1994 (9) TMI 175 - AT - Central Excise

Tribunal overturns order due to Department's inquiry failure and appellants' genuine belief

The Tribunal set aside the order confirming the demand and penalty, citing the Department's failure to conduct necessary inquiries and the appellants' ... Demand - Limitation Issues Involved:1. Classification of Soya Milk products.2. Eligibility for exemption under Notification No. 20/89-C.E.3. Invocation of extended period under proviso to Section 11A of the Central Excises and Salt Act, 1944.4. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.5. Validity of the second show cause notice.Issue-wise Detailed Analysis:1. Classification of Soya Milk Products:The appellants classified their Soya Milk under Heading 2202.90 as 'non-alcoholic beverages' and claimed exemption under Notification No. 20/89-C.E. The Tribunal had previously settled this issue in the case of Noble Soya House Ltd. v. Collector of Central Excise and in the appellants' own case by Final Order No. E/15/93-D, determining that Soya Milk with additives like sugar and fruit pulp did not qualify for exemption under Notification No. 20/89.2. Eligibility for Exemption under Notification No. 20/89-C.E.:The appellants claimed exemption under Notification No. 20/89-C.E., which was applicable only to plain Soya Milk. The Tribunal found that Soya Milk with additives such as sugar and fruit pulp was not eligible for this exemption. This classification was supported by the Tribunal's previous decisions, which clarified that only plain Soya Milk qualified for the exemption.3. Invocation of Extended Period under Proviso to Section 11A:The Collector invoked the extended period under proviso to Section 11A, citing mis-declaration and suppression of facts. However, the Tribunal in its order No. E/15/93-D had previously held that the appellants had given clear indications in their Classification List that their product contained additives. The Tribunal concluded that it was the Department's responsibility to investigate further, and their failure to do so could not be attributed to the appellants. Thus, the invocation of the extended period was deemed unsustainable.4. Imposition of Penalty under Rule 173Q:The Collector imposed a penalty of Rs. 1 lakh under Rule 173Q. The Tribunal found that since there was no sustainable evidence of mis-declaration or suppression of facts with intent to evade duty, the penalty was not justified. The Tribunal's earlier decision had already set aside similar penalties, reinforcing that the appellants had acted on a bona fide belief regarding their product's eligibility for exemption.5. Validity of the Second Show Cause Notice:The second show cause notice was issued on the same facts as the first one, which had been adjudicated without confirming the demand due to jurisdictional issues. The Tribunal noted that initiating fresh proceedings on identical facts was not permissible. The Tribunal's earlier decision had already addressed the issue of suppression and mis-declaration, thereby invalidating the grounds for the second show cause notice.Conclusion:The Tribunal set aside the impugned order confirming the demand of Rs. 29,01,430 and the penalty of Rs. 1 lakh, citing the Department's failure to conduct necessary inquiries and the appellants' bona fide belief in their product's exemption status. The appeal was allowed with consequential relief to the appellants.