2004 (6) TMI 548 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for Exemption under Notification No. 10/96-C.E.
2. Bona Fide Belief and Extended Period of Limitation
3. Modvat Credit Entitlement
4. Imposition of Penalty under Section 11AC and Rule 173Q
5. Penalty on Manager Accounts under Rule 209A

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 10/96-C.E.
The appellants, M/s. Bata (India) Ltd., cleared dutiable parts of footwear without payment of duty under the belief that they were eligible for exemption under Notification No. 10/96-C.E. The notification exempts parts of footwear used within the factory of production for manufacturing footwear of value not exceeding Rs. 75/- per pair. The appellants argued that the condition of use within the factory should be interpreted to include use by job workers manufacturing footwear for Bata. However, the Tribunal held that the notification's primary condition was that the goods should be consumed within the factory of production. Since the parts were sent to independent job workers, they did not meet this condition, and the exemption was correctly denied.

2. Bona Fide Belief and Extended Period of Limitation
The appellants contended that they were under a bona fide belief that the exemption applied even when parts were used by job workers. The Tribunal found this claim untenable, noting that the appellants did not inform the Department about the clearance of dutiable goods without payment of duty, did not file classification and price declarations, and did not enter these goods in statutory records. The Tribunal concluded that the appellants' actions indicated a deliberate intent to evade duty, justifying the invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act.

3. Modvat Credit Entitlement
The appellants claimed Modvat credit for the inputs used in manufacturing the dutiable footwear parts. The Tribunal acknowledged that the substantive benefit of Modvat credit cannot be denied for non-compliance with procedural requirements. However, the appellants failed to produce relevant records to substantiate their claim before the Commissioner. The Tribunal directed the Commissioner to give the appellants an opportunity to submit their claim for Modvat credit and to allow it if found in order.

4. Imposition of Penalty under Section 11AC and Rule 173Q
The Tribunal upheld the imposition of a 100% penalty under Section 11AC and an additional penalty under Rule 173Q, finding that the appellants had deliberately suppressed facts with intent to evade duty. The appellants' failure to disclose the clearance of dutiable parts and to maintain proper records indicated a clear intent to evade duty, justifying the penalties.

5. Penalty on Manager Accounts under Rule 209A
The Tribunal upheld the penalty on Shri N.K. Chakraborthy, Manager Accounts, under Rule 209A. He was responsible for Central Excise work and was aware that the parts were being cleared without payment of duty. His involvement in the clearance of these parts rendered him liable for the penalty.

Conclusion:
The appeals were rejected except for the modification regarding the opportunity to claim Modvat credit. The Tribunal directed the Commissioner to allow the appellants to submit relevant documents to establish their Modvat credit claim. The penalties imposed under Section 11AC, Rule 173Q, and Rule 209A were upheld, as the appellants' actions demonstrated a deliberate intent to evade duty.