1990 (9) TMI 189 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of Notification No. 119/66.
2. Clandestine removal of goods.
3. Demand under Rule 9(2) vs. Rule 10/10A.
4. Penalty Imposed.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 119/66:
The appellants were manufacturing 'Copper and Bronze Ingots' from copper and bronze boring scraps supplied by the South Central Railways. They added lead, tin, white metal, gun metal, etc., during the manufacturing process, which was not reported in the classification list filed before the Assistant Collector. The Central Board of Excise & Customs upheld that Notification No. 119/66 was not applicable to their products due to the addition of extra materials, making them liable to pay duty. The appellants argued that the classification list was approved and the department was aware of the products manufactured. However, the department found that the conditions for availing the notification were not followed, and thus, the exemption was not applicable.

2. Clandestine Removal of Goods:
The show cause notices dated 19-10-1976 and 18-1-1977 alleged that the appellants removed Bronze Ingots and Copper Ingots without payment of duty and without approval of the classification list. The department argued that the goods were removed clandestinely. However, the appellants contended that the RT-12 Returns and GP-1 forms were assessed under nil rates of duty and maintained in Form IV Register, indicating the department's awareness. The Tribunal concluded that since the RT-12 Return and GP-1s were assessed with the department's knowledge, it was incongruous to call it an act of clandestine removal. Hence, the demand under Rule 9(2) was deemed untenable.

3. Demand under Rule 9(2) vs. Rule 10/10A:
The Tribunal analyzed the applicability of Rules 10 and 10A. Rule 10 pertains to recovery of duties short-levied due to inadvertence or error, while Rule 10A is a residuary rule for cases not covered under Rule 10. The Supreme Court's decision in N.B. Sanjana, Assistant Collector of Central Excise, Bombay v. The Elphinstone Spinning and Weaving Mills Co. Ltd. clarified that Rule 10 applies even in cases of nil assessment where duty ought to have been paid. The Tribunal held that the demand should be restricted to three months from the date on which duty ought to have been paid, which is the date of issue of the gate-pass.

4. Penalty Imposed:
The penalty of Rs. 10 lakhs was reduced to Rs. 5 lakhs by the Central Board of Excise & Customs. The Tribunal found no evidence of clandestine removal and set aside the penalty imposed. The appeal was modified to the extent indicated, and consequential relief was ordered.

Conclusion:
The Tribunal concluded that the appellants were liable for payment of duty as they did not satisfy the department about the availability of the exemption under Notification No. 119/66. The demand was restricted to the period of three months from the date on which duty ought to have been paid. The penalty imposed was set aside, and the appeal was modified accordingly.