Excise duty wrongly collected on non-dutiable goods remains recoverable under Section 11D, despite credit utilisation

Amounts collected from customers as central excise duty on goods not liable to duty were recoverable under Section 11D of the Central Excise Act, 1944. The goods had been found to fall outside the scope of manufacture under Section 2(f) for the relevant period, so no excise duty was payable on their clearance; accordingly, the sum recovered as duty could not be treated as lawfully collected duty. The Court found that credit utilisation did not defeat Section 11D because the amount had been collected from buyers as excise duty and remained payable to the Central Government. The Tribunal's contrary view was unsustainable, the order was set aside, and the matter was remanded.

---

---

Issues: Whether the amount collected by the assessee as central excise duty on goods not liable to duty was recoverable under Section 11D of the Central Excise Act, 1944, and whether the Tribunal was justified in holding otherwise.

Analysis: The goods in question were held by the adjudicating authority to be outside the scope of manufacture under Section 2(f) of the Central Excise Act, 1944 for the relevant period, and therefore no excise duty was payable on their clearance. On that basis, the amount recovered from customers as duty could not be treated as lawfully collected duty. The adjudicating authority had also held that the credit-utilisation position did not defeat the operation of Section 11D, because the amount had been collected from buyers as excise duty and remained payable to the Central Government. The High Court found the Tribunal's contrary conclusion to be inconsistent with the record and the adjudication order.

Conclusion: The demand under Section 11D was sustainable and the Tribunal's view rejecting it was unsustainable.

Final Conclusion: The impugned order of the Tribunal was set aside and the matters were remanded for fresh decision.

Ratio Decidendi: Amounts collected from customers as excise duty in respect of goods not liable to duty are recoverable under Section 11D of the Central Excise Act, 1944.

---