Customs, Excise and Gold Tribunal - Delhi
Orient General Industries Ltd. vs Collector Of Central Excise on 17 February, 1993
Equivalent citations: 1993ECR339(TRI.-DELHI), 1993(65)ELT238(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. The appellants are engaged in the manufacture of electrical stampings and laminations falling under Item 28A of the erstwhile Central Excise Tariff. They were transferring the stampings and laminations after payment of duty to other ancillary units engaged in the manufacture of rotors and stators of electric fans. Since such goods manufactured in the appellants' factory were not being sold in the market their assessable value was being determined having regard to the manufacturing cost and manufacturing profit under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. Taking into account the price of electrical grade steel sheets purchased from the Steel Authority and other well known manufacturers, the value of scrap generated, the cost of finishing materials such as varnish and thinners, labour charges and notional profit, in the price list effective from 24-7-1980 the appellants declared the assessable value of the goods as Rs. 15.50 per kg. This price list was approved by the Department on 18-2-1985. For the period commencing from 1-5-1982 a revised price list declaring the assessable value of the goods as Rs. 19.50 per kg. was filed. The second price list filed by the appellants was also approved by the Department on 14-9-1983.
2. On the basis of the scrutiny of the appellants' records the Department arrived at the finding that while working out the assessable value of the goods the appellants had failed to add expenses incurred on transportation to the cost of the electrical steel sheets. After taking into the account the transportation charges, the Department worked out the revised assessable value of the goods for 1981-82 as Rs. 17.53 per kg. and Rs. 27.24 per kg. respectively. Thereafter the appellants were served with a show cause notice dated 7-5-1984 alleging short levy of Rs. 6,11,700.99 during the period 1981-82 and 1982-83. By a corrigendum dated 1-10-1985 to the show cause notice the demand in respect of the duty alleged to have been short levied was revised to Rs. 11,06,962.00. In their defence the appellants mainly contended that there was no loss of revenue since in respect of the entire duty paid on electrical stampings used in the manufacture of rotors and stators meant for the production of fan motors proforma credit could be availed under Rule 56A. They also claimed that the demand was time barred since in the absence of any allegation of wilful suppression of facts or misrepresentation or fraud the extended period of 5 years for issuing the show cause notice was not available to the department. However, while confirming the demand for a sum of Rs. 11,06,962/- in the impugned order the Collector held that even though there was no explicit allegation of wilful suppression, from the contents of the show cause notice, it followed that the appellants had wilfully withheld the correct assessable value of the inputs from the department.
3. On behalf of the appellants the learned advocate Shri A.K. Jain appeared before us. He stated that there being no allegation of wilful suppression or misrepresentation or fraud in the show cause notice the demand which was beyond the 6 months limitation provided under Section 11A of the Act has to be held as time barred. He added that the price lists dated 24-7-1980 and 1-5-1982 were filed on the basis of the manufacturing cost which was worked out by taking into account the actuals of the cost of raw materials and the manufacturing charges and manufacturing profits on notional basis. He contended that there could be no allegation of wilful suppression or misdeclaration or fraud since the price lists filed by the appellants were duly approved by the departmerit and along with the RT-12 Returns copies of the invoices in respect of the purchased raw materials were also filed. He argued that the Collector's finding in regard to wilful suppression and mis-statement was not sustainable since the provisions of Section 173Q had not been invoked against the appellants. He stated that the appellants could not have had any motive for suppressing any information or misdeclaring the value of the goods since credit under Rule 56A was available in respect of the entire amount of duty paid on the stampings supplied to the ancillary units engaged in the manufacture of rotors and stators and credit in respect of duty paid on rotors and stators was further available when they were received by the appellants for the manufacture of fans. Shri Jain stated that the amount of short levy worked out in the show cause notice was incorrect since on the basis of the actuals of manufacturing cost and profit certified by the Chartered Accountant the demand for a sum of only Rs. 66,223.45 could have been issued to the appellants. Reiterating his stand that the demand confirmed by the impugned order was time barred, Shri Jain cited the following case law:
(i) TIL Limited v. CCE 1991 (52) E.L.T. 466 (Tribunal)
(ii) Tata Engg. & Locomotive Co. Ltd. v. U.O.I. 1991 (52) E.L.T. 500 (Bom.)
(iii) CCE v. Chemphar Drugs & Liniments 1989 (40) E.L.T. 276
(iv) Padmini Products v. CCE 1989 (43) E.L.T. 195 (SC)
(v) Punjab Electricity Board v. CCE 1989 (44) E.L.T. 340 (Tribunal)
4. On behalf of the Revenue the learned SDR Smt. C.G. Lal stated that on a plain reading of the show cause notice it follows that the appellants had knowingly suppressed the information in regard to transportation costs of the raw materials while working out the assessable value of the goods. She contended that specific allegation in the show cause notice in regard to suppression or mis-statement or fraud was not necessary since allegation in regard to suppression or mis-statement could not be clearly inferred from the contents of the show cause issued to the appellants. She added that the point regarding the availability of proforma credit equivalent to duty paid on stampings and laminations to the ancillary manufacturers of rotors and stators had no force at all since the stampings and laminations in question could be cleared by the appellants only on payment of duty on the proper value in terms of Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. She stated that even in the revised calculations filed by the appellants the Chartered Accountant had confirmed a higher price in respect of electrical grade steel sheets than what was indicated in the price lists filed by the appellants. In support of her contentions she placed reliance on the following case law:
British India Corporation Ltd., Dhariwal v. Collector of Central Excise, Chandigarh 1986 (25) E.L.T. 727
5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the main point raised by the appellants is that the demand issued after the expiry of 6 months limitation provided under Section 11A of the Act was time barred since there was no allegation of suppression or fraud or mis-statement in the show cause notice. In this regard the appellants have further contended that in any case there could be no allegation of mis-statement or suppression or fraud since the price lists filed by them were duly approved by the department and the invoices in respect of the purchased electrical grade steel sheets were also filed alongwith the relative RT-12 Returns. The appellants have also stated that there could not have been any motive on their part to mis-declare the value of the goods since credit under Rule 56A in respect of the entire duty paid on the stampings and laminations was available to the manufacturer who used them in the manufacture of rotors and stators and credit in respect of duty paid on rotors and stators used by the appellants for the manufacture of fans was also admissible.
6. On perusal of the show cause notice dated 7-5-1984 and the corrigendum dated 1-10-1985 we find that there was no specific allegation of suppression or misrepresentation or fraud. In this regard we find that in the case of Tata Engg. and Locomotive Company Ltd. v. Union of India, reported in 1991 (52) E.L.T. 500 the Hon'ble Bombay High Court has held that extended period of limitation cannot be invoked in terms of proviso to Sub-section (1) of Section 11A of the Act if the show cause notice does not allege short levy due to fraud, collusion or wilful mis-statement or suppression of facts. Para 6 of the judgment being relevant is reproduced below:-
"Before adverting to the validity of the show cause notice dated February 20, 1985, which is admittedly within the stipulated period prescribed under Subsection (1) of Section 11 A, it is necessary to dispose of the challenge to the remaining five show cause notices. Section 11A of the Act prescribes for recovery of duties not levied or not paid or short-levied or short paid or erroneously refunded. Sub-section (1) prescribes that when any duty of excise has not been levied or paid or has been short-levied, then the officer may require the assessee by show cause notice served within six months from the relevant date to show cause why such short-levied duty should not be recovered. The proviso to Sub-section (1) enables the officer to serve notice within a period of five years from the relevant date when the duty is not levied or short levied by reason of fraud, collusion or any wilful mis-statement or suppression of facts. It is not the claim of the department and none of the show cause notices even whisper about short-levied duty by reasons of fraud, collusion or any wilful mis-statement or suppression of facts by the company. It is, therefore, obvious that five show cause notices which are in respect of period covered from January 1, 1980 and ending with March 31, 1981 are hopelessly barred by rule of limitation. These five notices are issued between February 28, 1985 and March 31, 1985 i.e. long after the period of six months from the relevant date had expired. Mr. Desai, therefore, very rightly did not support these five show cause notices and consequently, the same are required to be struck down."
7. It is seen that taking a similar view in the case of TIL Ltd. v. CCE, reported in 1991 (52) E.L.T. 466 the Tribunal has held that when allegation of suppression is not made in the show cause notice, the extended period of limitation cannot be invoked.
8. On behalf of the Department it has been contended that for invoking the extended period of limitation, allegation of suppression or mis-statement in the show cause notice was not necessary since wilful mis-statement could be inferred from the overall contents of the show cause notice. In this regard reliance has been placed on the decision in the case of British India Corporation v. Collector of Central Excise, Chandigarh reported in 1986 (25) E.L.T. 727 in which Tribunal had made the following observations :-
"7. (i) Coming now to the plea of time bar, we find that the periods which the demands relate and the dates on which the show cause notices issued are as under :-
Period Date of Issue of S.C.N. 1. 1980-81 5-2-1983 2. 1981-82 21-2-1983 3. 1982-83 26-3-1984 4. 1983-84 18-4-1984 (revised on 12-6-1984)
The demands were raised under Rule 9(2). During the material period, Rule 9(2) read with Section 11A fixed two time limits - 5 years for cases of "fraud, collusion or any wilful mis-statement or suppression of fact, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty" and six months for other cases. The Collector has held that the appellants were guilty of suppressing the fact of manufacture of blended wool tops, that in the facts and circumstances of the case the extended time limit of 5 years applied and so all the demands were within time. The appellants contend that only the normal time limit of six months applied and most of the demands were time-barred. The first point made by the appellants in this behalf is that the show cause notices did not allege any suppression on their part nor any reasons for applying the extended time limit had been cited therein, except in the revised show cause notice dated 12-6-1984. We observe that the words "fraud" "suppression" etc. need not be directly mentioned in the show cause notice. It is enough if the statement of allegations contained in the show cause notice brings out the charge of fraud, suppression etc. The show cause notice as issued to the appellants specified the quantity of blended wool tops which had been removed during the relevant financial year and stated that they had been so removed "without accounting in excise record, without classifying such blended wool tops, without determination/payment of Central Excise duty and without the cover of C.P.T. Thus M/s. B.I.C. Ltd., N.E.W. Mills, Dhariwal had contravened Rules 9(1), 52A, 173B, 173F, 173G and 226 of the Central Excise Rules, 1944 and are liable for penal account under Rule 173Q of Central Excise Rules, 1944 besides payment of central excise duty amounting to Rs. ". The notice further called on the appellants to show cause why the duty due as shown in the Annexure to the notice should not be recovered from them under Rule 9(2) and why penalty should not be imposed on them under Rule 173Q. The statement of the allegations thus clearly brought out that the appellants had neither made the necessary declaration (by way of classification list) to the excise authorities nor had they accounted for the production and removal of blended wool tops in excise registers and documents. The appellants were, at the relevant time, working under the self-removal procedure and not under physical type of control. Under the self-removal procedure, the excise authorities gained knowledge of the operations of an assessee through the prescribed declarations and assessment documents. The appellants admitted that they had filed no such declaration or classification list or assessment documents in respect of their blended wool tops. This is precisely what the statement in the show cause notice alleged. Suppression is merely another word for such non-declaration. We, therefore, hold that the charge of suppression could reasonably be inferred from the statement of allegations contained in the show cause notice and the appellants' defence was in no way prejudiced merely because the word "suppression" was not directly mentioned in the show cause notice. The fourth and the last show cause notice went further and alleged that the appellants had removed the blended wool tops in contravenetion of rules with intent to evade payment of duty. The chart of events contained in Paragraph 4 above would show that even before the issue of formal show cause notice, there was considerable exchange of correspondence between the department and the appellants whereby the appellants were made aware of their responsibility and yet they persisted in contravention of the rules. The show cause notices have to be appreciated in the background of this prior correspondence and the charge of suppression and persistent contravention clearly comes out from this record read together."
It is seen that in the case relied upon by the Revenue M/s. British India Corporation were charged with the contravention of Rule 9(2) on the ground that they had neither filed the required declaration in respect of goods in question before the excise authority by filing the classification list nor had they recorded the production and removal of the goods in the statutory records. Having regard to these facts the Tribunal held that the charge of suppression could reasonably be inferred from the statement of allegations contained in the show cause notice. On the other hand we find that in the case before us the classification list effective from 24-7-1980 filed by the appellants was approved by the Department and even the revised classification list effective from 1-5-1982 was also approved by the proper officer and assessments were regularly made on the basis of these classification lists. It is also evident from the records of the case that the appellants were not charged with the contravention of Rule 9(2) for having cleared the goods without filing the necessary declarations or failure to maintain the statutory records showing the production and clearances of the excisable goods. Under these circumstances we do not find any force at all in the contention of the learned SDR that the absence of any explicit allegation regarding wilful suppression in the show cause notice does not prejudice the Revenue's case since withholding of the correct assessable value of the goods by the assessee could be inferred from the contents of the show cause notice.
9. We find that apart from the fact that the classification lists filed by the appellants were approved by the Department, along with the RT-12 returns the appellants had also filed copies of the invoices of SAIL, TISCO and other well known suppliers showing purchase price of electrical grade steel sheets on the basis of which they had computed the declared value of stampings and laminations under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. Further, as pointed out by the appellants, credit under Rule 56A was admissible in respect of the entire amount of duty paid on the stampings supplied to the concerned ancillary units engaged in the manufacture of rotors and stators and credit in respect of duty paid on rotors and stators was also admissible when they were received by the appellants in their factory for the manufacture of electric fans. Under these circumstances, we are of the view that the failure on the part of the appellants to take into account the transportation cost in respect of the electrical grade steel sheets for the purpose of computation of the assessable value of the disputed goods, was an unintentional omission and not a conscious or deliberate act of withholding of information or suppression of facts.
10. In the case of Collector of Central Excise v. Chemphar Drugs and Liniments reported in 1989 (40) E.L.T. 276 the Hon'ble Supreme Court has held that "in order to make the demand for duty sustainable beyond a period of six months and upto a period of 5 years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short levied or short paid, or erroneously refunded by reasons of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with the intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew or otherwise is required before it is saddled with any liability, before the period of six months."
11. In view of the above discussion, we hold that in the absence of any specific allegation in the show cause notice regarding wilful suppression of facts or misrepresentation, or misstatement or fraud, the demand issued to the appellants for the period beyond the 6 months limitation under Section 11A of the Act, was time barred.
12. In view of the finding that the demand issued to the appellants was time barred, it is not necessary for us to examine the other points raised on behalf of the appellants.
13. In the result, the impugned order is set aside and the appeal is allowed.