1998 (5) TMI 67 - AT - Central Excise

Summary

Issues:
1. Denial of benefit of Notification No. 65/87 on HDPE sacks.
2. Imposition of penalty for contravention of central excise duty.
3. Dispute regarding use of power in manufacturing HDPE woven sacks.
4. Time-bar aspect in relation to duty demand.

Analysis:

Issue 1: Denial of benefit of Notification No. 65/87 on HDPE sacks
The appellants were denied the benefit of Notification No. 65/87 on HDPE sacks manufactured by them, leading to a demand of duty and imposition of penalty. The HDPE Woven Sacks manufactured by the appellants were classified under CET sub-heading 6301.00. The appellants had availed the benefit of another notification up to a certain clearance value and had later informed the authorities about manufacturing HDPE Woven Sacks without power. The adjudicating authority denied the benefit of the notification but acknowledged that the appellants fulfilled the conditions of the notification by using fabrics procured under Chapter X procedure. The Tribunal, however, found that the appellants were entitled to the benefit of nil rate of duty under Notification No. 65/87 as they did not use power in their factory, as required by the notification.

Issue 2: Imposition of penalty for contravention of central excise duty
A penalty was imposed on the appellants under Rule 173-Q for contravention of central excise duty. The Tribunal upheld the penalty, acknowledging the violation of Central Excise Rules but reduced the penalty amount from Rs. 10,000 to Rs. 5,000. The penalty was sustained due to the contravention of rules despite the duty demand being set aside based on the entitlement to the benefit of the notification.

Issue 3: Dispute regarding use of power in manufacturing HDPE woven sacks
The main contention raised was the use of power in manufacturing the fabrics procured by the appellants, which led to the denial of the benefit of the notification. The appellants argued that since they did not use power in their factory for manufacturing HDPE woven sacks, the use of power by the fabric manufacturer should not affect their eligibility for the notification's benefit. The Tribunal agreed with the appellants, emphasizing that the notification's condition of not using power was fulfilled by the appellants, irrespective of how the base material was manufactured.

Issue 4: Time-bar aspect in relation to duty demand
Regarding the time-bar aspect, the appellants had informed the Department about their intention to manufacture HDPE Woven Sacks without power and clear them at nil rate of duty under Notification No. 65/87. The Department argued that the extended period of limitation was justified due to the appellants' failure to file a classification list after exceeding the ceiling limit. However, the Tribunal found that there was no suppression on the part of the appellants, as they had disclosed relevant information to the Department, and hence, the demand was not time-barred.

In conclusion, the Tribunal ruled in favor of the appellants, allowing the benefit of Notification No. 65/87 and setting aside the duty demand. The penalty imposed was upheld but reduced, considering the contravention of Central Excise Rules.