reaffirming the independent nature of Rule 223A demands and their exemption from Section 11A's limitation provisions.