2004 (6) TMI 169 - AT - Central Excise

Metal containers for packaging Everyday Dairy Whitner not exempt under Notification 181/88-C.E. Duty liability upheld, penalty reduced.

The Tribunal held that metal containers used for packaging 'Everyday Dairy Whitner' did not qualify for exemption under Notification No. 181/88-C.E. The ... Adjudication - Exemption - Duty liability - Demand Issues Involved:1. Applicability of Notification No. 181/88-C.E. for metal containers used for packaging 'Everyday Dairy Whitner'.2. Constructive res judicata in relation to multiple show cause notices for the same period.3. Liability for duty on metal containers used for packaging 'Everyday Dairy Whitner'.4. Applicability of the time-limit under Section 11A of the Central Excise Act to Rule 196 of the Central Excise Rules.Detailed Analysis:1. Applicability of Notification No. 181/88-C.E. for Metal Containers:The core issue was whether the metal containers used by the appellants for packaging 'Everyday Dairy Whitner' qualified for the exemption under Notification No. 181/88-C.E., dated 13-5-1988. The notification exempts metal containers intended for packing specific goods like whole milk powder, skimmed milk powder, and milk powder for infants and baby foods.The Tribunal observed that 'Everyday Dairy Whitner' is classified as partly skimmed milk powder, which is not explicitly covered under the said notification. Therefore, the metal containers used for packaging this product do not qualify for the exemption.2. Constructive Res Judicata and Multiple Show Cause Notices:The appellants argued that once the issue had been adjudicated and accepted by the Revenue for the same period, it could not be reopened. They cited the principle of constructive res judicata, supported by decisions such as Jai Hind Oil Mills and Co. v. Union of India, 1994 (71) E.L.T. 902 (Bom.).The Tribunal agreed, noting that the previous Order-in-Appeal had attained finality as it was not challenged by the Revenue. Consequently, issuing a fresh show cause notice for the same period was not permissible. The Tribunal set aside the impugned Order-in-Appeal No. 306/CE/CHD-II/2001, dated 31-8-2001, and allowed the appeal.3. Liability for Duty on Metal Containers:The appellants contended that any duty short-levied due to denial of exemption should be recovered from the manufacturer of the metal containers, not from them. They relied on precedents like Arti Paints & Chemicals Industries v. C.C.E., Bombay, and Dalmia Industries Ltd. v. CCE.The Tribunal, however, held that the appellants were liable under Rule 196 of the Central Excise Rules, 1944, as they had not used the metal containers for the intended purposes specified in the notification. The onus was on the appellants to ensure proper use, and failure to do so made them liable for the duty.4. Applicability of Section 11A Time-Limit to Rule 196:The appellants argued that the demand was barred by the limitation period under Section 11A of the Central Excise Act. They cited the Allahabad High Court's decision in U.P. State Cement Corporation Ltd. v. Union of India, 1996 (86) E.L.T. 6 (All).The Tribunal, referencing the Supreme Court's decision in C.C.E., Jaipur v. Raghuvar (India) Ltd., 2000 (118) E.L.T. 311 (S.C.), held that Section 11A's time-limit does not apply to Rule 196. Rule 196 is a self-contained provision, and the demand for duty under this rule is not subject to the general limitation period specified in Section 11A.Conclusion:The Tribunal concluded that the metal containers used for packaging 'Everyday Dairy Whitner' did not qualify for the exemption under Notification No. 181/88-C.E. The appellants were liable for the duty under Rule 196, and the time-limit under Section 11A did not apply. The penalty imposed was deemed excessive and was reduced to Rs. One lakh. Both appeals were disposed of accordingly.