Customs, Excise and Gold Tribunal - Delhi
Castrol India Ltd., Mr. A. Batra (Works ... vs C.C.E. on 10 August, 2006
ORDER C.N.B. Nair, Member (T)
1. These three appeals are before us on remand by the Hon'ble Supreme Court, under judgment dated May 4, 2006.
2. The facts of the case are that the appellant is a manufacturer of lubricating oil. That oil is packed in plastic containers. During the period 1.7.98 to 26.3.99, the appellant received in its factory plastic granules for the purpose of manufacture of plastic containers. Input (modvat) credit was also taken (equivalent to the excise duty paid on the granules). The granules were passed on to job workers for manufacture of containers. Upon return of the containers, the appellant used them for packing both dutiable (excise) and non-dutiable oils. It is to be noted that no input credit is available in regard to manufactured goods which are exempt from duty. Therefore, clearly, the credit taken on that portion of the granules, which went into the production of containers which were used for packing non-duty paid oil was not available to the appellant. Upon this being noticed, a Show-cause Notice dated 16.9.99 was issued demanding duty on the containers which were cleared without payment of duty. In the adjudication proceedings, this demand was confirmed. Confiscation of seized containers as well as imposition of penalties was ordered in adjudication. The appellants filed appeals before this Tribunal challenging the impugned order. In those appeals, this Tribunal accepted the appellants' claim for exemption under Notification No. 5/98-CE, dated 2.6.1998 and quashed the demand and penalties. Aggrieved by that order, revenue filed appeals before the Hon'ble Supreme Court and the remand order has been passed in those appeals.
3. We have heard both sides and perused record. The contention of the appellants is that Notification No. 5/98-CE has granted exemption to the plastic containers in question under serial No. 69 and therefore, duty demand is not sustainable. The appellant has also a contention that, in any event, there was no suppression of facts and therefore, the demand for the extended period is required to be set aside.
4. Coming to the penalties, the submission is that since appellant had deposited the short-levied duty even before the issue of Show-cause Notice no penalty was attracted. The contention of the learned Counsel is that it remains settled [C.C.E., Bangalore v. Shree Krishna Pipe Industries ] that no penalty is attracted to a case where short-levied/short paid duty demand is satisfied before issuance of show cause notice. Learned Counsel would also contend that this is not a case of suppression of facts inasmuch as the appellant was eligible for exemption under Notification No. 5/98-Ex as held by this Tribunal in the earlier order.
5. Learned JDR had relied on the show cause notice and the findings to submit that the claim of the appellant was not based on the Notification 5/98 at all. Instead, it was a case where modvat credit was taken and utilised, even as the final product was exempt. It is her contention that the demand should be settled in terms of the provisions of Modvat credit, without regard to the defence, subsequently raised, by the appellants in terms of the Notification No. 5/98. With regard to penalties, it is being pointed out that the period in the present case (1.7.98 to 26.3.99) was before Section 11AC was amended to provide for exclusion of penalty in cases where duty is paid before adjudication and, therefore, the law as it stood during the relevant period mandated imposition of penalty.
6. The facts of the case make it clear that the appellant had availed of Modvat credit on inputs, while part of the produce, was used without payment of duty. Clearly, this involves violation of Modvat Rules and the duty demand made is to be upheld. As pointed out in show cause notice, the appellants had also not informed the Central Excise authorities that part of the produce from the modvated inputs was being cleared without payment of duty. That being the factual situation, the finding regarding the extended period has to be upheld. The plea of exemption (5/98) was raised by the appellant in adjudication and appeal proceedings as an alternative claim. Our finding on that claim in the earlier order has no application in regard to the issue of incorrect availment of Modvat credit.
7. We have rejected the claim of assessees for exemption under 5/98 under an order dated 9.8.2006 in the case of N.M. Nagpal Pvt. Ltd. v. C.C.E., Delhi II in Appeal Nos. E/228/2000 and E/1343/2001. The view taken in that order equally applies to the present cases. Accordingly, the duty demands are required to be confirmed. We do so. However, the appellants shall be entitled to relief by way of Modvat credit.
8. In regard to penalties, we find that appellants' claim is covered by the judgment of the Karnataka High Court in the case of C.C.E., Bangalore v. Shree Krishna Pipe Industries. Penalty in that case also was in regard to duty evasion prior to the amendment of Section 11AC. All the same, the Hon'ble High Court took the view that since duty was satisfied before issuance of show cause notice, penalty was not justified. Following that order, we set aside the penalties imposed and the confiscation made under the impugned order.
9. In the result, duty demands made under the impugned orders are confirmed and confiscation and penalties are set aside.
10. The appeals are ordered in the above terms.
(Dictated and pronounced in open Court)