ORDER
Moheb Ali M., Member (T)
1. This appeal arises out of the order of the Commissioner of Central Excise (Appeals), Vadodara. In the impugned older, the Commissioner upheld the demand for duty under proviso to Section 11A, imposition of penalty under Section 11AC and demand for interest under Section 11AB of the Central Excise Act. The period involved is 1992-93.
2. Briefly the facts are that the appellant is a manufacturer of HDPE woven bags made out of HDPE fabrics. He has been discharging duty on these bags without including the value of liners which are inserted in the bags before removal. The allegation is that the liner being an essential part of the bag, its value should have been included in the value of the bag while discharging duty. The department claims that the appellant has not disclosed the fact that such value is not included in the assessable value of the HDPE bags. Larger period of limitation is invoked on this ground.
3. Heard both sides.
4. The learned advocate argued that the value of the liners need not be included in the assessable value of the HDPE bags because these liners are bought out items and no process of manufacture was undertaken while inserting these liners in the HDPE bags. He further submitted that larger period of limitation is not invocable as the department was aware that the value of the liners is not included as early as in 1994 itself whereas show cause notice was issued in 1997 for the period 1992-93. He further argued that in any case, penalty under Section 11AC cannot be imposed and interest under Section 11AB cannot be demanded as the period involved is prior to introduction of these provisions in the Central Excise Act, i.e. in 1996.
5. We observe that the appellant’s contention that larger period cannot be invoked as the department was aware of the facts in 1994 is incorrect. The demand was made in 1997 for the period 1992-93. The date of knowledge of the department is not relevant for the purpose of computing the five-year period. The decision of the Tribunal in the Nizam Sugar case is clear on this point. We, therefore, hold that larger period of limitation is invocable. On the issue as to whether the value of the liners should be included in the HDPE bags, we observe that the Commissioner (Appeals) has correctly held that without these liners the bags will not serve the purpose for which they are meant. We have perused the purchase orders made on the appellant. They clearly say that the appellant is required to supply HDPE woven bags made out of tubular cloth woven on circular looms with HDPE liners, the specification of which is also given. Thus, the bags cleared from the factory are with the liners. The appellant’s plea that even without these lines the bags are complete cannot be accepted in view of the fact that the impugned goods were supplied for a particular purpose with a particular specification. We ate concerned with the goods as they are supplied. Secondly, the fact that the liners are bought out items also will not help the cause of the appellant as even the value of bought out items will have to be included in the assessable value if such bought out items form an essential part of the bags. We, therefore, reject the plea that the value of the liners need not be included in the value of the bags. Since the appellant has suppressed the fact that he has not included the value of the liners in the assessable value of the bags, larger period is invocable. We accordingly confirm the impugned order insofar as it relates to the demand for differential duty.
6. In regard to penalty under Section 11AC, we observe that it is not imposable as the period involved in the present case is prior to the introduction of these provisions in the statute. The same thing applies to the demand for interest as well. We, therefore, set aside the penalty and the demand for interest.
7. The appeal is thus partly allowed in the above terms by confirming the duty demanded and by setting aside the penalty under Section 11 AC and interest under Section 11AB of the Central Excise Act.
8. The appeal is disposed of thus.