Customs, Excise and Gold Tribunal - Delhi
Indian Granite Limited vs Collector Of Central Excise on 14 July, 1987
Equivalent citations: 1987(14)ECC97, 1987(13)ECR182(TRI.-DELHI), 1987(31)ELT847(TRI-DEL)
ORDER V.T. Raghavachari, Member (J)
1. The appellants M/s. Indian Granite Limited are manufacturers of Granite slabs, cut and polished. Under order dated 12-12-1986 the Collector of Central Excise, Hyderabad has held these articles to be excisable under T.I. 68 CET but not entitled to benefit of exemption under Notification No. 234/82 as claimed by the appellants. He further held that the appellants have been guilty of suppression of facts with intent to evade payment of duty and hence larger period of limitation was available in the matter of demand for duty. He, therefore, confirmed the demand for the period November, 1983 to March, 1986, the amount being Rs. 16,15,805.40 P. It is against the said order that the present appeal has been preferred.
2. We have heard Shri S.K. Srivastava, Consultant for the appellants and Shri G.V. Naik for the Department.
3. It would be better, for a proper appreciation of the issues involved, to give a resume of the chronology of events. On 22-5-1982 the appellants had written to the Assistant Collector claiming that their product was not excisable since no manufacture as defined in Section 2(f) of the Central Excises and Salt Act was involved. The Assistant Collector issued notice dated 20-9-1982 as to why the said claim should not be rejected. On 16-10-1982 the appellants replied reiterating their contention regarding non-excisability and further contended that even if excisable the same would be exempt from payment of duty in terms of Notification No. 104/82, dated 18-2-1982 as the product would be a handicraft. On 3-11-1982 the Assistant Collector passed an order rejecting both contentions. He held that the cut and polished granite slabs were manufactured products and were not handicrafts.
4. It appears that no appeal had been preferred against this order. On 19-4-1983 the appellants had filed a classification list mentioning the article to be under Tariff Item 68 CET but claiming benefit of exemption Notification 234/82 had been issued on 1-11-1982 in supersession of Notification No. 104/82. Item 9 of this Notification No. 234/82 reads "handicrafts". Approval had been granted on 6-5-1983 but denying the exemption claimed. The appellants preferred an appeal against the same, which was allowed by the Collector of Central Excise (Appeals) Madras under his order dated 29-10-1983. The Collector mentioned that he was not going into the question whether the product was excisable, apparently because there had been no appeal against the earlier order holding the product to be excisable and further because the order under appeal before him arose out of approval granted on a classification list wherein the excisability was not in issue. The Collector (Appeals) held that under his earlier order the Assistant Collector had given no reason for denying the benefit of exemption and there was no finding by the Assistant Collector that cutting and polishing of the quarried granite was not by way of manual skill of a craftsman. He held that the Govt. of India in the Ministry of Commerce have recognized cut and polished granite stones as handicrafts and consequently the product of the appellants was entitled to exemption under Notification No. 234/82.
5. Following the said order the appellants had intimated the Assistant Collector by their letter dated 29-11-1983 that they shall in future clear their stock without payment of duty. But it appears that assessment orders were passed in their RT-12 returns for November, 1983; December, 1983 and January, February, 1984 assessing the goods to duty denying the benefit of exemption. The appellants preferred appeals against each of the said assessments. The Collector of Central Excise (appeals) Madras had, under four orders dated 19-5-1984, set aside the orders of assessment noted above. He observed that in view of his earlier order dated 29-10-1983, and in the absence of information whether any appeal had been preferred by the Department against the said order in which the stay of the said order may have been obtained, the Deptt. was not entitled to assess the goods to duty and demand the same.
6. But on 4-9-1984 notice had again been issued to the appellants mentioning that the slabs manufactured by them, as well as the scrap arising out of this manufacture, were both excisable and not exempt. This notice was with reference to the revised classification list filed by the appellants on 16-5-1984. In this notice it was mentioned that reliance on the orders of the Collector (Appeals) was not correct. The Assistant Collector discussed in the said notice the process of manufacture and observed that the granite slabs were not manufactured by manual skill but by use of large and sophisticated power driven machinery and would not therefore be handicrafts. Under the said notice duty was demanded for the period November, 1983 to May, 1984. The appellants replied by letter dated 26-10-1984 reiterating their earlier contentions and relying upon a judgment of this Tribunal as supporting their contention regarding non-excisability. They claimed that the notice, ignoring the order of the Collector (Appeals), was contempt of the said order. The reaction of the Department was issue of another notice dated 23-11-1984 by the Assistant Collector under which doty was demanded for the period June, 1984 to October, 1984. The reply thereto was by letter dated 7-12-1984. From this letter it transpires that though a rearing had been fixed, on 20-11-1984 with reference to the notice, dated 4-9-1984 the appellants had not attended the said hearing. Under this letter dated 7-12-1984 they reiterated their earlier contentions.
7. From the paper book filed it appears that a. hearing was held on 21-1-1985 with reference to the above notice. The appellants had, in the said hearing, reiterated their contentions and further pointed out that the duty demand did not indicate which part thereof related to duty payable on slabs and which part to duty payable on scrap. It appears that even after this hearing no order were issued but that two further notices were issued by the Superintendent - one on 26-4-1985 (demanding payment of duty for the period November, 1984 to February, 1985) and the other on 3-10-1985 (demanding duty for the period March, 1985 to August, 1985). It apears that a further hearing was held on 20-2-1986 in which the appellants filed a written memo detailing their process of manufacture. Herein they had extracted the process as described in the show cause notice dated 4-9-1984 and had interpolated the same at suitable places giving details of the parts in which manual skill was involved though machinery was 'being used. It further appears that even after the said hearing no orders had been issued.
8. Then followed the notice dated 19-6-1986 by the Collector of Central Excise, Hyderabad under which he raised a demand, on slabs and scrap, under T.I. 68 CET, for the period November, 1983 to March, 1986. He mentioned therein that the said notice was without prejudice to the proceedings initiated by the Assistant Collector under his notices dated 4-9-1984 and 23-11-1984 as also the action initiated by the Superintendent under his letters dated 26-4-1985 and 3-10-1985, all of which proceedings stood modified in view of the provisions of Section 11A of the Central Excises and Salt Act. The reference apparently was to the fact that after the amendment in 1986 adjudications involving the larger period of limitation were to be by the Collector only. In this notice it was mentioned that with reference to the classification list filed by the appellants the proper officer had verified the facts and found that the process carried out by the appellants was by use of sophisticated power operated machines and the goods mentioned in the classification list were not identical with, and relatable to, the goods dealt with in the orders of the Collector of Central Excise (Appeals) and the said orders were therefore not relevant to the goods mentioned in the classification list. The notice alleged that the appellants were guilty of suppression of facts. The total duty demanded was Rs. 16,15,805.40 P., the said duty being demanded on the slabs as well as scrap removed between November, 1983 and March, 1986.
9. It appears from the paper book filed by -the appellants that With reference to the classification list filed by them on 3-3-1986 in respect of the above said two goods the Assistant Collector had passed an order dated 26-6-1986 underwhich he rejected the claim of the appellants for exemption under Notification No. 76/86 and further held that the orders of the Collector (Appeals) dated 29-10-1983 and 19-5-1984 were both inoperative.
10. With reference to the notice dated 19-6-1986 the appellants sent a reply dated 10-10-1986 denying the charge of suppression and reiterating the contention that the goods were exempt from duty. It was also claimed that as there had been no appeal against the order of the Collector (Appeals) the show cause notice was bad. It was also pointed out that though the Assistant Collector had issued the show cause notices mentioned earlier he had not indicated even therein that the appellants could not remove their slabs in accordance with the order of the Collector (Appeals). Following personal hearing on l9-11-1986 the appellants had filed further submissions on 24-11-1986 denying the applicability of Rule 9(2) of the Central Excise Rules. In this letter they relied on the registration certificate issued to them by the Handicrafts Board and further stated that "at no stage we made any statements about the process involved in converting granite blocks into granite slabs cut and polished. Our arguments was and continues to be even for your kind consideration, that the Ministry of Commerce have listed granite cut and polished under "Handicrafts". The order dated 21-12-1986 of the Collector followed this adjudication.
11. Though, as mentioned earlier, the Department appears to have proceeded on the basis that the goods manufactured during the period covered by the show cause notice issued by the Collector were not identical with and relatable to the goods considered by the Collector (Appeals) it appears to us that such a contention was not, and would not be, correct. It is not established that the method of manufacture had been changing from time to time. On the other hand, the process of manufacture appears to have been the same from the inception. The appellants had claimed even on 6-10-1982 that their goods are handicrafts. This was followed by order dated 3-11-1982 of the Assistant Collector wherein he rejected that claim. The appellants had preferred an appeal and obtained an order in their favour on 29-10-1983. It is not possible to accept the claim that during all these proceedings the Deptt. would not have inspected the process of manufacture. It is significant that it has not been mentioned in any of the later notices that there had been any change in the process of manufacture.
12. It is not denied for the appellants that sophisticated power driven machinery are, and have always been, used by them in the manufacture of cut and polished granite slabs. In fact they accept the use thereof as mentioned in the show cause notice but, in their written submissions filed on 20-2-1986, have tried to further elaborate the steps in the said process by pointing out that even during the course of use of such machinery human manual skill played a large part. It is not disputed for the appellants that the blocks of granite are cut into slabs of uniform size by gang saws operated by power driven machinery. These gang saws appear to be a series of toothed saw blades mounted on a frame and operated by power driven machinery. The blades are located at fixed intervals so that on the operation of the gang saw the block placed beneath the same is sawn into slabs of the required thickness. These slabs are then removed and edge trimming is done. Thereafter one side is polished, polishing being done by power operated spindles fixed with abrasive material and also by use of chemical abrasives. The case for the appellants, as seen from the note filed by them during the personal hearing on 20-2-1986, appears to be that, during this operation of sawing, manual skill of high order is required in order to position the block properly on the trolley and that again during polishing manual skill of a high order is required in order to see that the polishing does not go against the grain and damage the stone. It is, therefore, their contention that though sophisticated power driven machinery is involved in the process of manufacture of slabs it is the manual skill that is essential in producing the final product. On the other hand the conclusion of the Collector in the impugned order was that the very use of such sophisticated power driven machinery would establish that the product would not be a handicraft since handicrafts would be the product of artistic manual skill. He pointed out that the Collector (Appeals) appears to have proceeded on the basis that the slabs are obtained by the application of manual skill, without reference to the use of machinery, and he was therefore wrong in his conclusions. The Collector further held that these facts regarding the use of sophisticated machinery had been suppressed by the appellants and that these facts came to light only when verification was made by the proper officer on the classification list filed on 16-5-1984 and therefore the demand for duty could extend over the larger period of limitation.
13. Before us also Shri Srivastava laid stress on the purported use of artistic manual skill in the process of conversion of the blocks into slabs and claimed that the slabs would hence be handicrafts. He further relied on appendix 16 serial 7 of the Import and Export Policy April, 1985 - March, 1988 wherein cut and polished granite is shown under the heading "Handicrafts". His submission was that the Govt. itself have thus recognised cut and polished granite slabs as handicrafts and therefore it was not proper for the Collector to have refused the exemption claimed by the appellants under Notification No. 234/82. Shri Naik on the other hand supported the reasonings of the Collector and claimed that manual artistic skill played very little part in the manufacture of cut and polished slabs and they were therefore in no sense handicrafts and that the reference to the entry in the ITC Policy was of no avail as the same would not be applicable in respect of excise classifications or duty under the excise Acts. According to him the entry in the ITC Policy was merely by way of a description and not a definition. He conceded that the duty demand upto February, 1984 could not be supported in view of the earlier orders of the Collector (Appeals) but claimed that the duty demand from March, 1984 as under the order of the Collector was justified.
14. As earlier noted, the appellants had in the first instance claimed that the cut and polished slabs manufactured by them were not excisable goods at all. When the same was rejected under order dated 3-11-1982 of the Assistant Collector they did not file any appeal against the same. When subsequently they filed a fresh classification list on 19-4-1983 they did not dispute excisability but claimed exemption only. No doubt in their reply dated 26-10-1984 (to the show cause notice dated 4-9-1984) they had again raised the question of excisability, relying on a decision of this Tribunal. The said decision was in the case of Fine Marble & Minerals (P) Ltd. (Makrana) 1985 (22) ELT 128. That case dealt with mere sawing of marble blocks to convert them into slabs. No question of polishing etc. was involved. It was in those circumstances that the Tribunal had held that mere sawing of the block into slabs would not constitute manufacture calling for payment of excise duty. In the present case the granite blocks are not merely sawn but the cut slabs are then polished (requiring touch or expertise, according to the appellants) such polishing alone converting the cut slab into a distinct marketable product. Therefore, the question of excisability of these cut and polished slabs does not appear to present any difficulty. We may note that the consultant for the appellants also did not put forward any serious arguments in this regard before us.
15. Therefore, the real question for decision would be whether these cut and polished slabs would merit exemption under Notification No. 234/82 on the ground that they are handicrafts. As observed earlier, the fact of use of sophisticated and heavy power driven machinery in the conversion of the blocks into slabs is admitted as also use of power driven machinery (and chemical abrasives) in the polishing of the cut slabs. The Collector is of the view that the very use of such machinery would establish that the cut and polished slabs would not be handicrafts. On the other hand, the contention for the appellants is that in spite of use of such machinery the slabs would be handicrafts since both in the act of sawing as well as in the act of polishing it is the skill of the operator that would be decisive of the quality of the article and it is that quality that makes the goods marketable.
16. As to the extent to which such human skill is involved the case for the appellants has been put forward in the memo submitted by them to the Assistant Collector during the hearing on 20-2-1986. As mentioned earlier, this memo sets out the process of manufacture as detailed in the show cause notice of the Assistant Collector and interpolates therein further details as to the stages at which manual skill is involved. These stages have been interpolated by way of underlined passages, the said passages reading as follows :
(i) The raw blocks are extracted by the skilled manual labour, and thereafter partly dressed by using manual labour. In these proces-es chisels, crowbars and hammers are used, and, in these processes no power is used. Loading into trucks at the quarried is done manually.
(ii)...Before fixing up the raw blocks on the trollies, the blocks are dressed and trimmed manually in order to obtain required sizes of slabs. Again no power is used and skilled labourers carry out the necessary processes by using only chisels and hammers. Crane is used for lifting of the block and for placing it on the trolley-but fixing involves something more, and fixing and positioning is done manually, since fixing and positioning are delicate operations, and manual operations are necessary to protect and preserve the grain structure of the blocks.
(iii)...For the purpose of the operations, mentioned in the previous operations, blades are to be positioned and adjusted according to the sizes of the blocks. The positioning is also done manually.
(iv)...After the sawing operation is over, the trolley is pulled out of the machine manually. Blocks still remain on the trolly, but in a semi-processed form. From this semi-procesed form of blocks slabs are separated manually by skilled artisans who use only chisels and hammers and who ensure that the original grain structu're is not disturbed. In the roughening machines slabs are placed manually for levelling the surface.
(v)...Polishing is done by using the hand polishing machines.
For rotation the machine spindle, power is used. Silicon carbide bricks are fixed to the spindle. The spindle is moved manually by skilled polishers to different parts of the slabs. To the spindle manual pressure is required to be applied, and for polishing the same slab different pressures are to be applied. Thus the job of polishing is performed mainly by using the manual labour and manual skill.
(vi)...The sides or edges of the aforementioned polished slabs are smoothened by employing skilled manual labour, and the smoothened or the semi-smoothened edges are also polished by employing manual labour.
17. Thus according to the appellants manual skill is involved in (1) extraction of the raw blocks; (2) dressing of the blocks before loading on the trolly; (3) positioning the block on the trolley; (4) positioning of the blades in the Gang saw suitable to the block beneath (this appears to be merely a repetition of the process relating to Item 3 above); (5) pulling out the trolley; (6) separation of the sawn slabs, using chisels; (7) placing the slabs on the roughening machines; (8) polishing of one side of the slabs and (9) Edge trimming.
18. It appears to us that of the above processes involving manual labour the only ones which may, if at all, require artistic expertise would be in the separation of the slabs in tune with the grain structure and, later, in polishing the slabs in tune with the grain. The question therefore is whether that would qualify the cut and polished slabs to be called handicrafts. The word handicrafts is not defined in the Central Excises and Salt Act or the Rules thereunder. Therefore, we have to look to the dictionary meaning thereof, or the meaning of the term in ordinary trade parlance. On the question of trade parlance the appellants have relied on the entry in the import and Export Policy - April, 1985 to March, 1988 and not to any other information. We shall take up consideration thereof later.
19. The Advanced Learners Dictionary of Current English (2nd Edition) gives the meaning of the word handicraft as "Art or craft needing skill with the hands (e.g.) Pottery, wood work, weaving at a handloom". The word "craft" is given the meaning "occupation especially one in which skill in the use of hands is needed: the potter's skill, to learn the wood carver; the school of arts and crafts." The entries in the Shorter Oxford English Dictionary (3rd Edition) read as follows (Page 921) :
"Handicraft (hae.ndicraft). Also formerly handycraft. ME. [alt. of earlier HAND-CRAFT (OE. handcraeft) after HANDIWORK] 1. Manual skill; skilled work with the hands. 2. A Manual art, trade, or occupation 1548. 3. A handicraftsman - 1821. 4. altrib., passing into adj. = 'manual, practical' 1662.
Ha.ndicraftsman. Formerly also as two words or hyphened. 1551. [lit. handicraft's man, man of handicraft; ef. CRAFTMAN] A man who exercises a handicraft; one employed in manual occupation. The best wit of any handycraft man is Athens SHAKS."
The new Webster's Dictionary of the English language contains the following entry (Page 437) :
"Hand.i.craft, han'de.kraft", han'de.kraft, n. (Equiv. to hand-craft, the i representing old prefix ge, as in handiwork). The skill of one's hands; work of an artisan, hobbyist, or trademan, with or without special tools or equipment; a craft sometimes identified with a nation or region and oftentimes artistic; an object produced by- handicraft. - hand.icraft.er, n. One who engages in crafts as an occupation or hobby - hand.i-crafts.man."
The definition in Stroud's Judicial Dictionary of words and phrases (4th Edition) (to which reference has been made in the order of the lower authorities also) reads as follows (Page 1208) :
"Handicraft. [Workshop Regulation Act 1867 (c.146), s.4], "handicraft" shall mean any manual labour exercised by way of trade or for purposes of gain in or incidental to the making any article or part of an article, or in or incidental to the altering, repairing, ornamenting, finishing, or otherwise adapting for sale, any article." Making straw plait, by a child under the.age of 8 years and who is being taught such plaiting, was a "handicraft" within this definition (Beadon v. Parrott, L.R. 6 Q.B. 718). Cp. HANDICRAFTSMAN. See LABOUR;PERSONAL LABOUR.
HANDICRAFTSMAN. (1) Is a skilled workman (per Brett L.3. Morgan v. London General Omnibus Co., 13 Q.B.D. 832) and generally speaking is, probably, much the same as an ARTIFICER. Yet a hairdresser is a handicraftsman (per Palles C.B.R. v. Justices (1900) 2 I.R. 714, cited LABOUR; see also Phillips v. Innes, 4 Cl. & F. 234, cited HOLIDAY); but is not an artificer (Palmer v. Snow (1900) 1 Q.B. 725, cited ARTIFICER). Cp. HANDICRAFT; LABOURER.
(2) No "common baker, brewer, surgeon or scrivener, shall be interpreted or expounded, handicraftsmen" [Aliens Act 1530 (c.13) Cp. ART."
The entry in the Encyclopaedia Britannica (Micropaedia) (15th Edition) at page 885 reads as follows :
"Handicrafts, occupations of making by hand usable products graced with visual appeal. Handicrafts encompass activities that require a broad range of skills and equipment, including needlework, lacemaking, weaving, printed textile decoration, basketry, pottery, ornamental metalworking, jewelling, leatherworking, woodworking, glassblpwing, and the making of stained glass.
Embellishing the useful is one of the oldest human activities. Until the Industrial Revolution, handicrafts were based on home production for home needs, but surplus items were traded, and advances in production and distribution processes influenced the designs of goods. Over the centuries, elaborate traditions were built up in the crafts, developed in guilds in European Society and in similar systems elsewhere. Training in handicrafts became formalized into steps, culminating in the rank of master. Few human institutions, few systems of thought, remained uninfluenced by handicrafts.
The industrial Revolution involved the displacement of the deeply rooted handicrafts by mass production methods. Although these resulted in new and improved products, the abuses of workers under early industrial conditions led to an inevitable reaction. The arts and crafts movement arose in England in the late 19th century as one such reaction, inaugurating the present-day role of handicrafts in limited production for special uses. Handicrafts also are popular as hobbies and effective in therapy. Interest is craft activities has been fostered by the introduction of simplified methods and commercially produced kits for beginners. The market for handmade goods has grown, and a handicraft can sometimes become a quite profitable avocation. Handicrafts are employed to supply models for many industries, such as power weaving and automobile-body building."
20. We have, therefore, to see, with reference to the above definitions, whether the process of sawing the granite block into slabs and then polishing the, cut slab" in order to manufacture the cut and one side polished slabs would, on the facts established in the present case, qualify the workmen employed therein as handicraftsmen and the product as a handicraft. The meaning assigned in the several dictionaries etc. noted earlier to the word handicrafts makes it clear that it is only such processes as are dependent on the individual manual artistic skill of the person engaged in the process that would make the resultant product a handicraft though in the exercise of such skill the person may utilise certain special tools or equipment. It appears to us that such special tools or equipment would also refer to specialized individual tools, may be in certain occasipns operated with the aid of power also, but which would essentially (require the directions or control thereof by the individual artistic skill of the person concerned in order to produce the product required. So far as the sawing of the granite blocks through a gangsaw the operation of the gangsaw would, once the operation commences, be automatic until the sawing of the block into the slabs is completed. The gangsaw would not in our opinion qualify to be called a special tool or equipment to be wielded by the individual artisan. Even the operation of polishing with the aid of the power operated tool employing chemical abrasives also would not in our opinion be the work of a handicraftsman. In this view we are satisfied that it would be a misnomer to call the cut and polished granite slabs handicrafts or the person engaged in the manufacture thereof handicraftsman.
21. As earlier mentioned, the appellants rely on the fact that in the Import & Export Policy - April 1985 to March, 1988, cut and polished granite is mentioned in appendix 16 under S.No. 7 titled handicrafts. From paragraph 248(1) of the above policy it is seen that appendix 16 gives the list of products for export which are treated as Select Products. The argument for the appellants is that when thus the Commerce Ministry itself has classified cut and polished granite under the heading handicrafts that would furnish irrefutable proof of the fact that such cut and polished granite is known in the trade as a handicraft. This argument had been accepted by the Collector (Appeals) but not by the jurisdictional Collector under his impugned order. We may note that S.No. 7 of the appendix 16 reads as follows :
"7. Handicrats.
7.1 Handicrafts.
7.2 Cut and polished granite."
The argument of the Deptt. is that the above classification in the ITC Policy was for the purposes of export and that the same will not be relevant with reference to excise classification. The Collector in his order had further held that Notification No. 234/82 (under which the appellants claim relied) does not refer to such a categorisation.
22. It appears to us that the very manner in which S.No. 7 has been sub-divided would suggest that cut and polished granite would not be a handicraft but that the same has been put under S.No. 7 by way of a deeming fiction only. If cut and polished granite is known as a handicraft in the trade there would have been no need to sub enumerate the same under S.No. 7.2 since that would have automatically been included in S.No. 7.1 which reads "handicrafts". Therefore the inclusion of cut and polished granite under the main heading 'handicrafts' appears to be only by way of a deeming fiction for the purpose of the said ITC policy. As earlier mentioned, the appellants have not produced any other proof of trade parlance under which cut and polished granite slabs are known as handicrafts.
23. The result of the above discussion would be that the appellants would not be entitled to benefit of exemption under Notification No. 234/82 with reference to their manufacture of cut and one side polished granite slabs.
24. But then the question would be whether this conclusion should be made applicable with reference to the demand for the period November, 1983 to March, 1986. The answer to this question would involve the consideration of several issues. One would be whether the extended period of limitation under Section 11-A of the Central Excises and Salt Act, would be available to the Deptt. The second would be whether in view of the earlier orders of the Collector (Appeals) the Department was entitled at all, without preferring any appeals against the said orders of the Collector (Appeals), to go into the question of the eligibility for exemption under Notification No. 234/82. The third question would be whether, if the Department was entitled to go into the question of exemption, the order of the Collector on this question of exemption should be made applicable for the entire period under the notice or from the date of his order.
25. It has been already noted that Shri Naik for the Deptt. conceded that the demand confirmed by the Collector under his impugned order cannot be supported so far as it related, to the period already covered by the order of the Collector (Appeals) in the absence of any further appeal against the said Appellate orders and the demand for the period November, 1983 to February, 1984 would, for that reason, be not sustainable. With reference to the subsequent period March, 1984 to March, 1986 it may be noted that the notice dated 19-6-1986 of the Collector read that the said notice was without pre-judice to the action already initiated under the two notices dated 4-9-1984 and 23-11-1984 by the Assistant Collector (for the periods November, 1983 to May 1984 and June, 1984 to October, 1984 respectively) and two other demands by the Superintendent dated 26-4-1985 to 3-10-1985 (relating to the period November, 1984 to February, 1985 and March, 1985 to August, 1985 respectively). It should be further remembered that with reference to these earlier notices there appear to have been personal hearings before the Assistant Collector (on 2-11-1985 and 20-2-1986) but that no final orders had been passed by the Assistant Collector with reference to these 4 demands until the time the Collector issued his own notice on 19-6-1986. The Collector had evidently taken up these show cause notices and demands also for adjudication by himself in view of the amendment to Section 11-A of the Central Excises and Salt Act by the end of 1985, under which the Collector alone was entitled to adjudicate in respect of demands extending over the larger period of limitation of 5 years. Therefore, the adjudication by the Collector has to be considered with reference to his own notice dated 19-6-1986 as well as the other earlier 4 notices. Depending on the finding on the question as to whether the larger or the normal period of limitation would be available on the facts and in circumstances of the case the question of the validity of all these notices will have to be determined.
26. We have already noticed that there does not appear to have been, or at least there is no proof of, any change in the manufacturing process adopted by the appellants. It appears that the process throughout continued to be the same. In their letter dated 22-5-1982 the appellants had claimed that the product manufactured by them did not invite imposition of excise duty since no manufacture, as defined under Section 2(f), was involved. The Deptt. had evidently questioned the said assertion, as they had, in that connection, issued the notice dated 20-9-1982. The appellants had replied under their letter dated 6-10-1982 that in any event the goods were exempt as they were handicrafts. In his order dated 3-11-1982 the Assistant Collector held the product excisable and summarily rejected the claim to be treated as handicrafts. Thus the appellants and the Department had joined issue even in 1982 as to the process of manufacture, the legal effect thereof and the claim for exemption. Once parties had thus joined issue it was open to the Deptt. to have called upon the appellants to disclose the entire process of manufacture and, if necessary, inspect the factory and satisfy themselves as to the process undertaken and then decide the issue. According to the appellants the officers of the Department had in fact frequently visited their factory and satisfied themselves as to the nature of the manufacturing activity. In any event it was, as noted above, open to the Deptt. to satisfy itself as to the facts regarding the process. Therefore, if, in these circumstances, the Deptt. wants to make out a case of fraud or suppression of facts on the part of the appellants, in order to entitle the Department to invoke the larger period of limitation, the onus would be on the Deptt. to establish either that the full process was not disclosed in spite of information having been called for or that at the time of inspection the full process was not disclosed and facts were suppressed. In the present case there is nothing to establish either that the appellants did not, even on request, disclose the full process of manufacture or that the Deptt. was prevented from inspection of the factory or the various processes undertaken therein or that at the time of any visit any particular facet of the manufacturing activity was screened away. The only reason advanced for the Deptt. for claiming the benefit of the larger period of limitation is that use of sophisticated power operated machinery by the appellants was not disclosed to the Deptt. As mentioned above, there is nothing to establish that such information was called for but not furnished. The Department has proceeded on the basis that the use of such power operated machinery was not disclosed and hence the Collector (Appeals) proceeded as if the operations were manual and therefore came to the wrong conclusion that the goods would be handicrafts. But it may be noted that no case has been established that the appellants had failed to disclose the full details of their manufacturing process when called upon to do so or kept such processes secret during visit by the officers. On the other hand the very nature as well as the scale of the operations of the appellants would suggest that there could have been no such secrecy or concealment. In the circumstances the claim that the appellants had been guilty of suppression of facts and, therefore, the larger period of limitation would be available, does not appear to be correct.
27. In this view if the demand is to be considered only with reference to the notice dated 19-6-1986 (issued by the Collector) the demand for duty will have to be set aside for the major portion and be taken up for consideration only for the period 19-12-1985 to March, 1986. But, as already stated, the Collector had made it clear that his adjudication was with reference to the earlier show cause notices also. Each of the said show cause notices related to a specific period. As earlier noted the Collector evidently adjudicated on the earlier four notices also because no orders had been passed by the Assistant Collector on these four notices till Section 11-A was amended. It has, therefore, to be held that the Collector's adjudication was on the earlier four notices as also his own notice dated 19-6-1986. In that event, the notice dated 19-6-1986 will have to be considered as relating to the period September, 1985 to March, 1986 since the earlier period November, 1983 to August, 1986 is covered by the earlier four notices. Hence the validity of the demand covered by the order dated 12-12-1986 will have to be considered with reference to each of the four notices, as well as the notice issued by the Collector himself.
28. We have already seen that there does not appear to have been, or at any rate there had been no proof of, any change in the manufacturing process adopted by the appellants. We have also seen that the charge made against the appellants, of suppression of facts, cannot be said to have been established. The question then would be whether, in spite of there having been no change in the manufacturing process, the Department could establish a case for denying benefit under Notification No. 234/82 when such benefit had been earlier accepted and granted under the order of the Collector (Appeals). We have seen that the said order of the Collector (Appeals) was against an order denying the said exemption claimed under the classification list and later with reference to assessments for November, 1983 to February, 1984. In the absence of any appeal against the said orders the question of re-assessment for the period November, 1983 to February, 1984 does not arise. The issue therefore would be whether, even so, the Collector, on the basis that the earlier order of the Collector (Appeals) had been passed in ignorance of the actual facts, would be entitled to come to a different conclusion and whether we should affirm the conclusion of the Collector.
29. In this connection the following passage in the representation dated 24-11-1986 made before the Collector during his adjudication proceedings is relevant. Under paragraph (iv) they had stated "at no stage we made any statements about the process involved in converting granite blocks into granite slabs cut and polished. Our argument was and continues to be even for your kind consideration that the Ministry of Commerce have listed granite cut and polished under handicrafts." We have also seen that it was in the note submitted during the personal hearing on 20-2-1986 that details of process had been set out by the assessee regarding the alleged manual skill part of the operations. The use of machinery as such had been described by the Deptt. in its show cause notice dated 4-9-1984. The order of the Collector (Appeals) dated 29-10-1983 read "there is no finding by the lower authority that this cutting and polishing of granite quarried is not by way of manual skill of craftsman." It is therefore clear that the Collector (Appeals) proceeded on the basis that the cutting and polishing was mainly by manual operations involving manual skill of the operator. He does not appear to have taken into consideration the use of machinery. As earlier mentioned, the appellants themselves have agreed (in the passage extracted earlier) that they had not been giving details of various processes involved except claiming that the goods will be handicrafts by reason of the Commerce Ministry classification. In the circumstances while it may be true that the appellants were not guilty of suppression of facts it would not, for that reason, be correct to hold that no further facts than were available to the Collector (Appeals) had emerged due to investigation by the Department subsequent to that order, which new facts would entitle the Deptt. to have a fresh look in the matter of classification and eligibility for exemption. We have already seen that if the extensive use of sophisticated power driven machinery is taken into consideration the right to claim the goods to be handicrafts would be found to be illusory.
30. We therefore hold that while it was not open to the Department to press into service the larger period of limitation in issuing the notices of demand the Deptt. was entitled to go into the question of classification and exemption in the light of the new facts discovered and raise demands on the basis of the altered conclusion. The order of the Collector dated 12-12-1986 related to not merely the show cause notice issued by him on 19-6-1986 but the earlier four show cause notices dated 4-9-1984, 23-11-1984, 26-4-1985 and 3-10-1985. In view of the earlier discussion we hold that the demand under each of these five notices (the demand under notice dated 19-6-1986 being for the period September, 1985 to March, 1986 for reasons stated earlier) could be enforced for the period of 6 months prior to the date of each of the said notices.
31. We have earlier seen that the notice dated 4-9-1984 related to slabs as well as scrap. The subsequent notices were also with reference to both commodities. In the personal hearing dated 27-1-1985 the appellants had pointed out that the duty demand did not. indicate how much of the demand was with reference to the slabs and how much with reference to scrap. This break-up does not appear to have been furnished even' thereafter, even when the consolidated notice dated 19-6-1986 was issued by the Collector. Apart from this, it may be seen that in his order dated 12-12-1986 the Collector discusses the question of classification of the cut and polished slabs and eligibility of < exemption thereof but does not at all take under consideration the question of the excisability of the scrap and its classification thereof. Normally therefore, this may in the case where, in the absence of any finding thereon by the Collector, a readjudication may have to be ordered with reference to this issue. But we are satisfied that an order of remand (for the said purpose) may not be really necessary since all the facts are before us. the scrap arises during the course of sawing of the slabs, edge trimming and during polishing also. It appears to us that such scrap cannot be said to be the result of manufacture since the manufacture would be of the slabs and not the scrap.
32. We are accordingly of the view that the granite scrap would not be an excisable product. In the result, we hold :
(1) Granite scrap is not excisable.
(2) The cut and polished granite slabs are excisable under Item 68 CET.
(3) They are not eligible for exemption under Notification No. 234/82 as handicrafts.
(4) The demand for the period November, 1983 to February, 1984 is set aside.
(5) The demands could be otherwise enforced for the period of 6 months preceding the date of each notice (the period covered by the notice dated 19-6-1986 being treated as September, 1985 to March, 1986 only for reasons earlier given) and not for any longer period.
33. The appeal, is therefore, allowed to the extent of modifying the order of the Collector in the above manner and directing that the quantification of duty in terms of this order will be done by the Collector. The appeal is dismissed otherwise.