Customs, Excise and Gold Tribunal - Delhi
O.N.G.C. vs Collector Of Central Excise on 22 July, 1995
Equivalent citations: 1995(79)ELT117(TRI-DEL)
ORDER Gowri Shankar, Member (T)
1. This is an appeal against the Order of the Collector of Central Excise, Vadodara whereby he has confirmed the demand of duty on the ground that manufactured and cleared a quantity of lean gas to M/s Kribhco Fertilizers.
2. We have heard the submissions made by Shri Mehta, Advocate on behalf of the appellant and those of Shri Bhansali, SDR for the Collector. We, however, do not propose to go into the merits of the issue as in our opinion the appeal could be disposed of on the issue of limitation.
3. The show cause notice dated 25-1-1991 demanding duty was issued for clearances during the period from 8-1-1988 to 29-2-1988. The extended period contained in the proviso to Section 11A of the Central Excises and Salt Act, 1944 was invoked on the ground that the appellant had suppressed the fact of manufacture and clearance without payment of duty with the deliberate attempt to evade duty. The notice alleges that after it was detected, the company came forward to pay duty. It is true, as argued by Shri Mehta that the appellant had filed a classification list for the lean gas. This list which is dated 18-12-1987 was approved in 1988 by the Assistant Collector, Central Excise. The classification list also indicated the rate of duty as 'nil' for the reason that the benefit of Notification 175/85, dated 26-7-1985, as amended by Notification 78/86 dated 10-2-1986 was being claimed in respect of the lean gas, this Notification exempts gas if intended for use as feedstock in the manufacture of fertilizer. There is no dispute that this is the purpose for which the gas was supplied to M/s. Kribhco, the Departmental Representative is correct when he points out that the classification list did not indicate that the use of lean gas as feed stock in the manufacture of fertilizer was outside the factory of production and, therefore, the officers not knowing this, would not be in a position to verify whether the Chapter X procedure, which the notification required to be followed in such a case had been complied with. The fact, however, remains that the appellant had intimated to the Department, before the period in question that it was manufacturing lean gas and that it was claiming the exemption in respect of so much of the gas as was intended for use as feedstock in the manufacture of fertilizer. In its letter dated 6-2-1988 to the Central Board of Excise and Customs, New Delhi, the appellant had requested that the O.N.G.C. Hazira Gas Processing Complex be declared as a refinery under Rule 140(2) and the warehouse under Rule 139 of the Central Excise Rules. One of the annexures to this letter, a copy of which was marked 'forwarded to the Collector of Central Excise, Surat' indicated that lean gas was being manufactured.
4. It appears that the chain of events culminating in the issue of show cause notice commenced with the letter dated 5-3-1988 of the Superintendent to the appellant. In this letter, the Superintendent had said that the floor chart of gases in the ground plan of the appellant indicated that it supplied lean gas through pipeline to M/s. Kribhco for use in manufacture of fertilizer. The letter goes on to point out that the classification list does not indicate the supply of lean gas to Kribhco and ask for details of such supply. In his reply dated 29-3-1988, the appellant gave details of lean gas supplied to Kribhco through the pipeline. These details are the basis for the show cause notice. It is thus clear that in March itself in response to the enquiry from Superintendent, the company promptly gave all the information relating to the supply of the gas. The ground plan in question would have been submitted along with the application for issue and renewal of the licence and showed that there was a pipeline running from the appellant's premises to Kribhco through which gas was being supplied to Kribhco. From the letter of the Superintendent, it is clear that he was aware that lean gas [was] being supplied through pipeline to Kribhco. Further, letters were written by the appellant on 12-4-1988, 22-4-1988, 12-5-1988 and 17-8-1988 relating to supply of lean gas. The letters dated 12-5-1988 and 17-8-1988 related to the appellant paying duty on quantities of lean gas removed.
5. Thus, as early as April and May 1988, the Department's officers were fully aware that lean gas was being supplied by the appellant to Kribhco and that the provisions of Chapter 10 were not being followed with regard to such supply. However, the show cause notice was only issued more than 21/2 years later in 1991. We are not able to understand the reason for the delay in issuing the show cause notice. Apart from this the facts narrated above show that the Department was aware from the appellant that it was manufacturing lean gas; and that it supplied gas through its pipelines to Kribhco. The facts also show that on an enquiry being made by the Superintendent the appellant promptly supplied the information as for regarding detail of supply of the gas. These facts do not lead to the conclusion that the appellant wilfully suppressed information relating to supply of lean gas to Kribhco with an intent to evade payment of duty. The conduct of the appellant was not such as would be consistent with trying deliberately to evade payment of duty. If the officers had acted with promptitude in reply to the appellant's letter i.e. in March/April 1988, the show cause notice could comfortably have been issued well within time. Whatever the reason for not issuing it in time, the appellant's inaction or refusal to furnish the information could not be one of them.
6. It must also be borne in mind that during the relevant period, the appellant was a Commission constituted by an Act of Parliament wholly under the control of the Central Government. The supply of gas was also to a public sector undertaking engaged in the manufacture of fertilizer, also under the control of the Government. Evasion of duty by the appellant would not have enriched any body other than the Government. We refer to these facts only to show that the facts do not disclose that there was an intention to evade duty.
7. The judgment of the Hon'ble Supreme Court in the Rainbow Industries v. Collector of Central Excise - 1994 (6) SCC 563 [are] squarely applicable to the facts of this case. The Court held in that case that for the proviso to Section 11A to apply, two ingredients must be present wilful suppression, mis-declaration etc.; and the intention to evade duty. We are satisfied that there has been no intention to evade duty. It is not possible to say with solitude that there has been wilful suppression. It is, therefore, difficult to resist the conclusion that the extended period would not apply to the facts and circumstances of this case. The demand must, therefore, be held to be barred by limitation. It follows that the Collector's Order confirming the duty and imposing penalty does not survive. We, therefore, allow the appeal and set aside his Order.