1998 (5) TMI 185 - AT - Central Excise

Summary

Issues Involved:
- Marketability and excisability of 'carb-liquor'
- Limitation period for demand of duty
- Imposition of penalty

Issue-wise Detailed Analysis:

1. Marketability and Excisability of 'Carb-liquor':

The primary issue was whether 'carb-liquor' is a marketable commodity and hence, excisable. The appellant argued that 'carb-liquor' is not a marketable commodity as it is not chemically stable and its composition continuously changes due to ongoing reactions. They contended that 'carb-liquor' cannot be classified under sub-heading 2836.90 of the Central Excise Tariff Act, 1985, as it does not meet the criteria of ammonium carbonate, which should be chemically stable and marketable.

However, the tribunal found that the appellant's own actions contradicted their claims. The appellant had previously written to their jurisdictional Superintendent requesting to include 'carb-liquor' in their L-4 license and had sold it to M/s. PDIL. This sale, though small (0.2% of total production), demonstrated the capability of 'carb-liquor' to be marketed, which is the criterion for establishing marketability. The tribunal cited the Supreme Court's ruling in A.P. State Electricity Board v. C.C.E., Hyderabad, which held that the capability of being marketed is sufficient to establish marketability, regardless of the quantity sold.

Based on this evidence, the tribunal concluded that 'carb-liquor' is marketable and excisable under Tariff Heading 2836.90 of the Central Excise Tariff Act, 1985.

2. Limitation Period for Demand of Duty:

The appellant argued that the demand for duty was barred by limitation. The show cause notice was issued on 29-7-1991 for the period July 1986 to October 1990, which is beyond the normal period of six months. The appellant contended that the department was aware of the production and captive consumption of 'carb-liquor' through various documents, correspondence, and returns filed by the appellant. They maintained that there was no suppression of facts justifying the invocation of the extended period.

The tribunal agreed with the appellant, noting that the department had been made aware of the manufacture and captive consumption of 'carb-liquor' through a letter dated 12-1-1982 and other records. The tribunal found that the appellant had maintained RG 1 registers and disclosed the production and consumption of 'carb-liquor' in their monthly RT 12 returns. The tribunal held that there was no suppression or misstatement by the appellant, and therefore, the extended period of limitation was not justified. Consequently, the demand was held to be time-barred.

3. Imposition of Penalty:

Given the finding that the demand was time-barred, the tribunal found no justification for the imposition of a penalty. The penalty of Rs. 20 lakhs imposed by the Commissioner was set aside.

Conclusion:

The appeal was allowed on the point of limitation, and the impugned order was set aside. The tribunal held that 'carb-liquor' is marketable and excisable but found the demand for duty to be time-barred and unjustified for penalty imposition.