1998 (4) TMI 357 - AT - Central Excise

Summary

Issues:
1. Applicability of exemption Notification 175/86-C.E. to goods with brand name.
2. Interpretation of para 7 of Notification 175/86-C.E.
3. Confiscation of goods, demand of duty, and imposition of penalty.
4. Bona fide belief of the parties based on Board's circular.
5. Justification for setting aside confiscation, redemption fine, and penalty.

Analysis:

1. Applicability of exemption Notification 175/86-C.E. to goods with brand name:
The case involved goods received by the appellants under the benefit of exemption Notification 175/86-C.E. because the supplier was enjoying the said notification. However, authorities contended that the goods, carrying the brand name of the appellants, were not eligible for the exemption under the notification. This led to the seizure of goods and issuance of show cause notices for duty recovery, confiscation, and penalty.

2. Interpretation of para 7 of Notification 175/86-C.E.:
The appellants argued that the goods, although carrying their brand name, were meant for use as original equipment in the manufacture of specific goods. They relied on the proviso to para 7 of the notification, which exempts goods used by other manufacturers for making excisable goods. The appellants contended that the supplier did not follow Chapter X procedure due to a belief based on a Board circular regarding certain types of goods not being affected by para 7.

3. Confiscation of goods, demand of duty, and imposition of penalty:
The Additional Collector held that the goods were not exempt under Notification 175/86-C.E., leading to a demand for duty payment, confiscation of goods with an option for redemption on payment, and imposition of a penalty. The appellants appealed against this decision before the Tribunal.

4. Bona fide belief of the parties based on Board's circular:
The Tribunal acknowledged that both the appellants and the supplier might have acted under a genuine belief based on the Board's circular. Considering the circumstances, the Tribunal found it unjust to confiscate the goods and impose a penalty, although the duty liability on the goods remained intact. The appellants were allowed to seek Modvat credit for duty paid on the goods if eligible.

5. Justification for setting aside confiscation, redemption fine, and penalty:
Ultimately, the Tribunal set aside the confiscation of goods, redemption fine, and penalty. The decision was based on the parties' bona fide belief, the duty liability being recoverable if the goods were used, and the appellants' potential eligibility for Modvat credit.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the confiscation, redemption fine, and penalty, while upholding the duty liability on the goods, subject to the appellants' right to seek Modvat credit if eligible.