Custom, Excise & Service Tax Tribunal
Mattel Toys (India) Pvt. Limited vs Commissioner, Central Excise & ... on 30 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/3469/04-MUM [Arising out of Order-in-Original No. 49-56/2004/CE dated 31/8/2004 passed by the Commissioner of Customs and Central Excise, Nagpur] For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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Mattel Toys (India) Pvt. Limited
:
Appellants
VS
Commissioner, Central Excise & Customs, Nagpur
:
Respondent
Appearance
Shri. Bhupendra Singh, Advocate for the Appellants
Shri. Rakesh Goyal, Addl. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 30/4/2015
Date of decision /2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order Order-in-Original No. 49-56/2004/CE dated 31/8/2004 passed by the Commissioner of Customs and Central Excise, Nagpur, wherein Ld. Commissioner confirmed demand of Central Excise duty amounting to Rs. 17,72,864/- covered by eight show cause notices, demanded interest under Section 11AB and imposed penalty of Rs. 17,72,864/- under Rule 9(2) and Rule 173Q(i) of Central Excise Rules, 1944 read with Section 38A and Section 11AC of Central Excise Act. 1944.
2. The fact of the case is that the appellant is engaged in the manufacture of toys falling under Chapter heading No. 9502 and 9503 of Central Excise Tariff, 1985. The Central Excise Officer during visit of the appellants factory on 9/4/1996 observed that the appellant is also engaged in the manufacture of Paint falling under Chapter sub heading 3208.20. For the manufacture of Paint they used solvent like MEK, MIBK, Cyclo, Pigment and resin like PVC -440, they mixed all the ingredients as per their own formula in mixture to achieve desire homogeneosity. When the paint was manufactured they use it for the manufacture of final product i.e. for painting of toys. The statement of Shri. Sudesh Kumar Kapoor, Vice President(Works) was recorded wherein he stated that though the various raw material are mixed but it cannot be called as paint for the reason that essential requirement for the paint namely dispersing Agent, stabilizing agent and drier is required for paint whereas in the present case, such agent are not used and accordingly the intermediate product manufactured by them could not be called as paint in absence of dispersing agent, stabilizing agent and drier. He also stated that such product is instantly used for colouring of toys after manufacture but in case if the paint could not be used on the same day it can be used within 7 to 10 days after storing the same in closed container. As per the Revenues contention that the paint manufacture by the appellant is having shelf life of 7-10 days, it is excisable goods. The paint generally stored in the closed container and if any paint is kept open it will get dried therefore on this basis that the paint manufactured by the appellant has short shelf life could not be the reason for holding the product is non excisable. In view of this contention the Revenue has issued several show cause notices on periodical basis for the period 1992-93 to June 1999. The show cause notice came to be adjudicated and accordingly demand of duty, interest and penalty was confirmed vide order in original No. 15-22/2000 dated 27/2/2000. Aggrieved by the said order, appellant filed appeal before this Tribunal under appeal No. E/1534/00 MUM. The Tribunal vide order No. C-II/2601/WZP/2001 dated 16/10/2001 remanded the matter to the Commissioner for passing a fresh order mainly on the ground that opinion of Dy. Chief Chemist and Director of CRCL are substance is capable of being used as paint and the appellant hotly disputed this. The Tribunal also observed that due to the nature of the product the issue involved considerable scientific knowledge dealing with the properties of paint and other such material and in view of this Tribunal opined that he Technical authority of the government who carried out chemical examination should be cross examined before the Commissioner. In view of the Tribunal judgment, the Commissioner has allowed cross examination of Chief Chemist and Director of CRCL, who conducted test of the impugned product. After taking into consideration the cross examination, the Commissioner passed denovo adjudication order No. 49-59/2009/C dated 31/8/2004 wherein it was held that paint is excisable product accordingly duty was demanded for an amount of Rs. 17,72,864/- and demanded interest and penalty. Being aggrieved by the said impugned order the appellant is before us.
3. Shri. Bhupendra Singh, Ld Counsel appearing on behalf of the appellant at the out set submits that in their own case in respect of intermediate product namely Plastisol similar facts were involved and the product used for manufacture of toys, this Tribunal vide order dated 13/1/2006 held that being short shelf life and in absence of marketability the product is not liable for duty and the appeal was allowed. It is his submission that in the present case though the product is so called paint but nature of the short shelf life and non marketability is the same as was in the product namely Plastisol and both the product are used for manufacture of toys. Therefore in view of the Tribunal order dated 31/1/2006 in respect of other intermediate product namely Plastisol, the present appeal deserve to be allowed on the similar line. He further submits that in the denovo adjudication proceedings, in the cross examination of the Director CRCL, fact was brought to notice that the product in question did not have additive, though additive were essential. However, Commissioner has not appreciated this fact and confirmed duty. It was also established that product did not have stabilizing agent and therefore was not stable. In absence of stabilizing agent product cannot be regarded as paint as the same has very short life. He submits that there were serious discrepancies in the evidence of Chemical examiner in respect of sample and therefore chemical examiner report could not be relied upon for holding the product as paint. He submits that the Commissioner ought to have drawn fresh sample of the product and sent to two different independent laboratories as requested by the appellant, since it was not done so the impugned order deserve to be quashed. He submits that Ld. Commissioner has recorded findings that the product has sufficient shelf life whereas no evidence to this effect was adduced therefore the said findings is not tenable. It is his submission that in view of the fact that the product in question has no shelf life the same is not capable of being bought and sold in the market and hence the same is not marketable. If this is so non marketable product could not be called as goods under the provisions of Central Excise act, hence duty is not chargeable on the non marketable product. In support of his submission, he placed reliance on the following judgments:
(a) Bata India Limited Vs. CCE[2010(252) ELT 492(SC)]
(b) Gujarat Nermada Valley Fert Co Ltd. Vs. CCE[2005(184) ELT 128(SC)]
(c) Cadilla Laboratories Private Limited Vs. CCE[2003(152) ELT 262 (SC)]
(d) Moti Laminates Private Limited Vs. CCE[1995(76)ELT 241(SC)]
(e) Indian Cable Company Ltd. Vs. CCE[1994(74) ELT 22]
(f) Phoenix Mills Limited Vs. Union of India[2004( 168) ELT 310(Bom)]
(g) Ceat Tyres of India Limited Vs. Union of India [1987(30) ELT 857(BOM)].
(h) Khemka Containers Vs. CCE[2013(287) ELT 324]
(i) Ambaji Foods India Private Ltd Vs. CCE[2010(8) TMI 714] He further submits that the Commissioner ought to have appreciated the claim of the appellant of modvat credit in the event of confirmation of demand. He submits that the Ld. Commissioner has not appreciated and failed to apply ratio of the following judgments.
(a) Formica India Division Vs. Collector of Central Excise [1995(77) ELT 511]
(b) Haryana State Electricity Board Vs. Collector of Central Excise[1998(37) ELT 81]
(c) Kirloskar Brothers Ltd. Vs. Union of India and Others[1988(34) ELT 30]
(d) Vivek Re-Rolling Mills Vs. Collector of Central Excise, Chandigarh1994(73) ELT 660]
(e) Jagraon Machine Tools Vs.Collector of Central Excise[1993(65) ELT 300]
(f) Chamundi Steel Re-Rolling Mills Vs.Collector of C. Ex., Bangalore1996 (81) E.L.T. 563 (Tribunal)]
(g) Saphire Steels (P) Ltd. versus Collector Of Central Excise, Meerut[1994(71) ELT 1049] He submits that in view of settled legal position that in case of any demand arises out of the litigation on the issue of demand of excise duty, the benefit modvat credit on the input during the period of demand must be extended and the same should be adjusted against demand. The Ld. Commissioner seriously erred in disallowing the modvat credit by applying Rule 54G(4) which provides limitation for availing the modvat credit. He submits that in the present matter since demand has arisen out of litigation Rule 54G(4) has no application. Moreover, during the period of demand i.e. 1992-93 to 1999 there was no application of Rule 54G(4). Therefore the Commissioner has wrongly denied the modvat credit. He submits that demand in the first show cause notice was raised invoking the extended period of five years whereas there is no suppression of facts whatsoever on the part of the appellant. He submits that in their factory Central excise department has conducted repeated audit at number of occasion and nothing surreptitious or clandestine activity was intercepted. Therefore there is no suppression of facts on the part of the appellant. He further submits that the appellant was of bonafide belief that since the product in question does not have stability and Shelf life it is not goods which is liable for duty. Therefore there is no intention to evade payment of duty on the part of the appellant. In view of this fact demand related to first show cause notice stands time bar.
4. On the other hand, Shri. Rakesh Goyal, Ld. Addl. Commissioner(A.R) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that the appellants product is manufactured by mixing various ingredients namely MEK/MIBK/Cyclo/Pigment and resin like PVC-440. After process of mixing of these items there emerges a distinct product having different identity as against the raw material used, therefore the product is manufactured product and is excisable. He submits that resultant product is colouring matter and therefore it is Paint. There is no dispute that this paint is applied for giving colour to the toys. As per the use of the paint itself it can be established that the product is nothing other than paint which is correctly falls under the Chapter sub heading 32.08 and liable for excise duty. He submits that the appellant mainly raised the issue that the product in question does not have stabilizing agent therefore it does not have sufficient Shelf life and therefore in absence of Shelf life the product cannot be bought and sold hence not marketable. In the Chemical Examination Report of the product as well as cross examination of Director of CRCL it has been proved that the product has Shelf life of 8-10 days, rather, if it is kept closed Shelf life can be more than 8-10 days. He further submits that merely on the basis of that a product has short shelf life it cannot be conclusively decided the product is non excisable. It depends on the nature of the product and according to the nature of the chemical product it has shelf life of different duration. He submits that even paint which are available in the market has also short shelf life if it is not stored properly and kept open. Therefore in the present case the product being paint shelf life is not factor to decide the excisability of the product. He referred to HSN according to which paint of heading 32.08 are dispersion of insoluble colouring material. He submits that other ingredients such as drier, thickness agent, surface active agent, etc. may or may not be added for specific purpose. Therefore even if paint in question does not have stabilizing agent this alone could not be the reason that product is not paint. He submits that as per the dictionary meaning of the paint It is colouring matter substantiate any liquid vehicle so as to impart colour to surface. In view of this definition to qualify the product as paint, the only requirement is that it should be colouring matter and which is capable being applied to colour a surface. In the present case the product is mixture of pigment and other ingredient in the liquid form and the same is used to apply on the surface of toys only for the purpose of giving colour to the toys therefore there is no doubt that product in question is used as paint only. He placed reliance on following judgments.
(a) T. N. State Transport Corpn. Ltd. Vs. Collector of C. Ex., Madurai[2004(166) ELT 433(S.C.)]
(b) Nicholas Piramal India Ltd. Vs. Commissioner of C. Ex. Mumbai[2010(260) ELT 338(S.C.)].
He further submits that in the Chemical examiner report as well as cross examination of the Director of CRCL, it was maintained that product in question is paint therefore the same could not be brushed aside. In support of his submission he relied on judgment of Reliance Cellulose Products Ltd Vs. Collector of C. Ex. Hyderabad[1997(93) ELT 646(S.C.)]
5. We have carefully considered the submissions made by both sides.
6. From the facts of the case, we find that the product in question is mixture of various chemicals and the resultant product is used as colouring matter for giving colours to the toys which is final product of the appellant. As far as character, use and purpose of the product, it is undisputedly used as colouring matter and it is a paint. The stand taken by the appellant is that since the mixture of the various chemicals used for making colour does not have stabilizing agent, it has very short shelf life and therefore is not marketable, hence, it is not goods. From the statement of the appellants representative as well as from the chemical examiner report, it has been noticed that the paint manufactured by the appellant and used captively has shelf life of certain hours either 4-5 or 8-10 hours. Stabiling agent is not used only for the purpose that it is used in house. It also came on record that after manufacture of the paint and after use thereof when certain quantity is left over, it is stored by keeping it into closed container and same is subsequently used. It is observed that in general the paint has tendency of drying, if it is not kept closed it will get dried and the same will not be capable being used. Therefore as regard the product in question the shelf life is not significant. It is to be seen that the product in the form as such is used whether it is paint or otherwise. From the undisputed fact of use of the product by the appellant it is fact that the product is exclusively used for painting/colouring the toys manufacture by the appellant. In our view since use of the product itself clearly shows that it is coloring matter this is more than sufficient reason to hold that the product is paint and nothing else. As regard shelf life the product in question has been proved having shelf life. There is no parameter of duration of the shelf life to decide whether it is paint or otherwise. Ld. Commissioner in denovo adjudication after careful application of the mind and following the direction of the Tribunals remand order, given proper findings for coming to the conclusion that the product in question is paint and is excisable. The relevant findings of the impugned order is reproduced below:
On the above findings of the Ld. Commissioner, we agree with the findings in so far as it relates to the excisabililty of the product in question i.e. paint. The appellant emphatically submitted that this Tribunal while remanding the matter for denovo adjudication, categorically directed the Commissioner to allow the cross examination of the Chemical examiner and Director of Central Revenue Laboratory to ascertain the chemical characteristic of the product. The Commissioner has allowed the cross examination of Shri. Badri Prasad, Director Central Revenue Laboratory and Shri. D. Mohan Kumar, Chemical Examiner. We have observed from the cross examination record that though there are variations as regard stabilizing character, ingredient but from the overall explanation given by both the authorities it has been boiled down to the fact that the product in question is paint even though it has short shelf life or longer. In view of this, even though shelf life of product is short, but only due to this reason it cannot be said that product is other than paint particularly when its character and use is of paint only, for giving the colour to the toys. In this regard, we take the support of Honble Supreme Court Judgments in the case of Tamil Nadu State Transportation Corpn. Ltd.(supra) wherein Court held that Aluminium paste, metal lacquer and thinner are mixed in exact proportions, a separate and distinct product with a distinct identity comes into existence. It is paint which is know in the market as Aluminium Paint, this is enough to market it. The Honble Supreme Court in case of Nicholas Piramal India Ltd.(supra) held that short shelf life cannot be acquitted to no shelf life, short shelf life would not ipso facto mean that product cannot be marketed. Shelf life of the product not relevant factor to test marketability unless it is shown that product was absolutely no shelf life or shelf life is such that it is not capable being brought and sold during that shelf life. In the case of Reliance Cellulose Products Ltd. (supra) Honble Supreme Court held that test report of Chemical examiner and Chief Chemist of the government unless demonstrated erroneous, cannot be lightly brushed aside on the basis of opinion of some private person obtained by assessee.
In view of the above Honble Supreme Court Judgments, it is settled position that merely the product has short Shelf life, it cannot be taken away from the purview of excisable goods. In the present case the test report has categorically reported that product in question is paint. In the cross examination also both the authorities have maintained that irrespective of short shelf life or composition is without stabilizing agent, the product tested is paint. Therefore in view of the legal position as settled by the Honble Supreme Court the product is paint and excisable.
6.1 As regard the invocation of extended period of demand, we observed that appellant has not declared the manufacturing process of the paint and use thereof to the department at any point of time. Therefore department has no occasion to know about activity of manufacturing of paint and captive consumption thereof by the appellant. Therefore in our view the demand of extended period is also sustainable.
6.2 As regard the Modvat credit claim of the appellant during the relevant period of the demand, we do not agree with the Ld. Commissioner that Modvat credit is not admissible after six months in terms of 57G(4) of Central Excise Rules, 1944. Firstly the question of Modvat arosed only when issue of excisibility of the product is attained finality. In the present case the stage of determination of the duty on the product only after adjudication of the show cause notice as provided under Section 11A(1). Therefore at the time of determination of duty if the appellant is in position to establish and if the appellant has valid duty paying documents in respect of input received and used in the manufacturing of dutiable final product, Modvat credit must be extended to the appellant. This issue has come up time and again in the various judgments wherein Modvat credit in the event of confirmation of demand has been allowed. The ratio of the judgments cited by the appellant are clearly applicable in the present case. The judgments and relevant operative portion of the order are reproduced below:
Formica Division Vs. CCE [1995(77) ELT 511]
2. The High Court, however, took note of the fact? that no contention had been raised before the Tribunal that the appellants should be permitted to meet the requirements of Rule 56A of the Central Excise Rules and, therefore, they cannot be permitted to avail of that benefit in a Writ Petition brought under Article 226 of the Constitution. That indeed was a technical view to take because if the appellants were entitled to the benefit of the Notification No. 71/71-C.E., dated 29th May, 1971, to deny that benefit on the technical ground of non-compliance with Rule 56A would tantamount to permitting recovery of double duty on the intermediary product. The circumstances in which the appellants did not pay the duty on the intermediary product before putting the same to captive consumption for producing that stage, the appellants contested the correctness of the classification and had, therefore, not paid the duty on the intermediary product. When it was found that they were liable to pay duty on the intermediary product and had not paid the same, but had paid the duty on the end product, they could not ordinarily have complied with the requirements of Rule 56A. Once the Tribunal took the view that they were liable to pay duty on the intermediary product and they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. We are, therefore, of the opinion that the appellants should be permitted to avail of the benefit of the notification by complying at this stage with Rule 56A to the satisfaction of the Department.
3.In the result, we allow Civil Appeal No. 1493/88? and remit the matter to the Collector of Central Excise with a direction to permit the appellants to comply at this stage with the requirements of Rule 56A of the Central Excise Rules and claim set off of the duty payable on the intermediary product by satisfying the Collector that the same was used in the manufacture of the end product on which full duty had already been paid. On such satisfaction being recorded, the appropriate consequential orders would be passed.
4.In this view that we take in Civil Appeal No.? 1493/88, Civil appeal No. 4171/84 does not survive and shall stand disposed of accordingly. In both the appeals, we make no order as to costs.
Vivek Re-Rolling Mills[1994(73) ELT 660]
15.In view of our finding that old and? unserviceable railway materials used as inputs by the appellants were treatable only as old and unserviceable scrap which, during the relevant period, was not one of the specified inputs in Notification No. 202/88, duty would be recoverable on the clearances of the final products in question that may have been cleared by the appellants within a period of six months of the date of the show cause notice. The appellants have argued that even if it is held that during the relevant period the final products were dutiable on account of the inputs used in the manufacture thereof not being specified in the Notification 202/88, on the ratio of the Tribunals Final Order E/161/94-B1, dated 9-3-1994 in the case of M/s. Chamundi Steels Re-rolling Mills v. Collector of Central Excise, Bangalore and the decision in the case of Jagraon Machine Tools v. Collector of Central Excise, reported in 1993 (65) E.L.T. 300 (Trib.), they would be entitled to Modvat credit that might have been admissible in respect of re-rollable scrap in terms of the relevant order of the Ministry. In this regard it is seen that in Final Order E/161/94-B1, dated 9-3-1994, the Tribunal having regard to the appellants contention that if benefit of Notification No. 202/88 is disallowed they would be entitled to Modvat credit in terms of Notification No. 177/86 read with Rules 57A to 57J of the Central Excise Rules, had remanded the matter to the Collector for consideration of the following issues :-
Whether the demand of duty raised may be reduced by allowing the modvat credit after verifying the duty paying documents prescribed under rule 57G(ii). In ascertaining that the inputs used by the appellants are duty paid", the fact that the appellants have not filed any declaration under rule 57G is not material for the purpose of disposing of this case. The benefit of modvat credit should not be denied merely on account of non-filing of declaration under Rule 57G or maintenance of RG- 23A.
The question of time bar is also open for arguments by both sides and both sides are at liberty to adduce evidence in support of their allegations/submissions.
Question of penalty will also be at large before the adjudicating authority having regard to the amount of duty payable by the appellants after allowing them the modvat credit and finding on time bar, if any."
16.Having regard to the Tribunals order quoted? above, we hold that if in case duty is found to be recoverable in terms of this order in respect of clearances within a period of 6 months from the date of the show cause notice, the benefit of Modvat credit would not be deniable on the grounds of non-filing of declaration under Rule 57G or non-maintenance of R.G. 23A.
17.The appeals are disposed of in the above? terms.
Jagram Machine Tools[1993(65) ELT 300] 4.7 Next contention of the appellants is that the benefit of proforma credit would have been available to the appellants since these have been made out of duty paid hot rolled strips. The adjucating authority has denied this benefit on the ground that the appellants did not take a Central excise licence and consequently did not apply for availing of the procedure for proforma credit. This we think is not a sufficient reason for denying the proforma credit and determining the duty liability after reducing the element of duty paid on hot rolled strips. It is not disputed by the department that iron and steel products are covered under the scheme of Rule 56A. We, therefore, direct that the duty liability of the appellants should be redetermined for the period 1-8-1983 to January 1984 after reducing the element of duty payable on the hot rolled strips.
Chamundi Re-rolling Mills[1994(3) RLT 855]
4.We have carefully considered the pleas advanced? from both sides. Having regard to the overall facts and circumstances of the case, we remand the matter to the adjudicating authority i.e. Collector of Central Excise, Bangalore on the following two issues :
Whether the demand of duty, raised may be reduced by allowing?1. the modvat credit after verifying the duty paying documents prescribed under Rule 57G(ii). In ascertaining that the inputs used by the appellants are duty paid, the fact that the appellants have not filed any declaration under Rule 57G is not material for the purpose of disposing of this case. The benefit of modvat credit should not be denied merely on account of non-filing of declaration under Rule 57G or maintenance of RG-23A.
Saphire Steels (P) Ltd 1994(71) ELT 1049]
910. However, we find sufficient force in the? second plea of the ld. adovcate. There is no dispute that ingots and bars and rods are specified in Notification No. 177/86 issued under Rule 57A of the Central Excise Rules, 1944. Therefore, MODVAT credit of duty paid on ingots used in the manufacture of bars and rods would be available to the various applicants. Mere fact that the applicants could not file a declaration on the ground of their plea that they were entitled to Notification No. 202/88 cannot deprive the applicants/appellants benefit of MODVAT credit. Accordingly, we allow the stay petitions unconditionally. In the facts and circumstances, we remand the matters to the adjudicating authority to allow the MODVAT credit and adjust the payment of duty now demanded from them against such MODVAT credit admissible to them after verifying the duty paid character of ingots (inputs) in accordance with law. Appeals are thus allowed by remand in the light of the aforesaid directions.
In view of settled legal position in the above judgments, we are of the considered view that the appellant is entitled for Modvat credit on the input used in the subject goods i.e. paint subject to condition, they produce the valid duty paying documents in respect of inputs. After allowing the modvat credit the duty confirmation in the impugned order requires to be re-quantified after reducing the available modvat credit.
6.3 The appellant relied upon various judgments on the issue of shelf life of product and burden prove marketability is on Revenue. In this regard, we have observed that as discussed by us in the above paras on the facts of the product in this case based on the Honble Supreme Court judgments, the judgments relied upon by the appellant having different facts stand distinguished. Regarding the marketability issue, we are of the view that when the characteristics of the product as Paint and used thereof as paint is not under dispute, the product being paint is obviously marketable. Paint is available in market produced by various manufacturers. Therefore marketability of the product being paint need not to be proved further. Issue of test of marketability arises only in respect of these product which are generally not available in market and produced and used captively only. That is not the case here as the paint is indeed marketed. In view of this, the case laws cited by the appellant are distinguished.
6.4 It is observed that the demand pertains to the period April 1993 to Oct 1999 and the interest on the confirmation of duty under Section 11AB and equal amount of penalty under Section 11AC was confirmed. It is seen that the provision of Section 11AB, Section 11AC has been enacted on 28/9/1996 therefore the interest 11AB and penalty under Section 11AC cannot be demanded on the duty for the period up to 27/9/1996. It is also observed that except show cause notice dated 4/6/1997 other seven show cause notices were periodically issued within the normal period of one year, therefore penalty provisions under Section 11AC is not applicable in respect of the duty demanded for the period 12/96 to 10/99 hence equal penalty on the duty for the said period is waived. In nutshell the adjudicating authority is directed to do following exercise for arriving at the correct liability.
(a) Duty to be re-quantified after allowing and deducting the admissible Modvat Credit.
(b) Interest under Section 11AB to be demanded only on the net amount of demand arrived as mentioned above(a) for the period from 28/9/1996 to 10/1999
(c) No interest under Section 11AB and penalty under Section 11AC shall be demanded on the duty pertaining to period up to 27/9/1996.
(d) Penalty under Section 11AC has to be imposed commensurate to the net duty (Duty less Modvat) demand for the period 28/9/1996 to 11/1996.
(e) No penalty under Section 11AC shall be imposed during the period 12/1996 to 10/1999.
With the above direction the matter is remanded to the original authority for the purpose of re-quantification of duty demand, interest and penalty. Needless to say that the appellant should be given sufficient opportunity for presenting their case on the above re-quantification of the liability. The appeal is disposed of by way of remand in the above terms.
(Order pronounced in court on______________) P.K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 26 E/3469/04-MUM