2005 (4) TMI 66 - SUPREME COURT

Whether, in the facts and circumstances of this case, the Tribunal was justified in upholding the order of the commissioner dated 28-4-1998 with respect to (a) the excisability of the kimam and classification thereof under sub-heading 2404.49 prior to 23-7-1996 and under sub-heading 2404.40 w.e.f. 23-7-1996; (b) rationale for invoking the extended period of limitation under the proviso to section 11A(1); and (c) eligibility for the benefit of proforma/modvat credit in respect of the chewing tobacco kimam, is the question which arises for determination in these civil appeals filed by the appellant-assessee under section 35-L(b) of the Central Excise Act, 1944?

Held that:- the adjudication in this case was confined to the question of excisability and concealment of the existence of two units in which the compound (kimam) was manufactured. No explanation has been given by the assessee for not disclosing the affairs of these units, particularly when the assessee was in business for couple of years and when the assessee had been dealing with other traders who operated from licensed factories. It was for the assessee to explain the reasons for not getting the units registered or licensed. It was for the assessee to explain its failure to maintain the records under the 1944 Act and rules thereunder. In this connection, no evidence was put before the commissioner about receipt and utilization of the compound in the manufacture of Tulsi Zafrani Zarda. No evidence was led to show that the amount of proforma/modvat credits was equal to the duty demanded, although it was urged that after 3/94, the liability to duty on inputs stood shifted to the final product.

A right to claim proforma/modvat credit against duty on final product was different from the defence of bonafides in a case where circumstances mentioned in the proviso to section 11A(1) stands proved by the department for invoking larger period of limitation. The burden to prove the defence of bonafides was on the assessee and the assessee in this case has failed to prove its bonafides. Under modvat, excisable finished products made out of duty-paid inputs are given relief of excise duty to the extent of duty paid on inputs. In the circumstances, we are satisfied that the department was justified in invoking the extended period of limitation under the proviso to Section 11A(1).

.On the applicability of the Notification No. 121/94, dated 11-8-1994, the tribunal remanded the case back to the commissioner for re-examination of the limited question of its applicability. The tribunal also directed the commissioner to reconsider the quantum of penalty, fine etc. in the light of its findings on the applicability of the said notification. We do not wish to express any opinion on the applicability of the notification dated 11-8-1994. Civil appeals filed by the assessees are dismissed