1989 (3) TMI 265 - AT - Central Excise

Summary

Issues:
- Appeal against duty demand and penalty upheld by Collector of Central Excise (Appeals)
- Interpretation of Notification No. 175/86 regarding exemption limit for small scale industries
- Calculation of aggregate value of clearances under different headings of the Central Excise Tariff Act, 1985

Analysis:
The appeal in this case was directed against an order passed by the Collector of Central Excise (Appeals), Madras, upholding a duty demand and penalty imposed by the Assistant Collector of Central Excise, Coimbatore. The dispute arose when the appellants, who operated two small scale industrial units, crossed the Rs. 30 lakhs exemption limit for small scale industries under Notification No. 175/86. The Department contended that the appellants had exceeded the exemption limit by clearing goods under various headings of the Central Excise Tariff Act. The Department demanded duty on the excess clearances and imposed a penalty under Rule 9(2) of the Central Excise Rules, 1944. The Assistant Collector confirmed the demand and penalty, a decision upheld by the Collector (Appeals).

The main contention raised by the appellants was regarding the interpretation of Notification No. 175/86. The appellants argued that the exemption limit of Rs. 30 lakhs for first clearances should be applied collectively to all goods manufactured, with each individual item being below Rs. 15 lakhs. They claimed that no duty should be payable on other goods as long as the total value of clearances did not exceed Rs. 30 lakhs. On the other hand, the Department argued that once clearances for a specified good exceeded Rs. 15 lakhs, duty had to be paid on further clearances of that good.

Upon careful consideration of the submissions, the Tribunal analyzed the provisions of Notification No. 175/86. The Notification provided for duty concessions based on the value of first clearances made in a financial year. It allowed duty-free clearances up to Rs. 15 lakhs under one heading of the tariff and up to Rs. 30 lakhs for multiple headings. The Tribunal noted that the Notification permitted manufacturers to combine the value of clearances of different goods to enjoy full exemption up to Rs. 30 lakhs, as long as the value under any one heading did not exceed Rs. 15 lakhs. The Tribunal also referred to departmental clarifications supporting the appellants' interpretation of the Notification.

Based on the analysis of the Notification and relevant clarifications, the Tribunal found in favor of the appellants. It concluded that the claim of the appellants that no duty was payable by them in the present case was sustainable. Therefore, the impugned order upholding the duty demand and penalty was set aside, and the appeal was allowed.