2001 (3) TMI 414 - AT - Central Excise

Tribunal Overturns Duty & Penalty in Appellant's Favor

The Tribunal set aside the duty and penalty imposed on the appellant, a public sector undertaking, under Notification Nos. 58/86 and 220/86 for tools, ... Demand and penalty - Adjudication Issues:1. Exemption under Notification Nos. 58/86 and 220/86 for tools, jigs, and fixtures used within the factory.2. Duty payment for tools and fixtures manufactured before the introduction of excise levy.3. Interpretation of Rule 9 and Rule 49 of the Central Excise Rules regarding removal of goods.4. Assessment of assessable value based on depreciation.5. Imposition of penalty on the appellant.Exemption under Notification Nos. 58/86 and 220/86:The appellant, a public sector undertaking, manufactured tools, jigs, and fixtures for use within their factory, availing exemption under Notification Nos. 58/86 and 220/86. The issue arose when certain goods were temporarily removed to job workers for manufacturing intermediate goods. The Collector imposed duty and penalty, leading to the appeal. The Tribunal noted that the Collector failed to consider the date of manufacture of the goods and the initial duty exemption claimed. The goods, used over time and returned to the factory, were not assessed based on the date of manufacture, leading to the order being set aside due to lack of correlation between clearance documents and manufacturing dates.Duty payment for pre-levy manufactured tools and fixtures:The appellant contended that duty payment for tools and fixtures manufactured before the introduction of excise levy was erroneous since they were not excisable at the time of manufacture and removal for captive use. The Tribunal found merit in this argument, emphasizing that the Collector did not consider the nature of goods used in the factory before temporary removal for ancillary processes. The Tribunal ruled that there cannot be two removals for duty determination under excise law, especially if the use outside the factory was for ancillary processes or full manufacture elsewhere.Interpretation of Rule 9 and Rule 49 of Central Excise Rules:Regarding the interpretation of Rule 9 and Rule 49 of the Central Excise Rules, the Tribunal held that if goods were used in the factory before being temporarily removed, there should not be a second removal for duty assessment. The Collector's failure to consider whether the external use was for ancillary processes or full manufacture elsewhere led to the demand being rejected. The Tribunal emphasized that if the external use constituted manufacturing, the job worker would be the manufacturer, impacting duty liability.Assessment of assessable value based on depreciation:The appellant argued that the assessable value should consider depreciation rather than the value at the time of manufacture. The Tribunal did not delve deeply into this issue as the primary focus was on the duty liability and removal of goods for external use. However, the Tribunal's decision to set aside the duty demand indirectly addressed the concern over the assessment of assessable value based on depreciation.Imposition of penalty:Lastly, the Tribunal ruled that since the duty demand was not upheld due to various shortcomings in the Collector's assessment, there was no justification for imposing a penalty on the appellant. The lack of a valid duty demand negated the basis for imposing any penalty, leading to the appeal being allowed and the order set aside.