1983 (10) TMI 187 - AT - Central Excise

Tribunal Upholds Excisability of Cushion Compound, Rejects Time-barred Claim

The Tribunal upheld the Appellate Collector's order, dismissing the appeal. It ruled that the cushion compound was excisable, the demand was not ... Clandestine removal - Short levy - Demand - Show cause notice Issues Involved1. Excisability of Cushion Compound.2. Demand being barred by time.3. Double incidence of duty.4. Correctness of the rate and quantity of duty assessed.Detailed AnalysisExcisability of Cushion CompoundThe appellants, a manufacturer of rubber products, contested the excisability of 'cushion compound' used in the manufacture of 'cushion-backed tread rubber.' The Assistant Collector and the Appellate Collector both held that the cushion compound was a distinct commodity, with a separate trade name and uses, and thus liable to excise duty. The Tribunal upheld this view, referencing its previous judgment in the Ceekay Rubber Industries case and a Kerala High Court judgment that concluded the cushion compound was dutiable under sub-item No. 2 of Item 16A of the Central Excise Tariff (CET).Demand Being Barred by TimeThe appellants argued that the demand was barred by time as per Rule 10 of the Central Excise Rules, 1944, which prescribes a one-year period for raising such demands. They contended that Rule 9(2), which was invoked by the authorities, required proof of 'clandestine removal' and 'intention to evade duty,' neither of which was present. The Tribunal, however, found that the appellants had not disclosed the manufacture and captive consumption of cushion compound in the classification list, which is the primary document for assessment. Thus, the Tribunal concluded that the case fell under Rule 9(2), which had no time limit for raising demands at the time the notice was issued on 13-9-1974.Double Incidence of DutyThe appellants contended that levying duty on both the cushion compound and the final product, tread rubber with cushion backing, amounted to double duty, which was not intended by the law. They argued that both products fell under the same tariff item, 16A(2). The Tribunal, however, upheld the lower authorities' view that the cushion compound was a separate marketable commodity and thus liable to duty irrespective of the final product's duty status.Correctness of the Rate and Quantity of Duty AssessedThe appellants challenged the rate and quantity of duty assessed, arguing that the authorities erroneously applied a flat rate from 1974 to the period between 1968 and 1972. They also contended that they were not given an opportunity to examine the Chemical Examiner's formula used for determining the quantity. The Appellate Collector had directed the Assistant Collector to re-examine these issues, and the Tribunal upheld this direction, affirming that the quantum of duty should be based on the tariff rates applicable during the period in question.ConclusionThe Tribunal dismissed the appeal, upholding the Appellate Collector's order. It concluded that the cushion compound was excisable, the demand was not barred by time under Rule 9(2), and the issue of double duty was not tenable. The Tribunal also upheld the direction to re-examine the rate and quantity of duty assessed.