1998 (8) TMI 326 - AT - Central Excise

Summary

Issues:
1. Exemption under Notification No. 223/86-C.E.
2. Interpretation of amendments to the Notification regarding the manufacturing criteria.
3. Point of limitation for issuing show cause notice.
4. Disclosure requirements for availing exemption benefits.

Analysis:

1. Exemption under Notification No. 223/86-C.E.:
The case involves the appellant firm manufacturing HDPE Woven Sacks and claiming exemption under Notification No. 223/86-C.E. A show cause notice was issued denying the exemption and demanding duty for the period from 2-12-1986 to 31-12-1989. The Commissioner confirmed the duty demand and imposed a penalty. The appellants appealed against this order.

2. Interpretation of amendments to the Notification regarding the manufacturing criteria:
The Notification exempted Woven Sacks manufactured on flat knitting looms but not those manufactured on circular looms. The amendments clarified that sacks made from fabrics woven on circular looms would be deemed as manufactured on circular looms. The Tribunal rejected the argument that the amendments introduced a new criterion, emphasizing that the clarification was in line with the original intent of the Notification.

3. Point of limitation for issuing show cause notice:
The Department invoked a longer period of limitation beyond the normal six months under Section 11A for issuing the show cause notice. The appellants contended that their declarations clearly stated the manufacturing process involving HDPE tubes woven on circular looms, putting the Department on notice. The Tribunal held that the longer period of limitation was unjustified as there was no intention to evade duty or suppress facts, setting aside the impugned order on this point.

4. Disclosure requirements for availing exemption benefits:
The Tribunal found that the appellants' disclosure in their declaration about manufacturing sacks from HDPE tubes/fabrics exempt from duty was sufficient to alert the Department. Since HDPE tubes are necessarily woven on circular looms, the Tribunal concluded that there was no suppression of facts or intent to evade duty. Consequently, the Tribunal allowed the appeal on the point of limitation, leading to the setting aside of the penalty as well.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the duty demand and penalty due to the show cause notice being time-barred and the lack of evidence of intentional evasion or suppression of facts.