2006 (7) TMI 665 - AT - Central Excise

Summary

Issues Involved:
1. Validity of the second show cause notice.
2. Allegations of misdeclaration and undervaluation of excisable goods.
3. Classification of items and applicability of exemption notifications.
4. Demand of differential duty and penalties imposed.

Issue-wise Detailed Analysis:

1. Validity of the Second Show Cause Notice:
The second show cause notice dated 29-10-1987 was issued for a period overlapping the first show cause notice dated 31-3-1986. The appellant argued that both notices were based on similar allegations of misdeclaration of value. The Tribunal relied on the Supreme Court's decision in Nizam Sugar Factory v. Commissioner of Central Excise, A.P., which held that a subsequent show cause notice on the same set of facts invoking the extended period of limitation cannot be issued if the facts were already known to the Department. Consequently, the Tribunal set aside the second show cause notice and allowed Appeal No. E/1890 of 1990.

2. Allegations of Misdeclaration and Undervaluation of Excisable Goods:
The Department alleged that the appellant declared lower values for excisable goods and diverted a major portion of the assessable value towards non-dutiable accessories, enabling them to evade central excise duty. The Tribunal found that the appellant's practice of issuing two sets of bills (one for the product and another for accessories) and not revealing the second bill to the Department constituted deliberate undervaluation and suppression of facts. The Tribunal upheld the demand for differential duty based on the evidence presented.

3. Classification of Items and Applicability of Exemption Notifications:
The appellant contended that the items manufactured were parts of refrigeration machinery and should fall under Item No. 29A(iii), with only eight items subject to duty according to Notification No. 80/62. The Tribunal noted that the learned Collector had misclassified some items under Items 29A(i) and 29A(ii) but found that the duty raised was based on the correct classification under Item 29A(iii) as alleged in the show cause notice. The Tribunal upheld the Department's classification and the corresponding duty demand.

4. Demand of Differential Duty and Penalties Imposed:
The appellant argued that the demand under Section 11A was time-barred as the classification and price lists were approved by the Department, and no review was done under Section 35E. The Tribunal referred to the Supreme Court's decision in Easland Combines v. CCE, Coimbatore, which held that the amendment to Section 11A allowed the Central Excise Officer to issue show cause notices within one year from the relevant date, even for approvals made under the Act or Rules. The Tribunal found that the demand raised under Section 11A was valid and confirmed the penalty imposed by the Collector, stating that the penalty was commensurate with the nature of the offense established.

Conclusion:
The Tribunal allowed Appeal No. E/1890/1990, setting aside the second show cause notice, while dismissing Appeal No. E/2749/1987, upholding the demand for differential duty and penalties imposed for misdeclaration and undervaluation of excisable goods. The Tribunal emphasized that the amendments to Section 11A allowed retrospective action against erroneous approvals, and the penalty framework for contraventions remained intact.