2002 (12) TMI 482 - AT - Central Excise

Summary

Issues Involved:
1. Demand of Central Excise duty and imposition of penalty.
2. Classification and excisability of structural materials and bearing boxes.
3. Invocation of the extended period of limitation under Section 11A.
4. Value addition for determining assessable value.
5. Principles of natural justice.

Issue-wise Detailed Analysis:

1. Demand of Central Excise Duty and Imposition of Penalty:
The appellants contested the demand of Central Excise duty amounting to Rs. 1,80,621.52 and the penalty of Rs. 20,000/- imposed by the Collector of Central Excise. The demand was based on the removal of structural materials and bearing boxes without payment of duty during the periods 1-4-86 to 30-9-87 and 1-3-88 to 31-12-89.

2. Classification and Excisability of Structural Materials and Bearing Boxes:
The appellants argued that the structural materials were not excisable as the processes involved (punching, cutting, painting, and galvanizing) did not constitute "manufacture" under Section 2(f) of the Central Excise Act. They cited the Tribunal's decisions in Dodsal Mfg. (Pvt.) Ltd. v. CCE and the Supreme Court's dismissal of the department's appeal in the same case. The Tribunal noted that the excisability of the structural items had been settled in favor of the assessee by the Supreme Court. Regarding bearing boxes, the appellants claimed they were machined on a job work basis under Rule 57F(2) and were not liable to duty. However, they failed to produce evidence to support this claim.

3. Invocation of the Extended Period of Limitation under Section 11A:
The department invoked the extended period of limitation, alleging suppression of facts with intent to evade duty. The Tribunal found that the Collector did not establish any intent to evade duty or deliberate suppression of facts by the appellants. The absence of such findings meant that the extended period of limitation could not be invoked, rendering the entire demand time-barred.

4. Value Addition for Determining Assessable Value:
The Collector added 25% to the assessable value based on a price variance clause in the contract between the appellants and the Orissa State Electricity Board. The Tribunal found this addition unjustifiable as it was based on a report not disclosed to the appellants, violating the principles of natural justice. Moreover, no price variance bill was shown to justify the addition.

5. Principles of Natural Justice:
The Tribunal noted that the value addition was made without disclosing the Superintendent's report to the appellants, violating the principles of natural justice. The lack of transparency and failure to provide reasons for the value addition further invalidated the Collector's decision.

Conclusion:
The Tribunal allowed the appeal, holding that the demand of duty was time-barred and unenforceable. Consequently, the penalty imposed by the Collector was vacated, and the appeal was allowed on the ground of limitation.