1983 (3) TMI 190 - AT - Central Excise

Summary

Issues Involved:
1. Excisability of 'cushion compound'.
2. Applicability of Rule 9(2) of the Central Excise Rules.
3. Calculation of duty based on the value of 'cushion compound'.

Issue-wise Detailed Analysis:

1. Excisability of 'Cushion Compound':
The appellant, a manufacturer of rubber products, contended that 'cushion compound' used in their factory for backing tread rubber was not excisable as it was an intermediary product used captively. The Assistant Collector and the Appellate Collector held that 'cushion compound' was a product known separately in the market and thus excisable under Item 16A(2) of the Central Excise Tariff. The Kerala High Court had also ruled that 'cushion compound' captively consumed was excisable. The Tribunal upheld this view, stating that the excisability of 'cushion compound' was conclusively decided by the Kerala High Court and reinforced by a retrospective amendment in the Central Excises and Salt Act, 1944, making captively consumed goods liable to duty.

2. Applicability of Rule 9(2) of the Central Excise Rules:
The appellant argued that Rule 9(2), which presupposes clandestine removal, was wrongly invoked as the goods were manufactured and used within the knowledge of the Excise authorities. The Assistant Collector and the Appellate Collector rejected this argument, stating that the appellant did not disclose the manufacture and use of 'cushion compound' in the classification lists. The Tribunal agreed, noting that the appellant had not declared the goods in the classification lists, thus justifying the invocation of Rule 9(2). However, a dissenting opinion by one member argued that the Department was aware of the production and captive consumption of 'cushion compound', as evidenced by a counter-affidavit in the Kerala High Court, and thus Rule 9(2) should not apply.

3. Calculation of Duty Based on the Value of 'Cushion Compound':
The appellant contended that the duty was wrongly calculated based on the value of tread rubber with cushion backing rather than the lower value of 'cushion compound' and that the prices from 1970-72 should be used instead of the 1974 prices. The Tribunal found merit in this argument and remanded the matter to the Appellate Collector to reassess the duty based on the correct value and prices for the relevant period.

Conclusion:
The appeal was dismissed on merits regarding the excisability and applicability of Rule 9(2), but the calculation of duty was quashed and remanded for reassessment based on the correct value and prices of 'cushion compound' during the relevant period. The dissenting opinion highlighted that the Department's awareness of the production and consumption of 'cushion compound' should preclude the application of Rule 9(2).