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1986 (5) TMI 32 - SC - Central ExciseWhether the demand for payment of excise duty on the M.S. Rounds was illegal since they had been Re-rolled from rails which were exempt from levy of excise duty? Held that - No hesitation to uphold the view expressed by the High Court that the M.S. Rounds manufactured by the appellant fell within the ambit of Item No. 26-AA and were liable to be charged to duty under the said item. The time limit of three months specified in Rule 10 has no applicability at all in the present case since there has been no assessment of duty before the goods were removed and it is not a case of short levy occasioned by any of the reasons specified in the said Rule. The case is, therefore, covered by the provisions of Rule 10A, which is a residuary provision authorising the demand and collection of any deficiency in duty or of any other sum of any kind payable to Central Government under the Act or the Rules without any limit of time. Hence the High Court was clearly right in rejecting the contention of the appellant that the demand notices issued to it under Rule 10A were illegal and unsustainable. Appeal dismissed.
Issues:
1. Interpretation of excise duty liability on manufactured goods. 2. Applicability of exemption notification. 3. Time limit for demand of excise duty. Analysis: Issue 1: Interpretation of excise duty liability on manufactured goods The appellant engaged in converting untested rails into M.S. Rounds through the process of Re-rolling. The High Court held that this conversion amounted to manufacturing, making the M.S. Rounds liable for excise duty under Item No. 26-AA(i) of the First Schedule of the Central Excises and Salt Act, 1944. The description of goods under this item included various rolled shapes and sections, encompassing the M.S. Rounds produced by the appellant. The Court found no merit in the appellant's argument against the excise duty liability on the manufactured goods. Issue 2: Applicability of exemption notification The appellant contended that the M.S. Rounds were covered by a partial remission of excise duty under Notification No. 89/62. However, the Court clarified that the exemption applied only if the appropriate duty had been paid on the raw material used for manufacturing the goods. Since no excise duty was paid on the untested rails used by the appellant, the benefit of the notification could not be claimed. Consequently, the Court upheld that the M.S. Rounds were liable for excise duty under Item No. 26-AA. Issue 3: Time limit for demand of excise duty The appellant argued that the demand for excise duty was invalid as it exceeded the three-month period specified in Rule 10 of the Central Excise Rules, 1944. However, the High Court determined that Rule 10 was not applicable in the absence of an initial assessment or levy of duty at the time of goods removal. Citing legal precedents, the Court explained that Rule 10A, a residual provision without a time limit, was applicable for demanding any deficiency in duty payable to the Central Government. Consequently, the Court rejected the appellant's contention regarding the timeliness of the demand notices under Rule 10A. In conclusion, the Supreme Court dismissed the appeal, upholding the excise duty liability on the M.S. Rounds manufactured by the appellant and affirming the validity of the demand notices issued under Rule 10A.
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