1998 (7) TMI 630 - AT - Central Excise

Summary

Issues:
1. Whether stems produced during the manufacture of GLS lamps are excisable goods and chargeable to duty under the Central Excise Tariff Act, 1985.
2. Whether the longer period under Section 11A can be invoked for demanding duty.
3. Whether the penalty under Section 11AC and interest under Section 11AB are chargeable during the relevant period.

Issue 1: Stems as Excisable Goods
The central issue in this appeal was whether the stems produced during the manufacture of GLS lamps could be considered excisable goods chargeable to duty under sub-heading 8539.00 CETA. The appellants argued that the stems were not marketable and thus not subject to excise duty. They presented evidence, including affidavits, to support their claim that the stems were not stored and were immediately used in the manufacturing process, making them unsuitable for the market. The Commissioner, however, concluded that the stems, though made to suit the appellants' requirements, were commercial products known in the market. The Tribunal found that the Commissioner failed to provide evidence to substantiate this finding and noted that duty is attracted only to goods that are marketable or capable of being marketed. Citing a similar Delhi High Court judgment, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeals.

Issue 2: Invocation of Longer Period for Duty Demand
The appellants contested the invocation of the longer period under Section 11A for demanding duty, arguing that there was no justification as the stems were visible and part of their manufacturing process known to the department for years. They relied on Supreme Court judgments emphasizing the need to prove intent to evade duty for invoking the longer period. The Tribunal found merit in this argument and held that the longer period should not have been invoked without evidence of intent to evade duty, especially considering the department's familiarity with the appellants' production process.

Issue 3: Penalty and Interest Chargeability
Regarding the penalty under Section 11AC and interest under Section 11AB, the appellants contended that these were not chargeable during the relevant period when the statutory provisions were not in force. Citing a Tribunal judgment, they argued that penalty and interest could not be imposed retroactively. The Tribunal agreed with this argument, noting that the duty demand related to a period before the provisions came into effect, and thus, the penalty and interest were not chargeable during that time.

In conclusion, the Tribunal ruled in favor of the appellants on all issues, holding that the stems produced during the manufacture of GLS lamps were not excisable goods, the longer period for duty demand was unjustified, and the penalty and interest were not chargeable during the relevant period. The impugned order was set aside, and the appeals were allowed based on the lack of marketability of the stems and the absence of evidence to support the duty demand and imposition of penalty and interest.