2006 (9) TMI 62 - AT - Central Excise

Demand Department demanded for differential duty from appellant in response of their final products and accordingly penalties were also imposed on him Authority after considering the detail impugned order set aside and allowed appeals by way remand

Issues Involved:
1. Liability to pay excise duty on intermediate products (plastic sheets and layflat tubing) captively consumed in the manufacture of final products.
2. Applicability of various exemption notifications, specifically Notification No. 4/97-C.E., 16/97-C.E., 38/97-C.E., and 67/95-C.E.
3. Retrospective effect of amendments to Notification No. 16/97-C.E. by Notification No. 69/97-C.E.
4. Inclusion of the value of intermediate products in the aggregate value of clearances for determining concessional rates under SSI exemption notifications.
5. Imposition of penalties under Rules 173Q and 209 of the Central Excise Rules, 1944.
6. Invocation of the extended period of limitation and imposition of penalties under Section 11AC of the Central Excise Act.

Detailed Analysis:

1. Liability to Pay Excise Duty on Intermediate Products:
The appellants did not pay excise duty on intermediate products (plastic sheets and layflat tubing) captively consumed in manufacturing final products, claiming exemptions under various notifications. The lower authorities demanded duty on these intermediate products, stating that the final products were cleared without payment of duty.

2. Applicability of Exemption Notifications:
- Notification No. 4/97-C.E.: Provided 'nil' rate of duty for final products, subject to non-availment of input duty credit.
- Notification No. 16/97-C.E. and 38/97-C.E.: Provided SSI exemptions but required inclusion of the value of intermediate products in the aggregate value of clearances.
- Notification No. 67/95-C.E.: General exemption for intermediate products captively consumed, but not applicable if final products were cleared without payment of duty.

3. Retrospective Effect of Amendments:
The amendment to Notification No. 16/97-C.E. by Notification No. 69/97-C.E. introduced clause (f) to para 5, which stated that intermediate products would not be deemed exempt if the final products were cleared at 'nil' rate or were exempt under any other notification. The Tribunal held that this amendment was not retrospective, thus not applicable to the period before 3-12-1997.

4. Inclusion of Intermediate Products' Value in Aggregate Clearances:
The authorities included the value of intermediate products in the aggregate value of clearances for determining concessional rates under SSI notifications. The Tribunal found that prior to 3-12-1997, such inclusion was not permissible as intermediate products were deemed exempt under para 3(c) of Notification No. 16/97-C.E.

5. Imposition of Penalties:
Penalties were imposed under Rules 173Q and 209 of the Central Excise Rules, 1944. The Tribunal's decision to remand the cases for re-quantification of duty implies that penalties will also be reconsidered in light of the correct interpretation of the notifications.

6. Extended Period of Limitation and Penalties under Section 11AC:
In the case of M/s. Sakthi Plastics, the department's appeal contested the non-imposition of penalty under Section 11AC and the shortfall in the duty amount. The Tribunal directed the adjudicating authorities to reconsider the issues of time-bar and penalties afresh.

Conclusion:
The Tribunal set aside the impugned orders and remanded all appeals for fresh adjudication. The adjudicating authorities are to re-quantify the demands of duty and reconsider penalties in light of the Tribunal's interpretation of the exemption notifications and the non-retrospective effect of the amendment brought by Notification No. 69/97-C.E. The authorities are instructed to pass fresh speaking orders in accordance with law and principles of natural justice.

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