2006 (1) TMI 291 - AT - Central Excise

Summary

Issues:
Waiver of pre-deposit of duty and penalty based on time bar issue regarding drawal of samples for test purposes without payment of duty.

Analysis:
The applicants, manufacturers of Cigarettes, sought waiver of pre-deposit of duty and penalty amounting to Rs. 1,65,80,915/- for drawal of samples for test purposes. The issue revolved around the payment of duty on these samples, which was previously decided against the applicants by the Apex Court. The contention was that the department was aware of the drawal of samples as evidenced by correspondence and maintenance of records by the applicants. The learned Counsel argued that there was no suppression of facts, fraud, or misrepresentation, making the larger period for demands not invocable due to being time-barred. The Show Cause Notice issued in 2004 for the period from September 1999 to November 2002 was challenged on grounds of departmental awareness and lack of timely action by the authorities.

The department defended its stance by citing Circular No. 1/87-CX-6, which outlined the mandatory provisions for maintaining proper accounts on samples drawn for testing and paying appropriate duty. The Commissioner rejected the contention of time bar based on convincing reasons, emphasizing that the department had no control over the quantities of samples drawn. The applicants, on the other hand, highlighted their compliance history as the highest duty paying unit and the department's presence within their premises, indicating mutual awareness of the sampling process. They argued that the Commissioner's findings were incorrect and not legally sound, supported by a list of citations.

After considering the submissions, it was noted that the factory had a long history of drawing samples for testing, with the department's presence on-site and previous litigation on the matter. Despite rulings in favor of the applicants, the Apex Court's decisions necessitated duty payment on the samples. The records showed ongoing correspondence and maintenance of sample drawal details by the appellants, indicating no intent to evade duty through suppression of facts or fraud. The department was criticized for not issuing a Show Cause Notice earlier and waiting for the Apex Court's final verdict. The Tribunal found that the appellants had a strong case on the time bar issue, granting an unconditional waiver of pre-deposit and staying recovery until the appeal's disposal. The matter was scheduled for an expedited hearing due to the significant amounts involved.