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2016 (3) TMI 517 - AT - Central ExciseClandestine removal of manufactured goods viz. Nickel Alloy, Tin Alloy and Lead Alloy - duty demand along with penalty - Held that - The appellant is entitled to avail cenvat credit on inputs used in clandestine manufactured and cleared goods viz. Nickel, Tin and Lead Alloys for the period 1989-90 on production of relevant documents. The appellant is entitled to avail benefit of SSI exemption under notification no. 173/86-CE dated 1.3.86 for the period 1989-90. No interest is payable by the appellant on the demand confirmed by way of this order. After giving the benefit of input credit and SSI exemption, duty is payable by the appellant for the period 1989-90 on clandestine clearance of Nickel, Lead and Tin Alloys (if any) alongwith the demand of duty already confirmed for the period 1988-89. The appellant has to pay 25% of the duty confirmed as penalty, as discussed.
Issues:
1. Demand of duty, interest, and penalty on clandestine removal of manufactured goods. 2. Scope of show cause notice in confirming demand for different alloys. 3. Entitlement to cenvat credit on inputs for clandestine clearance. 4. Eligibility for Small Scale Industries (SSI) exemption. 5. Demand of interest in the absence of statutory provision. 6. Applicability of reduced penalty under Section 11AC of the Act. Issue 1: Demand of Duty, Interest, and Penalty on Clandestine Removal: The appellant appealed against the order confirming a duty demand of Rs. 50,10,034, along with interest and a penalty of Rs. 50 lakhs for clandestine removal of manufactured goods. The matter involved a show cause notice issued for the period 1988-89 to 1991-92, proposing a duty demand of Rs. 1,21,07,034.70 and a penalty under Central Excise Rules. The Tribunal confirmed the charge of clandestine removal and upheld a demand of Rs. 11,15,593.30 for 1988-89. Subsequent periods were remanded for re-calculation. The impugned order confirmed a demand of Rs. 38,94,439 in addition to the previous demands and imposed a penalty of Rs. 50 lakhs under Rule 173Q. Issue 2: Scope of Show Cause Notice in Confirming Demand for Different Alloys: The appellant contested the demand for alloys beyond Nickel, Tin, and Lead, arguing they were not part of the original show cause notice. The Tribunal held that duty could only be demanded for the mentioned alloys subject to quantification, excluding other alloys like Copper, Zinc, and Cadmium. The demand was limited to the specified alloys based on the show cause notice. Issue 3: Entitlement to Cenvat Credit on Inputs for Clandestine Clearance: The appellant claimed entitlement to cenvat credit on inputs used for clandestine clearance, citing a Tribunal ruling allowing such credit. The Tribunal agreed, permitting the appellant to avail cenvat credit on inputs used in the manufacture of clandestinely cleared goods upon producing relevant documents. Issue 4: Eligibility for Small Scale Industries (SSI) Exemption: The appellant sought SSI exemption for the period 1989-90 based on previous clearances. The Tribunal referred to relevant notifications and rulings, allowing the appellant to benefit from SSI exemption under notification no. 174/86-CE dated 1.3.86 for the specified period. Issue 5: Demand of Interest in the Absence of Statutory Provision: The appellant argued against the demand of interest, noting no proposal in the show cause notice and the absence of statutory provisions during the relevant period. The Tribunal set aside the demand for interest, ruling in favor of the appellant. Issue 6: Applicability of Reduced Penalty under Section 11AC of the Act: The appellant contended that the paid duty demand and 25% penalty entitled them to a reduced penalty under Section 11AC. The Tribunal found the penalty paid by the appellant sufficient in the circumstances, aligning with the provisions of the Act. In conclusion, the Tribunal allowed cenvat credit on inputs, granted SSI exemption, waived interest, and confirmed the duty payable for the specified period along with the penalty. The appeal was disposed of accordingly, addressing the issues raised by the appellant and ruling in their favor on various grounds.
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