1986 (3) TMI 192 - AT - Central Excise

Summary

Issues Involved:
1. Classification of tin sheets as non-excisable.
2. Validity of show cause notices based on audit objections.
3. Applicability of Rule 10/10A for demand of duty.
4. Alleged failure of the Department to conduct proper investigation.
5. Exemption under Notification No. 94/70.

Summary:

1. Classification of Tin Sheets as Non-Excisable:
The appellants argued that the tin sheets cut to size for container bottoms and bodies were classified as non-excisable components of metal containers, a classification approved by the Central Excise authorities on multiple occasions. The Department later issued show cause notices demanding duty for these items, claiming they were unassembled metal containers.

2. Validity of Show Cause Notices Based on Audit Objections:
The appellants contended that the show cause notices were based solely on audit objections without any further inquiry or investigation by the Department. Citing Delhi High Court decisions, they argued that such notices, based on unsubstantiated audit objections, were illegal and void. The Tribunal agreed, noting the absence of any subsequent evidence to contradict the earlier approved classification.

3. Applicability of Rule 10/10A for Demand of Duty:
The appellants challenged the applicability of Rule 10A, arguing that only Rule 10 could be invoked, which was time-barred. They cited a Supreme Court decision stating that Rule 10A cannot apply when a short levy is due to an officer's error. The Tribunal did not delve into this issue, as the primary ground for quashing the notices was the lack of evidence supporting the Department's claims.

4. Alleged Failure of the Department to Conduct Proper Investigation:
The appellants claimed that the Department failed to conduct a thorough investigation and did not associate them with any inquiries. The Tribunal found that the Department had not undertaken any investigation to establish that the goods were metal containers in unassembled form, thus violating principles of natural justice.

5. Exemption Under Notification No. 94/70:
The appellants argued for exemption under Notification No. 94/70, stating their sheets were manufactured manually. The Department countered that power was used in cutting the sheets. The Tribunal did not address this issue, as the appeals were allowed on other grounds.

Conclusion:
The Tribunal set aside the Orders-in-Appeal and allowed the appeals, finding no evidence that the goods cleared by the appellants were metal containers in unassembled form. The show cause notices were quashed due to the Department's failure to provide a substantiated basis for the demand.