1999 (2) TMI 721 - AT - Central Excise

Excess Rebate Demand Upheld Under Notification 108/78: Legal Principles Clarified

The case involved a duty demand confirmation of excess rebate paid to the appellants under Notification 108/78. The excess rebate received on free sale ... - Issues:1. Duty demand confirmation of excess rebate paid under Notification 108/78.2. Bar on limitation for the demand.3. Jurisdiction of show cause notice based on audit objection.Analysis:Issue 1: Duty Demand Confirmation of Excess RebateThe case involved a duty demand confirmation of Rs. 1,65,878.34 being the excess rebate paid to the appellants under Notification 108/78. The sugar mill was granted an incentive rebate on the condition that the excess sugar produced must be cleared from the factory, and any loss would result in a reduction of the rebate. The department noticed the excess rebate received by the appellants on free sale sugar during the 1977-78 season, contravening the principle that exemption cannot exceed the leviable duty. The demand-cum-show-cause notice was issued to recover the excess amount, which was confirmed by the Assistant Collector and upheld by the Collector (Appeals). The appellants did not dispute the excess payment exceeding the duty paid, leading to the sustainability of the recovery following relevant judicial precedents.Issue 2: Bar on Limitation for the DemandThe appellants contended that the demand was barred by limitation, arguing that the rebate was provisionally sanctioned with provisions for adjustment, and no final decision or order on rebate claims had been made. However, it was noted that trade notices specified that rebate claims were treated as provisional until finalization upon actual clearance of excess sugar. The High Court's judgment emphasized that assessees were bound by their undertaking to refund any excess amount, preventing them from claiming finality of the sanction. As a result, the demand was not time-barred due to the provisional nature of the sanction.Issue 3: Jurisdiction of Show Cause NoticeThe appellants challenged the jurisdiction of the show cause notice based on an audit objection, citing a Tribunal decision. However, it was clarified that the demand was raised in accordance with Notification 108/78 and Trade Notice 140/78, not solely on the basis of an audit objection. Therefore, the Tribunal rejected this argument, affirming the validity of the demand. The Tribunal upheld the impugned order, dismissing the appeal.In conclusion, the judgment addressed the duty demand confirmation, the limitation bar for the demand, and the jurisdiction of the show cause notice, emphasizing the legal principles governing rebate payments and provisional sanctions.