1998 (6) TMI 238 - AT - Central Excise

Summary

Issues Involved:

1. Confirmation of duty demand and imposition of penalty.
2. Alleged suppression of facts by the appellant.
3. Use of power in the manufacturing process.
4. Invocation of the larger period under the proviso to Section 11A of the Central Excises & Salt Act, 1944.
5. Applicability of exemption notifications.

Detailed Analysis:

1. Confirmation of Duty Demand and Imposition of Penalty:
The Commissioner confirmed a duty demand of Rs. 4,79,490.71 under Rule 9(2) of the Central Excise Rules, read with the proviso to Section 11A of the Central Excises & Salt Act, 1944, for excisable goods manufactured and cleared without payment of Central Excise duty during the period 1983-84 and 1987-88 (up to December 1987). A penalty of Rs. 50,000/- was imposed, and 12 cardboard boxes of cola/orange concentrates/flavours valued at Rs. 13,710/- were ordered for confiscation under Rule 9(2) of the Central Excise Rules. However, these were released on payment of a redemption fine of Rs. 1,500/-.

2. Alleged Suppression of Facts by the Appellant:
The appellants were issued a show cause notice on 7-6-1988, alleging full suppression of the manufacture of cola/orange concentrates/flavours falling under T.I. 68 of the erstwhile Central Excise Tariff and Chapter sub-heading 3301 of the Central Excise Act. The goods were cleared without obtaining a Central Excise license, following Central Excise procedures, or paying Central Excise duty, thereby evading duty payment. Statements recorded from the appellant's accountant and director admitted to not filing any declaration or obtaining a license from the Central Excise Department.

3. Use of Power in the Manufacturing Process:
The Commissioner noted the installation of several machines (Spectrometer, P.H. Meter, Vacuum Pump, Distillation apparatus, Water Purifier, Pouch Sealer) used in the manufacturing process. The appellant's director admitted that these machines, which function with the aid of power, were essential for testing incoming raw materials and outgoing finished products. This testing was deemed incidental and ancillary to the completion of the manufactured product, thus constituting manufacture with the aid of power under Section 2(f) of the Central Excise Act.

4. Invocation of the Larger Period under the Proviso to Section 11A:
The Commissioner confirmed the invocation of the larger period under the proviso to Section 11A, noting that the appellants did not file any declaration or classification list with the Department. The appellants' consumer public price list stated, "we do not charge Excise Duty," indicating awareness of their obligations under Central Excise Rules and Acts. This was deemed suppression of facts, justifying the invocation of the larger period.

5. Applicability of Exemption Notifications:
The appellants contended that the goods were manufactured without the aid of power and thus exempted under Notification No. 236/86, dated 3-4-1986. However, the Commissioner held that the benefit of Notification No. 179, dated 18-6-1977, was not applicable as it only covered goods manufactured without the aid of power. From 1-3-1986 onwards, the goods were classified under sub-heading 33.03 of the Central Excise Act, and Notification No. 230/86, dated 3-4-1986, was also deemed inapplicable as it only covered goods manufactured without the aid of power.

Conclusion:
The appellants did not contest the classification or the use of power in the manufacturing process but argued against the invocation of the larger period due to alleged non-wilful suppression. However, the Tribunal rejected these arguments, noting that the appellants failed to declare their goods or seek clarification from the Department. The Tribunal distinguished the cited judgments and upheld the Commissioner's order confirming the duty demand, imposing the penalty, and invoking the larger period. The appeal was rejected.