1991 (4) TMI 262 - AT - Central Excise

Issues Involved:

1. Correctness of the order confirming the demand for duty on acrylic plastic sheets and MMM.
2. Imposition of penalty and confiscation of property.
3. Allegations of fraud, mis-statement, and suppression of facts.
4. Applicability of exemption notifications.
5. Marketability and excisability of MMM.
6. Time-bar and limitation for issuing the Show Cause Notice.

Issue-wise Detailed Analysis:

1. Correctness of the order confirming the demand for duty on acrylic plastic sheets and MMM:

The appellants challenged the order confirming the demand for Rs. 1,84,17,489.27 on acrylic plastic sheets under Heading 39.20 of the Central Excise Tariff Act, 1985, and Rs. 1,18,431.03 on MMM removed outside the factory. The officers found that the appellants had availed of unintended exemption benefits under Notification No. 53/88 for acrylic plastic sheets manufactured from imported plastic scrap. The Department alleged that MMM was illegally manufactured, removed, and consumed without paying excise duty. The appellants contended that MMM was not goods within the Act's meaning as it had a short life and was not marketable. They also argued that MMM was an intermediate product and not liable for excise duty.

2. Imposition of penalty and confiscation of property:

The Collector imposed a penalty of Rs. 25,00,000/- under Rule 173Q(1) of the Central Excise Rules, 1944, and confiscated the land, building, plant, and machinery used in manufacturing, storing, and removing the goods. However, an option to redeem the confiscated property on payment of a fine of Rs. 5 lakhs was provided. The seizure of 1000 Kgs. of MMM was also ordered, and the cash security of Rs. 3500/- was appropriated towards the value of the goods.

3. Allegations of fraud, mis-statement, and suppression of facts:

The Department alleged that the appellants had manufactured and removed MMM without declaring it to the Department, intending to evade excise duty. The appellants contended that the Department had knowledge of their activities from the beginning, as they had filed declarations describing the goods manufactured, the process, and the value/quantity of goods cleared. The Collector rejected this contention, stating that the appellants did not disclose that they were manufacturing acrylic plastic sheets from non-duty paid MMM.

4. Applicability of exemption notifications:

The appellants argued that the acrylic plastic sheets were exempt from excise duty under various notifications, including Notification No. 53/88, which applied to products manufactured from duty-paid plastic scrap. The Collector held that the exemption was not available because the sheets were manufactured from non-duty paid MMM. The Tribunal referred to previous rulings and trade notices clarifying that the emergence of an intermediate product does not preclude claiming exemption for the final product.

5. Marketability and excisability of MMM:

The Collector held that MMM was marketable and excisable based on the appellants' admission of selling MMM before 1986. The Tribunal noted that MMM was consumed in manufacturing acrylic plastic sheets and was not removed from the factory without paying duty. The Tribunal also referred to the relevant portion of Notification No. 38/73, which provided exemption for acrylic plastic sheets produced from specified materials, including MMM.

6. Time-bar and limitation for issuing the Show Cause Notice:

The appellants contended that the corrigendum Show Cause Notice was time-barred and that the duty liability could not be extended beyond six months from the date of receipt of the corrigendum. The Tribunal examined the declarations and correspondence filed by the appellants and concluded that the Department was aware of their activities, and the charge of suppression or mis-declaration failed. The Tribunal found that the Department's inference regarding the letter dated 13-2-1986 was far-fetched and that the letter was acknowledged by the Department.

Judgment:

The Tribunal allowed the appeal, setting aside the impugned order. The Tribunal held that the emergence of an intermediate product (MMM) does not bar the appellants from claiming exemption for the final product (acrylic plastic sheets). The Tribunal also found that the Department was aware of the appellants' activities, and there was no suppression or mis-declaration of facts. The Tribunal concluded that the demand raised was barred by the period of limitation.

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