1996 (5) TMI 162 - AT - Central Excise

Summary

Issues involved:
1. Validity of sample checks for determining quantum of non-compliant cigarette packets.
2. Acceptance of color variation by the appellants.
3. Eligibility for the benefit under Notification No. 201/85.
4. Imposition and quantum of penalty.
5. Applicability of extended period for demand of duty.

Detailed Analysis:

1. Validity of Sample Checks:
The Tribunal examined whether the sample checks conducted on 5th, 6th, and 8th September 1986 could be used as a basis for determining the total number of cigarette packets with unapproved surface designs. It was noted that there were no entries in the RG 1 register or any statutory records regarding these sample checks. The Tribunal found that no packets were segregated or seized during these checks, which would have been the normal procedure if there was a variation. Thus, the Tribunal concluded that averages cannot be used as a precise measure for quantifying duty, and there was no evidence to show when the variation actually occurred.

2. Acceptance of Color Variation:
The Tribunal considered whether the appellants had accepted the color variation through their letter dated 28-11-1986 and during a personal hearing on 9-12-1986. The letter did not explicitly accept the variation but mentioned that any variation was due to the state of printing technology. The Tribunal found that the statement made during the personal hearing could not be accepted as proof without corroborative evidence. The Tribunal held that there was no admission of color variation by the appellants.

3. Eligibility for Benefit under Notification No. 201/85:
The Tribunal noted that Notification No. 201/85 provided concessional duty only if the surface design was approved. The appellants had applied for fresh approval of the surface design on 8-9-1986, indicating a variation. However, the Tribunal found that the average percentage used to determine the quantum of non-compliant packets was not precise. Therefore, the concessional rate of duty under Notification No. 201/85 would be applicable to all clearances except for the packets segregated on 5th and 6th September 1986.

4. Imposition and Quantum of Penalty:
The Tribunal observed that the variation in surface design warranted a penalty as it violated the conditions of Notification No. 201/85. However, the penalty imposed should be proportionate to the gravity of the offense. Considering the facts, the Tribunal reduced the penalty to Rs. 1,00,000/-.

5. Applicability of Extended Period for Demand of Duty:
The Tribunal held that the extended period for demanding duty beyond six months was applicable only to the cigarettes segregated on 5th and 6th September 1986, as there was suppression of facts regarding these packets. For other clearances prior to 5-9-1986, the extended period would not apply.

Conclusion:
(a) Duty at tariff rate shall be charged on the cigarettes found in packets with unapproved surface designs segregated on 5th and 6th September 1986.
(b) The penalty is reduced to Rs. 1,00,000/-.
(c) The appellants are eligible for the concessional rate of duty under Notification No. 201/85 for other clearances.

The impugned order is upheld with the above modifications, and the appeal is disposed of accordingly.