1985 (7) TMI 109 - HC - Central Excise

Summary

Issues: Alleged contravention of Rule 9(1) of the Central Excise Rules, 1944; Applicability of Rule 9 in case of short levy of excise duty; Challenge to orders imposing penalty and demanding excise duty; Validity of notice issued under Rule 9(2) after three years.

Analysis:
1. The petitioner firm, engaged in manufacturing refrigeration equipment, sold goods to a buyer which were cleared from their factory after payment of excise duty. However, after about three years, a notice was issued alleging contravention of Rule 9(1) of the Central Excise Rules, 1944. The petitioner denied the allegations, stating that the goods were duly accounted for and cleared with appropriate duty paid. Subsequent orders imposed a penalty and demanded excise duty on the goods' value.

2. The petitioner argued that if there was a short levy of excise duty, the respondent should have issued a notice under Rule 10 instead of Rule 9. They contended that Rule 9 applies only to clandestine removal of goods, not in this case. The petitioner also highlighted that the goods sold were independent units, citing legal precedents to support their position.

3. The respondents contended that the notice under Rule 9 was justified as the petitioner supplied a complete unit of Beverage Cooler, not just a cabinet with an electric motor. They relied on the contract between the parties and disputed the presence of the Excise Inspector during the goods' clearance.

4. The Court analyzed the application of Rule 9(2) which pertains to clandestine removal of excisable goods. It noted that excise duty was short levied on one bill and not charged on another due to the Inspector's assessment. Legal precedents were cited to establish that Rule 9(2) does not apply when goods are removed with authorities' knowledge. The Court also highlighted the time limit under Rule 10 for issuing notices for recovery of duties, which was exceeded in this case.

5. Ultimately, the Court found the notice issued under Rule 9(2) after three years to be illegal and quashed it. The writ petition was allowed, with no order as to costs.