1996 (12) TMI 200 - AT - Central Excise

Tribunal upholds penalty for Central Excise Rules violation. Appellants' appeal dismissed.

The tribunal confirmed the penalty of Rs. 100 imposed on the appellants for non-compliance with the Central Excise Rules, ruling that their goods were not ... Interpretation of 'sewing machines and parts thereof' for exemption - exemption from operation of licensing rules - mandatory nature of central excise licence requirement - imposition of personal penalty for non-filing of declarationInterpretation of 'sewing machines and parts thereof' for exemption - exemption from operation of licensing rules - Whether the goods manufactured by the appellants (bag closure machines, overlock machines, embroidery machines and parts thereof) were unconditionally exempted as 'sewing machines and parts thereof' and thereby exempted from the operation of Rule 174 so as to excuse filing of declaration or obtaining licence. - HELD THAT: - The Tribunal examined the product description in Notification No. 234/82-C.E. and the classification under the tariff. It found that the notification's description is simply 'sewing machines and parts thereof' and that embroidery machines and bag closure machines are not known in common parlance as sewing machines. The appellants did not produce any documentary clarification or classification to show that their goods fell within the exemption, and despite being specifically asked to file the declaration they declined to do so. On these facts the Tribunal held that the goods were not covered by the exemption and therefore the appellants were not relieved from the operation of the licensing and declaration requirements under the Rules. [Paras 6, 7, 8, 9]Embroidery machines and bag closure machines are not covered by the description 'sewing machines and parts thereof' in the exemption notification; the appellants were not exempted from the operation of Rule 174 and were required to file the declaration/obtain licence.Mandatory nature of central excise licence requirement - imposition of personal penalty for non-filing of declaration - Whether the imposition of a personal penalty of Rs. 100/- for failing to file the declaration/obtain licence was justified. - HELD THAT: - The Tribunal noted that the detection resulted from a surprise visit and that the appellants had not filed any declaration nor obtained clarification supporting an exemption claim; they were specifically asked but declined to file the declaration. The Tribunal emphasised that the licence requirements were mandatory under the statute and that exemptions must be strictly established within the applicable rules and notifications. Having found that the appellants' goods were not exempt and that they failed to comply with the mandatory statutory requirement despite being asked, the Tribunal found no ground to interfere with the imposition of the modest personal penalty previously levied and confirmed the appellate authority's order. [Paras 6, 8, 9]The personal penalty of Rs. 100/- for failure to file the declaration/obtain licence is confirmed as justified.Final Conclusion: The appeal is rejected: the goods manufactured are not covered by the exemption for 'sewing machines and parts thereof', the appellants were obliged to comply with the licensing/declaration requirements, and the personal penalty of Rs. 100/- is confirmed. Issues:1. Interpretation of Central Excise Rules regarding the obligation to obtain a license.2. Application of exemption notifications for certain goods.3. Imposition of personal penalty under Rule 173Q of Central Excise Rules.Issue 1: Interpretation of Central Excise Rules regarding the obligation to obtain a license:The appeal centered around whether M/s. Ramesh Lal & Sons were required to obtain a Central Excise License as per Rule 174 of the Central Excise Rules, 1944, or if they were exempted under Notification No. 111/78-C.E. The Supdt., Technical, Central Excise found the appellants liable for not filing the required declaration, stating that the goods manufactured by them were not exempt from Rule 174. The Collector of Central Excise (Appeals) upheld this decision, emphasizing that the machines produced by the appellants did not fall under the category of 'sewing machines and parts thereof' for exemption under Notification No. 234/82-C.E.Issue 2: Application of exemption notifications for certain goods:During the hearing, the consultant for the appellants argued that their goods were unconditionally exempted from duty under relevant notifications, hence they were not obligated to file a declaration or apply for a license. The consultant cited legal precedents, including the Apex Court decision in Hindustan Steel Ltd. v. State of Orissa, to support the contention that penalties should not be imposed unless there is deliberate defiance of the law. However, the JDR representing the respondents maintained that the goods manufactured by the appellants were not unconditionally exempted, justifying the imposed penalty of Rs. 100.Issue 3: Imposition of personal penalty under Rule 173Q of Central Excise Rules:The tribunal deliberated on whether the penalty of Rs. 100 imposed on the appellants was justified. It was established that the goods produced by the appellants, such as bag closure machines and embroidery machines, did not fall under the description of 'sewing machines' as per the exemption notifications. Despite being asked to file a declaration, the appellants failed to do so, claiming they were not required to. The tribunal concluded that the failure to obtain a license and file a declaration, especially when there was doubt about the exemption applicability, did not warrant penalty avoidance. Therefore, the tribunal upheld the penalty and rejected the appeal, emphasizing the mandatory nature of license requirements and the need for strict compliance with applicable rules and notifications.Conclusion:The tribunal confirmed the penalty of Rs. 100 imposed on the appellants for non-compliance with the Central Excise Rules, ruling that their goods were not unconditionally exempted from duty and that the failure to obtain a license and file a declaration was a violation of the mandatory provisions. The appeal was dismissed, and the penalty upheld in line with the Collector of Central Excise (Appeals) decision.