1983 (3) TMI 187 - AT - Central Excise

Summary

Issues:
Violation of Central Excise Rules - Manufacturing without license and non-payment of duty, Burden of proof on Department, Bar of limitation under Section 40(2) of Central Excises and Salt Act.

Analysis:

1. The case involved a situation where the appellant was found to have manufactured electric wires and cables without obtaining a Central Excise license and without paying the required duty. The Central Excise officers discovered this during a surprise inspection of the factory premises. A show cause notice was issued to the appellant, who denied engaging in such manufacturing activities, claiming that the wires and cables were purchased from third parties and pledged to a bank for obtaining a loan.

2. The Collector of Central Excise, in his order, concluded that the appellant had indeed manufactured the goods in question based on the loan obtained from the bank for manufacturing purposes. The Collector demanded duty payment and imposed a penalty. The Central Board of Excise and Customs upheld the Collector's decision, leading to the appeal before the Tribunal.

3. During the appeal, the appellant argued that the burden of proof lay with the Department to establish their engagement in manufacturing activities. The appellant contended that the show cause notice was time-barred under Section 40(2) of the Central Excises and Salt Act. On the other hand, the Department argued that the loan obtained and pledged articles to the bank indicated manufacturing activities by the appellant.

4. The Tribunal carefully considered the evidence presented by both sides. It noted that there was no direct evidence of manufacturing activities by the appellant. The letters from the bank did not conclusively prove such activities, as they did not provide personal knowledge or inspection details. The appellant consistently denied engaging in manufacturing, and the Tribunal found the reliance on bank letters insufficient to establish manufacturing.

5. The Tribunal held that the lower authorities' reliance on the bank letters for proof of manufacturing activities was not justified. Therefore, it set aside the order of the Board. Additionally, the Tribunal addressed the argument regarding the bar of limitation under Section 40(2) of the Central Excises and Salt Act. It referenced conflicting High Court decisions but ultimately concluded that this provision did not apply to proceedings initiated by Central Excise authorities.

6. Consequently, the Tribunal allowed the appeal, setting aside the Board's order. The judgment emphasized the importance of concrete evidence to establish manufacturing activities and clarified the applicability of the limitation provision in Central Excise proceedings.