1996 (6) TMI 166 - AT - Central Excise

Summary

Issues: Time-barred demand for duty on cotton yarn transferred to non-power operated units under Rule 96E.

Detailed Analysis:
1. Facts of the Case:
The appellants, engaged in cotton yarn manufacturing, sought permission to transfer yarn to 5 units for conversion into hanks. The Assistant Collector granted permission, but later, it was found that the units were non-power operated, not covered under Rule 96E. A duty demand was raised for the period 12-10-1984 to 29-10-1986, with a penalty imposed by lower authorities.

2. Appellant's Contentions:
The appellants argued that they had obtained permission from the Assistant Collector under Rule 96E, providing details of the units. They highlighted that the 5 units had declared themselves as non-power operated in their classification list under Rule 173B. The appellants contended that there was no suppression of facts, and the demand was time-barred as the show cause notice was issued on 24-10-1986, exceeding the six-month limitation.

3. Respondent's Arguments:
The respondent contended that the appellants did not disclose that the units were non-power operated in their permission request under Rule 96E. They argued that such disclosure was implicit in seeking permission under the rule. The respondent claimed that the appellants suppressed facts required by the rule, justifying the duty demand.

4. Observations and Decision:
The tribunal noted that Rule 96E mandates a specific procedure for transferring cotton yarn for conversion. While the permission was granted, the proper verification of the units' status was lacking. The tribunal found that the 5 units were non-power operated, impacting the demand's limitation period. Consequently, the demand beyond six months was deemed time-barred. The tribunal modified the order, restricting the demand to six months, upholding the rest of the impugned order.

In conclusion, the tribunal ruled in favor of the appellants, holding that the demand for duty on cotton yarn transferred to non-power operated units under Rule 96E was partially time-barred. The judgment emphasized the importance of adhering to procedural requirements and ensuring accurate disclosures to avoid such disputes.