2005 (11) TMI 347 - AT - Central Excise

Summary

Issues:
- Duty demand contested on merits and limitation
- Allegation of suppression of facts
- Liability for duty on damaged goods
- Penalty imposition under Section 11AC of the Act

Detailed Analysis:

1. Duty Demand Contested on Merits and Limitation:
The case involved the appellants contesting a duty demand on both merit and limitation grounds. The department alleged willful suppression of destruction of excisable goods in a fire accident to evade duty payment. The appellants did not deny failing to report the fire accident to the department but argued they had no intention of claiming remission of duty for the damaged goods. The appellants manufactured only two out of the four damaged goods themselves, while the other two were manufactured on a job work basis. The appellants presented evidence from the RG-1 Account to support their claim that duty had been paid for the goods they manufactured themselves. The appellants successfully argued that the demand of duty was heavily time-barred for the month of July 1998.

2. Allegation of Suppression of Facts:
The department alleged suppression of facts against the appellants to invoke the extended period of limitation. However, the appellants demonstrated that they had no intent to evade duty payment for the damaged goods. They clarified that duty had already been paid for the goods they manufactured, and the goods manufactured on job work basis did not incur duty liability on them. The appellants' argument that there was no intent to evade duty was upheld, leading to the dismissal of the allegation of suppression of facts.

3. Liability for Duty on Damaged Goods:
The appellants faced a demand for duty on goods damaged in a fire accident, for which they had not applied for remission. The department issued a show-cause notice demanding duty and proposing a penalty. The appellants contested the notice on the grounds that they had no intention of claiming remission for the damaged goods and had already paid duty for goods they manufactured themselves. The appellants successfully argued that the duty demand was not applicable, given the circumstances of the fire accident and the nature of the goods involved.

4. Penalty Imposition under Section 11AC of the Act:
The original authority confirmed the duty demand and imposed a penalty equal to the duty amount on the appellants. However, the appellate tribunal found in favor of the appellants on both merit and limitation grounds. As a result, the duty demand was set aside, leading to the consequent setting aside of the penalty. The appeal was allowed in favor of the appellants, indicating a successful challenge to the penalty imposition under Section 11AC of the Act.

In conclusion, the appellate tribunal ruled in favor of the appellants, setting aside the duty demand and penalty imposition due to the absence of intent to evade duty payment and the heavy time-bar on the demand. The judgment highlighted the importance of considering both merit and limitation grounds in duty-related cases to ensure a fair and just outcome.