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3. As per Note 5 of the Tariff 38 inserted by Finance Act, 1997, repacking amounts to manufacture and as a result, the respondent is not eligible for SSI exemption as they are repacking products of IOC with the brand name 'SERVO' belonging to IOC.

4. Statements were recorded from various officers of the respondent, who clearly admitted that they had no knowledge of the same and, therefore, they did not pay duty. One Mr.K.S.Uma Shankar, Asst. Manager (Finance), Indian Oil Corporation, in his statement has stated as follows :-

9. Consequent upon the same, demand together with penalty under Section 11AC and Section 209A came to be passed. The relevant portion of the order is quoted hereinbelow :-

"15. In view of the discussion made in the preceding paragraphs, I pass the following order :-

(a) I demand an amount of Rs.32,17,984/= towards duty payable on the repacked goods manufactured and cleared/held in stock by M/s.PMP during the period from January, 1998 to 24.7.98 under Rule 9 (2) of the rules read with proviso to Section 11A (1) of the Act subject to my observation in para 12 of this order. I also order adjustment of an amount of Rs.1,51,000/= being the duty paid on the stock of repacked goods available with them on the date of detection of the case against the demand confirmed through they have claimed that Rs.3,47,369/- had been paid towards duty liability on the stocks held as on 24.7.98. The Assistant Commissioner had confirmed that only an amount of Rs.1,51,000/- alone had been paid by M/s.PMP towards the duty liability.

11. On remand, the Commissioner adjudicated the case once over and held that the assessee does not dispute that as per Note 5 of Chapter 38 of the Central Excise Tariff, repacking of goods amounts to manufacture. The Commissioner, therefore, held that it is a clear case of suppression of fact with intentment to avoid payment of duty. However, the Commissioner, on adjudication, allowed credit of duty on goods received in bulk and taking note of the report of the Divisional Assistant Commissioner, while passed the following order, also imposed penalty under Section 11AC and interest under Section 11AB :-

ORDER

(a) I confirm an amount of Rs.2,94,022/- towards duty payable on the repacked goods manufactured and removed/held in stock by M/s.PMP during the period from Jan' 1998 to 24.7.98 under Rule 9 (2) of the Rules read with proviso to Section 11A (1) of the Act against the duty demanded. I also order adjustment of Rs.1,51,000/- being the duty paid on the stock of repacked goods available with them on the date of detection of case against the duty confirmed above.

(b) I impose a penalty of Rs.2,94,022/- on M/s.PMP under Section 11AC of the Act.