1987 (7) TMI 351 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of Tariff Item 68 goods in the aggregate value of clearances for exemption eligibility.
2. Non-excisability of fully exempted goods under Tariff Item 68.
3. Legality of invoking the longer time limit for raising a demand of duty.
4. Justification for the imposition of penalties.

Detailed Analysis:

1. Inclusion of Tariff Item 68 Goods in the Aggregate Value of Clearances for Exemption Eligibility:
The primary issue was whether goods under Tariff Item 68, which were fully exempted from duty under Notification No. 55/75-C.E., should be included in computing the aggregate value of clearances for determining eligibility for exemption under Notification No. 71/78 or No. 80/80. The appellants argued that fully exempted goods should not be included in the aggregate value of clearances. They cited several decisions supporting their view, including Sulekh Ram & Sons v. U.O.I. and Tata Export v. Union of India. However, the Tribunal referred to the Karnataka High Court decision in Karnataka Cement Pipe Factories case, which held that excisable goods do not cease to be excisable merely because they are exempt from duty. The Tribunal concluded that fully exempted goods under Tariff Item 68 should be included in the aggregate value of clearances.

2. Non-excisability of Fully Exempted Goods Under Tariff Item 68:
The appellants contended that goods falling under Tariff Item 68, being fully and unconditionally exempted from duty, should be considered non-excisable. They argued that exemption from duty and licensing should render the goods non-excisable. The Tribunal, however, followed the Karnataka High Court's decision, which stated that the character of a product as excisable depends on its description in the First Schedule to the Act, not on the actual levy of duty. The Tribunal held that exemption from duty does not make the goods non-excisable unless the notification explicitly provides for such exclusion.

3. Legality of Invoking the Longer Time Limit for Raising a Demand of Duty:
The appellants argued that the longer time limit of five years for raising a demand of duty under Section 11A of the Central Excises and Salt Act, 1944, should not apply, as their non-filing of declarations was due to an unsettled legal position. The Tribunal disagreed, stating that the appellants did not disclose their manufacture of Tariff Item 68 goods to the authorities and continued to avail of exemptions for Tariff Item 14-E goods. The Tribunal upheld the invocation of the longer time limit, concluding that the appellants had suppressed facts to evade duty.

4. Justification for the Imposition of Penalties:
The appellants contended that penalties should not be imposed due to the divergent legal views on the includibility of fully exempted goods in the aggregate value of clearances. The Tribunal acknowledged the uncertain legal position and the appellants' reliance on various High Court decisions. It noted that the appellants' belief in the non-includibility of exempted goods was based on a reasonable interpretation of existing legal precedents. Consequently, the Tribunal set aside the penalties imposed on the appellants, recognizing the unsettled legal landscape.

Conclusion:
The Tribunal dismissed the appeals except for the relief of setting aside the penalties. It held that fully exempted goods under Tariff Item 68 should be included in the aggregate value of clearances for determining exemption eligibility. It also upheld the invocation of the longer time limit for raising a demand of duty but set aside the penalties due to the uncertain legal position.