1993 (10) TMI 162 - AT - Central Excise

Issues Involved:
1. Excisability and marketability of MX Resin and CL Resin.
2. Invocation of the extended period for demand under Section 11A of the Central Excises and Salt Act, 1944.
3. Validity of the show cause notice and addendum.
4. Admissibility of benefit under Rule 56A.
5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Excisability and Marketability of MX Resin and CL Resin:
The appellants contended that MX Resin and CL Resin were not excisable as they were unstable products with a short shelf life, making them non-marketable. They argued that the mixing of ingredients did not result in a new product with a distinctive name, character, or use. The Collector, however, held that the taxable event is the manufacture of goods, regardless of whether the goods are sold or consumed captively. He cited the Supreme Court's decision in Empire Industries Ltd. v. Union of India, asserting that non-marketability does not render goods non-excisable. The appellants countered by referencing the Supreme Court's decisions in Bhor Industries Ltd. v. Collector of Central Excise and Collector v. Ambalal Sarabhai Enterprises, which established that marketability is essential for dutiability and the burden of proof lies on the revenue authorities. The Tribunal found that the Collector failed to address the appellants' arguments regarding non-marketability and thus did not provide a reasoned finding, rendering the order non-speaking and indicative of non-application of mind.

2. Invocation of the Extended Period for Demand under Section 11A:
The appellants argued that the extended period of five years under Section 11A could not be invoked as there was no fraud, wilful misstatement, or suppression of facts. They maintained that the Department was aware of their manufacturing processes since 1977, and similar proceedings had been dropped previously. The Collector, however, held that the appellants' failure to maintain records and file classification lists amounted to suppression of facts, justifying the extended period. The Tribunal found that the Collector did not adequately address the appellants' detailed submissions regarding the Department's prior knowledge, again indicating non-application of mind and lack of a reasoned finding.

3. Validity of the Show Cause Notice and Addendum:
The appellants contended that the show cause notice dated 28-3-1985 was invalid as it did not specify the amount of duty or the period of demand, and the subsequent addendum could not rectify this deficiency. They argued that the addendum should be treated as the first and only demand, which was time-barred. The Collector did not specifically address this issue in his order. The Tribunal did not provide a conclusive finding on this point but highlighted the need for a reasoned order addressing all submissions.

4. Admissibility of Benefit under Rule 56A:
The appellants argued that the benefit under Rule 56A could not be claimed until it was determined that the resin mixtures were chargeable to excise duty. The Collector denied the benefit on the grounds that the appellants had not followed the prescribed procedure. The Tribunal did not specifically address this issue but implied that the Collector's order lacked a thorough examination of the appellants' contentions.

5. Imposition of Penalty under Rule 173Q:
The appellants contended that the imposition of a penalty was unwarranted as the relevant sub-clause of Rule 173Q was not indicated, and there was no finding of mens rea. The Collector imposed a penalty of Rs. 4 lakhs, citing contraventions of the Central Excise Rules. The Tribunal did not explicitly address the penalty issue but noted the overall lack of a reasoned and speaking order from the Collector.

Conclusion:
The Tribunal set aside the Collector's order, citing non-application of mind and failure to provide a reasoned finding on the appellants' detailed submissions. The matter was remanded to the Collector for de novo adjudication in accordance with the law, ensuring an opportunity for the appellants to be heard. The appeal was allowed by way of remand.

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