2001 (8) TMI 772 - AT - Central Excise

Marketability - Jute yarns and fabrics - Captively consumed - Demand - Modvat - Penalty - Exemption - Cess

Summary

Issues Involved:
1. Marketability of jute yarns and jute fabrics.
2. Revenue neutrality and Modvat credit.
3. Clarificatory nature of Notification No. 121/94-C.E.
4. Limitation period for issuing show cause notices.
5. Imposition of personal penalties under Section 11AC and Rule 173Q.
6. Confirmation of interest under Section 11AB.

Issue-wise Detailed Analysis:

1. Marketability of Jute Yarns and Jute Fabrics:
The appellants contended that jute yarns and jute fabrics were intermediate products and not marketable. However, it was established that these products were traded in the market, and the mere fact that the appellants consumed them captively did not make them non-marketable. The Tribunal noted that the prescribed RG-I stage by the Board indicated the marketability of these products. Therefore, the argument that jute yarns and jute fabrics were not marketable was rejected.

2. Revenue Neutrality and Modvat Credit:
The appellants argued that the entire exercise was revenue neutral since any duty paid on jute yarns and fabrics would be available as Modvat credit for the final products. However, the Tribunal held that since no duty was paid on the yarns and fabrics, the Modvat credit could not be availed. The Tribunal referred to the case of Prabhat Zarda Factory, where a similar situation was addressed, confirming the duty but allowing the credit for the final products. The Tribunal did not find merit in the revenue neutrality argument.

3. Clarificatory Nature of Notification No. 121/94-C.E.:
The appellants argued that Notification No. 121/94-C.E. should be considered clarificatory and effective from 20-5-94. The Tribunal examined the Explanatory Note attached to the notification and concluded that it did not support the appellants' contention. The notification was not intended to operate retrospectively. The Tribunal noted that the appellants had approached the Government for an 11C notification, which was denied, indicating no intention for retrospective effect.

4. Limitation Period for Issuing Show Cause Notices:
In some cases, the show cause notices were issued beyond the six-month period. The Tribunal found that the appellants were aware of the dutiable nature of the products and did not maintain proper records or file declarations. The Tribunal referred to the Larger Bench decision in Jay Yuhshin Limited, which held that awareness of duty liability and deliberate avoidance justified the extended period. Therefore, the show cause notices were not barred by limitation.

5. Imposition of Personal Penalties under Section 11AC and Rule 173Q:
The Tribunal noted that penalties under Section 11AC could not be imposed retrospectively. However, penalties could be imposed under Rule 173Q. The Tribunal set aside penalties imposed under Section 11AC and remanded the matters for reconsideration under Rule 173Q. Penalties imposed under Rule 173Q were upheld.

6. Confirmation of Interest under Section 11AB:
The Tribunal found that the confirmation of interest under Section 11AB, which came into existence in 1996, was not justified for the period in question. Therefore, the portion of the orders confirming interest was set aside.

Conclusion:
The Tribunal confirmed the duty on jute yarns and fabrics for the period from 20-5-94 to 10-8-94 but allowed the credit of duty paid on inputs. The imposition of cess on captively consumed materials was set aside. The appeals were disposed of accordingly, with adjustments for Modvat credit and reconsideration of penalties under Rule 173Q.