1990 (2) TMI 214 - AT - Central Excise

Summary

Issues Involved:
1. Imposition of duty on phenolic moulding compound (Powder).
2. Confiscation of phenolic moulding compound (Powder).
3. Imposition of penalty.
4. Applicability of exemption under Notification 83/83.
5. Alleged suppression of facts and invocation of extended period of limitation.
6. Clarification on whether the conversion process amounts to manufacture.

Summary:

1. Imposition of Duty on Phenolic Moulding Compound (Powder):
The appellants were charged with illicitly manufacturing and removing phenolic moulding compound (Powder) without payment of duty. The Collector imposed a duty of Rs. 1,56,487.28 on 64,921 kgs and Rs. 72,406.69 on 24,850 kgs of phenolic moulding compound (Powder). The appellants argued that they were a registered small-scale unit and believed that having paid duty on phenolic resin, they need not discharge duty liability on phenolic moulding (Powder). The Tribunal found that the appellants had reasons to believe, based on government clarifications, that the process of conversion did not amount to manufacture, thus no duty was liable.

2. Confiscation of Phenolic Moulding Compound (Powder):
500 kgs of phenolic moulding compound (Powder) was confiscated with an option to redeem on payment of a fine. The Tribunal set aside the seizure, stating there was no clandestine removal justifying confiscation, referencing the Andhra Pradesh High Court decision in Southern Steel Ltd. v. Union of India.

3. Imposition of Penalty:
A penalty of Rs. 10,000/- was imposed on the appellants. The Tribunal set aside the penalty, holding that since the demand for duty was time-barred due to the absence of suppression or misdeclaration, the penalty could not be sustained.

4. Applicability of Exemption under Notification 83/83:
The exemption under Notification 83/83 was denied due to non-filing of the requisite declaration. The appellants contended that they had filed the declaration on 20-3-1983 and could have filed it any time before the end of the financial year. The Tribunal found that the appellants had filed a declaration and there was no suppression of facts, thus the exemption should have been applicable.

5. Alleged Suppression of Facts and Invocation of Extended Period of Limitation:
The show cause notice was issued invoking the extended period of limitation of 5 years u/s 11A of the CESA 1944. The Tribunal held that there was no suppression of facts or willful misdeclaration by the appellants, as they had filed a declaration and were under the bona fide impression that the conversion process did not amount to manufacture. Consequently, the demand for duty was time-barred.

6. Clarification on Whether the Conversion Process Amounts to Manufacture:
The Tribunal referred to various government clarifications which indicated that the process of converting phenolic resin to phenolic moulding compound did not amount to manufacture. The Tribunal held that these clarifications acted as promissory estoppel against the collection of duty.

Conclusion:
The Tribunal set aside the order dated 30-5-1985 in its entirety, allowing the appeal on the grounds of limitation and absence of suppression or misdeclaration.