1985 (12) TMI 214 - AT - Central Excise

Excise duty chargeable at the time of removal of excisable goods from the place of manufacture

Summary

Issues Involved:
1. Whether excise duty was legally payable at the blended wool top stage.
2. Whether any portion of the demands confirmed against the appellants was time-barred.
3. Whether the penalties imposed on them were justified.
4. Whether any calculation mistakes in the demands needed rectification.

Summary:

I - Whether excise duty was legally payable at the blended wool top stage:

The appellants argued that duty should be charged at the earliest stage of manufacture, i.e., the pure wool top stage. However, the court held that the taxable event for excise is the manufacture of goods, and the duty is chargeable at the stage when the goods are removed for consumption or utilization in the manufacture of another commodity, as specified in Rule 9(1). The court cited the Supreme Court judgment in U.O.I. and others v. M/s. Bombay Tyre International Ltd., which clarified that the stage of collection need not synchronize with the completion of the manufacturing process. Therefore, duty was payable at the blended wool top stage when the wool tops were removed for spinning yarn.

II - Whether any portion of the demands confirmed against the appellants was time-barred:

The demands were raised under Rule 9(2) for the periods 1980-81 to 1983-84. The appellants contended that the normal time limit of six months applied, making most demands time-barred. However, the court found that the appellants had suppressed the fact of manufacture of blended wool tops by not filing the necessary declarations and assessment documents. The court held that the charge of suppression could be reasonably inferred from the show cause notices and the appellants' persistent contravention of rules justified the extended time limit of five years. However, the court limited the demand for the year 1980-81 to the period from 3-12-1980 onwards, when the Collector's trade notice was issued.

III - Whether the penalties imposed on them were justified:

The court agreed with the Collector that the appellants were guilty of contravention of Rule 9(1) due to suppression and defiance of the changed practice of assessment. The penalties totaling Rs. 2.75 lakhs were justified and not excessive, given the seriousness of the contravention.

IV - Whether any calculation mistakes in the demands needed rectification:

The appellants raised an additional ground regarding computation mistakes in the demand amounts. The court ordered the Assistant Collector to hear the appellants on instances of such computation mistakes and exclude any amounts due to obvious errors.

Conclusion:

The reliefs granted to the appellants were limited to: (i) exclusion of the duty demand for the period prior to 3-12-1980, and (ii) exclusion of duty amounts attributable to obvious computation mistakes. The four appeals were otherwise rejected.