1999 (9) TMI 198 - AT - Central Excise

Summary

Issues:
1. Whether cutting of tow into flocks amounts to manufacture.
2. Whether duty was required to be paid on flocks removed for captive consumption.
3. Whether the demand for duty was time-barred.
4. Whether there was an intent to evade payment of duty.
5. Applicability of a longer period for demanding duty.

Issue 1: Cutting of tow into flocks amounts to manufacture
The Tribunal considered whether cutting of tow into flocks constituted manufacture. The Revenue argued that duty should be paid on flocks removed for captive consumption. They contended that the Commissioner erred in holding the demand as time-barred and that the assessee was not entitled to remove flocks without payment of duty post-amendment. The Revenue also claimed that penalty should be imposed for evading duty. However, the respondent cited a Supreme Court decision stating that cutting tow into flocks did not amount to manufacture. The Tribunal upheld this argument, stating that the process did not create a new product attracting duty liability.

Issue 2: Duty on flocks removed for captive consumption
The Revenue asserted that duty should be paid on flocks removed for captive consumption. They argued that the assessee deliberately evaded duty by not accounting for flocks production and clearance. The Tribunal noted that a change in the tariff required filing a classification list and payment of duty, which the assessee failed to do. The Revenue sought an extended period for demanding duty and penalty imposition. However, the Tribunal found that the assessee had a bona fide belief that no duty was payable based on past practices. They cited a Supreme Court decision supporting this stance and rejected the Revenue's appeal.

Issue 3: Time-barred demand
The Revenue claimed that the demand was not time-barred as the period fell within six months from the relevant date under the Act. They argued that deliberate evasion of duty warranted an extended period for demanding duty. However, the Tribunal found that the assessee's bona fide belief in not paying duty on flocks for captive consumption due to past practices precluded a demand beyond six months. They upheld the impugned order based on this reasoning.

Issue 4: Intent to evade payment of duty
The Revenue contended that the assessee intentionally evaded duty by not paying for flocks captively consumed. They argued that the Commissioner should have invoked the extended period for demanding duty and imposed a penalty. However, the Tribunal found that the assessee's belief in not paying duty due to past practices was bona fide, leading to the rejection of the Revenue's appeal.

Issue 5: Applicability of a longer period for demanding duty
The Revenue sought an extended period for demanding duty based on alleged deliberate evasion of duty. They argued that failure to file a classification list and pay duty on flocks consumed captively constituted a violation of rules. The Tribunal, however, found that the assessee's belief in not paying duty due to past practices was genuine, leading to the rejection of the Revenue's appeal.

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