1991 (1) TMI 268 - AT - Central Excise

Issues Involved:

i) Whether the demand is barred by the period of limitation of 6 months in the absence of any suppression or mis-declaration;
ii) Whether Rule 9(2) of the Central Excise Rules under which duty has been demanded applies to the facts of the case;
iii) Whether for the purpose of the explanation to Notification No. 176/77, the face value of the investment on plant and machinery is to be calculated on the basis of price paid by the manufacturer (appellant herein).

Issue-wise Detailed Analysis:

Issue No. 1: Limitation Period

The appellant argued that the extended period of limitation should not apply as they themselves had informed the Department about the purchase of the industrial unit and the cost of plant and machinery on 27-7-81. They contended that there was no suppression or mis-declaration to justify invoking the extended period of 5 years. However, the Tribunal held that the appellant's silence from the time of purchase in 1979 until July 1981 constituted a "conscious or deliberate withholding of information." The Supreme Court's judgment in the case of Collector of Central Excise v. Chemphar Drugs & Liniments was distinguished on facts as the assessee in that case had filed a declaration and classification list during the relevant period. Thus, the Tribunal concluded that the demand was not time-barred and ruled against the appellant on this issue.

Issue No. 2: Applicability of Rule 9(2) of the Central Excise Rules

The appellant contended that Rule 9(2) could not be applied as it pertains to clandestine removal, which presupposes the existence of a license for manufacturing excisable goods. The Tribunal, however, referred to a series of decisions, including Saraiya Engg. Co. Bombay v. CCE Bombay, Shree Shankar Industries v. CCE, Sidheshwari Cotton Mills Ltd., Calcutta v. CCE, Calcutta, and Jai Hind Process and Printing Depot v. CC & CE, which established that Rule 9(2) applies when a license is not obtained for the manufacture of excisable goods and removal is effected. Consequently, this issue was also decided against the appellant.

Issue No. 3: Calculation of Investment Value for Notification No. 176/77

The appellant argued that the value of the investment should be based on their own expenditure on plant and machinery, not the value invested by the previous owner, M/s. Indian Glue Corpn. They claimed that even if the cost of the generating transformer was added, the value remained below Rs. 10 lakhs, excluding repair and replacement charges. The Tribunal, however, emphasized that Notification No. 176/77 specifies that the exemption is based on the "sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial unit." Thus, the value of the investment made by the previous owner was relevant. The Tribunal found no infirmity in adopting the value of Rs. 8,66,162.06 for plant and machinery as of 18-6-77 and agreed with the Department's inclusion of Rs. 1,95,988.35 for the generating transformer. However, based on the decision in Collector of Central Excise v. General Cement Private Limited and departmental clarification, the Tribunal excluded the value of generating sets from the computation. Despite this, the value of investment still exceeded Rs. 10 lakhs due to the inclusion of other items like copper pipes, G.I. pipes, steel pipes, valves, and flanges, as detailed in the Superintendent's report. Therefore, the appellants were not eligible for the exemption under Notification 176/77.

Penalty:

The imposition of a penalty of Rs. 2,000 was upheld due to the violation of Rule 173Q, as the appellants had manufactured excisable goods without a central excise license, without filing the classification list and price list, and removed the goods without proper gate pass and without payment of duty.

Conclusion:

The Tribunal concluded that:
(a) The demand is not barred by limitation;
(b) Rule 9(2) of the Central Excise Rules is applicable to this case;
(c) The appellants are not eligible for the benefit of Notification 176/77 as the value of investment on plant and machinery installed in the industrial unit exceeds Rs. 10 lakhs.

The appeal was dismissed.

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