Provisional rebate recovery upheld where excess rebate exceeded duty paid and the demand was not time-barred.

Rebate under a duty notification is confined to the duty actually paid or payable, so excess rebate could be recovered from the assessee. Where the rebate was sanctioned provisionally with an express condition for adjustment on final clearance and the assessee undertook to refund any excess, the sanction was not final and the recovery demand was not time-barred. A notice founded on the notification and the trade notice governing provisional rebate was not without jurisdiction merely because an audit objection prompted the demand. The excess rebate recovery was sustained and the appeal was dismissed.

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Issues: (i) Whether excess rebate paid under the notification was recoverable from the assessee. (ii) Whether the demand was barred by limitation on the footing that the rebate sanction was final. (iii) Whether a show cause notice based on audit objection was without jurisdiction.

Issue (i): Whether excess rebate paid under the notification was recoverable from the assessee.

Analysis: The rebate granted under the notification was only against the duty actually paid or payable on clearance of sugar. The assessee did not dispute that the rebate amount exceeded the duty paid. The excess payment was therefore recoverable in accordance with the settled principle that exemption or rebate cannot exceed the duty leviable and actually paid.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Issue (ii): Whether the demand was barred by limitation on the footing that the rebate sanction was final.

Analysis: The rebate had been sanctioned provisionally with an express condition for adjustment on final clearance and the assessee had given an undertaking to refund any excess amount. In those circumstances, the sanction could not be treated as final, and the demand issued on finalisation was not time-barred.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Issue (iii): Whether a show cause notice based on audit objection was without jurisdiction.

Analysis: The demand was founded on the notification and the trade notice governing provisional rebate and not merely on the audit objection. The objection to jurisdiction therefore failed.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Final Conclusion: The demand for recovery of excess rebate was sustained, the plea of limitation failed, and the challenge to the notice on jurisdictional grounds was rejected; the appeal was dismissed.

Ratio Decidendi: Rebate or exemption under a duty notification is confined to the duty actually paid or payable, and where rebate is granted provisionally subject to adjustment and refund under an undertaking, recovery of the excess amount is permissible and not barred by limitation.

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