2000 (4) TMI 117 - AT - Central Excise

Tribunal upholds duty demand on machinery, clarifies deemed removal, and validates audit-based notice

USHA RECTIFIER CORPN. (I) LTD. Versus COLLECTOR OF C. EX., NEW DELHI

The Tribunal upheld the demand of duty on plant and machinery/testing equipment, along with a penalty, based on documentary evidence from the balance ... Demand - Limitation - Suppression - Clandestine removal Issues Involved:1. Demand of duty on plant and machinery including testing equipment.2. Jurisdiction of the Additional Collector.3. Applicability of the extended period for issuing the demand.4. Concept of deemed removal u/r 9 & 49 of the Central Excise Rules.5. Validity of the show cause notice based on audit objection.Summary:1. Demand of Duty on Plant and Machinery Including Testing Equipment:The Tribunal upheld the demand of duty amounting to Rs. 4,92,566.28 and a penalty of Rs. 50,000/- based on the documentary evidence in the balance sheet, which indicated that the appellants had manufactured plant and machinery/testing equipment worth Rs. 31.26 lakhs. The balance sheet and Director's report were considered true unless proven otherwise. The Tribunal found no merit in the appellants' claim that the equipment was part of a research and development process and not finished goods, as the balance sheet explicitly mentioned the fabrication and capitalisation of the equipment.2. Jurisdiction of the Additional Collector:The appellants contended that the Additional Collector lacked jurisdiction to adjudicate the matter post-14th May 1992, as only Collectors were empowered to issue and decide demands involving allegations of fraud or suppression. However, the Tribunal held that the statutory position after the amendment of Section 11A(1) w.e.f. 14-5-1992 allowed any Central Excise Officer to issue and adjudicate show cause notices, including those invoking the proviso to Section 11A. Therefore, the Additional Collector was competent to adjudicate the present matter.3. Applicability of the Extended Period for Issuing the Demand:The Tribunal agreed with the department that the extended period of limitation was applicable as the appellants had neither taken a license for manufacturing the impugned goods nor filed any classification list or price list. The Tribunal found that the appellants had suppressed facts from the department, justifying the invocation of the extended period of limitation.4. Concept of Deemed Removal u/r 9 & 49 of the Central Excise Rules:The Tribunal rejected the appellants' argument that the provisions of Rules 9 & 49 were not applicable because the equipment was not subjected to further processing. The Tribunal clarified that the explanation to Rules 9 & 49 deems excisable goods manufactured and consumed or utilised within the factory as removed for the purpose of levying duty. The Tribunal cited the Supreme Court's decision in Wallace Flour Mills Co. Ltd. v. C.C.E., which held that the taxable event is the manufacture of goods, and the duty collection is merely postponed to the date of removal.5. Validity of the Show Cause Notice Based on Audit Objection:The Tribunal dismissed the appellants' contention that a show cause notice for demanding duty cannot be issued merely on the basis of an audit objection. The Tribunal noted that the balance sheet and the annual report, which are statutory documents, provided sufficient evidence of the manufacture of the impugned goods. The Tribunal distinguished the present case from Swastik Tin Works v. C.C.E., where the show cause notice was issued without any investigation.Conclusion:The Tribunal upheld the demand of duty and penalty, confirming the findings of the Collector (Appeals) and rejecting the appellants' arguments on all issues. The appeal was dismissed.