Judgment:
1. The appellants are a Small Scale Industrial (SSI) unit manufacturing "S. Sand" (SH 3823.00) and "P.P. Resin" (SH 3909.51) and availing the benefit of concession under Notification No. 1/93-C.E., dated 28-2-1993 in regard to payment of duty on their products. The period of dispute in this case is 1994-95. Whenever during this period they cleared goods under brand names ("Unique" and "AVS") of others who were not eligible for the SSI benefit, they paid duty at full Tariff rate in terms of para (4) of the above Notification. Unbranded goods or goods affixed with their own brand name were cleared by availing the exemption under the above Notification. All the clearances were made in terms of the declaration filed under Rule 173B. A dispute with the department arose when the appellants paid duty at full rate by utilizing Modvat credit in respect of a consignment branded as "MA", cleared to M/s. Metal Aids, under invoice No. 60, dated 6-6-1994. The department deemed this clearance of goods as exercise of option by the appellants under the first proviso to para (4) of the Notification and demanded duty on all subsequent clearances of goods in terms of the said proviso. The demand, raised in show-cause notice dated 7-5-1999, was resisted by the party, who pleaded that the payment of duty on the clearance made on 6-6-1994 was only due to a clerical error on the part of their accounting clerk and that they had no intent to opt out of SSI exemption and pay duty at Tariff rate. "M.A." was used only to demarcate the consignment of goods to be dispatched to M/s. Metal Aids, Bhadrabad (Haridwar) and not as a brand name within the meaning of this term used in para (4) of the Notification. These pleadings were rejected by the original authority, which held that the appellants had, for the purpose of utilizing accumulated Modvat credit, paid duty at normal rate on specified goods cleared under "their own brand name or brand name not owned by another person", by "mis-declaring" such brand name as another person's brand name for the purpose of para (4) of the Notification. The original authority further held that, by so paying duty on specified goods otherwise exempt under the Notification, the party had exercised option under the first proviso ibid and was consequently, liable to pay duty on all the subsequent clearances made in the financial year. The authority accordingly confirmed the above demand of duty against the party and imposed a penalty of equal amount on them. The appeal preferred by the party to the Commissioner (Appeals) against the decision of the adjudicating authority was rejected on merits although the quantum of penalty was reduced. Hence this appeal of the assessee.
2. We have heard Counsel for the appellants and DR for the respondent, and have carefully considered their submissions. The short question raised before us is whether the clearance, on payment of duty of excise at normal rate, of the specified goods marked "MA." to M/s. Metal Aids, Bhadrabad (Haridwar) under invoice No. 60 of 6-6-1994 should be deemed to be an exercise of option under the first proviso to para (4) of Notification No. 1/93-C.E. Para (4) itself was in the nature of a proviso to para (1) of the Notification and the same created a bar against availment of the exemption under para (1.) in respect of specified goods affixed with brand name of another person ineligible for exemption under the Notification. In the instant case, the assessee has cleared goods under "Unique" and 'AVS' brand names of such other persons, on payment of duty at Tariff rate in terms of para (4) of the Notification during the period of dispute and there is no quarrel about it. The controversy erupted when they paid duty at Tariff rate on the goods cleared to M/s. Metal Aids on 6-6-1994 after marking the consignment as "M.A.". A letter dated 16-10-1998 sent by M/s. Metal Aids to the Central Excise Range officer having jurisdiction over the appellants' factory has been referred to by the DR. This letter (copy available) reads as under :- "Refer your registered letter No. V/30/OFF/UMA/295.97/649, dated 9-10-1998 which have received by us on today. In this regard, we hereby declare that mark "MA." does not belong to us and not registered by us. We also declare that we had not purchased any material under brand name "MA." from M/s. Uma Sand & Resin Pvt.
Ltd., G-12, Site C, Surajpur." The above letter is a disclaimer in respect of "M.A." as brand name and goes to support the appellants' plea that they had marked "M.A." on the goods only for the purpose of identification/demarcation of the goods consigned to M/s. Metal Aids. Another explanation offered by the party in relation to the clearance in question is that the goods happened to be cleared on payment of duty due to a clerical error on the part of their accounting clerk who was new to the job. This explanation needs to be examined in the totality of the facts of the case. Admittedly, the assessee had not exercised any option in writing to the department under the first proviso to para (4). Admittedly, again, they were lawfully clearing "AVS" - branded and "Unique" - branded goods also on payment of duty at full rate during the period of dispute. The clearance of goods under invoice No. 60 of 6-6-1994 was a solitary instance of payment of duty on goods which should have been cleared by availing the benefit under para (1) of the Notification. The party's explanation that it was due to an inadvertent error on the part of their new accounting clerk, in our view, should have been accepted by the original authority itself, particularly when the first proviso to para (4) did not expressly provide for deemed exercise of option for not availing the benefit of exemption under the Notification. We have not found any forceful ground or conclusive evidence, in the impugned order, to rebut the party's plea of error.
3. The plea of limitation has also been raised in this appeal, against the demand of duty. The show cause notice was issued beyond the normal period of limitation. The extended period of limitation was invoked by alleging mis-declaration. This allegation also has not been substantiated in this case.
4. In the result, the impugned order is set aside and the appeal is al lowed.