1983 (11) TMI 287 - AT - Central Excise

Tax Appeal Outcome: Partial success for appellants, demand set aside for specific period. Department's appeal dismissed. Penalty upheld.

The appeal by the appellants was partially allowed, setting aside the demand for the period from March 1975 to 10-4-1977. The appeal by the Department was ... - Issues Involved:1. Clandestine removal.2. Validity of show cause notice under Rule 9(2) and confirmation under Rule 10A.3. Demand confirmation under Rule 10A after its repeal.4. Effect of not deciding the classification issue.5. Basic classification of nib slitting wheels.Detailed Analysis:1. Clandestine Removal:The appellants argued that there had been frequent visits by Excise officers since 1975, and they were never informed that T.I. 51 could be applicable to nib slitting wheels. They contended that the manufacture was known to the Department and there was no clandestine removal. The Assistant Collector found that the manufacture of nib slitting wheels was done with the aid of power from February 1973 and that the goods were cleared without obtaining a license or paying duty. The Appellate Collector reduced the period of demand, acknowledging that the Department had knowledge of the manufacture from November 1976. The Tribunal held that the demand for the period from March 1975 onwards was unenforceable under Rule 9(2) as the Excise authorities had knowledge of the manufacture by then.2. Validity of Show Cause Notice under Rule 9(2) and Confirmation under Rule 10A:The appellants argued that a notice issued under Rule 9(2) and confirmed under Rule 10A was invalid. The Tribunal found that the Assistant Collector's order was well-considered and that the circumstances justified the applicability of Rule 9(2). The Tribunal cited the Supreme Court's decision in J.K. Steel Ltd. v. Union of India, which held that if the exercise of power can be traced to a legitimate source, the fact that it was exercised under a different power does not vitiate the exercise.3. Demand Confirmation under Rule 10A After Its Repeal:The appellants contended that Rule 10A, having been repealed without a saving clause, could not be invoked. The Tribunal referred to the decision in J.K. Steel Ltd. and other Tribunal decisions, holding that the demand under Rule 9(2) was enforceable in cases where there was no assessment and no intimation to the Excise authorities about the manufacturing activity.4. Effect of Not Deciding the Classification Issue:The appellants argued that the classification issue had not been decided and that the demand was made on an erroneous assumption. The Tribunal found that the classification of nib slitting wheels under T.I. 51(2) had been determined and conveyed to the appellants in a letter dated 24-8-1977. The Tribunal held that the appellants' failure to challenge this decision meant it had become final.5. Basic Classification of Nib Slitting Wheels:The Tribunal upheld the classification of nib slitting wheels under T.I. 51(2), noting that the goods performed the function of cutting metals, which fell within the contemplation of the Explanation to T.I. 51. The Tribunal found that the goods were excisable from February 1973 when power was installed in the factory.Conclusion:The appeal by the appellants was partially allowed, setting aside the demand for the period from March 1975 to 10-4-1977. The appeal by the Department was dismissed. The demand for the period from 13-2-1973 to 6-3-1975 was upheld, and the penalty of Rs. 250 was confirmed.