SREE KARTHIKEYA INDUSTRIES Vs. CCE

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of HDPE bags with liners. They got the goods manufactured by a job worker. For supply of HDPE bags to M/s. Thirumalai Chemicals Ltd. (TCL), TCL had arranged supply of additional liners for the bags directly to the job worker. The impugned demand was made on the ground that in computing aggregate value of clearances, the value of the liners supplied by TCL to the job worker on account of the appellants was not included. Demand is consequent to the revision of the aggregate value of clearances and consequent liability to duty in terms of the SSI Notification No. 1/93. As regards this omission, the Ld. Counsel for the appellants submits that they were under the bonafide belief that the said element of cost was not includible in the assessable value of HDPE bags. In any case, TCL would have taken CENVAT credit of whatever duty they paid. There was therefore no intention to evade payment of duty. In the impugned order, which rejected their appeal and sustained the demand denying the SSI exemption, the Commissioner had held that the argument against the allegation of suppression of facts was raised for the first time before that authority in rejecting their said claim. The Ld. Counsel took us through the reply to the Show Cause Notice and submissions before the Commissioner (Appeals), wherein the appellants had claimed that they had not suppressed any facts from the department. As suppression of facts with intention to evade payment of duty was not established, the impugned order affirming demand denying SSI benefit for clearances during the material period was not sustainable. Demand for clearances made during a short period involving a short levy of Rs. 12,482.50 alone was within the normal period. The Ld. Counsel undertakes to make good the above short levy. He also claims that in view of the above position, the penalty of Rs. One lakh imposed was not justified. Ld. Counsel prayed for setting aside the penalty.

(2.) THE Ld. SDR reiterates the findings in the impugned order. However, he does not controvert the submissions relating to suppression of facts and plea, regarding applicability of proviso to Section 11A(1) to raise the demand, by the appellants.

(3.) AS regards the appeal filed by the revenue, seeking to impose equal amount of penalty under Section 11AC, we find that the impugned clearances had taken place before Section 11AC was enacted. Penalty cannot be imposed under the said section on the ground that the section was part of the statute at the time the show cause notice was issued or was adjudicated.