2002 (4) TMI 750 - AT - Central Excise

Summary

Issues Involved:
1. Invocation of Rule 196.
2. Demand barred by limitation.
3. Duty demand against the appellant.
4. Proceedings hit by Res judicata.
5. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Invocation of Rule 196:
The appellants contended that Rule 196 is inapplicable as it pertains to goods not duly accounted for or misused. They argued that their product, Dairy Whitener (partially skimmed milk powder), was correctly accounted for under the L-6 Licence. However, the Department contended that the benefit of Notification No. 181/88 was not available for Dairy Whitener, as it was not classified as Skimmed Milk Powder. The Tribunal noted that the application for L-6 Licence declared Skimmed Milk Powder, not partially skimmed milk powder, thus failing to meet the conditions for exemption under Rule 196. The matter was referred to a Larger Bench for further consideration.

2. Demand Barred by Limitation:
The appellants argued that the demand was time-barred under Section 11A of the Act, as they had always declared the correct product description. However, the Tribunal noted that the appellants had been contesting the classification of their product as partially skimmed milk powder, which was not declared in the letters submitted under Rule 142. This mis-declaration suggested an intent to evade duty, justifying the invocation of the extended period of limitation. The matter was referred to a Larger Bench.

3. Duty Demand Against the Appellant:
The appellants contended that any duty demand should be directed at the manufacturers of the metal containers, not the receivers. The Tribunal noted that the appellants used the metal containers in contravention of Rule 196, as the condition of use for the purpose and manner stated in the application was not met. Thus, the duty demand under Rule 196 appeared justified. The matter was referred to a Larger Bench.

4. Proceedings Hit by Res Judicata:
The appellants argued that the proceedings were barred by res judicata, as a previous order by the Collector (Appeals) had attained finality. The Tribunal noted that the previous order was upheld on technical grounds, not on merits, and covered a different period. Therefore, the present proceedings were not hit by res judicata.

5. Imposition of Penalty:
The appellants argued that penalty was not imposable as there was no clandestine removal of excisable goods. However, the Tribunal noted that there was a mis-declaration of the product as Skimmed Milk Powder to avail the exemption, which constituted a contumacious disregard of the Rules. Thus, the penalty appeared justified, but the matter would be reconsidered after the Larger Bench decision.

Conclusion:
The Tribunal found that the facts in the instant case were similar to those in the case of M/s. Dalmia Industries Ltd., where the Tribunal had held that duty could be demanded under Rule 196 from the L-6 Licensee. However, there were differing views in the Tribunal's decisions, necessitating a referral to a Larger Bench to resolve the legal issues regarding the scope of Rules 192 and 196, and the applicability of the extended period under Section 11A(1). The Registry was directed to place the matter before the Hon'ble President to constitute the Larger Bench.