2003 (11) TMI 386 - AT - Central Excise

Thread - Sewing thread cleared in form of hanks and not put on support - Demand - Limitation - Suppression of facts - Penalty

Summary

Issues:
1. Interpretation of Notification 25/97-C.E., dated 7-5-97 regarding the availability of benefits to the respondents.
2. Application of Section Note 3 of Section XI of the Schedule for defining "sewing thread."
3. Limitation period for duty demand in appeal No. E/1383/03.
4. Imposition of penalty under Section 11AC.

Interpretation of Notification 25/97-C.E., dated 7-5-97:
The Appellate Tribunal considered the issue of whether the benefit of Notification 25/97-C.E., dated 7-5-97 was available to the respondents for clearing sewing thread in the form of hanks. The Tribunal noted that the notification provided a concessional rate of duty for clearances of sewing thread but did not define "sewing thread" within the notification itself. It was established that the definition of sewing thread as per Section Note 3 of Section XI of the Schedule to the CETA required the thread to be put on support like reels or tubes and dressed for use as sewing thread. The Tribunal found that the respondents had only cleared the thread in the form of hanks without meeting the conditions specified in Section Note 3. Therefore, the benefit of the notification was deemed unavailable to the respondents.

Application of Section Note 3 of Section XI for defining "sewing thread":
The Tribunal analyzed Section Note 3 of Section XI to ascertain the criteria for qualifying as sewing thread. It emphasized that one of the essential conditions for a thread to be considered sewing thread was to be put on support like reels or tubes and dressed for use as sewing thread. The Tribunal observed that the thread cleared by the respondents did not fulfill this criterion as it was only tied in hanks without being placed on any support. The Tribunal concluded that the end-use of the thread could not determine it as sewing thread, and the respondents did not meet the necessary conditions outlined in Section Note 3, leading to the denial of the concessional rate of duty.

Limitation period for duty demand in appeal No. E/1383/03:
In appeal No. E/1383/03, the issue of limitation was raised concerning the duty demand for a specific period. The Tribunal deliberated on whether the respondents had suppressed material facts by not disclosing the form in which they intended to clear the thread. It was determined that the respondents had intentionally withheld crucial information from the Department, leading to the invocation of the extended period for raising the duty demand. The Tribunal rejected the contention that the demand was time-barred due to the deliberate omission of material facts by the respondents.

Imposition of penalty under Section 11AC:
Regarding the imposition of penalty under Section 11AC, the Tribunal assessed the respondents' actions in claiming the benefit of the exemption notification. It was concluded that the respondents had suppressed material facts and acted with a mala fide intention to evade duty payment. Despite the contention of bona fide belief by the respondents, the Tribunal upheld the imposition of penalty under Section 11AC. However, considering the circumstances, the penalty was reduced to Rs. 1 lakh. The Tribunal emphasized that the respondents' actions did not align with a bona fide approach, leading to the penalty imposition.

In conclusion, the Tribunal set aside the impugned orders in both appeals, restoring the original duty confirmation while modifying the penalty in one case. The appeals of the Revenue were allowed based on the detailed analysis and findings on the issues presented before the Appellate Tribunal.