Customs, Excise and Gold Tribunal - Delhi
Y.A. Hazare And Bros. vs Collector Of Central Excise on 27 July, 1989
Equivalent citations: 1990(47)ELT286(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. E/Misc./124/88-B.I. - This is an application seeking to include certain additional grounds which are to be added after Para 26 of the memorandum of appeal. Shri Gopal Prasad, the learned consultant is not pressing the point numbered as para 26 B in the Misc. application. He, however, urged for the inclusion of para numbered 26 A for being taken on record as additional ground. This relates to the validity of the Show Cause Notice issued under Rule 10 of the Central Excise Rules at a time when that Rule was not in existence and also raises the question of jurisdiction of the Collector of Central Excise to demand short levy under Section 11-A of the Central Excises and Salt Act, 1944. We find that the points are relating to legal aspect. The learned Departmental Representative, Shri Arora has no objection. Therefore, the additional ground numbered as para 26 A is allowed.
Appeal No. E/2372/84-B
1. This appeal is directed against the order dated 21-8-1984 passed by the Collector of Central Excise, Bombay-I, by which he had demanded Central Excise duty under Item 68 of Central Excise Tariff on the goods produced by the appellants for the period from 18-6-1977 to 31-3-1979 amounting to Rs. 2,14,920.10 besides imposing a penalty of Rs. 25,000/- on the appellants. He also confiscated the plant and machinery of the appellant's factory under Rule 173-Q(2) of the Central Excise Rules levying a fine in lieu of confiscation of Rs. 25,0007-. The brief facts are that the appellants are manufacturers of silver utensils and other articles of silver besides manufacturing of metal domes and lathe machinery falling under Item 68 of Central Excise Tariff. The department's case is that the officers of the Directorate of Revenue Intelligence, Bombay enquiring into the manufacture of silver utensils and engineering goods by the appellants recorded a statement of Sadanand Anant Hajare, a partner of the appellant firm on 2-3-1979 in which he said that silver utensils and articles were partly manufactured by them and partly got manufactured by outside parties on payment of labour charges. On 11-1-1978, the appellants produced a certificate from M/s. R.A. Jagtap and Company, Chartered Accountants alongwith the letter dated 12-1-1978 to the Assistant Collector of Central Excise, in which the value of goods cleared during the year 1976-77 was declared as Rs. 26.86 lakhs. The Assistant Collector, in response, told them that the value declared by them related to only silver and not the invoiced value of silver utensils and also pointed out the omission to declare the value of metal domes and lathe machinery. He also found that the total value of the goods by the appellants during 1976-77 was Rs. 32,70,190.83 and hence asked them to pay duty of 2% under Item 68 of Central Excise Tariff because they were ineligible for exemption under Notification No. 176/77, dated 18-6-1977, which they had claimed and for which purpose they had furnished the value of clearances. In response, the appellants furnished a letter dated 17-2-1978 with a revised certificate from the Chartered Accountant showing the total clearance value as 25.26 lakhs and hence claiming exemption. Similarly they gave another letter on 25-9-1978 giving the value of clearances during 1977-78 financial year as Rs. 22.30 lakhs. On the basis of the above two certificates, the Assistant Collector of Central Excise, Division A, Bombay issued a letter accepting the certificates and on that basis held it eligible for exemption under Notification 176/77. The officers of the Directorate of Revenue Intelligence, Anti Evasion, Bombay examined the figures given in the said certificates and further made enquiries with Shri Sadanand Anant Hajare, who admitted that the values mentioned in the certificates were not the sale value of silver utensils and articles but represented the cost of the goods manufactured by them in their factory only. He also said that the value of silver utensils and articles sold by them out of the goods got manufactured on job basis was not included. Further, it appeared to the department that the value of silver utensils and articles manufactured by the appellants on job work basis for and on behalf of other dealers was deliberately omitted from the certificate because only job charges were mentioned in the certificate. The Chartered Accountant Shri Jagdev Rao Jagtap in his statement on 2-3-1979 said that the proforma of the certificate was given to them by Shri Sadanand A. Hajare who had given them instructions that only manufacturing cost excluding profit should be certified for silver articles, machinery and metal articles manufactured by the appellants in their own factory only. Shri Sadanand A. Hajare in his statement on 16-4-1980 admitted that as directed by him, the Chartered Accountant gave the certificate showing only the value of silver utensils manufactured by them and belonging to them and that the value of silver goods manufactured on job work basis were not shown in the certificate. Based on these and following further investigations, proceedings were instituted against the appellants for demanding differential duty on the ground that they have claimed the exemption based on certain certificates relating to value of clearances which did not correspond with the reality. The proceedings ultimately resulted in the impugned order of the Collector against which the present appeal has been filed.
2. Shri Gopal Prasad, the learned consultant, appearing for the appellants, contended that there was no fraudulent intention on their part in obtaining the Chartered Accountants certificate. He pointed out that a perusal of the figures of clearances as given in the Show Cause Notice and as per their own record would show that the figures tally in both the documents fully in respect of metal domes and lathe machinery:,-There was discrepancy only in respect of silver. This discrepancy was also again only in respect of the value of silver whereas quantity-wise, there was an agreement. The discrepancy in respect of the value of silver, according to the appellants, was due to the fact that in the Show Cause Notice, the department has worked out the value based on value of bullion silver. This was clearly not a valid basis and was arbitrary because the appellants were not dealing with silver in bullion form. The learned consultant also urged that there was no evidence of any suppression of facts by the appellants or any fraudulent intention on their part in obtaining the Chartered Accountants certificate certifying the value of clearances. In this connection, it was explained by the appellants that at the material time, the general understanding of the law relating to Central Excise in respect of assessable value of the goods in the hands of the job workers was that only the job charges were lo be taken into consideration and not the value of the raw material. In this connection, the learned consultant cited and relied upon the Bombay High Court judgment reported Nurendra Engineering Works v. U.O.I. -1981 (8) E.L.T. 859 which laid down that for the purposes of Notification 176/77, only job work value was to be considered. Il was contended that their declaration for the purpose of this notification were made in the context of the general understanding of the law and hence no mala fides can be attributed to them. He further argued that the extended period for demanding the duty under Rule 9(2) cannot be invoked in this case as there is no charge of any clandestine removal. He relied upon and cited the case reported in Collector v. Cutfast Bonded Abrasives P. Ltd. -1987 (30) E.L.T. 569 and G. Lovcatos & Co. v. Collector - 1987 (31) E.L.T. 178. A further argument put forth was that if what had been furnished by the appellants in their declaration was not adequate for the department's purposes, it was upto the department to require the appellants to furnish such other particulars as they wanted for which he relied upon the judgment reported in Collector v. Chemphar Drugs & Liniments - 1989 (40) E.L.T. 276. The learned consultant also pointed out a legal infirmity in the Show Cause Notice that Rule 9(2) was not applicable as there was no clandestine removal of excisable goods. Further, at the material time, Rule 10, which has been cited in the Show Cause Notice as well as in the Collector's adjudication order, was no more in existence and the short levy to be demanded only under Section 11-A of the Central Excises and Salt Act, 1944. Under this Section, as it existed at the material time, only the Assistant Collector was specifically empowered to demand duty invoking the longer period and not the Collector who was so empowered under this Section only after the amendment thereof in December, 1985. Therefore, according to the appellants, the Show Cause Notice was without jurisdiction. As regards the order confiscating the plant and machinery, it was pointed out that Rule 173-Q(2) lays down certain specific criterion for ordering confiscation of plant and machinery. No such special reasons have been spelt out in the Collector's orders. The learned consultant in this connection referred to the case reported in Shree Shankar Industries v. Collector -1984 (17) E.L.T. 402 that the provision for such confiscation is not invoked normally except where it is seen that the party concerned is a habitual offender. It is not the department's case that the appellants belonged to that category. The personal penalty on them is also harsh and no reason has been given for imposing such a personal penalty, which should be set aside. Shri Gopal Prasad further urged that in any case, silver was always exempt from duty and referred to Webster's International Dictionary to urge that silver included utensils and that, therefore, the goods produced by the appellants were exempt.
3. Shri M.S. Arora, the learned Departmental Representative appearing for the department contended that the appellants ought to have given all the particulars relating to the value of their clearances including raw material value for job work and should not have held back any particulars. He also vehemently urged that the appellants were not entitled to raise the issue regarding the validity of the Show Cause Notice at this stage before the Tribunal for the first time when they had not chosen to agitate the matter before the Collector. In this connection, he relied upon the decision of this Tribunal in Misc. Application E/279/86 in Appeal No. E/1389/88-B.I in the case of Agarsen Engg. Works v. Collector of Central Excise, Madras, dated 30-3-1989. There the Tribunal disallowed raising of the point not made before the lower authority, after having subjected themselves to the adjudication proceedings by that authority. He further argued that the Collector's order was essentially under Rule 9(2) and in that Rule, Section 11-A has been incorporated only for the purpose of limiting the period for which demand should be made under that Rule. The learned Departmental Representative in this connection cited the decision of the CEGAT reported in Piya Pharmaceutical Works v. Collector -1985 (19) E.L.T. 272 with the effect that incorporation of the longer time limit under Section 11-A in Rule 9 was only with a purpose of curbing indiscriminate demand irrespective of the period. He also questioned the legality of the appellants, now trying to set up a new case on the ground that the discrepancy in the valuation of silver was due to the department basing their charges as per the value for bullion silver. The learned Departmental Representative further referred to the statements given by the appellants as well as by the Chartered Accountant, which clearly bring out suppression of material fact relating to the value of the excisable goods indulged in by the appellants.
4. We have carefully considered the submissions made by the learned consultant and the learned Departmental Representative. The appellants have submitted that there was no fraudulent intention on their part in obtaining the Chartered Accountant's certificates and that a comparison of the figures in the Show Cause Notice annexure and those in the Chartered Accountant's certificates would show that quantity-wise, the figures for silver, metal domes and lathe machinery tally in the two documents except in respect of value and that too only in the case of silver. This was explained as due to the fact that the department had arbitrarily adopted the silver bullion value which was irrelevant for valuing utensils of silver which the appellants dealt with. We arc-unable to accept this argument for the reason that it relates to a question of fact and had not been raised at all in the grounds of appeal or before the adjudicating authority, which ought to have been done as the bullion rates as basis has been furnished as an annexure to the Show Cause Notice. It is not permissible in law to go into this factual aspect for the first time at the appeal stage. It has also been contended that there was no suppression of facts in obtaining the certificate and that the cost of raw materials had not been included in the Chartered Accountant's certificate because it was their understanding / of the legal position at that time that only job charges are to be included and that, in any case, it was for the Assistant Collector to have asked for the particulars. However, we find from a perusal of the Assistant Collector's letter of 28-1-1978 that he had called for the invoice value of silver utensils after pointing out that they had furnished only the value of silver alone. Further Shri Sadanand A. Hajare in his statement dated 16-4-1980 had also admitted that as directed by him, the Chartered Accountant gave the certificate showing only the value of the silver utensils manufactured by them and belonging to them but that the value of silver goods manufactured on job work basis was not shown in the certificate. The Chartered Accountant Shri Jagdev Rao Raosaheb Jagtap had also said in his statement on 7-5-1980 that they were asked to certify manufacturing cost of silver articles only manufactured by the appellants in their own factory. He further said that being aware that the appellants are also manufacturing machinery and metal articles (other than silver) in their factory, they had included them in their certificate. Thus, it is found that the contents of the above statements do not support the submissions of the appellants in this regard. We are also unable to agree with the contention that the Assistant Collector should have called for the particulars for the reason that the exemption being claimed by the appellants, it was for them to furnish all particulars instead of omitting certain particulars on the basis of their understanding of the law. The plea that the omission was bonafide would at best be a mitigating factor in respect of the quantum of personal penalty.
5. As for the further argument put forth by the appellants that the department had knowledge about the excisable goods produced by them and that therefore, the extended period for duty demand is not valid, we find that the dispute revolves round the aspect of certain elements of valuation of the goods for which from the records it is seen the department could not be said to have been in the know of all particulars. The appellants have raised the further point that the Show Cause Notice and adjudication order have invoked Rule 10 which was not in existence at the relevant time when Section 11-A was on the statute under which at the material time, only the Assistant Collector had jurisdiction to demand duty for the period beyond six months and that since there was no charge of clandestine removal, Rule 9(2) also cannot be invoked. Yet, another submission made during the hearing of appeal was that silver is exempt from duty under Item 68-CET and that since silver includes utensils, their products are not dutiable at all. Examining these contentions, we have to make the following observations. These contentions have been made as additional grounds in the appeal. No objection had been taken on this ground before the Collector during the adjudication proceedings in which they participated without demur. In this connection, the observations of the Hon'ble Andhra Pradesh High Court in the case of Gollapadi Pullayya Co. v. State of Andhra -1958 (9) STC 24 (AP) are relevant. The Court observed :
"Even apart from that, I am unable to follow the contention that the invalidity of a notice preceding an assessment order such as Ex. B-3 would render the assessment void. It may be that a notice is issued by a person not authorised to issue it, a person who receives the notice may ignore it without risk. But if he complies with the terms of that notice and has had an opportunity of making the explanations to the proper officer which the notice directed him to offer, then the resulting order passed after hearing him cannot be challenged. I, therefore, hold in agreement with the lower Courts that there is no substance in this submission made by the learned counsel on behalf of the appellants."
Further, on a similar issue questioning jurisdiction, the Supreme Court observed in Remington Rend of India Ltd. v. Thim R. Jambulingam -1975 (2) SCR 17:
"It is rather extraordinary that even though the Commissioner at the instance of the appellant had rejected the plea of protected workman, the management now seeks to raise a plea of ouster of jurisdiction before the Commissioner on the self-same ground. This, in our opinion, cannot be allowed. Besides the appellant submitted to the jurisdiction of the Commissioner and had not raised any objection to its jurisdiction to hear the appeal. That being so, we have not allowed the learned counsel to raise the plea of jurisdiction before us in this Court for the first time in this appeal."
6. The further argument put forth that at the material time under Section 11-A, only the Assistant Collector had jurisdiction to demand duty for period beyond six months has been negatived by the Tribunal in two of its decisions in the case of D.C.W. Ltd. v. Collector of Central Excise, Madras -1988 (35) E.L.T. 167 and U.P. Laminations v. Collector of Central Excise, Kanpur -1988 (35) E.L.T. 398, wherein the Tribunal held that there is no prohibition in Section 11-A(2) on the Collector himself exercising the powers of the Assistant Collector who is an officer subordinate to him.
7. The appellant's further plea is that the confiscation of plant and machinery under Rule 173-O(2) is harsh and unjustified. We find a lot of force in this submission. The Rule requires the adjudicating authority to record specific reasons for directing such confiscation. We do not find any such specific reasons spelt out in the adjudication order for confiscating the plant and machinery. Nor has it been indicated whether it is for the reason that the offence has been committed for the second or subsequent occasion which is also one of the grounds mentioned for the purpose in Rule 173-Q(2). In the circumstances, the order confiscating the plant and machinery is not sustainable and is set aside and the appellant is entitled to the consequential relief. We also reduce the penalty on the appellant from Rs. 25,0007- to Rs. 15.000/- (Rupees fifteen thousand only) in the facts and circumstances of the case. The order of the Collector is modified to the extent indicated above. It is otherwise upheld. The appeal is disposed of in the above terms.