1997 (6) TMI 104 - AT - Central Excise

Summary

Issues:
1. Duty demand on staple fibre not exported
2. Imposition of penalty under Rule 191B
3. Justification of penalty amount
4. Applicability of Rule 209 for penalty imposition

Analysis:

Issue 1: Duty demand on staple fibre not exported
The appellants procured staple fibre for conversion into yarn for export under Rule 191B of the Central Excise Rules. The Department alleged that the yarn manufactured from the staple fibre was not exported, leading to a show cause notice for duty demand on the staple fibre and imposition of penalty. The Collector confirmed the duty demand of Rs. 14,62,657.70 and imposed a penalty of Rs. 2.00 Lakh, prompting the appellants to file an appeal against this decision.

Issue 2: Imposition of penalty under Rule 191B
The appellant's advocate argued that the duty amount had already been paid before the show cause notice was issued. He contended that the penalty imposition was the only point of contention. The advocate highlighted that Rule 191B allows for procurement of inputs without duty payment for export-oriented finished products. The advocate emphasized that the breach of the notification conditions by diverting goods from export to domestic consumption without Collector's permission led to the duty realization on the input used. He argued that the maximum penalty under Rule 191B(6) should be Rs. 2,000, and requested a reduction in the penalty amount to comply with this rule.

Issue 3: Justification of penalty amount
The JDR for the respondent Commissioner argued that the duty amount of Rs. 14,62,657.70 was not paid at the time of goods removal, constituting a general violation rather than a simple Rule 191B violation. The JDR justified the penalty imposition under Rule 209 of the Central Excise Rules, 1944, and defended the quantum of the penalty.

Issue 4: Applicability of Rule 209 for penalty imposition
Upon hearing both sides, the Tribunal noted that Rule 191B(6) allows for penalty imposition and confiscation of goods, but since the goods were not available for confiscation in this case, a penalty higher than Rs. 2,000 should not have been imposed. The Tribunal observed that the Order-in-Original lacked a specific finding on this aspect. Therefore, considering the specificity of Rule 191B(6), the Tribunal reduced the penalty amount to Rs. 2,000, in line with the rule's provisions.

In conclusion, the Tribunal modified the impugned order by reducing the penalty amount to Rs. 2,000, as per the provisions of Rule 191B(6), and disposed of the appeal accordingly.