NETPLAST LIMITED Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE appellants were engaged in the manufacture of spools for motor vehicles etc., and were availing the facility of Modvat credit on the inputs used in or in relation to such manufacture in terms of Rule 57A of the Central Excise Rules. On the basis of information gathered by Central Excise (Preventive) officers, who visited the appellants' factory on 07.07.1994, it was found by the Department that the appellants had cleared the product, classifiable under Chapter sub -heading No. 3923.90 attracting Central Excise duty @ 30%, to principal manufacturers on payment of duty at lower rate since January, 1994 and that such clearance was made by them by mis -classifying the goods under Chapter sub -heading No. 8448.00 which attracted Central Excise duty @ 10% in respect of clearances to buyers who were not SSI units and @ a minimum of 5% in respect of clearances to others in terms of Notification No. 175/86 -C.E. as amended. The duty allegedly short -paid was estimated at Rs. 1,39,131.00. The Department, therefore, issued show cause notice (SCN) dated 04.08.1994 to the appellants proposing, inter alia, to recover the aforesaid differential duty amount of Rs. 1,39,131.00 and impose penalty on the appellants under Rule 173Q(bb) of the Central Excise Rules (CER) for alleged violation of Rule 57F(l)(ii) of the CER. The party contested the show cause notice. The dispute was adjudicated by the Assistant Commissioner who confirmed the demand of duty under Section 11A of the Central Excise Act and imposed a penalty of Rs. 5,000.00 on the appellants. The order of the Assistant Commissioner was upheld by the Commissioner (Appeals), in the appeal filed by the aggrieved party. Hence the present appeal before the Tribunal.

(2.) WE have carefully examined the impugned order, grounds of appeal and connected records. We have also heard Ld. Advocate Shri Rajesh Kumar for the appellants and Ld. JDR Shri S.P. Rao for the respondents.

(3.) WE find that the demand of differential duty was raised by the Department on the basis of fresh classification of the product under Chapter sub -heading No. 3923.90 attracting duty @ 30% for a period prior to the date of the show cause notice. Such demand is enforceable by virtue of Section 110 of the Finance Act, 2000. Accordingly, the demand of duty in the instant case has to be upheld, and we do so. As regards penalty, however, we find that the penalty of Rs. 5,000.00 was imposed on the appellants on the ground of violation of Rule 57F(l)(ii) of the Central Excise Rules. The shortage of LDPE Granules (inputs) found by the Central Excise officers in the appellants' factory was admitted by them and the appellants reversed the Modvat credit of the duty paid on such inputs, well before issuance of the show cause notice. In the circumstances, we find no warrant for imposing any penalty.