Special-rate applications under excise notification must be decided before refund recovery proceeds under the default rate.

Clause 3(1) of Notification No. 20/2008-Central Excise allows a manufacturer to seek fixation of a special rate where actual value addition justifies a rate above the table rate. Where such an application has already been filed, coercive recovery of refund on the basis of the default notified rates should not proceed until the competent authority first decides that request. The department must examine the special-rate application and then proceed in accordance with law after determination of the applicable rate.

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Issues: Whether the petitioners' application for fixation of a special rate under Clause 3(1) of Notification No. 20/2008-Central Excise dated 27.03.2008 had to be considered before the department could proceed with recovery of refund on the basis of the notified rates.

Analysis: Clause 3(1) of the notification gave the manufacturer an option to seek fixation of a special rate where the actual value addition warranted a rate higher than the table rate. Since the petitioners had already submitted an application claiming such special rate, coercive recovery based on the notified refund rates was held to be inappropriate until that claim was first decided. The department was therefore directed to examine the application and, only after determination of the special rate, proceed in accordance with law.

Conclusion: The petitioners' request for prior consideration of the special-rate application was accepted, and recovery action was restrained until a decision was taken on that application.

Ratio Decidendi: Where a fiscal notification itself confers a substantive option to seek a special rate, recovery consistent with the default rate should not be pursued before the competent authority decides that request.

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