1988 (4) TMI 146 - AT - Central Excise

Summary

Issues Involved:
1. Classification of goods under Central Excise Tariff.
2. Eligibility for exemption under various notifications.
3. Inclusion of exempted goods in the computation of aggregate value of clearances.
4. Alleged suppression of facts and applicability of extended time limit for raising demand for duty.
5. Imposition of penalty under Central Excise Rules.

Issue-Wise Detailed Analysis:

1. Classification of Goods Under Central Excise Tariff:
The appellants manufactured paints and varnishes falling under Item 14 of the Central Excise Tariff and goods falling under Tariff Item 68. They claimed exemption under Notification No. 71/78 and Notification No. 80/80. The Department found that they were also manufacturing goods under Tariff Item 68 without using power, which they did not declare, leading to a contravention of Rules 173-B, 173-F, and 173-G(1) read with Rule 9(1) of the Central Excise Rules, 1944.

2. Eligibility for Exemption Under Various Notifications:
The appellants contended that they were entitled to exemption under Notification No. 179/77-C.E. dated 18.6.77 for goods under Tariff Item 68 as they were manufactured without the aid of power. They also claimed exemption from licensing control under Notification No. 111/78-C.E. dated 9.5.78. However, the Department found that the aggregate value of clearances exceeded Rs. 20 lakhs for the years 1979-80, 1980-81, and 1981-82, disqualifying them from the exemptions claimed.

3. Inclusion of Exempted Goods in the Computation of Aggregate Value of Clearances:
The Additional Collector held that the value of clearances of Tariff Item 68 goods should be included in the computation of aggregate value under clause 2(ii) of Notification No. 80/80-C.E., dated 19.6.80. This was based on the Madras High Court judgment in the case of Tamil Nadu Handloom Weavers Cooperative Society Ltd. v. Assistant Collector of Central Excise, Erode, which stated that goods remain excisable even after being exempted from duty by notification. The Tribunal upheld this view, stating that the value of Tariff Item 68 goods should be included in the aggregate value of clearances, making the appellants ineligible for exemption.

4. Alleged Suppression of Facts and Applicability of Extended Time Limit for Raising Demand for Duty:
The Additional Collector found that the appellants had deliberately suppressed facts, warranting the application of a five-year period for raising the demand under Section 11-A of the Central Excises and Salt Act, 1944. The appellants argued that they had informed the Superintendent of Central Excise about manufacturing goods without power and believed that these goods were not excisable. However, the Tribunal found that the appellants did not provide details about the value of annual clearances and made misstatements in their declarations, justifying the extended time limit and the demand for duty.

5. Imposition of Penalty Under Central Excise Rules:
The Additional Collector imposed a penalty of Rs. 6,000 under Rule 173-Q of the Central Excise Rules, finding that the appellants had suppressed facts with the intention to evade duty. The Tribunal upheld the penalty, considering it justified and not excessive.

Separate Judgment by V.P. Gulati, Member (T):
While agreeing with the conclusion regarding the eligibility criteria for the exemption, V.P. Gulati disagreed on the applicability of the longer time limit. He noted that the appellants had informed the authorities about manufacturing goods without power and that different High Courts had varying views on whether exempted goods should be included in the total value of clearances. He argued that there was no evidence of intent to evade duty, and the omission was due to ignorance or misunderstanding of the law. Therefore, he held that the demand could only be raised for six months, not five years.

Conclusion:
In view of the majority decision, the appeal was dismissed, upholding the demand for duty and the penalty imposed.