1989 (7) TMI 273 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of additional grounds in the appeal.
2. Validity of the Show Cause Notice issued under Rule 10 of the Central Excise Rules.
3. Jurisdiction of the Collector of Central Excise to demand short levy under Section 11A of the Central Excises and Salt Act, 1944.
4. Demand of Central Excise duty under Item 68 of Central Excise Tariff.
5. Confiscation of plant and machinery under Rule 173Q(2) of the Central Excise Rules.
6. Imposition of penalty on the appellants.
7. Exemption of silver utensils from duty.

Detailed Analysis:

1. Inclusion of Additional Grounds in the Appeal:
The appellants sought to include additional grounds after Para 26 of the memorandum of appeal. The learned consultant did not press the point numbered as para 26B but urged for the inclusion of para 26A, which pertains to the validity of the Show Cause Notice issued under Rule 10 of the Central Excise Rules and the jurisdiction of the Collector of Central Excise to demand short levy under Section 11A of the Central Excises and Salt Act, 1944. The Departmental Representative had no objection, and hence, the additional ground numbered as para 26A was allowed.

2. Validity of the Show Cause Notice:
The appellants contended that Rule 10 cited in the Show Cause Notice was not in existence at the relevant time, and the short-levy should be demanded only under Section 11A of the Central Excises and Salt Act, 1944. They argued that under Section 11A, only the Assistant Collector was empowered to demand duty invoking the longer period, not the Collector. The Tribunal noted that these contentions were raised as additional grounds in the appeal and were not objected to before the Collector during adjudication. The Tribunal referenced the Andhra Pradesh High Court and the Supreme Court's observations that compliance with a notice and participation in adjudication without demur precludes challenging the notice's validity later.

3. Jurisdiction of the Collector of Central Excise:
The appellants argued that the Collector lacked jurisdiction to demand duty for the period beyond six months under Section 11A as it existed at the material time. The Tribunal referenced its decisions in D.C.W. Ltd. v. Collector of Central Excise and U.P. Laminations v. Collector of Central Excise, which held that there is no prohibition in Section 11A(2) on the Collector exercising the powers of the Assistant Collector.

4. Demand of Central Excise Duty:
The appeal contested the order demanding Central Excise duty under Item 68 of the Central Excise Tariff for the period from 18-6-1977 to 31-3-1979. The appellants argued there was no fraudulent intention in obtaining the Chartered Accountant's certificate and that discrepancies were due to the department's arbitrary valuation of silver bullion. The Tribunal found that the appellants had omitted certain particulars in their declaration based on their understanding of the law, which could at best be a mitigating factor for the penalty but did not absolve them of the duty demand.

5. Confiscation of Plant and Machinery:
The Tribunal found merit in the appellants' submission that confiscation under Rule 173Q(2) was harsh and unjustified. The adjudicating authority did not record specific reasons for directing such confiscation as required by the Rule. The Tribunal set aside the order confiscating the plant and machinery.

6. Imposition of Penalty:
The Tribunal reduced the penalty on the appellants from Rs. 25,000/- to Rs. 15,000/- considering the facts and circumstances of the case. The reduction was justified as the omission in the declaration was based on the appellants' understanding of the law, which could be seen as a mitigating factor.

7. Exemption of Silver Utensils from Duty:
The appellants argued that silver, including utensils, was always exempt from duty under Item 68-CET. The Tribunal did not find this argument persuasive as it was raised for the first time during the appeal and was not substantiated with adequate legal backing.

Conclusion:
The Tribunal allowed the inclusion of additional grounds, upheld the demand for duty, set aside the confiscation of plant and machinery, and reduced the penalty. The appeal was disposed of with modifications to the Collector's order as indicated.