2004 (6) TMI 428 - AT - Central Excise

Summary

Issues:
1. Demand of duty without SSI exemption.
2. Time-barred demand.
3. Entitlement to SSI exemption.
4. Penalty imposition under Rule 173Q and Section 11AC.

Demand of duty without SSI exemption:
The case involved the appellants supplying pillow covers with the brand name of another company, leading to a demand for duty without Small Scale Industries (SSI) exemption. The Revenue Department found that the appellants were clearing branded goods without paying duty, resulting in the imposition of penalties under Section 11AC and Rule 173Q. The Commissioner (Appeals) confirmed the demand but reduced the penalty under Section 11AC due to the introduction date of the section. The Tribunal upheld the decision, stating that the appellants failed to disclose their manufacturing activities to avail SSI exemption, making them ineligible for the benefit.

Time-barred demand:
The appellants argued that the demand was time-barred as it was for a period in 1997, and the show cause notice was issued in May 1998. However, the Revenue contended that the extended period was rightly invoked due to the appellants' non-disclosure of clearing branded goods. The Tribunal agreed, emphasizing that the appellants never informed the Revenue about their manufacturing activities or filed a declaration for SSI exemption, justifying the invocation of the extended period for demand.

Entitlement to SSI exemption:
The appellants claimed they were entitled to SSI exemption as they entered into a contract with another company for the supply of pillow covers bearing the brand name of that company. They argued that since they filled the pillow covers with foam after stitching, they should qualify for the exemption. However, the Tribunal rejected this argument, stating that the appellants' activities rendered them ineligible for SSI exemption as they did not disclose crucial information to avail the benefit.

Penalty imposition under Rule 173Q and Section 11AC:
Regarding the penalty, the adjudicating authority imposed a composite penalty under Rule 173Q and Section 11AC, which was later reduced by the Commissioner (Appeals) considering the introduction date of Section 11AC. The Tribunal upheld the penalty, emphasizing that the appellants failed to disclose their availing of SSI exemption benefits and cleared goods without paying duty, leading to the dismissal of the appeal. The penalty under Rule 173Q was maintained, highlighting the appellants' non-compliance with legal requirements and lack of grounds for reduction.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by the parties, and the Tribunal's reasoning leading to the dismissal of the appeal.