1990 (1) TMI 219 - AT - Central Excise

Issues Involved:

1. Validity of the show cause notice dated 2-4-1981.
2. Confiscation of 100 batteries.
3. Allegation of clandestine removal of batteries and battery plates.
4. Demand for excise duty amounting to Rs. 2,65,759.89.
5. Imposition of penalty of Rs. 40,000.00.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice Dated 2-4-1981:

The appellants contended that the show cause notice dated 2-4-1981 was barred by limitation as it sought to demand duty for the period 1968 to 1971. Alternatively, they argued that if the notice was considered a continuation of earlier proceedings, the favorable findings from the first adjudication order should stand. The Tribunal held that the show cause notice was a continuation of earlier proceedings as it was issued following the Central Government's order for de novo adjudication. However, the Tribunal agreed that the second adjudication could not travel beyond the scope of the first order, thereby granting the appellants the benefit of the favorable findings from the initial adjudication.

2. Confiscation of 100 Batteries:

The Collector of Central Excise confiscated 100 batteries under Rule 173-Q, citing the appellant's failure to identify the source of assembly and labor charges, and the absence of markings indicating reconditioning. The Tribunal found these observations contrary to the Assistant Collector's report, which confirmed that the seized batteries bore the monogram "ACME Reconditioned." The Tribunal set aside the confiscation, noting that the Collector did not provide reasons for rejecting the Assistant Collector's clear and categorical report.

3. Allegation of Clandestine Removal of Batteries and Battery Plates:

The Department alleged that the appellant had clandestinely removed a significant quantity of batteries and plates without paying duty, relying on import application figures, lack of evidence of reconditioning, and sales invoices. The Tribunal found the appellant's explanation regarding the use of both new and reconditioned batteries plausible. It also noted that the price variations in the sales invoices were insufficient to conclusively establish clandestine removal. The Tribunal held that the Department failed to satisfactorily prove the charge of clandestine removal.

4. Demand for Excise Duty Amounting to Rs. 2,65,759.89:

The demand for excise duty was based on the alleged clandestine removal of batteries and plates. The Tribunal, having found the charge of clandestine removal unproven, set aside the demand for duty on batteries. The Tribunal also held that the favorable findings from the initial adjudication regarding import application figures and battery plates should stand, thus confining the duty liability only to the clearance of batteries.

5. Imposition of Penalty of Rs. 40,000.00:

Given the Tribunal's findings that the Department failed to prove the charge of clandestine removal and that the confiscation of 100 batteries was unjustified, the penalty imposed by the Collector of Central Excise was also set aside.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The show cause notice was deemed a continuation of earlier proceedings, but the second adjudication could not extend beyond the first order's findings. The confiscation of 100 batteries was overturned due to the Assistant Collector's report confirming reconditioning. The charge of clandestine removal was not satisfactorily proven, leading to the dismissal of the demand for excise duty and the penalty.

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