1995 (11) TMI 378 - AT - Central Excise

Scrap manufactured and removed clandestinely - product was fully exempt from duty under Notification No. 180/61 - goods exempted from duty are not includible within the definition of excisable goods as defined in clause (d) of Section 2 - appellant says, he was under the bona fide impression that he need not mention the value - Held that - department was aware of import of input by several importers and large quantities over a period of time - it cannot be said that the department was not aware of its use - levy of duty, is barred by limitation - appeals allowed

Summary

Issues Involved:
1. Excisability and classification of processed brass dross/ash.
2. Limitation period for demand of duty.
3. Imposition of penalties.

Issue 1: Excisability and Classification of Processed Brass Dross/Ash

The primary issue was whether the process of pulverizing, sieving, and cleaning brass dross/ash resulted in the production of new goods classifiable under Tariff Item 26A and sub-heading 7402.00 of the Central Excise Tariff Act, 1985. The appellants contended that such processing did not amount to manufacture as no new commodity with a distinct name, character, or use emerged. They argued that the brass dross/ash remained the same item despite the cleaning process, which merely removed extraneous impurities. The appellants supported their argument with several judgments, including the Supreme Court's ruling in Hyderabad Industries Ltd. v. U.O.I., which held that separating asbestos fiber from rock did not constitute manufacture. The Tribunal agreed with the appellants, concluding that the processes did not result in a new marketable commodity with a separate, distinct name, physical, or chemical composition. Thus, the demands for duty based on this classification were set aside.

Issue 2: Limitation Period for Demand of Duty

The second issue concerned whether the demands were barred by limitation. The appellants argued that the department had not proven any willful intent to evade duty through suppression of facts or misstatement. They cited the Supreme Court's judgments in Cosmic Dye Chemical v. Collector of Central Excise and Pushpam Pharmaceuticals Co. v. Collector of Central Excise, which established that the department must demonstrate deliberate intent to evade duty to invoke the extended limitation period under Section 11A of the Central Excises and Salt Act, 1944. The Tribunal found that the department had not shown how the appellants had willfully suppressed facts or evaded duty. Therefore, even if there was a duty levy, it was barred by the limitation period.

Issue 3: Imposition of Penalties

The final issue was the imposition of penalties under Rule 173Q(1) of the Central Excise Rules, 1944. Given that the Tribunal found no excisability and that the demands were barred by limitation, the penalties imposed by the Collector were also set aside. The Tribunal held that the appellants had succeeded on all points raised in the appeals, leading to the setting aside of the impugned orders and allowing the appeals.

Conclusion:

The Tribunal concluded that:
1. The process of pulverizing, sieving, and cleaning brass dross/ash did not result in the manufacture of a new commodity.
2. The demands for duty were barred by limitation as the department failed to prove willful intent to evade duty.
3. The penalties imposed were unjustified and were accordingly set aside.

The appeals were allowed, and the impugned orders were set aside.