ORDER
D.M. Vasavada, Member (J)
1. After hearing the parties, we have allowed this appeal with consequential relief to the appellant. Now hereunder, we set out the reasons for the same:
2. This appeal arises out of Order-in-Original No. 15/83/37/Addl. Collector 1/85 dated 17-10-1985 passed by the Additional Collector of Central Excise, Calcutta-1. Facts stated briefly are that the appellant manufactures various excisable goods including soap. By Notification No. 25/75, dated 1-3-1975 (as amended from time to time), a concessional rate of duty has been prescribed for soap manufactured with indigenous Rice Bran Oil or a mixture of such oil with other oils, and concession varied, depending upon percentage of Rice Bran Oil used therein. The amount of exemption was at the option of the manufacturer to be calculated either on the basis of individual charge or on monthly basis. The appellant was availing of the concession on the basis of individual charge.
3. The appellant received a show cause notice dated 20-1-1983 wherein it was alleged that the appellant has mis-declared in the R.G. 1 Register and in the relevant Gate Passes the percentage of Rice Bran Oil content of soap and evaded Central Excise duty amounting to Rs. 18,059.53 [Rs. 17,199.55 (basic duty) and Rs. 859.98 special excise duty] by availing of duty rebate of the duty amount which was not legally available. The appellant submitted a written explanation contending that the appellant was varying the percentage of Rice Bran Oil in manufacture of soap and was availing of duty exemption on the basis of individual charge, but usually 3/4 days were taken in the process of manufacture of soap from a particular batch from the date of charge. So, when different mixture was charged, one after another, the target date of manufacture from a particular charge is delayed and since the process being a continuous one, the soap from previous mixture comes out from the machine even after 3/4 days from the date of declaration. So, during the peirod (which was 25-1-1982 to 16-6-1982), according to the appellant, the appellant had paid a total amount of Rs. 11,165.26 in excess over the amount actually payable by them as percentage of indigenous R.B. Oil was more than what was recorded in R.G. 1. So, this should be adjusted against demand, if any.
4. The Jurisdictional Assistant Collector, on adjudication, confirmed the demand as raised in the show cause notice and also imposed a penalty of Rs. 1,000/- under Rule 173 Q of the C.E. Rules, 1944.
5. The appellant went in appeal and the Collector (Appeals) C.E., Calcutta, vide his order No. 169/Cal./84 dated 18-1-1984 set aside the order of the Deputy Collector and remanded the matter back to him for fresh decision according to law after examining whether the request of the appellant that some rebate, available to them, had not been availed of by them and whether the same could be adjusted against the demand raised.
6. On remand, the matter came before the Additional Collector of Central Excise, Calcutta-1. After hearing the appellant, he refused to accept the contention of the company about adjustment of any amount which, according to the appellants, was adjustable as stated above, on the ground that the appellant company had not informed the jurisdictional officer about non-availment of rebate at any time and that the point of non-availment of rebate to the extent of Rs. 11,165.26 was raised for the first time before the adjudicating authority. It is, further stated in the order that the claim for the amount of rebate, not availed of by the appellant (if any), could have been filed under the provision of Section 11B of the Central Excises & Salt Act, 1944 and there was no basis at the stage of this adjudication for adjusting the amount of rebate, if any, because to do so, at this stage, would amount to sanction refund after expiry of six months’ time meaning thereby that it would be time-barred. He also imposed a penalty of Rs. 1,000/-. This order has given rise to the present appeal.
7. We heard Shri K.R. Mehta, Ld. Consultant for the appellant and Shri M.S. Arora, Ld. J.D.R. for the department.
8. Shri Mehta, at the outset, explained the process of manufacture stating that the appellant had to vary percentage of R.B. Oil used in the manufacture of soap depending upon the availability of R.B. oil in the market and also depending upon the requirement of the appellant company about particular variety of soap. The process of manufacture in such that when any variation is made in composition of various materials, the final product would emerge as per that admixture after about 3/4 days as production takes that much time. Shri Mehta, further, submitted that the appellant company had agreed to pay duty based on individual charge. So, at times, even when percentage of R.B. Oil was more, duty was paid more than due because it was calculated on the basis of earlier declaration made. Conversely, even if the percentage of R.B. Oil used was less, the duty paid might have been less because of the same reason. Now this aspect is not disputed by the lower authorities. So, both these possibilities are quite probable and possible. Shri Mehta referred us to provisions of Rule 173-(1) Sub-rule (2) which is as under:
“The duty determined and paid by assessee under Rule 173F shall be adjusted against the duty assessed by the proper officer under sub-rule (1) and where the duty so assessed is more than the duty determined and paid by the assessee, the assessee shall pay the deficiency by making a debit in the account-current within ten days of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly countersigned by a Superintendent of Central Excise.”
9. Shri Mehta drew our attention to the discussion in the Order-in-Original where the Deputy Collector has stated as under:
“Their main defence lies in their claims that monthly rebates, though admissible to them have not been availed of by them as they had been clearing their products on the basis of the dates for casing the dates when the charges would be complete. In fact, for circumstances beyond their control the due dates for completion of charges had not been strictly adhered to. The party were categorically explained at the time of personal hearing that what is due as excess payments for short availments of rebates they are free to claim. Such claims can be made on a monthly basis on the relevant R.T. 12, which will be entertained by the Range Officer. It is evident that in the instant case there is no scope for allowing rebate not claimed by them regarding excess payment of rebate. The Department has the right to claim the appropriate Central Excise duty due thereon which is the cause for this case.”
10. On this basis, Shri Mehta submitted that the Deputy Collector took stand that if the duty was paid less the assessee was bound to pay, but if at any time, the assessee had paid more duty, it could not be adjusted against the demand but that they should file a separate claim. As rightly contended by Shri Mehta, this interpretation is not correct. In the impugned order also, the Additional Collector had, more or less, taken this line of agrument, but that is not proper. Otherwise, the above excerpted provision of Rule 173-I(2) would be negatived. So, the impugned order is bad in law. The appellant is entitled to ask for set off and the department has to calculate the excess payment also as well as under-payment, and after adjusting one against another, raise a demand for remaining amount of duty, if any.
11. Sh. Mehta also drew our attention to the fact that assessment for the period under consideration was provisional and from that point of view also demand for set off would not be time-barred. He submitted that the question whether what would be included in category of post-manufacturing expenses was under dispute and the matter was pending before CEGAT and that is why the assessments were made on provisional basis till the appeal was decided. He produced copy of the order No. 752/1985-A in ED (SB) (T) Appeal No. 366/80-A whereby the appeal was disposed of and the Tribunal decided the issue. The order is dated 8-10-1985. Sh. Mehta also produced copy of the Order of Supdt. of C.E., Calcutta Range of Calcutta ‘O’ Division whereby he passed final assessments of RT12 returns for the period from Jan. 81 to December, 1983 in respect of the appellant company and wherein it has been specifically stated that the assessments were made provisionally under Rule 9B of the C.E. Rules, 1944 and by this order final assessments were made. In view of this evidence also, the demand for adjustment of duty paid in excess by the appellant company cannot be termed ‘time-barred’. So, from that point of view also impugned order is not proper.
12. So, we have allowed this appeal by setting aside the impugned order and granting consequential relief to the appellant. The department shall examine the claim of the appellant and if any excess amount was paid by the appellant and was due at any time during the period, in question, it shall be adjusted against the demand of underpayment of duty, if any.
13. Sh. Mehta has also contended that order of penalty passed by the Additional Collector is also not legal because the matter was remanded back by the Collector (Appeals) only to examine the claim of adjustment staked by the appellant. This contention of Sh. Mehta has considerable force, but as we have set aside the impugned order, the order of penalty also gets set aside and so it is not necessary for us to discuss that aspect further.