1999 (2) TMI 256 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 175/86.
2. Calculation of the exemption limit of Rs. 30.00 lakhs.
3. Limitation period for issuing a show cause notice.
4. Allegation of wilful suppression or misstatement of facts.
5. Imposition of penalty under Rule 173Q of Central Excise Rules, 1944.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 175/86:
The appellants, a small-scale industrial unit, claimed the benefit of exemption under Notification No. 175/86, dated 1-3-1986, in their classification list filed on 3-4-1986. They claimed a nil rate of duty for the first clearances of Rs. 30.00 lakhs and thereafter paid a concessional rate of duty at 5% ad valorem. The appellants also manufactured excisable goods on job charges with raw materials supplied by their customers, valuing these goods under Section 4 read with Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975.

2. Calculation of the Exemption Limit of Rs. 30.00 Lakhs:
The dispute arose because the appellants, while calculating the Rs. 30.00 lakhs clearances for which the nil rate of duty was claimed, only considered the job charges and not the total assessable value, which included the cost of raw materials. A show cause notice dated 24-2-1989 was issued, raising a demand of Rs. 5,96,557.55 as differential duty for the period from 21-8-1986 to 31-3-1987, arguing that the aggregate value of all excisable goods should have been considered.

3. Limitation Period for Issuing a Show Cause Notice:
The appellants argued that the demand was time-barred, as there was no mala fide intention, and all relevant information was provided to the Department. They contended that they were under a bona fide belief that only job charges were to be considered for the exemption limit. They cited several Supreme Court decisions to support their case.

4. Allegation of Wilful Suppression or Misstatement of Facts:
The Department countered that the appellants' method of calculating clearances indicated a mala fide intention. They argued that the appellants were aware that the duty on excisable goods manufactured on a job work basis should include the cost of raw materials. The RT 12 returns filed by the appellants showed misleading information, reflecting only job charges under the column "Tariff Value" and nil under the column for value under Section 4.

5. Imposition of Penalty under Rule 173Q of Central Excise Rules, 1944:
The Commissioner confirmed the demand and imposed a penalty of Rs. 2.00 lakhs on the appellants under Rule 173Q. The appellants contended that there was no wilful suppression or misstatement, and thus, the extended period of limitation should not apply.

Separate Judgments:

Judicial Member's Judgment:
The Judicial Member held that the extended period of limitation was rightly invoked, as the appellants had a duty to compute their clearances correctly and inform the Department when they crossed the Rs. 30.00 lakhs limit. The misleading information in RT 12 returns and the failure to seek clarification from authorities indicated a mala fide intention. Thus, the demand and penalty were upheld, and the appeal was rejected.

Technical Member's Judgment:
The Technical Member disagreed, arguing that the appellants did not wilfully suppress or misstate facts. The RT 12 returns and accompanying documents provided sufficient information for the Department to detect any discrepancies. The misstatement in the returns was due to poor knowledge of Central Excise law and procedures, not wilfulness. Therefore, the extended period of limitation should not apply, and the demand and penalty were set aside.

Third Member's Decision:
The Third Member agreed with the Judicial Member, concluding that the extended period of limitation was applicable due to the appellants' failure to correctly compute and report clearances. The penalty was also justified. Consequently, the appeal was rejected.

Final Order:
In view of the majority decision, the appeal was rejected, and the demand and penalty were upheld.

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