1994 (8) TMI 132 - AT - Central Excise

Issues Involved:
1. Waiver of pre-deposit and stay of recovery.
2. Applicability of exemption notification under Section 5A of the Central Excises and Salt Act, 1944.
3. Alleged contravention of Central Excise Rules.
4. Suppression of facts and extended period for demand.
5. Financial hardship and balance of convenience.
6. Prima facie case and time-barred demand.
7. Discrepancy in the declaration and undertaking by Bharat Electronics Ltd. (BEL).

Issue-wise Detailed Analysis:

1. Waiver of Pre-deposit and Stay of Recovery:
The appellants sought a waiver of the pre-deposit of Rs. 20,21,383.77 and a penalty of Rs. 1.5 lakhs, along with a stay of its recovery during the pendency of the appeal. The appellants argued that the demand was excessive compared to the job charges of Rs. 6 lakhs and that paying the amount would cause significant hardship.

2. Applicability of Exemption Notification under Section 5A:
The appellants contended that the Government of India had issued a notification under Section 5A of the Central Excises and Salt Act, 1944, exempting 75,000 electronic voting machines manufactured by M/s. BEL from the whole of duty of excise. They argued that this exemption should also apply to the sub-assemblies they manufactured. The Gujarat High Court's ruling in Vallabh Glass Works v. State of Gujarat was cited to support the broad interpretation of "machinery" to include essential parts.

3. Alleged Contravention of Central Excise Rules:
The show-cause notice alleged that the appellants had contravened several Central Excise Rules by manufacturing and clearing goods without following the proper procedures and without paying the required duty. The rules cited included Rules 9(1), 52A, 53, 226, 173B, 173C, 173G, and 173Q.

4. Suppression of Facts and Extended Period for Demand:
The appellants argued that the demand was time-barred as the department was aware of the goods being manufactured by M/s. BEL and the sub-assemblies by the appellants. The lower authorities, however, contended that there was suppression of facts, justifying the extended period for demand.

5. Financial Hardship and Balance of Convenience:
The appellants claimed that their financial condition would make it difficult to pay the demanded amount. They highlighted their liquidity position, showing current assets and liabilities, and argued that the balance of convenience favored waiving the pre-deposit.

6. Prima Facie Case and Time-barred Demand:
The Judicial Member found no suppression of facts and considered the Gujarat High Court ruling applicable, suggesting that sub-assemblies should be exempted. The Technical Member disagreed, stating that sub-assemblies were excisable goods in their own right and that there was no specific exemption for them. The Technical Member also argued that the demand was not time-barred due to the lack of proper intimation by the appellants.

7. Discrepancy in the Declaration and Undertaking by BEL:
The Technical Member noted discrepancies in the declaration and undertaking provided by BEL, suggesting that the appellants' name was not originally included. This raised doubts about the appellants' compliance and the knowledge of the department regarding the manufacture of sub-assemblies.

Separate Judgments:

Judgment by Judicial Member (S.L. Peeran):
The Judicial Member accepted the appellants' offer to deposit Rs. 2 lakhs and furnish a bank guarantee for Rs. 5 lakhs, waiving the balance amount of duty and penalty. The appeal was to be taken up for out-of-turn hearing due to high revenue stakes.

Judgment by Technical Member (P.C. Jain):
The Technical Member disagreed, directing the appellants to deposit Rs. 10 lakhs within eight weeks. He argued that the sub-assemblies were excisable goods and that there was no prima facie case for the appellants. He also highlighted the appellants' sound financial condition.

Majority Opinion (K.S. Venkataramani):
The third member concurred with the Judicial Member, considering the contentious issue of exemption and the appellants' financial liquidity. The appellants were directed to deposit Rs. 2 lakhs and furnish a bank guarantee for Rs. 5 lakhs within eight weeks, with the balance duty and penalty waived upon compliance.

Final Order:
In terms of the majority opinion, the appellants were to deposit Rs. 2 lakhs in cash and furnish a bank guarantee for Rs. 5 lakhs within eight weeks. The balance duty and penalty were waived, and the case was to be listed for compliance and final hearing.

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