2003 (2) TMI 431 - AT - Central Excise

Summary

Issues:
1. Duty demand confirmation under Rule 9(2) of Central Excise Rules with Section 11A of the Act.
2. Imposition of penalty and interest under Section 11AB.
3. Dispute related to the classification of shoddy yarn under Heading 55.09.
4. Challenge against the extended period of limitation invoked.
5. Calculation of duty without abatement of the element of duty.
6. Applicability of Sections 11AB and 11AC regarding duty demand and interest.

Analysis:
1. The appeal challenged the duty demand confirmation, penalty, and interest imposed by the Commissioner of Central Excise. The dispute arose from the manufacturing of woollen yarn in Unit No. II and shoddy yarn in Unit No. I without Central Excise registration. The Commissioner confirmed the duty demand of Rs. 27,3,952 under Rule 9(2) and Section 11A, along with a penalty and interest. The appellant contested the duty demand and penalty.
2. The appellant argued that the duty demand for the period before 26-5-95 was not sustainable as Heading 55.09 related to MM fabrics, not yarn. The extended period of limitation invoked was also challenged, citing the frequent visits by department officers to Unit No. II. The correctness of the test report on the yarn sample was disputed, and the duty calculation without abatement was contested.
3. The Commissioner rejected all contentions raised by the appellant, leading to the appeal. During the hearing, it was contended that the demand was unsustainable due to limitation reasons. The appellant believed that the manufacturing activity in Unit No. II was known to department officers, and there was a genuine belief that synthetic rags yarn did not attract excise duty. However, the Departmental Representative argued against the limitation defense.
4. The Tribunal found merit in the appellant's argument regarding duty calculation based on a previous decision. After reviewing the submissions, the duty liability was recalculated to Rs. 7,28,540. The Tribunal also noted that Sections 11AB and 11AC were not applicable to the case due to the timeline of the demand notice. Consequently, the quantum of duty demand was reduced, and the penalty amount was decreased to Rs. 2 lakhs, partially allowing the appeal.