2001 (3) TMI 492 - AT - Central Excise

Summary

Issues:
Classification of compounded rubber under Notification 71/68, retrospective effect of Notification 377/86, exigibility of irregular sheets of compounded rubber, applicability of penalty under Rule 173Q(1).

Classification under Notification 71/68:
The appellants, manufacturers of batteries, prepared 'Compounded Rubber' for captive consumption but did not file a classification list for excisable goods, claiming benefit under Notification 71/68. The show cause notice was issued for the period 1-3-1986 to 31-5-1990. The Collector confirmed the demand due to the lack of provision for the reversal of Modvat credit once taken. The Tribunal set aside the order, considering the Supreme Court's decision in Chandrapur Magnet Wires Pvt. Ltd. case. The Tribunal directed to redetermine the penalty after evaluating any duty evasion established in light of the notification and the Supreme Court's decision.

Retrospective effect of Notification 377/86:
The Tribunal found that Notification 377/86 did not have retrospective effect, applying only from 29-7-1986. It observed that the benefit of this notification was available from that date and not prior, emphasizing that the applicability of Notification 71/68 needed to be decided by the Collector.

Exigibility of irregular sheets of compounded rubber:
The Collector concluded that irregular sheets of compounded rubber were not covered under Notification 71/68 but under Notification 371/86, which prescribed a concessional duty rate. The Tribunal disagreed, stating that irregular sheets would fall under the 'Sheets' category of Tariff Heading 40.05, entitling them to the benefit of Notification 71/68. The Tribunal highlighted that the irregular sheets were not established as marketable or having a shelf life, making them non-exigible.

Applicability of penalty under Rule 173Q(1):
The Tribunal found no violation of Rule 9 or Rule 49, concluding that penalty under Rule 173Q(1) was not sustainable as the demands could not be upheld due to the irregular compounded rubber sheets being exempt on reversal of credit. Therefore, the order was set aside, and the appeal was allowed based on these findings.