By TIOL News Service

MUMBAI, SEPT 02, 2014 : THE appellant is a manufacturer of sugar, molasses and ethyl alcohol.

The Directorate of Sugar, New Delhi issued release orders dated 30/09/1997 & 27/10/1997 in favour of the appellant for clearance of 15,681 quintals of sugar under the levy sale sugar quota.

Accordingly, the appellant cleared the said quantity of sugar during November 1997 to December 1997 paying the concessional rate of duty applicable to levy sale sugar @ Rs.52/- per quintal. Subsequently, the sale was treated as sale from “Free Sale Sugar” vide Directorate of Sugar, New Delhi letter F. NO.1-5/97 SC-II dated 20/10/1997. Thereafter, the said Directorate vide letter No.8-45/98CC/34/3573 to 3579 dated 11/12/1998 paid the differential amount of price between levy sale sugar and free sale sugar amounting to Rs.46.17 lakhs which was received by the appellant in January 1999.

However, the assessee did not pay the differential duty of Rs.5,17,473/- on the clearances of 15,681 quintals of sugar.

Therefore, SCN was issued on 22/10/2002 for recovery of the duty and the original authority confirmed the same along with penalty and interest. As the Commissioner (A) upheld the order, the appellant is before the CESTAT.

The appellant submitted that the demand is time barred as there is no mis-declaration on their part inasmuch as the clearances were in accordance with the sugar release order issued by the Directorate of Sugar. It is also submitted that the SCN invokes various rules of CER, 1944 although they were not in force in the year 2002. Reliance is placed on the decisions in The Peoples' Choice - 2014-TIOL-431-HC-KAR-ST, HMM Ltd. - 2002-TIOL-120-SC-CX in support of their stand.

The Revenue representative inter-alia submitted that the appellant never informed the department of the conversion of levy sugar to free sale sugar although they had received consideration from the Directorate of Sugar applicable to clearance under free sale quota and, therefore, extended period had been rightly invoked.

The Bench after considering the submissions and the tariff entry for sugar 1701.31 observed-

++ Though the Directorate of Sugar vide release order dated 30/09/97 and 27/10/97 had directed the appellant to release sugar of quantity of 16,587 quintal under levy sugar quota, subsequently, vide letter F. NO. 1-5/97 SC-II dated 20/10/1997 had directed that the sale be treated as free sale sugar and not as levy sugar.

++ Further, vide letter dated 11/12/98, the appellant/assessee was paid differential amount of price between levy sugar and free sale sugar amounting to Rs.46,17,427.26 and therefore, clearances of sugar was under free sale quota and therefore, the discharge of duty liability on such clearance under levy sugar quota was not in accordance with law.

++ The change of release of sugar from levy to free sale was never intimated to the department by the appellant, in spite of having received the consideration for the free sale release. Therefore, there was a suppression or willful mis-statement of fact on the part of the appellant as alleged in the show-cause notice and therefore, the invocation of extended period of time is clearly sustainable.

++ The appellant has contended that the duty demand has been made under wrong provisions which were not in existence at the time of issue of show-cause notice. This contention of the appellant is completely incorrect for the reason that differential duty was demanded under the provisions of Rule 9 (2) of the Central Excise Rules, 1944 read with provisions of Section 11A of the Central Excise Act, 1944. Similarly, interest was demanded under Section 11AB and penalty was sought to be imposed under Rule 173Q read with Section 11AC. Though, the Central Excise Rules, 1944 were substituted by Central Excise Rules, 2002, the provision for demand of duty short paid, not paid or erroneously refunded is Section 11A of Central Excise Act, which was in existence both in 1997 as well as in 2002. Similarly, the provisions for demand of interest invoking Section 11AB is also correct as the said provision was in existence both at the time of clearance a well as at the time of issue of show-cause notice. Therefore, it is incorrect to say that the notice was issued under non-existent provision. Reliance placed by the appellant on the various case laws cited by him is clearly unsustainable in law.

Holding that there was no merit in the contention of the appellant, the demand of duty and interest were upheld. In the matter of penalty, the Bench observed that since the clearances were effected as per the release order issued by GoI, there is no need for imposition of penalty.

The appeal was partly allowed.

(See 2014-TIOL-1647-CESTAT-MUM )