1998 (9) TMI 160 - AT - Central Excise

Summary

Issues:
Duty demand on non-woven fabrics for sanitary napkins under CET Heading 56.03, invoking proviso to Section 11A of the Central Excise Act, 1944 for suppression of manufacture and clearance for captive consumption, imposition of penalty.

Analysis:
1. The case involved a duty demand of Rs.15,37,973.01 on non-woven fabrics used in sanitary napkins production, under CET Heading 56.03, for the period of 1-3-1987 to 30-11-1987. The demand was based on the allegation of suppression of manufacture and clearance for captive consumption, with a penalty of Rs. 1 lakh imposed.

2. The appellant contended that the demand was time-barred due to prior correspondence with the Department regarding the manufacture of Softlinn. The Department argued that suppression arose from the non-filing of classification lists and incomplete description of the manufacturing process and place.

3. After reviewing the records and correspondence history between the appellants and the Department, it was found that the appellants had consistently provided information about the manufacturing process of Softlinn. The appellants believed that Softlinn was not marketable outside their specific requirements for sanitary napkins, which was supported by their communications with the Department.

4. The Tribunal held that the appellants were not guilty of suppression or misstatement of facts to evade duty payment, especially when they genuinely believed that Softlinn was not excisable due to its specialized use in their sanitary napkin production. Citing a Supreme Court decision, it was emphasized that when the Department was aware of the nature of products and there was ongoing communication, suppression could not be alleged.

5. Consequently, the demand was deemed barred by limitation, and the penalty imposed on the appellant was set aside. The Tribunal did not delve into the merits of the case further, as the appeal succeeded on the time bar issue.

This detailed analysis of the judgment highlights the key legal aspects, arguments presented, and the ultimate decision rendered by the Appellate Tribunal CEGAT, New Delhi, preserving the legal nuances and terminology used in the original text.