ITC LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE, BANGALORE

JUDGEMENT

(1.) THIS appeal is filed by M/s. ITC Limited, Bangalore against Order -in -Original No. 5/2001 -Bang.II, dated 30 -3 -2001 passed by Commissioner of Central Excise, Bangalore -II Commissionerate.

(2.) THE appellants are manufacturers of various brands of cigarettes assessable under Chapter 24 of Schedule to Central Excise Tariff Act, 1985. They were availing benefit of Notification No. 355/86, dated 28 -6 -1986 as amended. Under this Notification, they were allowed to avail set -off of duty paid on cut tobacco used in manufacture of cigarettes exported under bond and the set -off was permitted to be utilized for payment of central excise duty on cigarettes cleared for home consumption. It appeared that the appellants had irregularly availed set -off of Rs. 25,29,935.70 during the period from 15 -3 -1994 to 31 -12 -1994 on cut tobacco used in manufacture of cigarettes meant for export but not exported. They also utilized credit amounting to Rs. 56,90,953.95 on 113815.79 Kgs. of cut tobacco which was used in the manufacture of export brands of cigarettes which were held in stock in the factory as on 31 -12 -1994. Therefore, show cause notice was issued to the appellants for disallowing irregular set -off amounting to Rs. 82,20,889.70 (25,29,935.75 + 56,90,953.95) which was taken as credit and utilized against the provisions of Notification No. 355/86, dated 24 -6 -1986 as amended by Notification No. 69/94 -C.E., dated 15 -3 -1994 and Central Excise Duty of Rs. 82,20,889.70 which was short -paid on clearances of cigarettes for home consumption was demanded under Proviso to Section 11A(1) of Central Excise Act besides proposing to impose penalty on them under Rules 9(2), 209 and 173Q of Central Excise Rules, 1944. The case was adjudicated by the Commissioner who disallowed credit of Rs. 80,59,021/ - and confirmed a demand of differential duty of Rs. 80,59,021/ - which was short -paid on the cigarettes cleared for home consumption under the provisions of Section 11A of Central Excise Act. He also imposed a penalty of Rs. 10 lakhs on the appellants.

(3.) DR . Sameer Chakravarthy, Advocate along with Shri K.S. Ravishankar, Advocate appeared for the appellants and Smt. Shobha L. Chary, ld. JCDR appeared for the Revenue.