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CUSTOMS, EXCISE AND GOLD (CONTROL) APPELLATE TRIBUNAL, NEW DELHI
M. Gouri Shankar Murthy, I.J. Rao, JJ.
Sriram Pistons and Rings Ltd. -Appellant
Versus
Collector of Central Excise, Meerut -Respondent
N.R.B. Order No. 221/83
Decided On : 14-06-1983
M. Gouri Shankar Murthy, Member (J)
1. In this Appeal to the Central Board of Excise and Customs in terms of Sec. 35 (as it read at the relevant time), of the Central Excises and Salt Act, 1944, (hereinafter referred to as the Act), and transferred to the Tribunal pursuant to Sec. 35(F) of the Act, the questions that arise for consideration are-
(a) Whether, in the facts and circumstances of the case, the proviso to Rule 10 of the Central Excise Rules, as it read at the relevant time, was applicable to the issue of the show-cause notice for recovery of duty ? If not, was the show-cause notice dated 5-9-1980 barred by limitation ?
(b) Was the levy of penalty under Rule 173-Q sustainable ?
(c) Did the show-cause notice dated 5-9-1980 abate in consequence of the repeal of Rule 10 and its re-enactment as Sec. 11 of the Act with effect from 17-11-1980 without providing for any saving of pending proceedings ?
(d) Whether, in the facts and circumstances of the case, there has been a "manufacture" of the pistons in question, and if so, the process carried out by the Appellant came within the scope of Rule 173-H of the Rules ?
2. The material facts are not in controversy and can briefly be set out as under -
(a) The Appellant manufactures high precision pistons for use as original equipment in automobiles.
(b) Prior to 1976, the Appellant submitted a claim for refund of duty paid under Rule 173-L of the Rules, in respect of such of those duty paid pistons as were rejected and returned for replacement.
(c) The Assistant Collector, however, informed by his letter dated 28-7-1976 (S.No. 1 of the Paper Book) that it was Rule 173(H) that was applicable and not Rule 173(L).
(d) Subsequently, the procedure to be followed in terms of Rule 173(H), for-
(i) receipt in the factory of the rejected pistons;
(ii) the process to which they are to be subjected to; and
(iii) the manner of removal,
was mutually discussed and settled on two different occasions, and was alleged to have been scrupulously adhered to. The Appellant placed on record, by the letter dated 10-1-1977 (at S.No. 2 of the Paper Book), the clearance accorded by the Excise authorities for "remelting all our returned goods" and of their intent to do so. The receipt of the aforesaid letter admits of no dispute.
(e) Nevertheless, a show-cause notice (at S. No. 3 of the Paper Book), alleging, inter-alia,-
(i) inapplicability of Rule 173(H) to the process of remelting of rejected pistons,
(ii) contravention of Rule 173(H) in letter and spirit, in that manufacture of new pistons after remelting the rejected ones was not comprehended in the said rule,
(iii) violation of Rules 9(1), 52(A) and 173(G) in the clearance of newly manufactured pistons identical in quantity to those rejected for sale to buyers other than those from whom the rejected pistons were received without Gate Passes and proper account, and
(iv) infringement of Rule 173(D) for failure to maintain any raw material account,
and requiring the Appellant to show-cause as to why a penalty should not be imposed on them under Rule 9 and 173(Q) of the Central Excise Rules, 1944 and why the duty amounting to Rs. 4,42,159/- @ 25% in respect of goods valued at Rs. 22,10,195/- in respect of which the offence appears to have been committed should not be demanded under Rule 9(2) of the Rules, was issued on 5-9-1980.
(f) In adjudication, the Collector, Central Excise, Meerut by order dated 19-3-82 (S.No. 6 of the Paper Book), inter-alia, found that-
(i) there has been a fresh remanufacture of the pistons rather than a remaking of the rejected pistons in that there was no nexus whatsoever between the pistons rejected and returned for replacement and those freely replaced;
(ii) the pistons removed without duty, consequently was in contravention of the provisions of Rule 173-H of the Rules ;
(iii) in such circumstances, the pistons removed under the Self-removal Procedure was "obviously clandestine" ;
(iv) the whole process, having been entirely in their special
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