1994 (3) TMI 190 - AT - Central Excise

Summary

Issues Involved:
1. Classification and duty liability of plastic injection moulds.
2. Applicability of exemption Notification No. 220/86-C.E.
3. Allegation of suppression and imposition of penalty.

Summary:

Issue 1: Classification and Duty Liability of Plastic Injection Moulds

The appellants are engaged in the manufacture of plastic injection moulds and plastic moulded parts, classified under Heading 84.80 of the Central Excise Tariff Act, 1985. The Collector (Appeals) confirmed the demand of excise duty of Rs. 54,86,715/- for 41 moulds valued at Rs. 3,25,66,000/- u/s 3(2) of the Central Excises and Salt Act, 1944, and imposed a penalty of Rs. 5 lakhs u/r 173Q(i) of the Central Excise Rules, 1944.

Issue 2: Applicability of Exemption Notification No. 220/86-C.E.

The appellants claimed exemption u/s Notification No. 220/86-C.E., dt. 2-4-1986, for moulds manufactured and used within their factory. The dispute arose over moulds sold to financial institutions but retained and used in the appellants' factory. The Collector held that the appellants did not declare the "sold moulds being retained in the factory" in the classification list, thus denying the exemption. The appellants argued that the notification should be interpreted plainly, allowing exemption as long as the moulds were used within the factory, irrespective of ownership changes.

Issue 3: Allegation of Suppression and Imposition of Penalty

The department alleged suppression of transactions, attracting a larger period for duty demand and penalty imposition. The appellants contended that the department was aware of the transactions, and the moulds were used within the factory, thus qualifying for exemption. The Collector observed that the appellants should have paid duty upon sale and then sought permission to retain and use the moulds, which they failed to do, leading to the penalty.

Judgment:

The Tribunal held that excise duty is on manufacture, not on sale. Since the moulds were not removed from the factory and were intended for use within the factory, the exemption notification applied. The mere raising of sale invoices did not create a duty liability. The impugned order was set aside, and the appeal was allowed, emphasizing that the levy of excise duty is based on manufacture and not on the saleability of goods.