2024 (8) TMI 200 - AT - Central Excise

Rebate under Rule 18 allowed on duty paid not payable, demand time-barred without proven suppression

M/s Marathon Electric India Pvt. Ltd. Versus The Commissioner of Central Excise And Service Tax, Faridabad, Shri Sheel Kapoor Versus The Commissioner of Central Excise And Service Tax, Faridabad And Shri Mahesh Nagpal Versus The Commissioner of Central Excise And Service Tax, Faridabad

M/s Marathon Electric India Pvt. Ltd. Versus The Commissioner of Central Excise And Service Tax, Faridabad, Shri Sheel Kapoor Versus The Commissioner of ... Issues Involved:1. Eligibility for rebate on duty paid for special protective packing done overseas.2. Correct interpretation of 'duty paid' versus 'duty payable' under Rule 18 of Central Excise Rules, 2002.3. Validity of the Show Cause Notice issued for recovery of rebate.4. Applicability of extended period for demand and imposition of penalties.Issue-wise Detailed Analysis:1. Eligibility for Rebate on Duty Paid for Special Protective Packing Done Overseas:The appellants, M/s Marathon Electric India Pvt. Ltd., claimed rebate on the duty paid for electric motors and fans, including the cost of special protective packing (firewall packing) done overseas. The Department contended that the appellants paid excess duty on the value of this additional packing to wrongfully avail the rebate. The appellants argued that the transaction value, as defined under Section 4(3)(d) of the Central Excise Act, 1944, includes any amount the buyer pays to the seller by reason of the sale, which encompasses the cost of firewall packing. The Tribunal found no distinction in Section 4 suggesting that expenses incurred by persons other than the manufacturer/exporter should not be included in the assessable value. Thus, the appellants were eligible for the rebate on the duty paid, including the cost of special packing.2. Correct Interpretation of 'Duty Paid' Versus 'Duty Payable' Under Rule 18 of Central Excise Rules, 2002:The appellants argued that Rule 18 categorically states that rebate should be given on the duty paid, not the duty payable. The Department contended that the term 'duty' in Rule 18 should be interpreted as 'duty payable' under Section 3(1)(a) of the Central Excise Act, 1944. The Tribunal concluded that Rule 18 clearly mentions 'duty paid,' and there is no ambiguity in the Rule. The Tribunal referred to previous decisions, including the case of Omax Autos Ltd., which upheld that rebate should be granted on the duty paid, not the duty payable.3. Validity of the Show Cause Notice Issued for Recovery of Rebate:The appellants contended that the Department had not challenged the orders sanctioning the rebate, and thus, the orders had attained finality. Consequently, no demand could be issued to recover the rebate under Section 11A without challenging the rebate orders. The Tribunal agreed, citing the case of Shreenath Industries, where it was held that if the rebate orders are not challenged, any demand under Section 11A cannot be sustained. Therefore, the Show Cause Notice issued for recovery of the rebate was invalid.4. Applicability of Extended Period for Demand and Imposition of Penalties:The appellants argued that the Show Cause Notice issued on 12.07.2011 was time-barred since the issue pertained to the period from 01.04.2005 to 31.03.2010. They also contended that there were no elements of suppression of facts, collusion, etc., with intent to evade duty. The Department argued that the appellants did not disclose the inclusion of packing expenses incurred overseas in the assessable value, justifying the extended period and penalties. The Tribunal found that the Department had ample opportunity to verify the rebate claims over time and failed to do so. Therefore, invoking the extended period was not justified, and the penalties imposed on the appellants, their CFO, and DGM were not maintainable.Conclusion:The Tribunal concluded that the appellants were eligible for the rebate on the duty paid, including the cost of special protective packing done overseas. The interpretation of 'duty paid' under Rule 18 was upheld, and the Show Cause Notice for recovery of the rebate was deemed invalid. The extended period for demand and imposition of penalties was not justified. Consequently, all three appeals were allowed, and the impugned order was set aside on both merits and limitation grounds.