1990 (10) TMI 218 - AT - Central Excise

Issues Involved:
1. Entitlement to proforma credit on duty paid for stators and rotors used in the manufacture of electric fans.
2. Applicability of exemption notifications.
3. Validity of extended period for demand and imposition of penalties.
4. Withdrawal of refund claims.

Issue-wise Detailed Analysis:

1. Entitlement to Proforma Credit:
The appellants, manufacturers of electric fans, sought proforma credit for duty paid on stampings and laminations used in manufacturing stators and rotors, which were then used in electric fans. The Assistant Collector initially granted permission but later refused it, citing that stators and rotors were exempt if captively consumed under Notification No. 28/69. Despite this, the appellants continued to avail of the proforma credit, leading to show cause notices and the final order demanding duty and imposing penalties. The Tribunal found that the main issue was whether proforma credit on duty paid on stators and rotors, used in electric fans, was permissible. The Tribunal allowed the appellants to argue on merits, finding that the issue did not involve determining the rate of duty or valuation.

2. Applicability of Exemption Notifications:
The appellants argued that they were entitled to choose between two exemption notifications, 28/69 and 124/65, and opted for the latter, which allowed set-off of duty paid on stators and rotors. They cited Notification No. 95/79 and its amendment by Notification No. 110/80, which extended the set-off benefit specifically to electric fans. The Tribunal agreed, noting that the appellants had the right to choose the more convenient exemption and that the department could not force them to avail only Notification No. 28/69. The Tribunal also referenced clarifications from the Bombay Collectorate Trade Notice and the Ministry's letter, confirming the legality of the appellants' choice.

3. Validity of Extended Period for Demand and Imposition of Penalties:
The Tribunal found that the demand for the extended period was based on the assumption that the appellants were not eligible for proforma credit. Since the Tribunal held that the appellants were entitled to proforma credit, there was no deliberate violation of rules or intent to evade duty. The Tribunal noted that the appellants had been transparent in their RT-12 Returns and had pursued their case through representations, which negated any allegations of willful misstatement or suppression of facts. Consequently, the Tribunal ruled that the extended period and penalties were unjustified.

4. Withdrawal of Refund Claims:
The appellants had filed refund claims for the duty paid on stators and rotors as a precaution against time limitation. During the proceedings, they undertook to withdraw these claims if the Tribunal decided in their favor. The Tribunal directed the appellants to withdraw the refund claims and ordered the discharge of the bank guarantee furnished by the appellants.

Conclusion:
The Tribunal allowed the appeal, setting aside the Collector's order demanding duty and imposing penalties. It affirmed the appellants' entitlement to proforma credit for duty paid on stators and rotors used in the manufacture of electric fans, upheld their right to choose the applicable exemption notification, and invalidated the extended period for demand and penalties. The Tribunal also directed the appellants to withdraw their refund claims.

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