2007 (9) TMI 151 - AT - Central Excise

Mfg. of goods on job work without getting registration under Central Excise Act but returns to I.T. Dept. & Commercial Tax Dept. were regularly furnished Willful evasion of duty -Matter remanded to quantify duty liability after giving SSI exemption & taking value of clearance as cum-duty price

Summary

Issues:
1. Alleged evasion of central excise duty by a company engaged in machining of rough castings into tractor parts/components.
2. Applicability of Section 11A (1) of the Central Excise Act regarding demand for duty.
3. Entitlement of the company to SSI benefits and modvat credit.
4. Dispute over penalty under Section 11AC and interest under Section 11AB of the Act.

Analysis:

Issue 1: Alleged Evasion of Central Excise Duty
The company, engaged in machining rough castings into tractor parts, was alleged to have evaded central excise duty. The Commissioner found that the company did not suppress facts intentionally to evade duty. The company received rough castings under certain invoices and was not registered with the central excise department. The parts supplied to a division of a company bore part numbers of tractors manufactured by another company. The Commissioner concluded that the company did not evade duty deliberately with awareness of benefits or consequences. The demand for duty was restricted to six months only due to the company's entitlement to SSI benefits.

Issue 2: Applicability of Section 11A (1) of the Central Excise Act
The Revenue filed an appeal seeking recovery of unpaid duty for a longer period, penalty under Section 11AC, and interest under Section 11AB. The Revenue argued that the company willfully suppressed facts to evade duty, benefiting customers by offering components at lower costs. The department claimed that the company deliberately suppressed manufacturing activities from the central excise department, justifying the demand for duty over a period of five years. The Revenue sought penalty and interest under Section 11AC and 11AB, respectively, due to alleged fraud and suppression of facts by the company.

Issue 3: Entitlement to SSI Benefits and Modvat Credit
The company received duty-paid inputs from a customer and returned finished parts. The Tribunal found that the company should not be denied Modvat benefit due to technical grounds related to invoicing. The Tribunal also noted that the company was entitled to SSI benefits for clearances made under specific notifications. The duty liability was to be reworked considering the clearance value as the cum duty value. The case was remanded to the lower authority for a fresh decision based on these findings.

Issue 4: Dispute over Penalty and Interest
Regarding penalty under Section 11AC and interest under Section 11AB, the Tribunal decided that these provisions should apply only to clearances made after a specific date. The case was remanded for a reevaluation of the company's liabilities in light of the Tribunal's findings. The appeal filed by the Revenue was disposed of based on the terms outlined by the Tribunal.