1990 (10) TMI 198 - AT - Central Excise

Tribunal rules in favor of appellants in Central Excise case, finding no intent to evade duty

The Tribunal allowed the appeal in favor of the appellants in a case involving alleged contravention of Central Excise Rules related to the manufacturing ... Demand - Limitation Issues:- Alleged contravention of Central Excise Rules by manufacturing and removing carbon paper for the production of carbon paper ribbons.- Duty payment evasion accusations.- Dispute over classification of carbon paper.- Suppression of material facts by the appellants.- Applicability of duty payment on captively consumed goods.- Amendment of Rules 9 and 49 with retrospective effect.- Department's awareness of captive consumption.- Intent to evade duty by the appellants.Analysis:The case involved allegations against the appellants for contravening Central Excise Rules by manufacturing and removing carbon paper for the production of carbon paper ribbons. The Superintendent of Central Excise accused them of evading duty by not filing necessary documents, not paying appropriate duty, and not accounting for the goods properly. The demand was made for a specific period, and a penalty was imposed by the Assistant Collector, which was later confirmed in the appeal.The appellants contended that they did not pay duty on the carbon paper consumed in the production of carbon paper ribbons due to their belief based on previous judgments. They argued that the duty became payable only after a retrospective amendment in 1982. They also claimed that the classification of carbon paper was under dispute with the Department until a final decision was made in 1987, which clarified the duty liability.On the other hand, the Department argued that there was suppression of material facts regarding the captive consumption of carbon paper by the appellants. However, the Tribunal noted that the Department was aware of the captive consumption based on the duty payment history of the appellants and the prevailing understanding of the law at that time.The Tribunal observed that the amendments to Rules 9 and 49 were made to clarify the duty liability on captively consumed goods and that the classification of carbon paper was a disputed issue until a final decision was reached. Considering these factors, the Tribunal concluded that the appellants did not act with intent to evade duty. Therefore, the demand for duty was enforceable only for a limited period, and the penalty imposed was set aside.In conclusion, the appeal was allowed in favor of the appellants, setting aside the unsustainable demand for duty and the penalty imposed on them.