1996 (11) TMI 205 - AT - Central Excise

Issues Involved:
1. Demand of duty on various items manufactured by the appellants.
2. Invocation of the longer period of limitation.
3. Alleged suppression of facts by the appellants.
4. Bona fide belief regarding excisability of the items.
5. Applicability of judgments cited by the appellants.

Detailed Analysis:

1. Demand of Duty on Various Items Manufactured by the Appellants:
The appellants were involved in the fabrication of items such as cross arms, stay rods, street light fittings, clamps, and earth pipes in the workshop of the Kerala State Electricity Board (KSEB). The demand for duty was raised on these items, alleging that they were manufactured and cleared without a Central Excise licence and without following the requisite Central Excise formalities. The appellants contended that the items fabricated did not constitute new products for excise levy as they were merely cut, bent, or drilled and retained their original character.

2. Invocation of the Longer Period of Limitation:
The show cause notice invoked the longer period of limitation, alleging that the appellants had suppressed the fact of manufacture and clearance of goods with the intent to evade payment of duty. The appellants argued that they were under the bona fide belief that the items did not amount to manufacture and thus did not attract excise duty. They cited several judgments to support their plea that without positive action to suppress facts with intent to evade duty, the longer period of limitation could not be invoked.

3. Alleged Suppression of Facts by the Appellants:
The show cause notice alleged that the appellants suppressed the fact of their production and clandestine removal of goods. The appellants countered this by stating that they are a State Government Undertaking, and the materials manufactured were for captive use only. They argued that there was no intent to evade duty and that the officers in charge had no motives to withhold information. The appellants emphasized that mere failure to take out a licence or pay duty due to a bona fide belief does not amount to suppression with intent to evade duty.

4. Bona Fide Belief Regarding Excisability of the Items:
The appellants maintained that their activities were in line with their bona fide belief that the fabricated items did not amount to manufacture. They cited various decisions of the Tribunal where similar operations like cutting, bending, and drilling did not amount to manufacture. They argued that the lower authority did not address their pleas or provide a specific finding that they had suppressed facts with intent to evade duty.

5. Applicability of Judgments Cited by the Appellants:
The appellants cited several judgments, including:
- Chemphar Drugs & Liniments (1989): Mere inaction or failure to act does not attract the extended limitation unless something positive is shown.
- Padmini Products v. CCE (1989): Mere failure or negligence does not attract the extended limitation unless there is fraud, collusion, or wilful misstatement.
- Associated Cement Company Ltd. v. CCE (1989): Bona fide belief that no duty was leviable negates the invocation of the extended period.
- Electrical Mfg. Co. Ltd. v. CCE (1989): Deception with wrongful motives requires concealment of facts.
- Tibrewal Industries v. CCE (1991): Penalty is not justified in the absence of mala fides.

The Tribunal noted that the lower authority did not traverse the appellants' pleas and merely confirmed the demand without addressing the specific arguments and judgments cited by the appellants. The Tribunal observed that the appellants' activities did not show any mala fides or intent to evade duty.

Conclusion:
The Tribunal concluded that the appellants' plea on limitation should be allowed, as the lower authority did not provide any basis for invoking the longer period of limitation nor substantiated the charge of suppression with intent to evade duty. The demand was thus held to be barred by limitation. The merits of the case regarding the excisability of the goods were left open for consideration without any specific observation.

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