Section 11D recovery for excess buyer collections on exempted goods upheld, while Section 11A limitation was held inapplicable.

An amount collected from buyers on clearances of exempted goods, where the manufacturer had already discharged an equivalent 8% under Rule 57CC for common inputs, was treated as excess collection recoverable under Section 11D of the Central Excise Act because the goods carried nil duty. The special recovery scheme under Section 11D was held to operate independently, so the limitation under Section 11A did not apply to such proceedings. Penalty was not sustained, as the surrounding facts were considered insufficient to justify penal action.

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Issues: (i) whether the amount collected at 8% from buyers of exempted goods, when the manufacturer had paid an equivalent amount under Rule 57CC of the Central Excise Rules, 1944, was liable to be recovered under Section 11D of the Central Excise Act, 1944; (ii) whether any limitation under Section 11A of the Central Excise Act, 1944 applied to proceedings under Section 11D; and (iii) whether penalty was leviable.

Issue (i): whether the amount collected at 8% from buyers of exempted goods, when the manufacturer had paid an equivalent amount under Rule 57CC of the Central Excise Rules, 1944, was liable to be recovered under Section 11D of the Central Excise Act, 1944.

Analysis: The manufacturer had availed Modvat credit on inputs used for both dutiable and exempted products and discharged an amount equal to 8% of the price of exempted goods under Rule 57CC(1), which was in lieu of the credit attributable to exempted clearances. The invoices also showed collection of 8% from buyers. Since the exempted goods carried nil duty, the amount recovered from buyers was held to be in excess of the duty assessed or determined. Section 11D, as amended by Section 103 of the Finance Act, 2000, required such excess collection to be paid to the credit of the Central Government.

Conclusion: The demand under Section 11D was upheld against the assessee.

Issue (ii): whether any limitation under Section 11A of the Central Excise Act, 1944 applied to proceedings under Section 11D.

Analysis: The amended provisions of Section 11D contained their own recovery machinery and, by deeming fiction, applied from 20 September 1991. The Court treated the statutory scheme as not importing the limitation prescribed for Section 11A proceedings. The earlier contrary view was held inapplicable after the amendment.

Conclusion: No limitation under Section 11A was held applicable to the recovery under Section 11D.

Issue (iii): whether penalty was leviable.

Analysis: Although the demand was sustained, the facts and circumstances were considered insufficient to justify penal consequences.

Conclusion: Penalty was set aside.

Final Conclusion: The demand for the amount collected from buyers was sustained, the plea of limitation failed, and the penalty was deleted, resulting in only partial relief to the assessee.

Ratio Decidendi: Where a manufacturer collects from buyers an amount attributable to exempted clearances, that amount is recoverable under Section 11D as money collected in excess of duty, and the recovery is governed by the special machinery of Section 11D rather than the limitation applicable to Section 11A.

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