1998 (12) TMI 246 - Commissioner - Central Excise

Summary

Issues:
- Demand of Central Excise duty and penalty on the appellants
- Allegations of suppression of facts by the appellants
- Invokation of extended period for demand of duty
- Imposition of penalty disproportionate to allegations
- Maintainability of the show cause notice

Analysis:

Demand of Central Excise duty and penalty:
The appeal was filed against the Order-in-Original confirming the demand of Rs. 4,36,766/- and imposing an equal penalty on the appellants. The appellants were engaged in the manufacture of Pan Masala and Gutkha, and the allegations included blending tobacco with perfumes and flavoring agents, consumption of tobacco captively, and non-payment of duty on manufactured tobacco. The adjudicating authority found the allegations to be true and confirmed the demand and penalty.

Allegations of suppression of facts:
The appellants argued that the Department had prior knowledge of their activities, as evidenced by earlier show cause notices and regular factory visits. They contended that the charge of suppression of facts was baseless and contrary to the facts on record. The adjudicating authority's reliance on the alleged suppression to invoke a larger period for demand was deemed unsustainable.

Invokation of extended period for demand of duty:
The appellants cited legal precedents to argue against the invokation of an extended period for demanding duty, emphasizing that when facts were known to the Department, a longer period was not maintainable. The judgment highlighted that there was doubt regarding the dutiability of the manufactured tobacco at an intermediate stage, especially since duty was already paid on the final product, Gutkha.

Imposition of penalty disproportionate to allegations:
The appellants contended that the penalty imposed was not commensurate with the allegations made in the show cause notice. The judgment concluded that since the Department was aware of the appellants' activities, no penalty could be imposed on them.

Maintainability of the show cause notice:
The judgment ultimately set aside the impugned order and allowed the appeal, ruling that there was no suppression of facts by the appellants. It held that the extended period for demand of duty could not be invoked, and no penalty was imposable due to the Department's prior knowledge of the appellants' manufacturing activities.