2005 (4) TMI 144 - AT - Central Excise

Appeal - fixing of handle to container - benefit of Notification No. 67/95-C.E - demand of duty - Additional ground - Penalty - HELD THAT - We find that it is not in dispute that the fixing of handle to container was done by them in the premises of M/s. APCL and that the latter used the resulting containers for packing their product viz. paints. It appears from the relevant findings of the authorities below that this fact stands accepted by the Revenue. If that be the case, M/s. TPCL were clearly entitled to the benefit of Notification No. 67/95-C.E. in respect of the container-handles inasmuch as the said item was captively consumed by M/s. TPCL and M/s. APCL. It is settled law vide the case law cited by ld. Counsel that, under Notification No. 67/95-C.E., inputs/capital goods could be captively consumed in a given factory by different manufacturers. It is, again, settled law that the benefit of an exemption Notification could be claimed at appellate stage. This is what M/s. TPCL has done in this case. We, therefore, allow the benefit of Notification No. 67/95-C.E. to M/s. TPCL in respect of the container-handles and, accordingly, set aside the demand of duty. It would follow that the penalties on M/s. TPCL cannot be sustained. A benefit will, incidentally, flow from this decision to APCL insofar as the penalty imposed on them under Rule 198 is concerned, and we vacate that penalty also. In the result, after setting aside the impugned order, we allow both the appeals.

Issues:
1. Duty demand on M/s. TPCL for the period April '98 to March '2000.
2. Imposition of penalties on M/s. TPCL and M/s. APCL under various rules.
3. Contesting the penalties imposed under Rule 209A and Rule 198(2).
4. Benefit of exemption under Notification No. 67/95-C.E. for captively consumed items.
5. Applicability of exemption Notification at the appellate stage.

Analysis:
1. The case involved two appeals by M/s. Tambraparani Containers Pvt. Ltd. (TPCL) and M/s. Addison Paints and Chemicals Ltd. (APCL) regarding the supply of containers with handles. The dispute arose when the Department alleged that the cost of the handle was not included in the invoiced price of the containers supplied by TPCL to APCL. The original authority confirmed a duty demand against TPCL and imposed penalties on both parties, which were upheld by the Commissioner (Appeals), leading to the appeals before the Tribunal.

2. The counsel for TPCL argued that fixing the handle on the containers at APCL's premises was a special arrangement to prevent leakage and that the value of the handle was included in the invoices. They cited legal precedents supporting their position. On the other hand, APCL's counsel contended that no penalty was proposed under Rule 209A against them in the show cause notice.

3. The Department reiterated the findings of the Commissioner (Appeals) and argued against the exemption under Notification No. 67/95-C.E. The Tribunal observed that penalty under Rule 209A was not proposed in the show cause notice, leading to the allowance of Appeal No. 640/2001 based on procedural irregularities.

4. The Tribunal found that TPCL was entitled to the benefit of Notification No. 67/95-C.E. for captively consumed items, including the container handles. As per settled law, the benefit of an exemption notification could be claimed at the appellate stage, leading to the setting aside of the duty demand and penalties on TPCL. Consequently, the penalty on APCL under Rule 198 was also vacated.

5. Ultimately, the Tribunal allowed both appeals, setting aside the impugned order and granting the benefit of the exemption to TPCL, thereby impacting the penalties imposed on both TPCL and APCL. The decision highlighted the importance of procedural adherence and the applicability of exemption notifications at different stages of legal proceedings.

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