2001 (4) TMI 464 - AT - Central Excise

Summary

Issues:
1. Duty evasion on clearance of M.S. scrap without payment.
2. Imposition of penalty under Central Excise Act, 1944.
3. Time-barred demand of duty.
4. Applicability of penalty provisions.

Analysis:

Issue 1: Duty evasion on clearance of M.S. scrap without payment
The appellants, manufacturers of single and double barrel guns, were found to have cleared 64.935 M.Ts of M.S. scrap without paying the corresponding duty amounting to Rs. 37,756.00. The party voluntarily debited this amount in their PLA after being pointed out by the authorities. Subsequently, they were issued a show cause notice for contravening Central Excise Rules by not accounting for the scrap and removing it without payment of duty.

Issue 2: Imposition of penalty under Central Excise Act, 1944
The Joint Commissioner confirmed the demand of duty and imposed a penalty equivalent to the amount on the appellants under Rule 173Q read with Section 11AC of the Act. Additionally, interest under Section 11AB was ordered on clearances post-28-9-1996. The Commissioner (Appeals) upheld this decision citing the dutiability of the scrap and the justification for penalty and interest under the Act.

Issue 3: Time-barred demand of duty
The appellants contended that the demand was time-barred as the scrap was generated openly in their factory premises, known to Central Excise staff from the factory's inception. They argued that since authorities were aware of the scrap generation, no suppression or misstatement could be alleged against them. However, the authorities invoked the extended period for duty demand due to the lack of declaration by the party regarding the scrap generation and sale.

Issue 4: Applicability of penalty provisions
The appellants challenged the imposition of penalty under Section 11AC, arguing that the contravention period (1994-95 to June 1996) predates the provision's enactment in September 1996. The Tribunal agreed that Section 11AC could not be applied retrospectively to this case but upheld the penalty under Rule 173Q, reducing it to Rs. 2,000. The appeal was dismissed except for this modification, affirming the duty demand and penalty under Rule 173Q.

In conclusion, the Tribunal upheld the duty demand on the M.S. scrap, found the penalty under Section 11AC inapplicable due to retrospective effect limitations, and justified the penalty under Rule 173Q. The contention of time-barred demand was rejected, emphasizing the lack of declaration by the appellants regarding the scrap generation.