1997 (7) TMI 247 - AT - Central Excise

Summary

Issues:
1. Alleged misuse of proforma credit facility for rotors and stators.
2. Interpretation of Notification No. 66/83 and Notification No. 95/79.
3. Procedural lapses in availing proforma credit and duty payment.
4. Discrepancy in stock balance and clearance of rotors and stators.
5. Imposition of duty demand and penalty.

Analysis:
The case involved an appeal by M/s. Khaitan Electricals against the order of the Collector of Central Excise confirming a demand of Rs. 4,96,170.61 on 40,094 pieces of rotors and stators. The appellants were accused of misusing the proforma credit facility under Notification No. 9583 by not paying duty on the final products. The Collector found that the permission to avail proforma credit on laminations was subject to clearing rotors and stators on payment of duty. The appellants argued that they had consumed rotors and stators in the manufacture of electric fans and had accounted for them properly. The Collector noted the discrepancy in stock balance and held that the appellants failed to inform the Department of their intention to avail the benefit of nil rate of duty under Notification No. 66/83.

The appellants contended that under Notification No. 66/83, rotors and stators used in the manufacture of electric fans were exempt from excise duty. They argued that Notification No. 95/79 was not applicable as all rotors and stators were used captively in the manufacture of electric fans. They also claimed entitlement to set-off duty paid on rotors and stators when clearing electric fans. The appellants highlighted procedural lapses and technical nature of the alleged deficiency.

The Tribunal considered whether the appellants, who had obtained permission for proforma credit on laminations, could avail the nil duty concession under Notification No. 66/83 for rotors and stators without specific permission. The Tribunal noted that the conditions for availing proforma credit had been substantially complied with and that there was no dispute regarding the discharge of duty liability on electric fans. The Tribunal found the lapse to be procedural and not deliberate evasion of duty. It concluded that there was no justification for imposing a penalty and allowed the appeal, setting aside the duty demand and penalty.

In conclusion, the Tribunal set aside the impugned order and granted any consequential benefits permissible under the law to the appellants.