2005 (9) TMI 83 - SC - Central Excise

Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the additive mixture processed by the three appellants herein was excisable and classifiable under Chapter sub-heading 2404.49 of Central Excise Tariff Act, 1985 and that the Department was right in invoking the extended period of limitation under the proviso to Section 11A(1) of Central Excise Act, 1944? Held that - The appellants were maintaining Form-IV register as well stock register regarding receipt of kimam in their factories in UP and HP from their factories in Delhi. That, after the change in the entries in 1994, no show cause notice was ever issued. In the circumstances, although there was contravention of the provisions of Section 6 read with Rule 174 and although there was contravention in not obtaining registration of the units in Delhi, we are of the view that there was no intent to evade payment of duty. Additive mixture (kimam) was excisable and classifiable under Chapter sub-heading 2404.49/2404.40 of 1985 Tariff Act, as held in the case of Dharampal Satyapal (2005 (4) TMI 66 - SUPREME COURT OF INDIA), however, on the facts and circumstances of this case, the department was not entitled to invoke the extended period of limitation under the proviso to Section 11A(1) of the said Act. Accordingly, these civil appeals are partly allowed,

Summary

Issues Involved:
1. Excisability and classification of 'additive mixture' under Chapter sub-heading 2404.49 of Central Excise Tariff Act, 1985.
2. Invocation of the extended period of limitation under the proviso to Section 11A(1) of Central Excise Act, 1944.
3. Compliance with Notification No. 121/94-C.E. regarding exemption.

Issue-wise Detailed Analysis:

1. Excisability and Classification of 'Additive Mixture':
The Tribunal held that the 'additive mixture' processed by the appellants was excisable and classifiable under Chapter sub-heading 2404.49/2404.40 of the Central Excise Tariff Act, 1985. The appellants argued that the additive mixture was not a final product, was transient, not noticeable to the naked eye, and unsaleable for any other purpose. However, the Commissioner found that the mixture was a distinct, identifiable product known as kimam, marketable, and thus excisable. The Supreme Court upheld this classification, referencing the case of Dharampal Satyapal, where a similar product was deemed excisable.

2. Invocation of Extended Period of Limitation:
The main issue was whether the department was justified in invoking the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944. The appellants argued that they had disclosed their manufacturing processes to the Department since 1992-93 and had no intent to evade duty. The Commissioner, however, found that the appellants failed to get their units registered and suppressed their manufacturing activities. The Tribunal initially agreed but later found substantial compliance with Chapter X procedures, granting exemption under Notification No. 121/94-C.E. The Supreme Court, applying the test from Padmini Products and Cosmic Dye Chemical, concluded that there was no intent to evade duty. The appellants had disclosed their processes and maintained records, thus the extended period of limitation was not applicable.

3. Compliance with Notification No. 121/94-C.E.:
The Tribunal remanded the case to the Commissioner to ascertain substantial compliance with Chapter X procedures, which was later confirmed. The Supreme Court noted that the appellants maintained transfer challans and stock registers, indicating receipt and utilization of the additive mixture. The Tribunal's finding of substantial compliance was upheld, and the additive mixture was entitled to exemption under Notification No. 121/94-C.E.

Conclusion:
The Supreme Court held that while the 'additive mixture' (kimam) was excisable and classifiable under Chapter sub-heading 2404.49/2404.40, the department was not entitled to invoke the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944. The civil appeals were partly allowed, affirming the excisability but rejecting the extended limitation period due to lack of intent to evade duty.