1998 (3) TMI 211 - AT - Central Excise

Issues:
1. Central Excise duty demand and penalty imposition on the appellant.
2. Interpretation of Notification 64/83 regarding exemption for clearances of air-conditioners.
3. Appellant's resistance on the grounds of limitation and Notification 64/83.
4. Arguments on the merit of specific serial numbers in the show cause notice.
5. Dispute over the inclusion of Serial Numbers 2 and 6 in the total value of clearances.
6. Examination of evidence and statements related to the assembly and sale of air-conditioners.
7. Impact of the value of clearances exceeding Rs. 2.5 lacs on the benefit of Notification 64/83.
8. Invocation of the proviso to Section 11A(1) of the Central Excise Act due to suppression of material facts.
9. Error in confirming the entire demand and calculation of duty payable.
10. Modification of the order to reduce the duty and penalty amounts.

Analysis:
1. The appeal challenged the Central Excise duty demand and penalty imposed on the appellant, the proprietor of M/s. Jayesh Refrigerations, by the Additional Collector. The dispute arose from the appellant's failure to pay duty on clearances during 1986-87, with subsequent investigations revealing a total value of clearances exceeding the exemption limit set by Notification 64/83.

2. The appellant contested the demand and penalty on the grounds of limitation and the applicability of Notification 64/83. The notification provided exemption based on the value of clearances in the preceding year not exceeding Rs. 2.5 lacs. The Department argued that exceeding the limit in the current year did not negate the notification's benefit, only requiring duty payment on the excess value.

3. On the merit of specific serial numbers in the show cause notice, the appellant disputed the inclusion of Serial Numbers 2 and 6 in the total value of clearances. Serial Number 2 involved the sale of a second-hand air-conditioner, while Serial Number 6 related to repair charges, with conflicting evidence and statements regarding the transactions.

4. The judgment analyzed the evidence related to the assembly and sale of air-conditioners, focusing on the discrepancies in dates and statements provided by witnesses. The appellant's contentions regarding the transactions' timing and nature were scrutinized, leading to a determination that the value of air-conditioners in Serial Numbers 2 and 6 was correctly included in the total value of clearances.

5. Regarding the invocation of the proviso to Section 11A(1) of the Act due to alleged suppression of material facts, the judgment found deliberate suppression by the appellant, justifying the Department's action and the application of the larger period of limitation. The appellant's failure to maintain records and file returns contributed to this finding.

6. The judgment corrected the error in confirming the entire demand, noting that duty should have been levied only on the value exceeding Rs. 2.5 lacs. The duty payable was recalculated based on the specific rate applicable at the time, resulting in a reduction of both the duty and penalty amounts.

7. Ultimately, the order was modified to reduce the duty to Rs. 12,000 and the penalty to Rs. 3,000, allowing the appeal in part and addressing the discrepancies in the initial demand and penalty imposition.

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