1995 (2) TMI 171 - AT - Central Excise

Issues Involved:

1. Entitlement to the benefit of Notification No. 53/88.
2. Invocation of the larger period for demand and imposition of penalty.

Detailed Analysis:

1. Entitlement to the Benefit of Notification No. 53/88:

The appellants argued that they were entitled to a concessional rate of duty at 20% ad valorem on Bags and Sacks as per Notification No. 53/88, as amended. They contended that the credit taken on plastic granules was utilized towards the payment of excise duty on HDPE sacks, and since HDPE Tapes and HDPE Fabrics were intermediate products, the credit of duty on these intermediate products was not availed. The appellants emphasized that the plastic granules were used in the manufacture of tapes and not directly in the fabrics or sacks, thus fulfilling the condition in Column 5 of the Notification which states, "If no credit of the duty paid on the inputs used in the manufacture of such bags or fabrics has been availed of under Rule 57A of the said Rules."

The Collector, however, held that the appellants had utilized credit of duty on plastic granules for the manufacture of HDPE Tapes and Fabrics, which are intermediate products. Since HDPE Tapes and Fabrics are considered inputs for the manufacture of Bags and Sacks, the appellants had violated the condition of the Notification by availing credit on plastic granules. Consequently, the concessional rate of 20% could not be claimed, and the duty should be levied at 30% ad valorem as per Notification No. 53/88 read with Notification No. 148/90.

The Tribunal's majority opinion, however, found that the appellants had not taken credit on the intermediate products (HDPE Tapes and Fabrics) as they were cleared at a nil rate of duty for captive use. Therefore, the appellants did not violate the terms of Column 5 of the Notification. The Tribunal concluded that the benefit of the concessional rate of duty should be extended to the appellants.

2. Invocation of the Larger Period for Demand and Imposition of Penalty:

The appellants argued that there was no suppression of facts or deliberate evasion of duty. They had filed the classification list, and the show cause notice was issued by the Superintendent, which invalidates the invocation of the extended period. The penalty imposed under Rule 173Q was also challenged on the grounds that the show cause notice was vague and did not specify the sub-clauses under which the penalty was imposed.

The Collector contended that the appellants had not indicated the utilization of Modvat on HDPE Sacks in the classification list, amounting to suppression of facts, justifying the invocation of the larger period. The Tribunal, however, found that there was no suppression of facts or clandestine removal. The classification list was pending approval, and the clearances were provisional. Therefore, the demand for a larger period and the imposition of penalty were not justified.

Separate Judgments:

Majority Opinion:
- The majority opinion held that the appellants were entitled to the benefit of the concessional rate of duty under Notification No. 53/88, as they had not taken credit on the intermediate products (HDPE Tapes and Fabrics).
- On the issue of time bar and penalty, the majority opinion found that there was no suppression of facts or deliberate evasion of duty, and the demand for a larger period and the imposition of penalty were not justified.

Vice President's Opinion:
- The Vice President disagreed with the majority on the entitlement to the benefit of the Notification. He held that the appellants had availed Modvat credit on plastic granules used for making fabrics, which were further used for making Bags and Sacks, thus violating the condition in Column 5 of the Notification. Therefore, the benefit of the lower rate of 20% could not be claimed, and the duty should be levied at 30% ad valorem.
- However, on the issue of penalty, the Vice President agreed with the majority that the penalty was not justified as the classification list was pending approval, and there was no clandestine removal.

Conclusion:
- The impugned orders were modified to the extent indicated in the Vice President's order, confirming the demand at 30% ad valorem but setting aside the penalty.

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