ORDER
K.K. Bhatia, Member (T)
1. The appellants are the manufacturers of single barrel guns and double barrel guns falling under Chapter 93 of the Schedule to the Central Excise Tariff Act, 1985. Their factory premises were visited by the officers of the Central Excise Commissionerate, Chandigarh-II on 3.7.97 and 20.3.98. on scrutiny of the records maintained by the party and the statement dt.20.3.98 recorded from Shri D.R. Bhatia, Manager of the party, it was learnt that during the period 1994-95 to 1996-1997, they had cleared 64.935 M.Ts of M.S.scrap valued at Rs.1,88,763.00 without payment of duty amounting to Rs.37.756.00. on being pointed out, the party voluntarily debited this amount in their PLA vide Entry No.130 dated 20.3.98 and Entry No.132 dt.23.3.98. They were however issued a show Cause Notice dt. 14.5.99 by the dy. commissioner of con(SIC) Excise Commissionerate, chandigarh -II, in which they were called upon to show cause why aforestated amount voluntarily debited by them should not be considered as duty recovered under the provisions of Section 11A of the Central Excise Act,1944 and why penalty should not be imposed on them under Rules 173Q and 226 of the Central Excise Rules, 1944. they were further called upon to show cause why mandatory penalty equal to the amount of duty should not be imposed on them under Section 11AC and the interest should not be recovered under Section 11AB ibid.
2. On consideration of the reply of the party and the pleadings made by them in the personal hearing, the Joint Commissioner of Central Excise, Chandigarh-II vide his order dt.4.11.99 confirmed the demand of Rs.37,756.00 on the party and further ordered adjustment of the amount already paid through their PLA, against this confirmation of demand. the Adjudicating Authority also imposed a penalty of an equivalent amount on them under Rule 173Q read with Section 11AC of the Act. He also ordered for payment of the interest under Section 11AB on the clearances of the scrap effected after 28.9.96.
3. The appeal of the party against the above order of the Joint Commissioner failed and the Commissioner (Appeals), Chandigarh in his order dt. 1.11.2000 rejected the appeal of the party upholding the order passed by the lower authority. the operative portion of the order of Commissioner (Appeals) is extracted below:
” I have carefully gone through the facts of the case and submissions made at the time of appeal as well as Judgements cited by the appellant as above. I observe that clearances were made during the period 1994-95, 1995-96 & 1996-97. Under the law there is no doubt regarding dutiability of M.S. Scrap falling under sub heading No. 7204.90. By not accounting for,not filing the classification list/declaration, and removing the goods without payment of duty the appellants contravened the provisions of Central Excise Rules. As per provisions of Rule 173Q of Central Excise Rules penalty equivalent to three times of the value of goods can be imposed. penalty is justified as per provisions of Rule 173Q read with section 11AC of Central Excise Act 1944 as the suppression of facts continued for a long period. Interest under section 11AB of the Act is also applicable for the period as held in the adjudication order in view of the contravention and suppression as detailed above”.
4. This is the second stage appeal of the party against the above order. the appellants are not present. They have sent a communication dt. 23.3.2001, in which they have requested that their appeal to be decided on merits. Accordingly, we have heard Shri Ashok Mehta, SDR for the respondents. It is observed from the written memorandum of appeal filed by the party that the appeal is not contested on merits on the amount of duty confirmed on the appellants. It is, however, contended that the demand is time-barred and further contended that the penalty cannot be imposed under Section 11AC of the Central Excise Act, 1944. It is also contended that the contravention relates to the period 1994-95 to 1996-97 (upto June, 1996) i.e., long before the enactment of the Section 11AC which came into force with effect from 18.9.96. Therefore, the imposition of penalty under these provisions is not legally valid. With regard to the plea of the time-bar of demand, it is contended that the waste in question was generated in the course of drilling, boring, turning etc. (SIC)during he manufacture of M.S. rounds and forging and was kept in the factory in the courtyard in open near the factory gate which can easily be noticed by anybody who enters the factory premises. It is contended that this was within the knowledge of Central Excise staff right from time of inception of factory which was noticed by the Audit and Preventive parties visiting regularly their factory premises. On these facts, therefore, it is pleaded that since the Central Excise Authorities were well within the knowledge of the fact that M.S. scrap generated during the course of manufacture of their end products, no allegation of suppression or mis-statement etc. can be alleged against them and on that ground, the demand of duty made against them is time-barred. Shri Ashok Mehta, SDR on the contrary reiterates the findings of the lower authorities and pleads that since the appellants never declared in the Classification Lists filed by them about the manufacture and sale of M.S. scrap under consideration, the invocation of the provisions of extended period for the purpose of demand of duty under Section 11A has rightly been made and on that account, the imposition of an equivalent amount of penalty is also justified.
5. We have carefully considered the submissions made before us. As already stated, the appellants are not contesting their liability for payment of duty on the M.S. scrap generated and sold by them during the aforstated period and the (SIC)amount of duty so quantified and confirmed on them. Their only plea is that the demand is time-barred, as the departmental authorities were well aware of the fact of their manufacture of the M.S. scrap in question. We, however,do not find any force in this contention. As rightly observed in the order of the Commissioner (Appeals), The party never made any declaration with regard to the generation and the sale of the M.S. scrap in question during the impugned period. Therefore, the extended period for the demand of duty has rightly bene invoked. In this case, however, we find force in the contention that the provisions of Section 11Ac empowering the Adjudicating Authority to impose a penalty equivalent to the amount of duty came into effect from 28.9.96 and since the period for demand is only upto June, 1996, these provisions cannot be given any retrospective effect. Therefore, the imposition of penalty under Section 11AC of the Central Excise Act, 1944 cannot be sustained. It is however further observed that in the Show Cause Notice, the provisions of Rule 173Q have also been invoked. The appellants in their written memo. of appeal have not advanced any arguments against imposition of penalty under the provisions of this Rule. In view of the facts as already stated above, we are of the view that the imposition of penalty under Rule 173Q is justified. In the facts of the present case however, we reduce this amount to Rs. 2,000/- (Rs. two thousand only).
6. But for the above modification, the appeal otherwise fails ad the same is dismissed.
(Announced and dictated in the Court)