1988 (10) TMI 157 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for duty exemption under Notification No. 83/83-C.E.
2. Allegation of clandestine removal of goods.

Summary:

Issue 1: Eligibility for Duty Exemption under Notification No. 83/83-C.E.

The appellants manufactured 'Mig detergent bar' and 'Spa Detergent Cake' under an agreement with M/s. Kusum Products Ltd. and availed duty exemption u/s Notification No. 83/83-C.E., dated 1.3.1983. The Additional Collector held that the conditions in the agreement indicated that M/s. Kusum Products Ltd. were the de jure manufacturers u/r 174, and since their aggregate value of clearances exceeded Rs. 25 lakhs in the preceding financial year, the appellants were ineligible for the exemption. The appellants contended they were independent manufacturers and cited several decisions, including Union of India v. Cibatul Limited, to support their claim. The Tribunal concluded that the appellants were the actual manufacturers and not acting on behalf of M/s. Kusum Products Ltd., thus entitling them to the exemption as their clearances were below Rs. 5 lakhs.

Issue 2: Allegation of Clandestine Removal of Goods

The Additional Collector invoked Rule 9(2) of the Central Excise Rules, alleging suppression of facts by the appellants for not disclosing the manufacturing agreement with M/s. Kusum Products Ltd. The appellants argued there was no clandestine removal as the goods were cleared under gate passes and classification lists were approved by the Central Excise Officers. They relied on decisions such as Murugan & Company v. Deputy Collector of Central Excise, which held that bona fide belief and lack of deliberate evasion negate the applicability of Rule 9(2). The Tribunal found no evidence of clandestine removal and held that the appellants were not liable to pay duty due to the exemption under Notification No. 83/83-C.E.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal and confirming the appellants' eligibility for the duty exemption and rejecting the allegation of clandestine removal.