1994 (12) TMI 151 - AT - Central Excise

Issues Involved:
1. Validity of the provisional Small Scale Industry (SSI) certificate.
2. Applicability of the extended period for duty demand under Section 11A of the Central Excises & Salt Act, 1944.
3. Legality of the penalty imposed under Rule 173Q read with Rule 226 of Central Excise Rules, 1944.
4. Validity of the show-cause notice issued by the Collector when a similar notice was already issued by the Superintendent.
5. Correct classification and rate of duty applicable.

Detailed Analysis:

1. Validity of the Provisional SSI Certificate:

The appellants were found to be manufacturing auto seats and seat cushions under Chapter Heading 9401.00 and 4016.11 of Central Excise Tariff, 1985. They claimed exemption under Notification No. 175/86 based on a provisional SSI certificate issued on 11-4-1986. The department alleged that this certificate was only valid for one year and was not renewed after 10-10-1987. The Collector held that the benefits of Notification 175/86 were not available as the factory was not set up in an approved industrial area and the provisional certificate was not converted into a permanent one.

2. Applicability of the Extended Period for Duty Demand:

The department invoked the extended period under the proviso to Section 11A of the Central Excises & Salt Act, 1944, alleging mis-statement of facts in the classification list. The Collector confirmed the duty demand of Rs. 36,92,424.18 for the period 1986-87 to 1990-91 and an additional Rs. 8141.06 for the shortage detected on 7-9-1990. The appellants argued that the classification lists were approved by the department, and hence the extended period should not be invoked.

3. Legality of the Penalty Imposed:

A penalty of Rs. one lakh was imposed under Rule 173Q read with Rule 226 of Central Excise Rules, 1944. The Collector justified the penalty on the grounds that the appellants had clandestinely removed goods involving Central Excise Duty of Rs. 8,141.06, which were found short on physical verification.

4. Validity of the Show-Cause Notice:

The appellants contended that a similar show-cause notice had already been issued by the Superintendent for the period from April 1989 to September 1989, and the decision was not conveyed. They argued that the subsequent notice by the Collector was ab initio illegal. The Collector did not consider this plea. The Tribunal noted that if the earlier notice was not adjudicated, it would lapse, and the Collector's notice would be valid.

5. Correct Classification and Rate of Duty:

The appellants argued that they had paid duty at higher rates (50% ad valorem) under the approved classification lists, which should negate any short levy claims. The Tribunal found that this issue was not agitated before the Collector and required further adjudication.

Tribunal's Decision:

The Tribunal set aside the Collector's order and remanded the case for de novo consideration. The adjudicating authorities were directed to reconsider the appellant's pleas, including the validity of the provisional SSI certificate, the applicability of the extended period for duty demand, and the correct classification and rate of duty. The Tribunal emphasized the need for observing the principles of natural justice and providing sufficient opportunity for the appellants to present their case.

Separate Judgment by Vice President:

The Vice President concurred with the remand but provided additional observations:
- The provisional SSI certificate made the approval tentative, and the department could reconsider the matter without reference to the time bar.
- The lack of a permanent certificate and re-validation order constituted a mis-declaration, justifying the show-cause notice.
- The initial show-cause notice by the Superintendent abated upon issuing the fresh notice by the Collector.
- The appellants were liable for duty and penalty for goods found short on physical verification.
- The correct classification and rate of duty needed determination, and the appellants should be given an opportunity to make submissions on this aspect.

The Vice President's order also remanded the case for de novo consideration, emphasizing the need for a thorough examination of all issues raised.

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