METRO TYRES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) In this appeal, M/s. Metro? Tyres Ltd. are aggrieved by the order of the Commissioner of Central Excise confirming against them a demand of duty of Rs. 3,37,808/ - under Rule 9(2) read with Section 11A and imposing on them a penalty of Rs. 3,37,808/ - under Rule 173Q. The impugned order was in adjudication of show cause notice (SCN) dated 30 -3 -88. The period of dispute was 1 -3 -1986 to 11 -11 -1987. The extended period of limitation under the proviso to Section 11A(1) was invoked for demanding the duty.

(2.) The appellants were engaged in the manufacture of tyres of cycles, motor vehicles, animal -driven vehicles (ADVs) and hand carts falling under Chapter 40 of the Schedule to the Central Excise Tariff Act, 1985. The ADV tyres and hand cart tyres, both falling under CSH 4011.10, were chargeable to nil rate of duty. The appellants manufactured bead wire rings (in short, BWRs) and used the same captively in the manufacture of the tyres. In the SCN, the department held the BWRs to be classifiable under CSH 7308.90 and alleged, inter alia, that duty of excise was chargeable on those BWRs which had been captively used in the manufacture of the fully exempted products viz. ADV tyres and hand cart tyres during the aforesaid period. The SCN invoked the extended period of limitation to demand such duty, alleging that the noticee had suppressed the factum of manufacture and removal of the BWRs, before the department. The noticee denied all the allegations and pointed out, in their reply to SCN, that the question whether to grant exemption from duty in respect of BWRs to be used in ADV/Hand Cart tyres was under the CBEC's consideration. The party hoped that a notification in this behalf would be shortly issued by the Board under Section 11(c). The Collector who adjudicated the matter demanded duty of Rs. 3,30,353.25 on the BWRs used in the exempted ADV/Hand Cart tyres, apart from duty of Rs. 7454.40 on the rings used in other (dutiable) tyres. He also imposed a penalty of Rs. 2000/ - on the assessee under Rule 173Q. The Collector's order was set aside by this Tribunal in the assessee's appeal as per Final Order No. E/551/98 -B1, dated 9 -3 -98 [1998 (104) E.L.T. 655 (Tribunal)], which was an order of remand directing the adjudicating authority to reconsider, and give clear findings on, the "marketability" and "limitation" issues involved in the case. The Commissioner's order impugned in the present appeal is pursuant to the remand order.

(3.) Heard both sides, ld. Advocate, Shri Harbans Singh submitted that the question whether BWR used for ADV tyre was marketable had already been answered in the negative by this Tribunal in CCE v. MRF Ltd. [2000 (115) E.L.T. 85 (T)]. He referred to the process of manufacture, given in the memo of appeal, of BWRs for tyres of ADVs, hand carts and motor vehicles, and submitted that these rubberised bead wire rings had very short shelf life and were neither marketed nor marketable. In this connection, the counsel relied on (i) the affidavit dated 19 -5 -2001 of M.L. Khosla (ii) the affidavit dated nil of Prakash Y. Kulkarni and (iii) the "note on rubberised bead wire rings for animal drawn vehicle tyres" dated 9 -7 -97 of Indian Rubber Institute. The BWRs of other manufacturers, considered by the adjudicating authority, were different from those manufactured by the appellants for captive use in ADV/Hand Cart tyres, the former not being rubberised. The counsel had a further case that all the evidence adduced by the party had not been duly considered by the Commissioner. On the time bar issue, ld. Advocate submitted that, during the material period, the appellants' factory was under the physical control of Central Excise officers and hence their manufacturing activity was known to the department. The appellants bona fide believed that the BWRs were not 'goods' to be excised. There was neither any suppression of facts nor any intent to evade payment of duty on their part. The counsel thus contended that the extended period of limitation was not invokable in the appellants' case for demanding duty and that any penalty was not imposable on them. As regards the demand of interest on duty, he submitted that there was no provision of law for any such demand during the period of demand.