National Rifles Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. the appellant manufacture air rifles, air guns, air pistols and parts thereof. prior to 1-3-1986 the goods manufactured by them were exempted; therefore, they did not take out central excise license but only filed declaration for such exemption from central excise licensing control as required under notification 111/78 under rule 174a of central excise rules. on introduction of the central excise tariff act, 1985 air guns, air rifles, fall under sub-heading 9304.00 and parts are covered under sub-heading 9305.00. there was an exemption notification for air rifles under notification 228/86 but parts were not exempted.the department found that on a scrutiny of the declaration for exemption from licensing control filed by the appellants on 30-5-1988 claiming exemption under notification.....

Judgment:
1. The appellant manufacture Air Rifles, Air Guns, Air pistols and parts thereof. Prior to 1-3-1986 the goods manufactured by them were exempted; therefore, they did not take out Central Excise License but only filed declaration for such exemption from Central Excise licensing control as required under Notification 111/78 under Rule 174A of Central Excise Rules. On introduction of the Central Excise Tariff Act, 1985 Air Guns, Air Rifles, fall under sub-heading 9304.00 and parts are covered under sub-heading 9305.00. There was an exemption Notification for Air Rifles under Notification 228/86 but parts were not exempted.

The department found that on a scrutiny of the declaration for exemption from licensing control filed by the appellants on 30-5-1988 claiming exemption under Notification 228/86 that the appellants had shown besides sales of Air Rifles other sales and on a visit to their factory it was found that these other sales related to sales of spare parts and accessories which are classifiable under sub-heading 9305.00 which were not exempted from Central Excise. Show cause notice was issued to the appellant on 5-12-1989 covering the period 1-3-1986 to 13-2-1989 and on considering their reply to the notice the Commissioner of Central Excise and Customs passed the impugned order whereby the Notification 228/86 was held not applicable to parts of Air Rifles. He also held that there has been suppression of facts by the appellants because during the material period and also earlier they had suppressed the vital facts of their undertaking manufacture of parts and accessories of Air Rifles. In their declarations filed for exemption from licensing control they had never mentioned that they were manufacturing the parts and accessories for captive consumption in their final product. He therefore confirmed the demand of Rs. 5,00,771.42 under Rule 9(2) Section 11A of the Central Excise Act, 1944.

2. The ld. Counsel for the appellant Shri Baxi referred to their declarations filed on 20-3-1986, 10-5-1987 and 30-5-1988 to the department seeking exemption from licensing control due to the fact that the goods Air Rifles were exempted under Notification 228/86. The ld. Counsel pointed out in all these declarations they have given the manufacturing process for Air Rifles which clearly brings out that the parts were first manufactured and finally assembled into the Air Rifles. There was thus no suppression of facts by the appellants and the appellants at the time bonafidely believed that the exemption for Rifles would also cover the parts thereof. The ld. Counsel further pointed out that significantly the Commissioner has given up the proposed penalty in the show cause notice for deliberate suppression.

Reliance was placed on the Tribunal decision in the case of Nestler Boiler Pvt. Ltd. v. Collector -1990 (50) E.L.T. 613 and on the decision of the Tribunal in the case of Indian Explosives Ltd. v. Collector -1986 (24) E.L.T. 345 to say that where the declaration has been filed by the assessee giving the details of the manufacture the department cannot allege suppression of facts.

3. Shri V.K. Puri, the ld. SDR referred to the declarations relied upon by the Appellant and pointed out that the declarations shows the description of the goods manufactured against the relevant column as only as Air Rifles, and parts of Rifles were never indicated as goods manufactured. The ld. SDR further pointed that the very system of control over units which are exempted from licensing under the Central Excise Rules is not rigorous. Therefore, the case law cited by the appellants which related to classification list filed by the assessee who are Central Excise licensees will not be relevant in this case. The declarations filed before the department did not indicate sales of parts and accessories.

4. We have carefully considered these submissions. We find that the appellants have made out a case on limitation. We have perused the three declarations of 20-3-1986, 25-5-1987 and 30-5-1988. In these declarations that the full description of the goods is given as Air Rifles. The appellants have also given the process of manufacture in detail in all these declarations and the process of manufacture as furnished clearly indicates that the main components of the Air Rifles are manufactured and the Wooden Butts for the Rifles are also been manufactured and the metal components are blackened and after the final assembly of all the parts of the Air Rifle it is tested for performance by actual shooting itself. This being the declaration, the department had on its record clear indication that parts are also manufactured by the appellants. It is further noted from the perusal of these declarations that even earlier to the declarations filed on 30-5-1988 in the declaration filed on 25-5-1987 also they had indicated other sales. Therefore, there was sufficient disclosure of material in these declarations by the appellant to put the department on notice for making further enquiries and for the same reason the department cannot allege that the appellants had withheld information from the department with an intention to evade duty. It would also appear that there were representations to the Finance Ministry on the issue of non-availability of exemption to the parts and accessories of Air Guns and Air Rifles and it has noted that the Notification No. 182/89, dated 3-10-1989 had been issued for exempting parts and accessories of Air Guns and Air Rifles from duty when captively used in the factory of production for manufacture of Air Guns. However, as pointed out by the ld. Counsel, the fact that the Commissioner has not found it a fit case for imposing personal penalty would also be a factor in favour of the appellants. Therefore, on the facts and in the circumstances of this case, we hold that the longer period for demanding duty in this case under Section 11A cannot be invoked and as such the appellants succeed on grounds of limitation. The impugned order is therefore set aside and the appeal allowed in the above terms.