1984 (1) TMI 304 - AT - Central Excise

Summary

Issues Involved:
1. Entitlement to the benefit of exemption Notification No. 56/75-C.E., dated 1-3-1975.
2. Validity of demand raised under Rule 9(2) of the Central Excise Tariff Rules.

Issue-wise Detailed Analysis:

1. Entitlement to the Benefit of Exemption Notification No. 56/75-C.E., dated 1-3-1975:
The notification exempts goods falling under Item No. 68, manufactured by factories belonging to the Central Government and intended for use by its departments, from the whole of the duty of excise. The Tribunal analyzed whether Hindustan Shipyard Limited (HSL), a government company incorporated under the Companies Act, qualifies as a factory "belonging to" the Central Government. Despite HSL being under the direct control and supervision of its Board of Directors and having its shares held by the President of India, it was determined that HSL, as a corporate body with a separate legal entity, does not belong to the Central Government. The Tribunal cited the Supreme Court's decision in Salomon v. Salomon & Co. Ltd., emphasizing that a company is distinct from its shareholders and is capable of owning property in its own name. The Tribunal concluded that HSL does not meet the criteria set by the exemption notification, as it cannot be said to belong to the Central Government.

2. Validity of Demand Raised Under Rule 9(2) of the Central Excise Tariff Rules:
Rule 9(1) mandates that no excisable goods shall be removed from the place of manufacture without payment of excise duty, except on obtaining permission from the proper officer. Rule 9(2) applies if goods are removed in violation of Rule 9(1). The Tribunal found that HSL did not disclose the manufacture of the Floating Cassain Gate and Flap Type Gate to the excise authorities, nor did it file the necessary classification list or record the production and clearance of these goods in the R.G. 1 account or the monthly report in form R.T. 12. Consequently, HSL violated Rule 9(1) by removing excisable goods without the knowledge and permission of the excise authorities. The Tribunal held that the demand raised under Rule 9(2) was valid and within the 5-year period, as HSL failed to claim exemption under Notification No. 56/75-C.E. before removing the goods. The Appellate Collector's decision to restrict the demand to the normal time limit of 6 months was overturned, and the appeal filed by the Department was accepted.

Conclusion:
The Tribunal rejected HSL's cross objections and upheld the Department's appeal, confirming that HSL is not entitled to the benefit of exemption under Notification No. 56/75-C.E., and the demand raised under Rule 9(2) of the Central Excise Tariff Rules is valid.