1993 (4) TMI 147 - AT - Central Excise

Issues Involved:

1. Classification of the impugned products.
2. Allegation that KFI never produced MC Sheets & Hawai Chappals.
3. Allegation regarding purchase of Rubber foam goods by KRC to be treated as those of KFI.
4. Allegation that TRI never produced MC Sheets, latex, adhesives, etc.
5. Allegation of purchase of rubber foam goods by TRI to be treated as rubber goods manufactured by KFI.
6. Allegation of under-valuation.
7. Quantum of duty adopted by the Department.
8. Confiscation of goods in the premises of KRC.
9. Time bar applicability.

Detailed Analysis:

1. Classification of the Impugned Products:

The main issue is whether the products manufactured by KFI should be classified under Tariff Item 16A(1) or 16A(2). The appellants contended that their products, namely MC sheets and Hawai chappals, were exempt from duty and should be classified under 16A(2). The Department argued that these products should fall under 16A(1) as latex foam sponge. The Tribunal agreed with the Department's classification under 16A(1), referencing previous rulings that latex foam sponge in various forms, including sheets, should be classified under this heading.

2. Allegation that KFI Never Produced MC Sheets & Hawai Chappals:

The Department alleged that KFI suppressed the production and clandestinely removed foam rubber goods, selling them as MC sheets and Hawai chappals. The appellants argued that they were not required to declare these items as they were exempt. They provided evidence such as delivery challans, sales invoices, and balance sheets to support their claim. The Tribunal found that despite some lapses in record-keeping, the evidence provided, including statutory returns and payment of rubber cess, supported the appellants' claim of manufacturing these items. The Tribunal directed that the extent of clearances of MC sheets and Hawai chappals be verified to compute the total clearances.

3. Allegation Regarding Purchase of Rubber Foam Goods by KRC to be Treated as Those of KFI:

The Department alleged that purchases of rubber foam goods by KRC from other manufacturers were actually from KFI. The appellants provided evidence of independent purchases and sales, including payments made by cheques and sales tax returns. The Tribunal found that the Department's reliance on a single statement by Thomas Kuruvilla, which was later retracted, was insufficient to support the charge. The Tribunal set aside the finding that KRC's purchases should be treated as KFI's clearances.

4. Allegation that TRI Never Produced MC Sheets, Latex, Adhesives, etc.:

The Department alleged that TRI did not produce these items and that the value of these products should be added to KFI's clearances. The appellants provided evidence of TRI's independent operations, including licenses, sales tax registrations, and returns filed with the Rubber Board. The Tribunal found that the Department had not provided sufficient evidence to support this charge and set aside the finding.

5. Allegation of Purchase of Rubber Foam Goods by TRI to be Treated as Rubber Goods Manufactured by KFI:

The Department alleged that TRI's purchases of rubber foam goods were actually manufactured by KFI. The appellants argued that TRI made independent purchases and provided evidence of payments and sales tax returns. The Tribunal found that the Department had not provided sufficient evidence to support this charge and set aside the finding.

6. Allegation of Under-Valuation:

The Department alleged that KFI and KRC were related persons and that the assessable value of rubber foam goods should be based on KRC's selling price. The appellants argued that KFI and KRC were independent entities and provided evidence of comparable prices from other manufacturers. The Tribunal found that the Department had not followed the legal principles for determining assessable value and directed a re-examination of the issue.

7. Quantum of Duty Adopted by the Department:

The appellants argued that the calculation of duty was incorrect and that the value of clearances for certain periods should be excluded. The Tribunal found that the issue required re-determination in light of its findings on other charges and remanded the issue for reconsideration.

8. Confiscation of Goods in the Premises of KRC:

The appellants argued that the confiscation of goods was not justified as they had reconciled the stock with their books of account. The Tribunal found that the seizure was not proper and set aside the order of confiscation.

9. Time Bar Applicability:

The appellants argued that the demands were time-barred as the Department was aware of the facts when the first show cause notice was issued. The Tribunal agreed with the appellants and found that the subsequent show cause notice was issued beyond the permissible period, making the demands time-barred.

Conclusion:

The Tribunal allowed the appeals by remanding the issues of under-valuation and quantum of duty for re-determination and set aside the findings on other charges, including the confiscation of goods and the applicability of the time bar.

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