1989 (9) TMI 121 - HC - Central Excise

Summary

Issues:
1. Imposition of penalty and confiscation of goods by the Collector of Central Excise.
2. Appeal to Central Board of Excise & Customs and subsequent reduction in duty demand.
3. Challenge to the legality and validity of the orders by the petitioner.

Analysis:

Issue 1: Imposition of penalty and confiscation by the Collector of Central Excise
The petitioner, a textile mill, faced penalties and confiscation of goods for converting cloth into rags to evade excise duty. The Collector held that the petitioner deliberately cut cloth into rags to avoid duty, contravening various Central Excise Rules. Penalties were imposed, and goods were confiscated, with an option for redemption by payment of fines. The Collector also ordered duty payment on the original cloth converted into rags.

Issue 2: Appeal to Central Board of Excise & Customs
The petitioner appealed to the Central Board of Excise & Customs, which upheld the penalties but reduced the duty demand by 2% for one variety of cloth and 5% for another. The appeal was partially successful, leading to modifications in the duty demand. Subsequently, the petitioner's revision appeal to the Central Government was unsuccessful.

Issue 3: Challenge to the legality and validity of the orders
The petitioner challenged the orders, arguing that excise duty liability arises only at the time of goods removal, not before. The petitioner contended that the goods seized were not liable for duty until removal. However, the court rejected this argument, citing the deliberate conversion of sound cloth into rags to evade duty. The court emphasized that excise duty is leviable on manufactured goods at the time of removal, not just sale, and upheld the authorities' actions based on evidence of intentional evasion.

In conclusion, the court dismissed the petition, finding no merit in the petitioner's contentions. The ruling affirmed the imposition of penalties and duty payments based on the deliberate conversion of cloth into rags to evade excise duty, as established by the authorities.