In Sagar Drugs and Pharmaceuticals P. Ltd v. CCE, the CESTAT Ahmedabad bench held that recovery of excess tax collected under Central Excise Act, 1944 can be effected for three years from the date of issue of Show Cause Notice.
In the instant case, demand notice was issued against the appellant-assessee on ground that they had cleared the inputs as such on payment of duty, adopting transaction value, instead of reversing the credit availed on such inputs at the time of its receipt in the factory. Consequently, recover proceedings were initiated in respect of excess duty.
As per section 11D(1) of the CE Act, every person who is liable to pay duty under the Act or the Rules made thereunder and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods from the buyer of such goods, in any manner as representing duty of excise shall forthwith pay the amount so collected to the credit of the Central Government. Under s. 11D(2), if such amount is not credited, the Central Excise Officer may issue a notice requiring such person to show cause why the same should not be paid by him to the Central Government. Further, Section 11D(3), authorizes the Central Excise Officer to determine the amount so payable and thereupon such person shall pay the same.
Analyzing the above statutory provisions, the bench noted that whenever any duty has been collected in excess of excise duty payable or in any manner as representing duty of excise, such person has to pay the same to the Central Government forthwith. “In the present case, the respondent had collected certain amount from the purchasers representing the same as excise duty. Undisputedly, such amount could not have been collected as excise duty. The same, therefore, had to be forthwith paid to the Central Government in terms of Section 11D of the Act. The same not having been done, the Department was within its right to seek recovery thereof.”
Regarding the question that is, whether the demand for the period March 2003 to February 2007 can be enforced from the date when the demand notice was issued, the bench noticed the Ahmedabad High Court decision in C.C.E., Ahmedabad II vs. Inductortherm (I) Pvt. Ltd , wherein the Court held that in absence of time limit prescribed for recovery, a reasonable period, be applied for recovery of the amount. Further the decision of the Gujarat High Court in Pratibha Syntex Ltd. vs. UOI, that judging the period of limitation from the armchair of a reasonable person under no circumstance more than three years period could be considered as a reasonable period for effecting recovery of the amount.
It was therefore, observed that recovery could be effected for three years from the date of issue of show cause notice. However, the bench directed to delete the levy of penalty.
Read the full text of the Order below.
