1991 (5) TMI 154 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty imposed under Central Excise Rules.
2. Claim of exemption on soap manufactured without the aid of power.
3. Allegation of suppression of facts by the appellants.
4. Dispute regarding the process of manufacture as recorded in the Panchnama.
5. Intimation to authorities about manufacturing soap without the aid of power.
6. Interpretation of relevant Supreme Court judgments on suppression of material facts.

Analysis:

1. The Collector of Central Excise demanded duty and imposed a penalty on the appellants for illicitly manufacturing and removing soap, invoking Rule 9(2) of the Central Excise Rules and Rule 173Q. The appellants filed an appeal and a stay application, which was partially granted by the Tribunal, requiring the deposit of duty but waiving the penalty during the appeal's pendency.

2. The appellants claimed exemption on soap manufactured without the aid of power and steam under Notification 28/64. They argued that they had informed the authorities about manufacturing soap without power through various letters and declarations. The main issue was whether the allegation of suppression of facts could be upheld given the appellants' communication with the authorities regarding their manufacturing processes.

3. The Collector alleged suppression of material facts by the appellants, stating that they did not disclose that the manufacture up to the raw soap stage involved power. However, the appellants disputed the Panchnama's contents, which detailed the manufacturing process, indicating a lack of warrant for the Collector's conclusion.

4. The appellants had written letters and filed declarations with the authorities, explicitly stating their intention to manufacture soap without the aid of power and seeking guidance. The record showed that the appellants had informed the department about their manufacturing processes, and the department was expected to verify and act upon this information to safeguard revenue.

5. The Tribunal highlighted relevant Supreme Court judgments emphasizing the need for positive actions or deliberate withholding of information to establish liability for duty beyond a certain period. In this case, the appellants had informed the authorities about manufacturing soap without power, and the department had a duty to verify this information to protect revenue. As there was no deliberate suppression of material facts, the demand for duty and penalty was set aside, and the appeal was allowed in favor of the appellants.