1994 (7) TMI 165 - AT - Central Excise

Summary

Issues Involved:

1. Eligibility of exemption under Notification No. 202/88-C.E. for products manufactured from used and rejected railway materials.
2. Validity of invoking the extended period of limitation u/s 11A for demand of duty.

Summary:

Issue 1: Eligibility of Exemption under Notification No. 202/88-C.E.

The appellants were manufacturing M.S. Rounds/Squares from old and used railway materials and claimed exemption from Central Excise duty under Notification No. 202/88-C.E. The Department contended that these materials did not fall under the specified inputs in the notification. The appellants argued that such materials should be treated as "angles, shapes and sections" or "rollable or re-rollable materials" as per the prevailing practice and clarifications by the Department. However, the Tribunal held that old and unserviceable railway materials should be treated as "old and used re-rollable scrap" and not as "angles, shapes and sections." Consequently, these materials were not covered by the specified inputs in Notification No. 202/88-C.E., and the final products were not eligible for exemption.

Issue 2: Validity of Invoking the Extended Period of Limitation u/s 11A

The Collector invoked the extended period of limitation u/s 11A, alleging suppression of facts by the appellants. The appellants contended that they acted on a bona fide belief based on the Department's past practice and clarifications that their products were exempt. The Tribunal agreed with the appellants, noting that the Department's practice was to treat such materials as "angles, shapes and sections." The Tribunal cited the Supreme Court judgments in Padmini Products v. Collector of Central Excise and Collector of C. Excise v. Chemphar Drugs and Liniments, emphasizing that mere failure to take out a license or pay duty in cases of doubt does not attract the extended limitation. Therefore, the demand was restricted to a period of six months from the date of the show cause notice, and the Collector's order invoking the extended period was not sustainable.

Additional Points:

The Tribunal also noted that if duty was found to be recoverable for the period within six months of the show cause notice, the appellants would be entitled to Modvat credit, even if they had not filed the required declaration under Rule 57G or maintained RG-23A, as per the Tribunal's earlier decisions in similar cases. The appeals were disposed of in these terms.