Exemption for stone processing upheld, duty demand set aside, and procedural penalty reduced for excise breach.

Converting quarried stone into metal stone was treated as continuing to fall within Notification No. 179/85-C.E., with the Tribunal relying on the earlier interpretation of "mine" under the Mines Act; the duty demand was therefore set aside. For removal of goods without payment of duty, breach of the procedure under Rule 173F read with Rule 173G justified penalty under Rule 173Q(1)(a), but the amount was found excessive on the facts and reduced. The duty demand was annulled, while the penalty survived only in reduced form for the procedural contravention.

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Issues: (i) Whether the activity of converting quarried stone into metal stone continued to qualify for the benefit of Notification No. 179/85-C.E. dated 1-8-1985; (ii) whether the penalty imposed for removal of goods without payment of duty was liable to be sustained in full.

Issue (i): Whether the activity of converting quarried stone into metal stone continued to qualify for the benefit of Notification No. 179/85-C.E. dated 1-8-1985.

Analysis: The demand was examined in the light of the earlier finding that the relevant activity fell within the scope of the notification, including the Tribunal's reliance on the statutory meaning of "mine" under the Mines Act. On that basis, the duty demand could not be sustained.

Conclusion: The issue is decided in favour of the assessee and the duty demand of Rs. 1,04,192/- is set aside.

Issue (ii): Whether the penalty imposed for removal of goods without payment of duty was liable to be sustained in full.

Analysis: The appellants were held to have acted in breach of the procedure under Rule 173F read with Rule 173G of the Central Excise Rules and, therefore, liable to penalty under Rule 173Q(1)(a). At the same time, the Tribunal found that the amount imposed was on the higher side and warranted reduction on the facts and circumstances of the case.

Conclusion: The issue is partly decided in favour of the assessee and the penalty is reduced from Rs. 10,000/- to Rs. 5,000/-.

Final Conclusion: The duty demand was annulled, while the penalty survived only in a reduced form for the procedural contravention found against the assessee.

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