Full Judgment
2. The facts lie in a narrow complex. The appellant is manufacturing parts of air-conditioners falling under Chapter 84 of the Central Excise Tariff Act, 1985. It cleared the same as intermediate product for captive consumption without payment of duty under Notification 217/86. For the period from 24-8-1987 to 9-7-1991 the final products manufactured by them were cleared without payment of duty by availing of various notifications. It is the case of the Department that when the intermediate products are not applicable for exemption contemplated under Notification 217/86, if the final products are exempted from payment of duty. A show cause notice was issued by the Department on 3-9-1992 charging the applicant for suppression from the Department that intermediate products for which exemption Notification 217/86 had been claimed were meant for final products to be cleared at nil rate of duty and that is why the Department sought to follow the enlarged period of limitation. Reply to the notice was filed by the applicant and considering the same the adjudicating authority had confirmed the duty and imposed a penalty as mentioned in it.
3. Shri R. Ravindran, the ld. Counsel for the applicant has stated that the applicant had filed a classification list informing about the nature of the activity of the appellant in the captive consumption as well as supply to the 100% Export Oriented Units in respect of the goods manufactured by them. Having known these elements, the Department could not, in law, seek to invoke the larger period of limitation.
Having been informed of the entire matter, the Department could not charge the appellant any suppression with intend to evade duty. He also relies upon the judgment of the Bharat Bijlee Ltd. in Appeal E/38/93-Bom (Order No. 145/97-WRB/C-II, dated 13-1-1998) in which the Tribunal under similar circumstances have granted relief in favour of the assessee.
4. As against this, the Departmental Representative, while reiterating the grounds mentioned in the impugned order, stated that in every transaction, the Department has been kept in the dark about the nature of the transactions. He also made some arguments regarding the nature of the transactions as revealed in service by them.
5. We have considered the rival submissions. The application is only for waiver of pre-deposit of duty. Prima facie we are of the view that the applicant has a strong arguable case. However, taking the totality of the circumstances, we direct the applicant to freeze their Modvat account to the extent of an amount of Rs. 2.50 lacs. On such step being taken, there will be waiver of pre-deposit of the duty amount as well as the penalty amount.