CEAT LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE brief facts of the case are that the appellants are engaged in the manufacture of tyres, flaps and tubes. During the course of manufacture of tyres an intermediate product viz. dipped tyre cord fabric come into existence which was exempted from Additional Excise Duty (Goods of Special Importance) [AED (GSI)] under Notification No. 28/94 -CE dated 1.3.94. The appellants were availing this exemption and accordingly were not paying duty up to 1.3.94. However, this Notification was rescinded by Notification No. 71/95 -CE dated 16.3.95 and accordingly the above processed dipped tyre cord fabric became liable to AED (GSI) @ 5% advalorem under Ch.5902. This fabric as cleared by the appellant without payment of duty and therefore 23 show cause notices were issued to them demanding duty on the dipped tyre cord fabric so cleared by them. The appellant disputed the leviability of duty on the dipped tyre cord fabric on the ground that the process undertaken by them does not amount to manufacture and that the dipped tyre cord fabric cannot be considered as a marketable commodity. First 13 show cause notices were adjudicated by an order -in -original dated 25.9.99, two show cause notices on 31.3.2000 and one show cause notice on 29.11.2000. All these orders held their product as dutiable. The matters in respect of all the three order -in -originals were carried to CESTAT, who vide their order dated 28.1.2001, 9.10.2001 and 20.11.2001 held that no AED (GSI) was payable in respect of dipped tyre cord fabric, relying upon several earlier decisions of the CESTAT. Appeal filed against above CESTAT orders in the Supreme Court and the Hon'ble Supreme Court remanded the matters to the Commissioner of Central Excise for reconsideration of the issue relating to dutiability and classification of the dipped tyre cord fabric so manufactured by them. These 16 show cause notices which were subject matter of the appeal before the CESTAT along with remaining 7 show cause notices were thereafter adjudicated by the Commissioner by his impugned order dated 31.1.2006, who confirmed the duty amounting to Rs. 6,59,36,795/ - along with interest and imposed a penalty of Rs. 25 lakhs. The duty so confirmed by the Commissioner was paid by the appellants on 5.6.2006, which as per their contention was paid within three months from the date of receipt of the impugned order by debiting their Cenvat AED (GSI) account as the impugned order of Commissioner dated 31.1.2006 was received by them on 13.3.2006. It is against this order that the appellants have come up in appeal before us.

(2.) LD . advocate for the appellants submitted that though they still maintain that the dipped tyre cord fabric manufactured by them is not chargeable to duty, however they are not contesting the liability to duty for the reason that the entire duty has been paid by them by debiting their Cenvat AED (GSI) account and since the appellants do not manufacture any product in respect of which AED (GSI) is payable, taking of such credit would only mean a paper entry with no commercial addition. As such, they do not wish to pursue the matter in appeal regarding the issue of dutiability and classification of dipped tyre cord fabric. However, they are contesting the imposition of penalty of Rs. 25 lakhs and demand of interest on the duty so paid by them. As regards interest, it is their contention that since the duty determined has been paid within three months of the date of receipt of the impugned order by them, no interest is chargeable from them.

(3.) IT was further submitted that the show cause notices seeks to impose penalty under Rule 173Q without specifying the sub -clause of Rule 173Q under which the penalty is sought to be imposed. He refers to the decision of the Apex Court in the case of Amrit Foods v. CCE, U.P 2005 (190) ELT 433 (S.C.), wherein it was held that when neither the show cause notice nor the order of the Commissioner species which particular clause of Rule 173Q of erstwhile Central Excise Rules, 1944 had been allegedly contravened by appellant, then the penalty cannot be sustained as the assessee is to be put on notice as to the exact nature of contravention, for which the assessee was liable under the provisions of Rule 173Q. In view of this, penalty cannot be sustained on this ground as well.