1997 (8) TMI 184 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty imposed on the appellant.
2. Allegation of suppression of facts by the appellant.
3. Interpretation of returnable containers clause in agreements.
4. Application of extended period of limitation.
5. Imposition of penalty on the appellant.

Analysis:

Issue 1:
The appellant filed an appeal against duty demand and penalty imposed by the Collector due to non-return of drums used for packing Trichloroethylene. The duty demand was based on the exclusion of packing costs for the non-returned drums from the assessable value.

Issue 2:
The appellant argued that the demand was time-barred as the show cause notice only alleged suppression of the fact of collection of an amount, which was not a valid ground for invoking the extended period of limitation. The appellant contended that the agreement with buyers clearly indicated that the packings were returnable, even if no actual return took place.

Issue 3:
The JDR contended that the clause regarding return of containers was not workable as the cost of returning the containers exceeded their value. However, the Tribunal emphasized that the existence of an agreement or contract for returnable containers was crucial, and actual return was not necessary as long as the buyer had the option to return.

Issue 4:
The Tribunal held that for invoking the extended period of limitation, the department must specify the suppressed facts in the show cause notice to provide the assessee with an opportunity to respond. As the grounds for suppression mentioned in the impugned order were not part of the show cause notice, the extended period of limitation was deemed inapplicable, rendering the entire demand time-barred.

Issue 5:
Considering the absence of valid grounds for invoking the extended period of limitation and the lack of substantiated suppression by the appellant, the Tribunal allowed the appeal on the ground of limitation. Consequently, the penalty was deemed not imposable on the appellant, and the Tribunal did not delve into the merits of the case due to the limitation issue.

This judgment highlights the importance of clear allegations in show cause notices for invoking the extended period of limitation and the significance of contractual agreements for returnable containers in excise duty cases. The decision underscores the principles established by the Supreme Court regarding the necessity of arrangements for returnable containers, irrespective of actual return, and the implications for the imposition of penalties based on the timeliness of demands.