1983 (6) TMI 189 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of the proviso to Rule 10 of the Central Excise Rules and limitation on the show-cause notice.
2. Sustainability of the levy of penalty under Rule 173Q.
3. Abatement of the show-cause notice due to the repeal of Rule 10.
4. Determination of "manufacture" under Rule 173H.

Summary:

1. Applicability of the Proviso to Rule 10 and Limitation:
The Tribunal found that the proviso to Rule 10 was inapplicable for the recovery of duty. The entire process of remelting pistons was discussed and approved by the Excise authorities, indicating no suppression of facts or fraudulent intent by the Appellant. Consequently, the extended period of limitation of five years was not applicable, and the show-cause notice dated 5-9-1980 for the period between 12-11-1976 and 14-6-1979 was barred by limitation u/s Rule 10(1).

2. Levy of Penalty under Rule 173Q:
The Tribunal held that the penalty of Rs. 25,000/- levied under Rule 173Q could not be sustained. The show-cause notice did not allege any intent to evade payment of duty, which is a requisite for imposing a penalty under Rule 173Q. The adjudication order also failed to establish any contravention of the rules with intent to evade duty.

3. Abatement of Show-Cause Notice:
The Tribunal agreed with the ruling of the Madhya Pradesh High Court in 1982 E.L.T. 844, holding that the repeal of Rule 10 and its re-enactment as Section 11A of the Act did not abate the pending proceedings. The simultaneous enactment of Section 11A ensured the continuity of the provision, treating the rule as part of the Act.

4. Determination of "Manufacture" under Rule 173H:
The Tribunal concluded that the process carried out by the Appellant amounted to "manufacture" and did not come within the scope of Rule 173H. The rejected pistons were essentially scrap and required remelting, which constituted a manufacturing process. The Appellant's contention that the pistons retained their identity was rejected, distinguishing from the case of Century Spinning & Manufacturing Co. v. Union of India.

Conclusion:
The Tribunal allowed the Appeal, setting aside the demand for duty and penalty. The cross-objections by the Revenue were dismissed as there was no relief granted to the Appellant in the original order under appeal.