2001 (1) TMI 284 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of small scale exemption under Notification No. 1/93-C.E. and Notification No. 7/97-C.E. to persons procuring molasses from a Khandsari Sugar Factory.
2. Interpretation of legal fiction deeming procurers as manufacturers under Rule 7A of the Central Excise Rules, 1944.
3. Limitation period for issuing show cause notices.

Issue-wise Detailed Analysis:

1. Applicability of Small Scale Exemption:
The core issue was whether the small scale exemption under Notification No. 1/93-C.E. and Notification No. 7/97-C.E. applied to persons procuring molasses from a Khandsari Sugar Factory. The Revenue argued that the exemption was strictly for manufacturers with factories producing excisable goods, and procurers, deemed manufacturers by legal fiction, did not qualify. The exemption notification must be strictly interpreted, and benefits were limited to actual manufacturers of excisable goods. The Tribunal supported this view, citing multiple precedents emphasizing strict interpretation of exemption notifications.

2. Interpretation of Legal Fiction Deeming Procurers as Manufacturers:
The Tribunal examined Rule 7A, which deemed procurers of molasses as manufacturers for duty collection purposes. The legal fiction was intended to shift duty liability from khandsari manufacturers to procurers. The Tribunal noted that legal fictions should not extend beyond their intended purpose. The fiction in Rule 7A aimed to facilitate duty collection at the consumption point, not to extend small scale exemptions to procurers. The Tribunal referenced multiple Supreme Court decisions underscoring that legal fictions should be confined to their specific legislative intent.

3. Limitation Period for Issuing Show Cause Notices:
The respondents argued that show cause notices were issued beyond the normal limitation period. The Tribunal found that the notices were issued and received within the stipulated time. The Deputy Commissioner had previously determined that the notices were timely, and the respondents' contention was deemed an afterthought without substantive evidence. The Tribunal upheld this view, confirming that the notices were not time-barred.

Conclusion:
The Tribunal concluded that the small scale exemption under Notifications No. 1/93-C.E. and No. 7/97-C.E. did not apply to procurers of khandsari molasses, as they were not manufacturers within the meaning of the Central Excise Act. The legal fiction created by Rule 7A was strictly for duty collection purposes and could not extend to exemptions meant for actual manufacturers. Additionally, the show cause notices were issued within the limitation period. Consequently, the Tribunal set aside the impugned orders-in-appeal and restored the original orders, confirming the penalties and interest demanded. All appeals by the Revenue were allowed, and the cross-objections were disposed of accordingly.