1992 (7) TMI 225 - AT - Central Excise

Summary

Issues Involved:
1. Recovery of Central Excise duty on parts of storage electric batteries.
2. Disallowance of proforma credit and imposition of penalty for alleged mis-statement and suppression of facts.
3. Applicability of larger period for demand due to alleged wilful suppression of facts.

Issue-wise Analysis:

1. Recovery of Central Excise duty on parts of storage electric batteries:

The appellants challenged the order of the Collector of Central Excise, Pune, which confirmed the demand for Central Excise duty amounting to Rs. 7,57,385/- for the period 25-2-1978 to 31-5-1978 on parts of storage electric batteries. These parts were used in the manufacture of electric storage batteries and allegedly cleared free of duty. The Collector imposed a penalty of Rs. 10,000/- under Rule 173Q of the Central Excise Rules, 1944.

The appellants contended that parts of storage batteries are intermediates not sold as finished goods and hence not liable for duty. They argued that complete exemption granted to electric storage batteries should extend to their parts, as the parts have no separate entity at the time of removal from the factory. The Collector, however, held that parts of electric storage batteries are dutiable under Tariff Item 31(3) unless used for captive consumption where the end-product pays duty to avoid double taxation. The Collector granted remission of duty for the period 16-3-1976 to 24-2-1978 under Notification No. 115/83, dated 2-4-1983.

2. Disallowance of proforma credit and imposition of penalty for alleged mis-statement and suppression of facts:

The second order involved disallowance of proforma credit of Rs. 2,14,125/- towards basic duty and Rs. 1,693/- towards special excise duty for the period from April 1976 to May 1978. The Collector ordered the assessee to remit back the credit either by debit entry in the PLA or in cash and imposed a penalty of Rs. 2,000/- under Rule 57A(4) of Central Excise Rules, 1944.

The show cause notice alleged that the assessee availed proforma credit by wilful mis-statement and suppression of facts on containers and covers used in the manufacture of electric storage batteries cleared at nil rate of duty. The assessee argued that they could not predict which parts would be used for OE fitment and contended that complete exemption should include parts of storage batteries. The Collector rejected their contention, upholding the charge of wilful mis-statement and suppression of facts.

3. Applicability of larger period for demand due to alleged wilful suppression of facts:

The Tribunal considered the submissions and rulings cited by the appellants, focusing on whether the larger period for demand could be invoked. The appellants argued that there was no wilful suppression, given the notifications and the acceptance of RT-12 and RG-23 returns by the department. They cited several rulings, including Standard Batteries Ltd. v. Collector of Central Excise and Amco Batteries Ltd. v. Collector of Central Excise, where it was held that parts of batteries are dutiable and the larger period could not be invoked in the absence of wilful suppression.

The Tribunal noted that the Superintendent had informed the assessee of the issue by a letter dated 29-5-1978, and thus, the assessee could not claim a bona fide belief. However, the Tribunal accepted the plea that when a Section 11C notification is issued, it indicates a general practice and a genuine misunderstanding of law, negating the charge of wilful suppression. Consequently, the Tribunal set aside the demands for the larger period but held the assessee liable for demands within the standard limitation period.

Conclusion:

The appeals were disposed of with the modification that demands for the larger period were set aside, but the assessee was liable to pay demands within the standard limitation period. The Tribunal recognized the scope for a bona fide belief due to the issuance of Section 11C notifications, thereby negating the charge of wilful suppression of facts.