1988 (2) TMI 212 - AT - Central Excise

Summary

Issues Involved:

1. Eligibility for exemption under notifications 71/78 and 80/80.
2. Jurisdiction of the Collector of Central Excise.
3. Inclusion of exempted goods in the value of clearances.
4. Applicability of the longer time limit for raising demand.
5. Imposition of penalty.

Summary:

1. Eligibility for exemption under notifications 71/78 and 80/80:

The main question was whether the value of clearances of laminated cotton fabrics and laminated man-made fabrics, both exempt under notification 100/77, should be included in determining the eligibility for exemption under notifications 71/78 and 80/80 for laminated paper. The Tribunal found that the show cause notice and the adjudicating order were in direct violation of the law laid down by the Hon'ble Allahabad High Court, which held that goods exempted from excise duty are deemed to be non-excisable. Therefore, the show cause notice was invalid, and the adjudicating order confirming the same was also invalid.

2. Jurisdiction of the Collector of Central Excise:

The appellants argued that the adjudication proceedings confirming the demand of duty were void as u/s 11A(2) of the Central Excises & Salt Act, 1944, the power vested only in the Assistant Collector of Central Excise. The Tribunal rejected this argument, stating that there is no prohibition in the section from the Collector himself exercising the powers of the Assistant Collector and that a superior can exercise the power exercisable by his subordinates.

3. Inclusion of exempted goods in the value of clearances:

The Tribunal noted a divergence of judicial opinion on whether goods wholly and unconditionally exempted under a notification issued under Rule 8(1) become non-excisable. While some High Courts held that such goods remain excisable, others, including the Allahabad High Court, held that they cease to be excisable. The Tribunal followed the Allahabad High Court's decision, holding that exempted goods are non-excisable and their value should not be included in determining eligibility for exemption under notifications 71/78 and 80/80.

4. Applicability of the longer time limit for raising demand:

The appellants argued that no mis-statement or suppression was involved, and the shorter time limit of six months should apply. However, the Tribunal held that the appellants should have disclosed the manufacture of laminated man-made fabrics and laminated cotton fabrics in their declarations. Since they did not, the longer time limit of five years was justified.

5. Imposition of penalty:

The Tribunal found that the imposition of penalty was justified due to the appellants' failure to disclose full facts at the proper stage. However, the amount of rupees one lakh was deemed excessive and was reduced to Rs. 50,000. Ultimately, the Tribunal set aside the impugned order in toto and allowed the appeal based on the finding that the show cause notice and the order were in violation of the law laid down by the Hon'ble Allahabad High Court.