Judgment:
1. This appeal has been filed by the appellants against the order-in-appeal dated 27-11-2001 passed by the Commissioner (Appeals).
2. The facts are not much in dispute. The appellants are engaged in the manufacture of goods falling under Headings 29 & 39 of the CETA. They were purchasing various chemicals and allied items by importing the same in bulk quantity. A part from undertaking the manufacturing activity with respect to their firnished products, they were also repacking in small containers the imported goods and marketing the same after putting their label. This activity of their, before budgetary changes of the year 1997, was not being treated as process amounting to manufacture. But thereafter, a note was added in Chapters 29, 34, 35 & 39 of the CETA, vide which it was specified that such an activity i.e.
of labelling, relabelling of containers, repacking from bulk pack to retail packs etc. would amount to manufacture. But the appellants in spite of these changes neither filed any declaration nor sent any intimation to the excise department nor paid duty. They were, accordingly, served with a show cause notice, by invoking the extended period of limitation. The Additional Commissioner confirmed the demand against them. The Commissioner (Appeals) had affirmed his order with modification that the eligibility of; the Modvat to the appellants shall be examined by the A.C. or D.C.3. The learned Counsel has raised two fold contentions before us.
Firstly, that the demand was time barred. Secondly, no penalty could be imposed when the Modvat credit has yet to be quantified by the competent authority as per direction of the Commissioner (Appeals) and that the allowance of that amount has to be given to the appellants while determining their duty liability and imposing penalty on them.
4. The learned JDR has simply reiterated the correctness of impugned order.
6. So far as the first contention is concerned that the demand raised was time barred, the same, in our view, is not liable to be accepted.
After addition of note in Chapters 29, 34, 35 and 39 vide which the activity of the appellants of repacking from bulk packs of the imported goods, to retail packs, amounted to manufacture, There is nothing on record to suggest that the appellants ever filed any declaration or sent an intimation about their activity, to the excise department.
There was apparently suppression of material facts by them from the excise department. The contention of the Counsel that the excise department knew about the activity of the appellants before the budgetary changes of the year 1997, and as such, no suppression of facts could be presumed, cannot be accepted, as it was for the appellants to disclose in details about their activity which after the budgetary changes of 1997 amounted to manufacture. In this context, reference may also be made to the ratio of law laid down by the Larger Bench of the Tribunal in Nizam Sugar Factory v. CCE, Hyderabad - 1999 (114) E.L.T. 429, wherein it has been observed that it is for the assessee to disclose the true facts about his activity to the excise department and failure on his part to do so, would amount to suppression of facts by him. Therefore, the demand of duty raised from the appellants through notice dated 8-6-99 for the period March, 1997 to December, 1998 cannot be held to be time-barred as the extended period of limitation had been rightly invoked against them.
7. However, the second contention of the Counsel, in our view, de serves to be accepted. When the Commissioner (Appeals) had directed the A.C./D.C. to examine the eligibility of the Modvat credit to the appellants, in view of the various judicial pronouncements in identical cases and extend the benefit of the same, he should have also set aside penalty against them. After getting the benefit of the Modvat, the duty liability of the appellants will surely come down to what has been confirmed against them. The penalty has to commensurate with the duty amount. Therefore, we set aside the penalty imposed on the appellants but uphold the confirmation of duty demand against them. The eligibility of the Modvat claim to the appellants shall be examined as per the direction of the Commissioner (Appeals) in the im pugned order, by the competent authority and after permitting due allow ance of the same to them towards duty amount payable by them, the ques tion of imposition of penalty at that stage, may be examined by the compe tent authority, keeping in view the facts and circumstances of the case and the explanation offered by the appellants, in respect thereto.
8. In view of the discussions made above, the appeal of the appellants accordingly stands disposed of.