1987 (7) TMI 226 - AT - Central Excise

Summary

Issues:
1. Applicability of the five years time-limit under proviso to Section 11A(1) of Central Excises and Salt Act, 1944 in raising demand against the appellants.
2. Justification of the imposition of a penalty of Rs. 5,000 against the appellants for breach of certain rules set out in the show cause notice and orders of the lower authorities.

Analysis:

1. The appeal revolved around the applicability of the five years time-limit under proviso to Section 11A(1) of the Central Excises and Salt Act, 1944, and the imposition of a penalty against the appellants. The appellants, engaged in manufacturing P & P medicines, specifically Spirocton-gum-cream, were contesting the demand of duty and penalty imposed by the authorities. The issue of classification of the product under Tariff Item 14-E was central to the dispute. The appellants had filed a classification list declaring the product as non-excisable, leading to a series of correspondences and analyses by the authorities regarding the product's classification. The Assistant Collector classified the product under Tariff Item 14-E and demanded duty, which was upheld by the Collector of Central Excise (Appeals), prompting the appeal to the Tribunal.

2. The Tribunal scrutinized the facts and circumstances of the case, emphasizing the Department's burden to prove the classification for levy of duty. The Tribunal noted that the appellants cooperated with the Department, providing necessary information and documents. The inference of suppression of fact against the appellants, based on a letter from the Food and Drug Administration, was deemed insufficient to justify the imposition of penalty. The Tribunal highlighted that the Department had the responsibility to arrive at a proper classification based on the material provided by the appellants. The Tribunal concluded that invoking the five years time-limit for demanding duty was unjustifiable, given the Department's delay in classification and decision-making process.

3. Ultimately, the Tribunal ruled in favor of the appellants, restricting any demand of duty to a period of six months preceding the show cause notice. The imposition of the penalty of Rs. 5,000 was set aside, as the appellants' actions did not warrant such punitive measures. The appeal was disposed of with consequential relief granted to the appellants, emphasizing the importance of proper classification procedures and the Department's onus to establish the same before imposing duties and penalties.