1990 (6) TMI 147 - AT - Central Excise

Summary

Issues Involved:
1. Penalty
2. Limitation

Detailed Analysis:

Penalty:

At the outset, the learned Advocate clarified that appeals No. 411/81 and 412/81 relate only to classification lists and there is neither any demand made nor penalty imposed in these two matters. Therefore, while this order relates to all four appeals in view of the judgment of the Supreme Court, in effect, it would be applicable only to appeals No. 943/85-D and 787/80-D.

The appellants argued that they acted bona fide and thus, no penalty should be imposed. They did not obtain an L4 license nor followed other requirements of Central Excise law as they believed their product was exempt. They cited several judgments to support this argument, including Padmini Products v. Collector of Central Excise and Murugan and Company v. Dy. Collector of Central Excise, which emphasized that penalties are warranted only for quasi-criminal activities or intentional evasion. The appellants also argued that the show cause notice did not allege suppression of facts or misstatement, which are prerequisites for imposing penalties.

In contrast, the respondent argued that the appellants had no reason to believe that Notification No. 55/75 was available to them and that the trade notice cited by the appellants was not applicable to their case. They contended that the appellants' actions amounted to suppression or misstatement, justifying the imposition of penalties.

Upon reviewing the show cause notices and the arguments, the Tribunal concluded that there was no deliberate attempt by the appellants to evade duty through suppression or misstatement. Therefore, the Tribunal held that there was no warrant for imposing penalties.

Limitation:

The appellants argued that the demands were not sustainable under Rule 10 as they were substantially hit by limitation. They contended that only the normal period of limitation should apply, as they had a bona fide belief that their product was exempt from duty under Notification No. 55/75-CE. The appellants listed seven circumstances to justify their bona fides, including the Central Excise Trade Notice No. 103/75, orders from the Appellate Collector of Central Excise, and the CCCN explanatory notes.

The respondent countered that the appellants had no valid reason to believe their product was exempt and that the trade notice was not applicable to them. They argued that the appellants' actions during the periods of demand indicated a lack of requisite knowledge and that the show cause notices contained necessary allegations of suppression or misstatement.

The Tribunal examined the seven circumstances listed by the appellants and noted that much of the evidence and events cited occurred after the period in question. The Tribunal agreed with the appellants that for invoking the extended period of demand, the Department must conclusively prove the necessary elements of suppression or misstatement. The Tribunal found that the show cause notices did not contain direct allegations of suppression or misstatement and that the appellants might have had a bona fide belief in their eligibility for exemption.

Considering all circumstances, the Tribunal held that only the normal period of limitation should be applied and that the extended period was not justified. Consequently, the demands for duty beyond the normal period of limitation were not sustained.

Conclusion:

The Tribunal disposed of the four appeals accordingly, applying only the normal period of limitation and ruling out the imposition of penalties.