2001 (12) TMI 168 - AT - Central Excise

Summary

Issues:
1. Confirmation of demand of duty and penalty imposition by the Commissioner of Central Excise.
2. Confiscation of land, building, etc., and imposition of a fine for redemption.
3. Nature of job work undertaken by the appellants.
4. Demand of duty based on exemption under Notification No. 214/86.
5. Allegations of suppression and lack of knowledge of the process by the department.
6. Barred proceedings by limitation.
7. Liability of the principal manufacturer to pay duty.

Analysis:

1. The appeal was filed against the decision of the Commissioner confirming the duty demand of Rs. 9,27,78,318/- and imposing an equal penalty, along with the confiscation of assets and a fine for redemption. The appellants were engaged in manufacturing paper covered copper strips and providing job work services. They imported insulating paper for their manufacturing process and reversed Modvat credit when used for job work. The appellants had a history of filing classification lists and had previously dealt with issues related to job work in legal proceedings.

2. A show cause notice was issued to demand duty for a specific period, alleging that the appellants were not entitled to exemption under Notification No. 214/86. The department later issued another notice stating that the appellants had wrongly claimed exemption and had carried out manufacturing activities under the guise of job work. The department alleged that the appellants used their own inputs and recovered costs from the principal manufacturers. The adjudicating authority relied on legal precedents to support the decision.

3. The Senior Counsel for the appellants argued that the department was aware of the nature of the activity since 1980, and the proceedings were barred by limitation. The counsel emphasized that the department could not claim ignorance given the history of legal actions and notices. The Senior Counsel also discussed the liability of the principal manufacturer to pay duty and referred to relevant legal judgments.

4. The appellate tribunal found that the department was not ignorant of the appellants' activities since 1980, and therefore, the plea of ignorance could not be accepted. The tribunal concluded that the parameters under Section 11A(1) were not complied with, and the larger period of limitation could not be invoked by the department. As a result, the impugned order was set aside, and the appeal was allowed, ruling in favor of the appellants.

5. In the final decision, the tribunal allowed the appeal, stating that the department's invocation of the larger period of limitation was not valid due to the department's prior knowledge of the appellants' activities. The tribunal found that the impugned order was legally flawed and, therefore, set it aside.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the tribunal's reasoning leading to the final decision in favor of the appellants.