Whether the assessee is entitled to exemption under Notification No.175/86-CE?

PJ/Case Laws/2011-12/1245

Case: M/s Prakash Metal Works v/s Collector of Central Excise,Ahmedabad

Citation: 2007-TIOL-184-SC-CX

Issue:Whether the assessee is entitled to exemption under Notification No.175/86-CE?

Whether pat scrap was liable to excise duty under the Central Excise Act, 1944?

Whether penalty can be imposed for clandestine removal and non – maintenance of statutory records like RG – 1 register under erstwhile Rule – 9 and Rule – 173Q Central Excise Rules

Brief Facts:- Appellant is a registered partnership firm engaged in manufacturing and selling of aluminum articles, aluminum plates, sheets, ingots and strips, aluminium circles and aluminium waste and scrap. They were availing SSI exemption.

For the period April 1, 1988 to February 28, 1992, Department issued show cause notice on the grounds, namely, clandestine removal, non-payment of duty on goods cleared during the material period, non-maintenance of statutory records and accounts, selling of pat scrap without payment of duty and non-entitlement to the benefit of exemption under Notification No.175/86-CE for ingots.

On the issue of clandestine removal and non-maintenance of statutory records and accounts, penalties were imposed on appellant-firm and on its partner as well as on the supplier of raw material.

The benefit of exemption of aluminium ingots for the year 1990-91 was denied on the ground that the aluminium circles cleared by the appellant during the period 1989-90 as exempted goods, cannot be treated as exempted goods and consequently the total value of clearances exceeded the limit of Rs. 2 crores during the earlier year (1989-90) and, therefore, the appellant was not entitled to SSI exemption for the year 1990-91 in respect of ingots.

Appellant’s Contention:- On the issue of availability of benefit of exemption on Aluminium ingots for the year 1990-01, appellant submitted that in view of proviso to clause 3 as also on Explanation II, they were entitled to the benefit of the exemption Notification No.175/86-CE on the ground that the goods cleared were affixed with a brand name and, therefore, the clearances for the preceding year in respect of such goods, cannot be taken into account for determination of the ceiling limit of Rs.2 crores.

Another issue raised was that Pat scrap which fell on the ground and which had emerged in the course of manufacture of aluminium circles, cannot be said to have been manufactured and, therefore, no duty thereon was payable.

Reasoning of the Judgment:The Apex Court held that the appellant has violated Rule 9 read with Rule 173Q of the Central Excise Rules. The appellant has not maintained RG-1 register; it has not filed the classification list; it has not maintained statutory records and accounts and, in the circumstances, penalty, has been rightly imposed. The statutory rules were not complied with and, as a result, the appellant was rightly found guilty of clandestine removal of the goods without filing the classification list.

The Apex court are in agreement with the view expressed by the Tribunal, vide the impugned judgment, that the penalty was leviable on the appellant for clandestine removal of the goods in question. In fact, this was the only point on which the Tribunal has focused its entire attention. Therefore, the Supreme Court upholds the order of the Tribunal imposing the penalty as stated hereinabove. To this extent, the civil appeals stand dismissed.

For the points whether the appellant was entitled to exemption and whether pat scrap was excisable to excise duty, it was noticed that these issues were not decided by the Tribunal. The Apex Court did not wish to express any opinion and the matter was remitted to the Tribunal.

The Supreme Court upholding the impugned order of the Tribunal imposed penalties on the partner of the firm, on the partnership firm as well as on the supplier of raw-materials.

Decision:- Appeal disposed of accordingly.

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PJ/Case Laws/2011-12/1245

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