1999 (3) TMI 233 - AT - Central Excise

Exemption - Set off of duty/C.V. duty already paid or raw material under Notification No. 225/86-C.E.,

Summary

Issues Involved:
1. Disallowance of set-off of duty on Mono-Ethylene Glycol (MEG) used in the manufacture of man-made staple fibre (mmsf) exported without payment of duty.
2. Imposition of personal penalty.
3. Invocation of the extended period of limitation for demand recovery.

Issue-wise Detailed Analysis:

1. Disallowance of Set-off of Duty on MEG:
The appellants were availing the benefit of Notification No. 225/86-C.E., which exempted mmsf from so much of duty of Excise as was equivalent to the duty paid on MEG used in its manufacture. The Collector of Central Excise disallowed the set-off of duty amounting to Rs. 84,32,790/- on MEG used in the manufacture of mmsf that was exported without payment of duty. The appellants argued that goods exported under bond without payment of duty are not exempt from the levy of duty, but rather the collection of duty is waived. They relied on several Tribunal decisions to support their contention that goods removed for export under bond cannot be treated as exempted goods, thus allowing the set-off of duty under the notification.

The Tribunal noted that Notification No. 225/86 does not require a one-to-one correlation between inputs and final products, as established in the larger Bench decision in the case of J.K. Synthetics Ltd. The Tribunal concluded that the goods exported under bond are not exempted goods, and the benefit of the notification applies to such goods. Therefore, the disallowance of the set-off of duty was not justified.

2. Imposition of Personal Penalty:
The Collector had imposed a personal penalty of Rs. 10 lakhs on the appellants. Given the Tribunal's finding that the set-off of duty was wrongly disallowed, the imposition of the penalty was also deemed unjustified. The Tribunal set aside the penalty along with the disallowance of the duty set-off.

3. Invocation of the Extended Period of Limitation:
The show cause notice was issued on 27-2-1992 for the period March 1987 to December 1990, invoking the larger period of limitation. The appellants contended that the extended period was not applicable as the credit was availed and utilized with the department's knowledge and consent. They argued that all relevant records and returns were filed with the department, and there was no suppression of facts or intent to evade duty.

The Tribunal agreed with the appellants, noting that the department was aware of the credit being availed and utilized. The reasoning of the adjudicating authority for invoking the extended period based on non-compliance with a trade notice was found to be inconsistent with the principles laid down by the Supreme Court, which require an intention to evade duty for invoking the extended period. The Tribunal held that the duty demand was barred by limitation.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellants. The disallowance of the set-off of duty and the imposition of the personal penalty were found to be unjustified, and the demand was held to be barred by limitation.