FREEDOM RUBBER LTD Vs. C.C.E.

JUDGEMENT

(1.) THE appellants were engaged in the manufacture of cycle tyres falling under Subheading 4011.10 of the Central Excise Tariff. The said product was exempt from duty. The dispute involved in the present appeal arose when the Department proposed to levy duty on the intermediate product namely "rubberised cotton cord fabric" produced by the appellants and used by them captively in the manufacture of cycle tyres. The appellants had manufactured 7,95,961.300 kgs of rubbersied cotton cord fabric (in short, "RCC fabric") valued at Rs. 2,86,84,028.20 involving Central Excise duty of Rs. 24,68,403.00 and had captively consumed it for manufacture of cycle tyres during the period 01.03.1994 to 16.03.1995, in which period rubberised textile fabrics falling under Heading 59.05 of the Tariff were not exempt from duty. Department, by show -cause notice (SCN) dated 14.01.1999, proposed to recover duty as above with interest under Section 11 -AB of the Central Excise Act and to impose mandatory penalty under Section 11 -AC of the Act. The SCN invoked the extended period of limitation under Section 11 -A(1) of the Act by alleging 'wilful suppression of facts with intent to defraud the Department of Central Excise duty'. The demand of duty in the SCN was based on the allegation that the RCC fabric was an "independent stable" intermediate excisable product well -known to tyre -manufacturers/traders all over the world, which had a shelf life and was transportable" and that it was chargeable to duty @ 10% ad valorem under Tariff Subheading 5905.10 during the period of dispute. The appellants, in their reply to the SCN, denied all the allegations and submitted, inter alia, that the intermediate product in question was neither marketed nor marketable and here it was not dutiable. They relied on case law as also on CBEC's circular dated 30.06.1999 [published in 1999 (111) E.L.T. 31] which clarified that certain intermediate products captively consumed and not sold commercially were not chargeable to duty on account of their short shelf life. The jurisdictional Commissioner of Central Excise adjudicated the dispute and, by order dated 01.12.1999, held the intermediate product to be marketable on account of its being stable (with shelf life of two days) and known to commercial community and to be chargeable to duty @ 10% during the relevant period under TSH 5905.10 The adjudicating authority confirmed the demand of duty under Rule 9(2) of the Central Excise Rules (CER) read with Section 11 -A of the Act and directed the party to pay the same with interest @ 20% under Section 11 -AB of the Act. Mandatory penalty of Rs. 25 lacs was also imposed on them under Section 11 -AC of the Act. This order of Ld. Commissioner is under challenge in the present appeal.

(2.) CAREFULLY examined the records of the case. Heard both sides.

(3.) SHRI G. Shivdars, Counsel for the appellants reiterated the grounds of the appeal. He emphasised the following points: