1989 (11) TMI 170 - AT - Central Excise

Summary

Issues Involved:
1. Validity of the demand for duty under Rule 10 of the Central Excise Rules, 1944.
2. Imposition of personal penalty under Rule 173Q of the Central Excise Rules.
3. Whether the demand is time-barred under Section 11A of the Central Excise Act.
4. Classification of the product as phenolic resin or epoxy phenolic adhesive formulation.
5. Marketability and excisability of the intermediate product.

Detailed Analysis:

1. Validity of the Demand for Duty:
The appellants challenged the order of the Collector of Central Excise, Meerut, which confirmed a demand of Rs. 2,47,987.23 under Rule 10 of the Central Excise Rules, 1944. The demand was based on the allegation that the appellants had removed dutiable goods without payment of duty, without a license, and without observing Central Excise formalities. The Collector also imposed a personal penalty of Rs. 5,000/- under Rule 173Q of the Central Excise Rules.

2. Imposition of Personal Penalty:
The Collector imposed a personal penalty of Rs. 5,000/- for contravention under Rule 173Q of the Central Excise Rules, alleging that the appellants had removed goods without payment of duty and without a license.

3. Time-Bar under Section 11A:
The appellants contended that the demand was time-barred, arguing that there were no allegations of suppression, misrepresentation, or misstatement of facts in the show cause notice. They emphasized that they had always been transparent with the Department, regularly seeking advice and filing classification lists. The Tribunal found that the show cause notice did not clearly indicate suppression or misrepresentation of facts, and the appellants had consistently informed the Department about their manufacturing process. Consequently, the Tribunal held that the demand was time-barred as the Department had not shown that they were unaware of the appellants' activities.

4. Classification of the Product:
The appellants argued that the product in question was not phenolic resin but an epoxy phenolic adhesive formulation with a short shelf life, used as an intermediate input for their final product, glass textolite. The Collector, however, concluded that the appellants had manufactured phenolic resin based on dictionary definitions and the commercial nature of the product. The Tribunal disagreed, stating that the Department had not conducted any tests to determine the nature of the product and that conclusions based on dictionary meanings were insufficient.

5. Marketability and Excisability:
The appellants contended that the intermediate product was not marketable due to its short shelf life and was not goods that could attract excise duty. The Tribunal noted that the Department had not provided evidence of the product's marketability or shelf life and had not tested samples of the product. The Tribunal emphasized that marketability is essential for a product to be excisable and that the Department had failed to prove this aspect.

Conclusion:
The Tribunal concluded that the demand was time-barred as the Department had not demonstrated suppression or misrepresentation by the appellants. The Tribunal also noted that the Department had not provided sufficient evidence to classify the product as phenolic resin or to prove its marketability. Consequently, the appeal was allowed, and the impugned order of the Collector was set aside. The cross-appeal filed by the Revenue was also dismissed.