the provisions of time limit that are contained in Section 11A of the Central Excise Act, 1944 are applicable to the recovery of amounts due under the compound levy scheme for Hot-Re-rolling mills

PJ/Case Laws/2010-11/1183

Case: Hans Steel Rolling Mills V/s CCE Chandigarh

Citation: - 2011 (265) ELT 321 (SC)

Issue: - Whether the provisions of time limit that are contained in Section 11A of the Central Excise Act, 1944 are applicable to the recovery of amounts due under the compound levy scheme for Hot-Re-rolling mills, under the Annual Capacity determination Rules 1997 because it is a separate scheme for the collection of Central Excise Duty for the goods manufactured in the country.

Brief Facts: - Appellants are engaged in the manufacture of iron and steel products falling under Chapter 72 and 73. During the period from 01.09.1997 to 31.03.2000, the goods manufactured by the appellants were chargeable to Central Excise Duty in terms of Section 3A of the Act i.e. they had opted for compound levy scheme. As per the Act, the duty was suppose to be paid on the annual production capacity of the plant, irrespective of the actual production. Under scheme of Section 3A the payment of duty to be under Rule 96ZP of the Central Excise Rules. The Hot-Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 were introduced by notification no. 32/97-CE (NT) dated 01.08.1997, wherein the manner and procedure for determination of annual capacity of rolling mill was provided. On 27.04.1998, the Commissioner determined the Annual capacity to be 3355MT.

Aggrieved by the determination made by the Commissioner, appellants filed an appeal before the Tribunal, where under the Tribunal remanded the matter back to the Commissioner for the re-determination of the value.

Department issued show cause notice dated 03.11.1998 to the appellants contending that the demand of the duty has to be based on the capacity determination of 3355MT, for which the recovery of duty under Section 11A of the Act was to be made.

On 11.12.1998, the appellants changed the parameters of their re-rolling mill and applied for the re-determination of the annual capacity for fresh declaration in terms of Capacity Determination Rules. On 31.05.1999, the Commissioner passed an order based on Rule 5 of the Capacity Determination Rules stating the capacity as 1890MT. During the pendency of the final re-determination, the Central Excise Department issued a demand notice under Section 11 of the Act, for recovery of duty. Aggrieved by the same, appellants filed writ petition before the High Court, whereby and where under the High Court set aside the demand notice and directed the revenue to re-determine the annual capacity.

On 04.01.2001, the Commissioner re-adjudicated the matter and determined the annual capacity of the period 1.09.97 to 31.3.2000 to be 1890MT. The appellant filed an appeal before the Tribunal against the same. On 08.04.2002, the Larger Bench of Tribunal held that in case of the manufacturer operating under Compound Levy Scheme in terms of Section 3A of the Act, and Rule 96ZP of the Central Excise Rules, recovery mechanism provided in terms of Section 11A of the Act is not to be followed and hence the matter was to be remanded back to the Commissioner for re-determination.

Still being aggrieved by the order of the High Court, appellant filed appeal before the Supreme Court.

Appellant’s Contention: - Appellants contended that the provisions of Section 11A of the Act are mandatory for recovery of any duty short levied and short paid. The Section 11A of the Act stipulates the procedure to be followed invariably and without exception for recovery of any duty which has not been levied or not paid or short paid or erroneously refunded. Appellant referred to sub-section (2) of Section 11A of the Act which stipulated that the determination of amount of duty short levied etc, from a person is to be made after considering his representation in the matter. In this case since the recovery proceedings have been initiated under Section 11 of the Act, the procedural requirements for issuing notice, determining the amount etc, have not been satisfied at all. It was further submitted that there is no exception in the Central Excise Act or Rules regarding the procedure of recovery.

Respondent’s Contention: - Revenue pointed out that under the Compound Levy Scheme, the appellants opted for the payment of duty at compounded rates and filed declarations furnishing details about annual capacity of production and duty payable on such capacity of production. Once the Commissioner approved such applications, payments are to be made in terms of Rule 96ZP of the Rules.

Reasoning of Judgment: - The Supreme Court held that from records it is clearly established that the appellants are availing the facilities under the Compound Levy Scheme, which they themselves, opted for and filed declarations furnishing details about annual capacity of production and duty payable on such capacity of production. It was held that it has to be taken into consideration that the compounded levy scheme for collection of duty based on annual capacity of production under Section 3 of the Act and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a separate scheme from the normal scheme for collection of central excise duty on goods manufactured in the country. Under the same, Rule 96P of the Rules stipulate the method of payment and Rule 96P contains detailed provision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions in the Act and Rules are excluded.

The Court relied upon the judgment in Commissioner of C. Ex & Customs v/s Venus Castings (P) Ltd [2000 (117) ELT 273 (SC)] and Union of India v/s Supreme Steels and General Mills [2001 (133) ELT 513 (SC)] wherein it was clearly laid down the principle that the compound levy scheme is a separate scheme altogether and an assessee opting for the scheme is bound by the terms of that particular scheme. It is settled that Section 11A of the Act has no application for recovery under different schemes.

Further reliance was placed on Collector of Central Excise, Jaipur v/s Raghuvar (India) Ltd [2000 (118) ELT 311 (SC)] wherein the Supreme Court has categorically stated that Section 11A is not an omnibus provision which stipulates limitation for every kind of action to be taken under the Act or Rules. An example can be drawn with Modvat scheme, because even in that particular scheme, Section 11A had no application with regard to time limit in the administration of scheme.

The Supreme Court was in agreement with the finding and decision arrived at by the Tribunal that the importing of elements of one scheme of tax administration to a different scheme of tax administration would be wholly inappropriate as it would disturb the smooth functioning of that unique scheme. The time limit prescribed for one scheme could be completely unwarranted for another scheme and time limit prescribed under Section 11A of the Act is no exception. No merit in appeals.

Decision: - Appeals dismissed.

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PJ/Case Laws/2010-11/1183

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