2004 (9) TMI 176 - AT - Central Excise

Summary

Issues Involved:
1. Demand of duty on metal scraps.
2. Classification of metal scraps.
3. Invocation of the extended period of limitation.
4. Imposition of penalties under various provisions of the Central Excise Act and Rules.

Detailed Analysis:

1. Demand of Duty on Metal Scraps:
The appellants challenged the duty demand of Rs. 36,12,733/- confirmed by the Commissioner of Central Excise under Rule 9(2) read with proviso to Section 11A of the CE Act, 1944. The department's case was based on intelligence that the appellants cleared metal scraps without payment of duty. Investigations revealed that the scraps were removed under separate invoices and generated from virgin metals like steel, stainless steel, and aluminium, purchased to the tune of Rs. 3.34 crores. The appellants argued that the scraps emerged from wear and tear, not manufacturing activity, and thus were not liable for duty. However, the Tribunal held that the waste and scrap were indeed generated from mechanical working on virgin metals, as corroborated by statements from senior officers of the appellants. Therefore, the demand for duty was upheld.

2. Classification of Metal Scraps:
The appellants contended that the classification of the scraps under Chapters 72, 74, and 76 of the CETA, 1985, was arbitrary and done without giving them an opportunity to present their case. They cited the Supreme Court's judgment in UOI v. Indian Aluminium Co., which held that refuse and rubbish emerging in the course of manufacture are not excisable. However, the Tribunal noted that the appellants did not propose any alternative classification and that the classification adopted by the department was correct. Section Note 8(a) of Chapter 72 defines "waste and scrap" as metal waste from the manufacture or mechanical working of metals, which was applicable in this case. Thus, the Tribunal confirmed the classification and the duty demand.

3. Invocation of the Extended Period of Limitation:
The appellants argued that the department was aware of the clearance of scrap since 1994 and hence, the extended period of limitation could not be invoked. They relied on their correspondence with the department and cited Supreme Court judgments in Tamil Nadu Housing Board v. CCE and Padmini Products v. CCE, which held that mere failure to pay duty does not justify the extended period unless there is an intention to evade duty. However, the Tribunal found that the appellants had not furnished the required details, filed RT 12 returns, or declared under Rule 173B. The Tribunal concluded that the appellants had suppressed facts with the intention to evade duty, justifying the invocation of the extended period of limitation under the proviso to Section 11A of the CE Act.

4. Imposition of Penalties:
The Commissioner imposed a combined penalty of Rs. 37,00,000/- under Rules 9(2), 52A, 173Q, and 226 of the CE Rules, 1944, and Section 11AC of the CE Act, 1944. The appellants contended that Section 11AC, introduced on 28-9-1996, could not be applied retrospectively for the period 1993-1998. The Tribunal agreed that Section 11AC could not be applied retrospectively and reduced the penalty to Rs. 15,00,000/-, considering that only part of the period was covered by Section 11AC. The Tribunal also upheld the penalties under the CE Rules for contraventions by the appellants.

Conclusion:
The appeal was rejected except for the reduction in the quantum of penalty from Rs. 37,00,000/- to Rs. 15,00,000/-. The Tribunal upheld the duty demand, classification of scraps, invocation of the extended period of limitation, and imposition of penalties under the relevant provisions.