1999 (10) TMI 678 - AT - Central Excise

Classification - Excisability - Marketability - Demand - Limitation - Modvat/Cenvat - Exemption - Chapter X Procedure

Issues Involved:
1. Excisability and dutiability of chewing tobacco kimam.
2. Marketability of the product.
3. Limitation and suppression of facts.
4. Applicability of Modvat credit and exemption under Notification No. 121/94-C.E.
5. Compliance with Chapter X Procedure.
6. Quantum of penalties and fines.

Detailed Analysis:

1. Excisability and Dutiability of Chewing Tobacco Kimam:
The Tribunal confirmed that chewing tobacco kimam, manufactured by mixing raw kimam with various ingredients, was excisable and dutiable under sub-heading No. 2404.49 prior to 23-7-1996 and sub-heading No. 2404.40 thereafter. The appellants had not disclosed the manufacturing premises or paid the required central excise duty, leading to a demand of Rs. 16,91,79,394.29 for M/s. Dharampal Satyapal and similar demands for other appellants. The Tribunal upheld the adjudicating authority's view that the chewing tobacco kimam was a manufactured and marketable product, confirming the duty liability.

2. Marketability of the Product:
The Tribunal found that chewing tobacco kimam was a marketable commodity, as evidenced by the fact that it was being sold by other manufacturers who were paying central excise duty. Statements from various manufacturers confirmed that the product was known in the market as chewing tobacco kimam and was sold as such. The Tribunal rejected the appellants' argument that their product was not marketable unless diluted, emphasizing that marketability was established by the fact that similar products were being sold and taxed.

3. Limitation and Suppression of Facts:
The Tribunal agreed with the adjudicating authority that the extended period of limitation was applicable due to the appellants' failure to declare their manufacturing premises, obtain proper central excise registration, and follow prescribed procedures. The appellants' argument that they believed no duty was payable was rejected, as they were aware that similar products were dutiable. The Tribunal cited the Supreme Court's decision in Tamilnadu Housing Board v. C.C.E. to support the view that suppression of facts with intent to evade duty justified the extended period of limitation.

4. Applicability of Modvat Credit and Exemption Under Notification No. 121/94-C.E.:
The Tribunal held that the appellants could not claim Modvat credit or exemption under Notification No. 121/94-C.E. without first paying the appropriate central excise duty on the inputs. The fiscal benefits were subject to the conditions laid down in the relevant provisions of the law, and the appellants could not presume eligibility without fulfilling these conditions. The Tribunal emphasized that the availability of legal alternatives could not justify an illegal act.

5. Compliance with Chapter X Procedure:
The Tribunal noted that the appellants had not followed the Chapter X Procedure, which was a prerequisite for availing exemption under Notification No. 121/94-C.E. However, the Tribunal acknowledged that substantial compliance with the procedure could be considered in the interest of natural justice. The Tribunal directed the adjudicating authority to re-examine whether there was substantial compliance regarding the receipt and utilization of the chewing tobacco kimam by the appellants' factories, and to reconsider the duty liability and penalties accordingly.

6. Quantum of Penalties and Fines:
The Tribunal directed the adjudicating authority to reconsider the quantum of penalties and fines in light of the re-examination of the applicability of Notification No. 121/94-C.E. The Tribunal emphasized that the appellants should be given an opportunity to present their case before the final order is passed.

Conclusion:
The appeals were disposed of with directions for re-examination of the limited issue of substantial compliance with Chapter X Procedure and reconsideration of duty liability, penalties, and fines. The Tribunal upheld the excisability and dutiability of chewing tobacco kimam and the applicability of the extended period of limitation due to suppression of facts.

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