1997 (7) TMI 394 - AT - Central Excise

Summary

Issues Involved:
1. Classification and dutiability of printed plastic films, paper, polyethylene-coated paper, and polyethylene tubings.
2. Allegations of suppression of facts and intent to evade duty.
3. Applicability of extended limitation period under Section 11A.
4. Imposition of penalties on the appellants.

Issue-wise Detailed Analysis:

1. Classification and Dutiability of Printed Plastic Films, Paper, Polyethylene-coated Paper, and Polyethylene Tubings
The appellants were engaged in printing on various materials and converting some printed tubings into pouches on a job-work basis. They believed that their printing activity did not transform the basic materials into new goods and thus did not require a Central Excise license. The jurisdictional Superintendent informed them in 1982 that their activities attracted duty under the Finance Bill, 1982. The appellants contended that their products were exempt under Notification No. 55/75 and Notification No. 31/76. However, a show cause notice issued in 1991 demanded duty for the period from 1-4-1986 to 30-9-1989, classifying the printed goods under Chapter 39, which became dutiable since March 1986. The Commissioner confirmed part of the demand and imposed a penalty.

2. Allegations of Suppression of Facts and Intent to Evade Duty
The appellants argued that there was no suppression of facts as the Department was aware of their activities since 1982. The Commissioner, however, observed that the appellants did not disclose the manufacture of pouches or bags in their 1982 letter. The appellants maintained that the pouches were manufactured by job-workers, not by them, and thus there was no deliberate suppression. The Tribunal found that the Department was aware of the appellants' activities and that the charge of deliberate suppression could not be sustained.

3. Applicability of Extended Limitation Period under Section 11A
The appellants contended that the demand was hit by limitation. The Commissioner invoked the extended period due to alleged suppression of facts. The Tribunal referred to the Supreme Court's judgment in Pushpam Pharmaceuticals Company v. Collector of Central Excise, which stated that suppression must be deliberate to escape duty payment. The Tribunal found that there was considerable confusion regarding the classification of the goods during 1987-89, and the appellants had a bona fide belief that their products were not dutiable. Therefore, the extended period could not be invoked.

4. Imposition of Penalties on the Appellants
The Assistant Commissioner imposed a penalty, which was upheld by the Commissioner, based on the conviction that the appellants had wilfully suppressed information to evade duty. The Tribunal, however, found no suppression of facts with intent to evade duty. Citing the Supreme Court's judgment in Tamil Nadu Housing Board v. Collector of Central Excise, the Tribunal held that penalty was not imposable in the absence of intent to evade duty. Consequently, the penalty was set aside.

Conclusion
The Tribunal allowed both appeals, set aside the Orders of the Commissioner of Central Excise and Commissioner (Appeals), and directed consequential reliefs to the extent warranted. The Tribunal concluded that the demand was time-barred, and there was no suppression of facts or intent to evade duty, thus invalidating the penalties imposed.