S.L. Peeran, Member (J)

1. Both these appeals arise from two separate Orders-in-Appeal No. 887/99-C.E., dtd. 19-8-99 and 853/99-C.E., dtd. 13-8-99 in respect of same assessee and hence they are taken up together for disposal of the appeals as per law. The question that arises for consideration in both these appeals is as to whether the assessee can adjust the amounts, paid in excess with lesser amount paid by them after crossing the SSI exemption limit. The appellants were working under SSI Notification No. 1/93, dtd. 28-2-93 as amended. In the impugned Orders-in-Original the Assistant Commissioner confirmed duty demands of Rs. 1,00,322/- and Rs. 11,650/- respectively on the ground that the assessee had paid duty at the rate of 10% instead of 15% after crossing their SSI exemption limit of Rs. 75 lakhs as per Notfn. No. 1/93, dtd. 28-2-93 as amended which resulted in short payment of duty, while in appeal No. E/1859/99 the amount of Rs. 11,650/- was confirmed on the ground that the assessee had paid at the rate of 5% instead of 10% as per slab rate for Rs. 50-75 lakhs as per Notfn. No. 1/93, dtd. 28-2-93 as amended and also disallowed Mod-vat credit of Rs. 1,248.55 under rule 57-1 of CER availed on invalid invoice. The appellants are not contesting on the aspect of disallowance of Modvat credit of Rs. 1,248.55 under Rule 57-1 of CER availed on invalid invoice. The appellants ground of appeal is that they paid duty during the year 95-96 as exactly as per the defined norms. The exact cut off point was not derived by them because of their inclusion of non-payment of duty amount not separated in arriving at the total turnover summary and because of that only there was over-lapping of the slab rate, which was subsequently corrected. The time lag in correction of the payment in the particular slab is only within three months and that too they had ensured that there should not be any less payment, till the exact amount established, they had deposited more duty at the rate of 15%. Further, there has been no revenue loss to the Government and they had not done it with any intention to evade duty and total duty has been paid as per norms. This contention raised in respect of Appeal No. E/1858/99, which resulted in Order-in-Appeal No. 887/99-C.E., dtd. 19-8-99 was not accepted by the Commissioner (Appeals) in his order. He has noted that the assessee cannot suo motu make duty adjustments on a financial year basis. He has noted that the law requires that no consignment should be removed from the factory without payment of appropriate duty. He has noted that if there is excess payment, the same should be claimed as refund and if there is short payment, the same, on demand should be paid after observations of due process of verification. He has noted that process of refund of short payment can be adjusted after filing the RT 12 return or separately within the time limits provided in the law. He has noted that the appellants plea that the short payment be adjusted against excess payment is not permissible under law. While Order-in-Appeal No. 853/99-C.E. the grounds taken by the appellants was that they have followed the slab rate of duty exactly as per the defined norms, although there has been a few cases of overlapping in the slab because of the fact that some non-payment duty amount were not separated while arriving at the exact cut-off point over the first slab. This overlapping was not intentional and was never with a view to pass on any undue advantage to its customers. However, the Commissioner has not agreed with their contention and held that short payment has to be dealt with separately from over payment, which has to be claimed for as refund.

2. We have heard ld. Advocate, Shri S. Raghu for the appellants and Shri L. Narasimha Murthy for the respondents.

3. Ld. Counsel submitted that for the same financial year where there is short payment under one slab and excess payment under another slab due to inadvertence then the Revenue suo motu can make adjustments. He submits that where there was short payment under one slab and where there was excess payment in another, the sum total was that there was no revenue implication. He submitted that it would amount to undue hardship if they were asked to file refund claim and demands were raised in respect of short payments, The procedure should be adopted in such a way as to finalise the RT 12 returns by giving proper adjustments. He relied on the judgment rendered in the case of Tata Oil Mills Co. Ltd, v. CCE [1990 (46) E.L.T. 438] wherein it has been held that 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 an the account-current within ten days of receipt of copy of the return duly countersigned by a Superintendent of Central Excise. Drawing attention to the provisions of Rule 173F(1) and sub-rule (2) which is incorporated in Para 8 of the Order, ld. Counsel submits that as held in Para 10 that the appellant is entitled to ask for set off and the Department has to calculate the excess payment as well as under payment and after adjusting one against another raise a demand for the remaining amount of duty, if any. He submits that the same view was expressed by the Tribunal in the case of Kothari Pouches Ltd. v. CCE, Noida [2003 (159) E.L.T. 927 (Tri. - Del.)] wherein the Tribunal relying on the judgment of the Apex Court in the case of CCE, Hyderabad v. Divya Enterprises Ltd. [2003 (153) E.L.T. 497 (S.C)] held in Para 5 as follows :-

"We find that there is no dispute on the fact that appellants had paid 60% duty. They had paid 8% less as additional excise duty, whereas, they had paid 8% more NCCD. We find that Honble Supreme Court in the case of Divya Enterprises Ltd. (supra) where the assessee paid duty on exempted product and had not paid duty on fabric used in the manufacture of the exempted product, held that the duty is to be paid on fabrics and directed the Revenue to give adjustment of duty paid on exempted final product. The Honble Supreme Court further held, if, on calculation of duty it is found that higher amount of duty has been paid, then the assessee is entitled for refund and if, it was found that some duty has still to be paid, then assessee shall pay the duty. In the present case the appellants paid 8% less on additional excise duty and paid 8% more NCCD. Therefore, in view of the above decision of the Honble Supreme Court, if the adjustment of 8% is given then there will be no deficiency in the payment of additional excise duty. Hence, the impugned order is set aside and the appeal is allowed."

Ld. Counsel also relied on the judgment of the Apex Court in the above Tribunal judgment. Also, the Apex Court has laid down that the assessee be given adjustment for the duty paid on the towels when the demands were made for fabric. He submits that the Apex Court in the case of Serai Kella Glass Works (P) Ltd. v. CCE, Patna [1997 (91) E.L.T. 497 (S.C.)] has also laid down a similar proposition with regard to duty paid to be adjusted in current account in terms of Rule 173-I.

4. Ld. DR countered the arguments by stating that the impugned order passed by the appellate authority is correct in law. He submitted that the Larger Bench in the case of CCE v. Kashmir Conductors [1997 (96) E.L.T. 257 (Tri.)] has laid down the time limit for filing the refund claim and that they have held that the time limit for refund claim filed on the basis of notifications granting exemptions is based on total value/quantity of clearance during a particular financial year to commence from the date of payment of duty and not from the date of closing of that financial year. On a specific query from the Bench as to how this judgment is relevant to the facts of that case, Ld. SDR pointed out that the case dealt with was of filing refund applications and hence an analogy can be drawn in the present case on the same lines. Likewise he relied on a judgment rendered in the case of Kansal Knitwears v. CCE [2001 (136) E.L.T. 467 (Tri. - Del.)] which deals about computation of clearances of goods for exports and the Tribunal held that the same shall not be taken into account for arriving at an assessable value but only home consumption is to be considered. Even this judgment on being pointed out by the Bench, the ld. SDR could not explain as to how this ratio is applicable to the facts of the case.

5. On a careful consideration of the submission, it is seen that the appellants had paid excess duty of 15% while on some clearances, they had paid lower duty of 5% instead of slab rate of 10%. The Department proceeded on the ground in appeal E/1858/99 that they had adopted 10% as rate of duty as applicable as against the correct rate of duty of 15% after crossing their SSI exemption limit. The assessee took the stand that although they had adopted less percentage but yet they had paid duty at 15% for the month of January 1996 and they have made good of the same in February 1996. In sum, they stated that while during the month of November 1995 they paid at 10% but they made good of the same by paying excess in the other months. Hence, they resisted the demand in show cause notice for the month in which they had paid less wherein demand for Rs. 1,00,322/- was raised for short payment. The question is as to whether payment made in excess during January - February 1996 can be adjusted towards the less demand made for November 1995. Likewise in appeal E/1859/99, they had short paid the amount adopting 5% as against rate of duty of 10% and hence a demand was raised for an amount of Rs. 11,650/-. Even here they contended that they had paid excess of 10% and 15% for subsequent months and therefore, the amounts could be adjusted. Both the authorities have rejected their plea and stated that such adjustment cannot be done for excess payment. The Tribunal in the case of Tata Oil Mills Co. Ltd. (supra) after noting the provisions of Rule 173F(1) has held that in such circumstances appellants are entitled to ask for set-off and the Department has to calculate the excess payment as well as under payment and after adjusting one against another, raised a demand with regard to remaining amount of duty, if any. In the present case, if such adjustment no duty demand arises. The same view was expressed by the Tribunal in the case of Kothari Pouches Ltd. v. CCE (supra), in the light of the decision of the Apex Court, rendered in the case of Divya Enterprises Ltd, (supra). In the case of Divya Enterprises Ltd., Apex Court has clearly held that the demands raised on terry towelling fabric can be made adjusted for the duty paid on the towels. Therefore, in view of this Apex Court ruling, there cannot be any doubt with regard to the powers of the officer to make adjustments and raise the demands at the end of the financial year or at the time of issue of show cause notice. Similar view was expressed by the Apex Court in the case of Serai Kella Glass Works (P) Ltd. v. CCE (supra). It was also rendered in terms of Rule 173-1. Therefore, in terms of citations referred to, we are of the considered opinion that the appellants were entitled to set off/adjustment against the excess payment and it is not the Revenues case that on such adjustment still demands are subsisting. As no demands subsist, as such the appellants claim is required to be accepted. The impugned orders are therefore not legal and proper in term of the citations referred to and hence they are set aside and appeals are allowed with consequential relief, if any.