1. The facts giving rise to this appeal are that M/s. Rasoi Vanaspati & Industries Ltd. (hereinafter called the Appellants) manufacture vegetable products in admixture with Hydrogenated indigenous cotton seed oil with hydrogenated other oils. The Central Government has granted exemption from excise duty in the use of indigenous cotton seed oil in the manufacture of vegetable products under Notification Nos.
121/72 dated 1-4-1972,230/72 dated 15-12-1972 and 23/75 dated 4-3-1975.
2. The appellants submitted claim for rebate of duty on use of cotton seed oil in the manufacture of vegetable products and this was admitted by the Departments. Subsequently, it was found that the system of calculating the percentage of cotton seed oil in the total vegetable products cleared during the period and the quantity of the total vegetable products cleared was not correct and as such all the rebate claims submitted by the appellants since 1-4-1972 were re-examined and the amount of rebate so found to be paid in excess was adjusted from their subsequent claims.
3. Aggrieved by the said order passed by the Assistant Collector, the appellants filed an appeal before the Appellate Collector alleging therein that the authority below rejected their claim violating the principle of natural justice, no show cause notice was issued before deciding the matter and even the copy of the document issued was not furnished despite the repeated requests. On merits also, the correctness of the order of the lower authority was challenged.
4. The Appellate Collector of Central Excise, Calcutta by his order-in-appeal No. 219/Cal./79 dated 3-4-1979 rejected the appeal and confirmed the findings of the Assistant Collector.
5. Not satisfied with the order passed by the Appellate Collector of Central Excise, Calcutta, the appellants filed a Revision Application before the Government of India, Ministry of Finance, New Delhi, which now stands transferred to this Tribunal under Section 35-P(2) under Central Excises & Salt Act, 1944, and is treated as an Appeal.
6. We have heard Shri N.C. Jain, Advocate, Counsel for the appellants and Shri S.N. Khanna, JDR for the Department and gone through the record.
7. Shri Jain, the learned Counsel for the appellants drew our attention towards the sorry state of affairs which the lower authorities have created while deciding this matter. According to Shri Jain, the appellants were availing the benefit of the exemption Notification Nos.
121/72 dated 1-4-1972, 230/72 dated 15-12-1972 and 23/75 dated 1-3-1975. Without issue of any Show Cause Notice or without giving any opportunity to the appellants, the Jurisdictional Superintendant of Central Excise, vide his letter No. C.E.-20/AR. III/4/74/52 dated 7-1-1975, returned the outstanding rebate claims of the appellants informing that all batches of Vanaspati whether or not containing cotton seed oil, should be included for computing the total quantity of Vanaspati cleared for the whole period and to re-submit the claims after calculating the percentage of cotton seed oil accordingly.
According to the learned Counsel, this decision of rejecting the claim of the appellants was taken without issue of any show cause notice to the appellants and that instead of making a demand which had already become time-barred, the Department deducted this amount from the subsequent claims of the appellants. This procedure adopted by the Department is illegal and against the principles of natural justice and as such the order passed by the authority below is liable to be set aside in this sole ground.
8. The departmental representative, Shri S.N. Khanna, could not justify the method adopted by the authorities below in rejecting the claim of the appellants without affording them any opportunity of hearing. He, however, submitted that the percentage of cotton seed oil was so high in the vegetable products that it could not be said to be fit for human consumption. According to Shri Khanna, the appellants in order to get maximum benefit of the rebate made use of the indigenous cotton seed oil to the maximum and, therefore, they are not entitled to claim the rebate on such an excessive quantity of indigenous cotton seed oil used in the manufacture of vegetable products.
9. Without going into the merits of the case, we have to see whether the impugned order is a result of judicial process? A perusal of the record shows and even the departmental representative has agreed that the Jurisdictional Superintendent, vide his letter dated 4-3-1975, asked the appellants to make payments of the excise amount paid to them as a result of rebate by debiting their PLA account. This action was taken by the Jurisdictional Superintendent without giving an opportunity to the appellants at their back. This order of the Superintendent is the basic order which was confirmed by the Appellate Collector though the Assistant Collector of Central Excise later on, on the request of the appellants, passed an appealable order but the Assistant Collector of Central Excise also did not issue any show cause notice to the appellants giving them an opportunity to explain their case. Giving a hearing in the case which has already been decided without issue of any show cause notice is not sufficient to condone the illegality which has already resulted. Though before the Appellate Collector, the party raised this plea of the violation of the principles of natural justice but he also did not think it proper to remand the case back with the directions to issue the show cause notice before taking any action against them. It was obviously on account of the fact that the demand was barred at that time. As no show cause notice was issued to the appellants asking them to explain their case and no demand was raised within the time prescribed, so the impugned order cannot be said to be justified and legal. If it was a case of erroneous refund, the Department should have issued a show cause notice in accordance with the provisions of the Central Excises & Salt Act, 1944 and Central Excise Rules within the time prescribed after giving an opportunity of showing cause to the opposite party but in this case, unfortunately the departmental authorities kept aside all the provisions of law and forced the appellants to debit their PLA account to the extent of this amount claimed. Adjusting a demand in the future claims in this way cannot be said to be justified and legal.
10. Under these circumstances, we set aside the order of the authority below and accept the appeal.