1999 (6) TMI 104 - AT - Central Excise

Summary

Issues Involved:
1. Liability to pay duty on tow consumed in the manufacture of PSF and waste.
2. Applicability of Rule 191BB and Notification 43/80.
3. Penalty under Rule 173Q.
4. Limitation period for issuing the show cause notice.

Summary:

1. Liability to pay duty on tow consumed in the manufacture of PSF and waste:
M/s. Reliance Industries Ltd. was alleged to have not paid duty on the tow consumed in manufacturing polyester staple fibre (PSF) and waste. The Commissioner confirmed the liability to pay duty on tow cleared under Rule 191BB and Notification 43/80. The assessee argued that clearances for export without payment of duty were covered by sub-clause (3) of the proviso to sub-rule (1) of Rule 9 and Clause (4) of Rule 49. The Tribunal agreed with the assessee, referencing previous decisions, and concluded that clearances under Rule 191BB and for export did not amount to clearances exempted from duty or at nil rate of duty.

2. Applicability of Rule 191BB and Notification 43/80:
The Tribunal examined whether tow cleared under Rule 191BB and Notification 43/80 could be considered exempt from duty. It was held that clearances under Rule 191BB for manufacturing goods to be exported or for replenishment did not amount to exemption from duty. The Tribunal referenced the Supreme Court's decision in Hindustan Petroleum Corporation Ltd. v. C.C.E., which clarified that removal under bond without payment of duty did not equate to exemption from duty.

3. Penalty under Rule 173Q:
The Commissioner had imposed a penalty under Rule 173Q. However, since the Tribunal found that the demand for duty was not sustainable, the penalty was also deemed not imposable.

4. Limitation period for issuing the show cause notice:
The show cause notice dated 10-2-1994 demanded duty for clearances between 25-7-1991 and 30-6-1992, invoking the extended period u/s 11A(1) on grounds of alleged contravention of rules. The Tribunal found that the extended period was not applicable as there was no evidence of intent to evade duty. The factory was under physical control, and the appellant had filed classification lists, which were returned by the officers. The Tribunal concluded that the demand was barred by limitation.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The Tribunal found that the demand for duty was not sustainable, and penalties were not imposable due to the bar of limitation.