VISHAL INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) A demand of duty of Rs. 3,06,364/ - has been confirmed against the appellants who are manufacturers of MS bars and rods on the ground that they are not eligible to the benefit of exemption in terms of Notification No. 202/88 dated 20 -5 -1988 since they purchased unserviceable rails, sleepers; fishplates, etc. (rail scrap) during auction from Railways and used the same as raw material which was clearly recognisable as non -duty paid and that therefore, they should have paid appropriate duty. The period in dispute is August 1992 to February 1994 while the show cause notice is dated 26 -8 -1997. Penalty of amount equal to the duty has also been imposed.

(2.) WE have considered the submissions of both the sides. We find that on merits, the issue has been decided against the assessee by the Tribunal in the case of Vivek Re -rolling Mills v. C.C.E., [1994 (73) E.L.T 660] which has been followed subsequently in the case of Rehal Industrial Corporation v. C.C.E. wherein the Tribunal has held that bars and rods manufactured out of old unserviceable railway scrap are not covered by Notification No. 202/88 and are therefore, leviable to duty. However, we agree with the appellants that the demand is entirely barred by limitation and the appellants were under the bona fide belief based upon the various circulars issued by the CBEC that, used and rejected railway material was to be treated as angles, shapes and sections; that their final product made out of such railway material was exempt from payment of duty in terms of Notification No. 202/88.

(3.) EVEN in the case of Vivek Re -rolling Mills and Rehal Industrial Corporation, the demands were set aside as time -barred due to bona fide belief based upon CBEC circulars. The case law relied upon by the learned DR namely in the case of Mujaffar Nagar Pipe Industries [2000 (36) RLT 867] does not consider that aspect of bona fide belief and is hence distinguishable. The further contention of the learned DR is that non -filing of declaration or non -obtaining of Central Excise registration or non -submission of returns required under the Rules, amounts to suppression so as to attract the ingredients of the proviso to Section 11A(1) of the Central Excise Act. However, we see no force in this argument in view of the fact that we have already held that the assessee was under a bona fide belief that it was not liable to pay duty on the products in dispute and therefore, non -filing of returns etc. will not amount to suppression with intent to evade payment of duty.