2000 (4) TMI 106 - AT - Central Excise

Summary

Issues Involved:
1. Denial of benefit of Notification No. 222/77-CE dated 15-7-1977.
2. Denial of benefit of Notification No. 230/86-CE dated 3-4-1986 for "Thinners".
3. Confirmation of demand of duty on samples taken for testing.
4. Imposition of penalty and interest.

Summary:

1. Denial of Benefit of Notification No. 222/77-CE:
The appellants claimed exemption u/s Notification No. 222/77-CE for products classifiable under Sub-Heading: 3404.90, including 'Metal Polish', 'Valve Grease Paste', 'Silicon Polish', 'Glass Cleaner', and 'Wax Polish'. The Commissioner denied the benefit on the ground that containers and/or poly-bottles used for packing were manufactured with the aid of power. The Tribunal held that the use of power in the manufacture of packing materials (Poly-bottles and Metal Containers) does not equate to the use of power in the manufacture of the final products. Therefore, the benefit of Notification No. 222/77-CE was extended to the appellants' products, and the demand raised in respect of these items was set aside.

2. Denial of Benefit of Notification No. 230/86-CE for "Thinners":
The Commissioner denied the benefit of Notification No. 230/86-CE for "Thinners" on the ground that power was used to transfer De-natured Alcohol into drums. The Tribunal acknowledged a precedent where the use of power-driven pumps was considered 'use of power in relation to the manufacture of goods'. However, the matter was remanded to the Commissioner to decide on the issue of limitation, as the show cause notice was issued on 31-3-1994 for the period 1-4-1989 to 10-1-1994, and the Commissioner did not specifically address the limitation aspect for "Thinners".

3. Confirmation of Demand of Duty on Samples:
The demand of Rs. 25,538.24 was confirmed for samples taken for testing within the factory. The Tribunal agreed with the appellants that since the testing of samples is a technical necessity for quality control and the samples were not taken outside the factory, no duty can be demanded. Thus, this portion of the demand was set aside.

4. Imposition of Penalty and Interest:
A penalty of Rs. 4.00 crore was imposed on the appellants. Given that the major portion of the demand was set aside and the matter was remanded for "Thinners", the penalty was also set aside. The adjudicating authority was given the liberty to decide on the imposition of personal penalty in the remand proceedings. Additionally, interest u/s 11AB was not required to be paid as the section was not in existence during the relevant period.

Conclusion:
(i) Benefit of Notification No. 222/77-CE dated 15-7-1977 extended to the products, and the demand set aside.
(ii) Benefit of Notification No. 230/86-CE denied to "K.K. Thinners", but the matter remanded to decide on limitation.
(iii) Duty of Rs. 25,538.24 on samples set aside.
(iv) No interest u/s 11AB required.
(v) Penalty set aside.