1998 (1) TMI 192 - AT - Central Excise

Summary

Issues:
Violation of Rule 56B of Central Excise Rules - Misuse of permission to remove and bring back semi-finished goods for processing.
Dispute regarding exemption under Notification 217/86 for duty payment on inputs.
Justification of duty demand and penalty for conscious violation of Rule 56B permission.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Mumbai involved a situation arising from the misuse of Rule 56B of the Central Excise Rules. This rule allows manufacturers to transport excisable goods, such as semi-finished products, for processing at another location and then bring them back to the original factory without duty payment. The case concerned a manufacturer of carburattors with units in Gujarat and Pune. The department discovered that the manufacturer was using semi-finished components from the Pune unit without returning them after processing, thereby evading duty payment. This led to the initiation of proceedings with a show cause notice demanding duty payment for the period in question.

The appellant argued that they were covered by exemption Notification 217/86, which allows the use of inputs from another factory belonging to the manufacturer without duty payment for further production. The appellant contended that even though they did not claim this exemption initially, it should not be denied. Additionally, they claimed that the dispute was revenue neutral as the goods were eligible for Modvat credit. On the other hand, the department argued that the appellant had consciously violated the Rule 56B permission by not returning the processed components as required.

Upon careful consideration, the Tribunal found that the appellant had indeed violated the conditions of the Rule 56B permission. The permission granted to the Pune unit was for processing and returning the components, not for clearance at the appellant's end. The appellant's actions of using the components without duty payment for manufacturing carburattors clearly contravened the permission granted. The Tribunal noted that the misuse came to light during a check of the appellant's records in 1986. Despite the appellant's arguments regarding exemption Notification 217/86 and revenue neutrality, the Tribunal found no merit in their claims. The duty demand and penalty imposed on the appellant were deemed justified based on the misuse of dutiable components without payment. Consequently, the appeal was rejected by the Tribunal.