1989 (6) TMI 145 - AT - Central Excise

Summary

Issues:
Manufacture of Dry Compressed Air without Central Excise license and formalities, classification list declaration, duty payment, time-barred demand, suppression of facts, imposition of penalty.

Analysis:
The appellants manufactured Dry Compressed Air without a Central Excise license and proper formalities from 1963 to 1984. They filed a classification list declaring 'nil' for other goods produced, failing to disclose the production of Compressed Air. A show cause notice was issued in 1985 for contravention of Central Excise Rules, demanding duty payment and imposing a penalty. The Collector ordered duty payment and imposed a penalty of Rs. 50,000. The appellants argued that Compressed Air was not excisable under Item 68 of the Central Excise Tariff and the demand was time-barred. They claimed no intention to evade duty and cited precedents to support their argument.

The respondent argued that the appellants suppressed facts by not disclosing the manufacture of Compressed Air in the classification list. They contended that duty liability should have been discharged after the introduction of Tariff Item 68 in 1968. The respondent disputed the existence of a letter from the appellants in 1977 and emphasized that duty was demanded only from 1975 onwards.

The Tribunal found that Compressed Air was dutiable under Item 68 of the Central Excise Tariff. However, they accepted the appellants' argument that the demand for duty was time-barred as there was no suppression of facts. The Tribunal noted that prior to 1968, the factory was under physical control, and the Department was aware of the manufacturing activities. The Tribunal also considered a letter from the appellants in 1977 indicating non-coverage under Tariff Item 68. They concluded that the appellants were not guilty of suppression of facts, making the demand time-barred. Regarding the penalty, the Tribunal observed that the appellants' omission in the classification list was a technical offense, and the penalty was unjustified. The penalty order was set aside, and the duty paid under protest was ordered to be refunded to the appellants.

In conclusion, the Tribunal upheld the duty liability but deemed the demand time-barred due to the absence of suppression of facts. They found no justification for imposing a penalty and ordered the refund of the duty paid under protest to the appellants.