1994 (4) TMI 163 - AT - Central Excise

Summary

Issues:
- Duty liability for manufacturing and removing cotton yarn without proper accountal and payment of excise duty.
- Imposition of penalty under Rule 173-Q.
- Claim of exemption under Notification No. 172/72 for waste cotton of short length.
- Time-barring issue regarding the demand for duty.

Analysis:

The appeal before the Appellate Tribunal arose from an Order-in-Original passed by the Collector of Central Excise, Calcutta, regarding the manufacturing and removal of cotton yarn without proper accountal and payment of excise duty. The appellants were charged with manufacturing and removing specific quantities of cotton yarn without accounting for them in the R.G. 1 register, leading to a demand for duty amounting to Rs. 5,908.90 and imposition of a penalty under Rule 173-Q. The Collector, after considering the submissions, confirmed the demand and imposed the penalty, citing the failure of the company to establish that the cotton yarn in question was exempt from duty due to its short length and saleability.

The appellants contended that the waste cotton arising during the manufacturing process, specifically the waste yarn from the Ring frames, was not accounted for in the R.G. 1 register due to its short length and entangled nature. They argued that this waste cotton, though not recorded in the statutory register, was reflected in private records and balance-sheets, indicating no intention to evade duty. The appellants also claimed exemption under Notification No. 172/72 for waste cotton of short length. They further argued that the demand was time-barred, as the facts were not suppressed, and the value of the waste cotton was clearly shown in the balance-sheets.

On the other hand, the Department contended that the failure to account for the waste cotton in the R.G. 1 register amounted to suppression of facts, and the substantial value of the waste cotton was not recorded in the statutory records. The Department maintained that the demand for duty and the penalty were justified based on the findings of the Collector.

After considering the submissions and perusing the records, the Tribunal noted that the production and sale value of cotton yarn and waste cotton were reflected in the balance-sheets. The Tribunal observed that while the duty liability and exemption claim were relevant, the crucial issue was the time-barring aspect of the demand. The Tribunal agreed with the appellants that there was no clandestine removal of goods, given that the value of the waste cotton was disclosed in the balance-sheets and private accounts. In the absence of specific allegations of suppression of facts and considering the disclosure of the waste cotton value, the Tribunal held that the Department was not justified in invoking the extended period for demand. Consequently, the impugned order was set aside, and the appeal was allowed.