1998 (6) TMI 229 - AT - Central Excise

Summary

Issues Involved:
1. Pre-deposit requirement for hearing appeals.
2. Classification and exemption of 'Chik' brand shampoo.
3. Allegations of dummy units and non-independent manufacturing.
4. Time-barred demands.
5. Non-consideration of evidence and non-speaking order.
6. Similar proceedings against other manufacturers.
7. Leviability of interest under Section 11AB.
8. Entitlement to Modvat benefit.
9. Non-issuance of show cause notices to all units.

Issue-wise Detailed Analysis:

1. Pre-deposit Requirement:
The appellants were required to pre-deposit a duty amount of Rs. 15,77,75,000/- confirmed under Rule 9(2) of Central Excise Rules, 1944, read with Section 11A(1) of Central Excise Act. Penalties were also imposed on the company and its directors under Rule 173Q of Central Excise Rules.

2. Classification and Exemption:
The appellants, manufacturers of 'Chik' brand shampoo, claimed exemption under Notification No. 140/83. However, investigations revealed discrepancies in their declarations and actual manufacturing activities.

3. Allegations of Dummy Units and Non-Independent Manufacturing:
The department alleged that the appellants set up dummy units to manufacture 'Chik' shampoo. Evidence showed that these units lacked infrastructure and necessary licenses, and the manufacturing process was controlled by the appellants. The department's investigation indicated that raw materials and packing were supplied by the appellants, and the unit owners were not independent.

4. Time-Barred Demands:
The appellants argued that the demands were time-barred as the units had filed declarations independently. The department had visited the factory and obtained details in 1992 and 1993, but the order did not address the time-bar issue adequately.

5. Non-Consideration of Evidence and Non-Speaking Order:
The appellants contended that the Commissioner did not consider several pieces of evidence, including annual accounts, certificates, sales tax records, and statements from unit owners. The order was deemed non-speaking as it did not address these evidences or the appellants' detailed submissions.

6. Similar Proceedings Against Other Manufacturers:
The appellants highlighted that similar proceedings against other manufacturers had been dropped, but no findings were given on this issue. Affidavits from 15 unit holders stating their independence were not cross-examined by the revenue.

7. Leviability of Interest Under Section 11AB:
The appellants argued that Section 11AB, which pertains to the levy of interest, was not in existence during the relevant period, and thus, the order was unsustainable in this regard.

8. Entitlement to Modvat Benefit:
The appellants claimed entitlement to Modvat benefit, citing the Supreme Court's judgment in Formica India. However, the Commissioner did not address this issue in the order.

9. Non-Issuance of Show Cause Notices to All Units:
The department did not issue show cause notices to all units, which the appellants argued was a fundamental requirement. The order did not satisfactorily address whether the units were independent manufacturers.

Conclusion:
The tribunal found that there was a violation of principles of natural justice and the order was non-speaking. The matter required a detailed consideration of whether the units were independent and whether the appellants were the actual manufacturers. The tribunal set aside the impugned order and remanded the matter for de novo consideration, directing the Commissioner to issue a notice of hearing and address all aspects raised by the appellants, including the time-barred issue and the non-issuance of show cause notices. The appeals were allowed by way of remand.