1997 (6) TMI 114 - AT - Central Excise

Summary

Issues:
1. Allegation of suppression to evade licensing control and duty payment.
2. Application of Rule 9(2) and Section 11A in the case.
3. Interpretation of Notification No. 75/67 and Notification No. 113/80.
4. Impact of prior departmental knowledge on the suppression allegation.
5. Limitation period for invoking demand under Rule 9(2).

Analysis:

The judgment pertains to assessees engaged in manufacturing M.S. wires from duty paid Wire Rods, previously exempted from duty under Notification No. 75/67 which was later rescinded by Notification No. 113/80. A show cause notice alleged duty evasion of Rs. 7,12,967.64 due to suppression of manufacturing facts to evade licensing control. The Collector confirmed the demand and imposed a penalty of Rs. 5,000 on the assessees.

The appellant's counsel argued that the department was aware of the manufacturing activity for years, citing a memorandum from 1974. The counsel contended that the show cause notice issued nearly three years after the relevant period was time-barred. The department claimed suppression due to the assessees' failure to apply for a license post-Notification No. 113/80, despite knowledge of the duty payment requirement. The appellant relied on a Ministry directive for leniency and a Supreme Court judgment equating wire rods and wires as the same commodity.

The Tribunal considered the submissions and analyzed Rule 9(2), which requires establishing suppression for duty evasion. It noted the department's long-standing awareness of the assessees' activities and previous decisions exempting them from licensing requirements. The Tribunal held that the demand was time-barred due to the department's knowledge and lack of suppression by the assessees. As a result, the order was set aside, and consequential relief was granted, bypassing the need to determine if drawing M.S. wires from wire rods constituted manufacturing.

In conclusion, the judgment focused on the limitation period for invoking demands under Rule 9(2) in cases of alleged suppression to evade duty payment and licensing control. It emphasized the significance of prior departmental knowledge in assessing suppression allegations and highlighted the impact of such knowledge on the timeliness of demands. The interpretation of relevant notifications and the obligation of assessees to comply with duty payment requirements were central to the analysis, ultimately leading to the appeal's success based on the limitation period grounds.