Customs, Excise and Gold Tribunal - Delhi
British India Corporation Ltd. vs Collector Of Central Excise on 2 December, 1985
Equivalent citations: 2003(90)ECC636, 1986(6)ECR712(TRI.-DELHI)
ORDER K.L. Rekhi, Member (T)
1. A common issue is involved in all these four appeals and they relate to the same appellants. They are, therefore, being disposed of by this common order.
2. The appellants manufacture both pure wool tops as well as blended wool tops and use them further in the manufacture of woollen yarn and woollen fabrics within their factory. Pure wool tops are first produced out of natural wool which are then mixed with synthetic/cellulosic fibres to make blended wool tops. The substantive issue involved in these appeals is whether the appellants should discharge their duty liability under item 43 of the Central Excise Tariff at the pure wool top stage or at the blended wool top stage. This item reads as under:
"43 WOOL TOPS and carded gilled slivers containing, in either case, more than fifty percent by weight of wool calculated on the total fibre content."
In these proceedings we are concerned only with those blended wool tops which contained more than 50 percent by weight of wool.
3. During the material period (1980-81 to 1983-84), the appellants paid the duty at the pure wool top stage. The Collector has held that the duty was legally payable at the blended wool top stage, that is, the stage at which wool tops were taken for manufacture of another commodity woollen yarn (tariff item 18B). However, while so holding, the Collector has not demanded the full duty again. He has only asked for the difference between the pure wool top stage duty and blended wool top stage duty, by giving credit to the appellants for the duty already paid. On this basis, he has confirmed four demands -- one for each of the four financial years 1980-81, 1981-82, 1982-83, and 1983-84 -- totalling in all about Rs. 18.72 lakhs against the appellants. He has also held them guilty of unauthorized removals of blended wool tops without payment of the duty due and other attendant violations and imposed penalties totalling Rs. 2.75 lakhs on the appellant, under Rule 173Q of the Central Excise Rules, 1944. The appellants are in appeal against these demands and penalties. They informed us that from September 1985 they have been paying duty at the blended wool top stage under protest.
4. In order to facilitate a proper understanding of the rival contentions, we set down below chronologically the developments of this case as presented to us by both sides. During the hearing before us (as also before the Collector earlier), the appellants relied on certain proceedings going on separately against their competitor in the same Collectorate -- M/s. Modella Woollen Mills. We have mentioned these proceedings also in our Chronological chart at the proper place so that the setting of facts at any given time remains clear:
1.3.1975 -
Tariff description of item 43 expanded to include tops containing more than fifty percent by weight of wool calculated on the total fibre content.
30.6.1976- Advice issued by the Ministry of Finance (letter No. 56/2/75-cx 2) to say that no further duty was to be levied on the blended wool tops which were produced from duty paid wool tops.
30.7.1976 -
The above advice circulated by the Collector of Central Excise, Bangalore in his Trade Notice No. 212/76.
28.3.1980- The Collector, by his Order-in-Original No. 12-CE/80, directed M/s. Modella Woollen Mills to pay duty at the blended wool top stage.
3.12.1980 -
After taking prior approval from the Ministry (vide, Ministry's letter F.No. 56/l/80-cx-2 dated 21.8.80), the Collector of Central Excise, Chandigarh, having jurisdiction over the appellants, issued his Trade Notice No. 146.CE/80 to say that if blended wool tops (containing more than 50% wool) were produced, by using pure wool tops manufactured in the same factory, duty would be chargeable on the basis of weight such blended wool tops at the stage of final clearance there of from the factory. However, the appellants continued to pay duty at the stage of pure wool tops only.
28.4.1981 -
The Board, by their Order-in-Appeal No. 254 B/81, reversed the Collector's order dated 28.3.80 in the case of M/s. Modella Woollen Mills and held that payment of duty at the pure wool top stage was in order, 5.9.1981 -
Show cause notice issued by the Central Government to M/s. Modella Woollen Mills stating its tentative view that the Board's Order-in-Appeal Was not correct in law and proposing to revise it.
5.2.1982 to 18.2-1982- Revenue Audit Party visited the appellant's factory and reported that their assessment practice was contrary to the Collector's Trade Notice dated 3.12.1980. Consequent thereto, the Sector Officer i/c of the appellants' factory made a note to that effect in their Production Register. (The appellants have not produced this Register before us. They say that it is not available).
27.5.1982- The appellants wrote to the jurisdictional Superintendent of Central Excise that the two constituents of their blended tops pure wool tops and synthetic/cellulosic tops - were paying duty separately and that duty on blended tops "for the second time" was not leviable. The Superintendent endorsed on their letter: "Party is allowed to clear blended tops as usual till further clarification."
29.5.1982- The Superintendent asked the appellants to submit their production records for blended tops and to maintain prescribed records in future.
29.6.1982 -
Reminder by the Superintendent.
20.7.1982 -
The Central Government, by their Order No. 430/82 of 1982 set aside the Board's Order-in-Appeal dated 28.4.81 in the case of M/s. Modella Woollen Mills and restored the Collector's Order-in-Original dated 28.3.1980 which had demanded duty at the blended wool top stage.
27.8.1982 -
Superintendent's second reminder to the appellants. It invited their attention to the Collector's Trade Notice dated 3.12.1980 under which they were required to pay duty on blended wool tops and asked them to produce the records regarding blended tops urgently "to know the amount of short-duty assessed on account of change of pattern of assessment of blended wool tops w.e.f. 3.12.80 and maintain R.G.-1 Register and other records for the same within seven days of receipt of this letter, failing which necessary action will be taken under the Central Excise Rules."
7.9.1982 -
Third reminder of the Superintendent, demanding action within three days.
27.11.1982- On the appellants' persistent failure to comply with his directions, the Superintendent drew up an Offence Report against them and forwarded it to the Assistant Collector for further action.
1982- M/s. Modella Woollen Mills filed Civil Writ No. 2700 of 1982 in Delhi High Court against the Central Government's order dated 20.7.82 and reportedly obtained a stay order.
27.12.1982- In the RT 12 return for wool tops for July 1982, the Superintendent did not approve the assessment for wool tops but remarked: "Duty leviable on blended tops cleared during the month for which action will be taken separately." Remarks to the same effect appeared in RT 12 returns for subsequent months.
5.2.1983 -
First show cause notice issued to the appellants, followed by others on 21.2.1983, 26.3.1984 and 18.4.1984.
5. During the hearing before us, the appellants presented a list of 14 points on which they argued. They added another point -- the 15th -- by way of additional ground which we allowed to be taken after hearing both sides. We heard both sides and have carefully considered the matter. In the succeeding paragraphs we shall deal with each of the points but for the sake of coherence we have grouped them into four main heads:
I-
Whether excise duty was legally payable at the blended wool top stage.
II-
Whether any portion of the demands confirmed against the appellants was time barred.
III-
Whether the penalties imposed on them were justified.
IV-
Whether any calculation mistakes in the demands needed rectification.
6. (i) The principal argument of the appellants is that since in terms of entry 84 of List I of the Seventh Schedule to the Constitution of India and Section 3 of the Central Excises and Salt Act, 1944, the taxable event for excise is the manufacture of the goods, the duty is chargeable at the earliest stage when the excisable goods come into existence and that Rule 9 should be harmoniously interpreted so that it does not override Section 3. A glance at paragraph 11 of the Supreme Court judgment reported at 1984 (2) ECC 102 (SC): 1983 ELT 1986 (SC) - U.O.I. and Ors. v. Bombay Tyre International Ltd., etc. is enough to show that there is no basis for the theory of "earliest stage" put forth by the appellants.
After discussing the earlier Federal Court, Privy Council and Supreme Court judgments which had drawn a distinction between the nature and character of excise duty and the method of its collection, the Supreme Court summed up the position thus in paragraph 12 of the same judgment:
"While the levy is on the manufacture of production of goods, the stage of collection need not in point of time synchronize with the completion of the manufacturing process. While the levy in our country has the status of a constitutional concept, the point of collection is located where the statue declares it will be."
Section 3 and the First Schedule to the Central Excises and Salt Act specify the goods the manufacture or production of which within the country is to be taxed but do not lay down the stage of collection of the tax. On the contrary, Section 3 specifically declares that the duty of excise shall be levied and collected in the manner prescribed, that is, prescribed by the Rules framed under the Act. Rules 7, 9, 9A, 9B, 49 etc., fill in the void left by Section 3 inasmuch as they lay down as to who shall pay the duty and what would be the time, place and manner of payment etc. It is settled law that rules framed under the Act are a part and parcel of the statute itself. Rule 9(1) fixes the stage for payment of duty which is to be when the goods are removed from the place of their manufacture or production for -
(a) export;
(b) consumption; or
(c) utilization in the manufacture of another commodity.
In these proceedings, we are not concerned with removals for export. As already stated in paragraph 2, the appellants first manufacture pure wool tops from natural wool, then blend them with other fibres to make blended wool tops and thereafter spin blended woollen yarn from them which in turn they use for weaving blended woollen fabrics. It is not in dispute that item 43 encompasses both pure wool tops as well as blended wool tops. In other words both the "wool tops" within the meaning of the tariff entry. Woollen yarn and woollen fabrics are, however, (sic)red by separate tariff items -- 18B and 21, respectively, -- and are different commodities from wool tops. The specific provision of Rule 9(1) that is applicable to the facts of the appellants' case is that they should pay the duty at the stage when they remove wool tops for captive utilization in the manufacture of another commodity -- woollen yarn. In other words, they should pay the duty at the time of removal of blended wool tops for spinning yarn and not at the time of removal of pure wool tops for blending because such removal is not for manufacture of another commodity, pure wool tops and blended wool tops both being the same commodity -- wool tops. On the contrary, if the appellants' proposition were to be accepted, the scheme of excise as set out in the statute would get distorted. For example, a composite textile mill could then claim that it would pay the duty only on the grey cotton fabrics, that is, the earliest stage at which cotton fabrics came into existence and not on the processed cotton fabrics. In their judgment in the case of M/s. Empire Industries Ltd., 1986 (7) ECC 208 (SC): 1985 (20) ELT179 (SC)], the Supreme Court have held that processing of cotton fabrics, is also manufacture and further processing duty is payable thereon. The appellants say that item 19 relating to - cotton fabrics lists processed fabrics as a separate sub-item in the tariff. True, but so does item 43 by including blended tops in its expanded definition.
(ii) The appellants say that the stage of "Consumption" in Rule 9(1) applies to them and that duty is payable by them when they remove pure wool tops for consumption into preparation of blended wool tops. Their plea is not tenable for two reasons. First, the word "Consumption" occurs in the rule in juxtaposition with export and thus stands for home consumption or removal into the home market. Secondly, the appellants' case is one of captive use which is covered by a separate and more specific expression in the rule -- "for ....manufacture of any other commodity." If such captive use Were also to be covered by the general word "Consumption", the specific expression would be rendered superfluous. It is equally well settled that no part of a legal provision is redundant and the acceptable interpretation is the one which gives due meaning to every word of the provision.
(iii) The appellants contend that the rate of duty should be as on the date of manufacture (which, according to them, is the earliest date of coming into existence of the product) although the duty may be quantified and collected later at the time of removal. They rely on the Madhya Pradesh High Court judgment reported at 2978 ELT J 33 -- Kirloskar Brothers Ltd., Dewas v. UOI and two Ors., which was later confirmed by the Supreme Court when the S.L.P. filed by the Union of India was dismissed. Their contention is not acceptable for three reasons. The Kirloskar judgment dealt with a case in which the goods were fully exempt from duty when they were manufactured but at the time of their removal the exemption was no longer in force and it was in this setting of facts that the question arose whether the goods sought or ought not to be charged to duty. In the case before us, wool tops were dutiable both at the time of their manufacture as well as removal. Reliance of the appellants on Kirloskar case judgment is, therefore, misplaced. Secondly, Rule 9A specifically provides that the rate of duty applicable to the goods shall be the rate in force on the date of their removal. If the appellants' proposition were to be accepted and the old rate as on the date of manufacture applied in preference to the new rate as on the date of removal, Rule 9A would be rendered nugatory which cannot be accepted. Thirdly, in the case before us, there really was no difference in the rates of duty on wool tops as on the two dates of manufacture and removal. The rate was the same. What really happened was that by blending with other fibres, wool tops gained weight and their quantity became more. The appellant's argument amounts to saying that though 15 kgs. of blended wool tops are actually removal for spinning into yarn, duty should be charged only on 10 kgs. which was their weight before blending. We find no authority for such a proposition.
(iv) It is argued by the appellants that the process of blending does not amount to manufacture of a new product since both pure wool tops and blended wool tops remain classified in the same item 43 and hence no further duty should be chargeable after blending. They add that the Collector has also accepted that from pure wool top to blended wool top no manufacture is involved. We find that the appellants are proceeding on a wrong hypothesis. The time chart of events given by us earlier shows that item 43 was amended on 1.3.1975 to include blended wool tops containing more than 50% wool within its ambit. No interpretation which seeks to nullify a deliberate legislative amendment made by the Parliament is acceptable. Reading the tariff entry as it prevailed during the material period, blended wool tops containing more than 50% wool were specifically covered by it. The fact of manufacture has, therefore, to be presumed 1980 (6) ELT 735 (Delhi) -- Hyderabad Asbestos Cement Products Ltd. v. UOI and Ors. The correct way to approach the matter is first to determine whether the goods are covered by the entry and, if so, to access them at the stage fixed in Rule 9(1). Validity of the entry cannot be questioned before us nor the vires of the rule.
(v) The appellants asserted that it was not legal to charge duty twice under the same tariff entry and relied for this purpose on the Supreme Court judgment in the case of M/s. Oriental Timber Industries, 1985 (20) ELT 202 (SC). To quote from this judgment:
"No question of double taxation arises as duty is leviable only once on the plywood as it comes out of the press in the panel or block stage and no further duty is to be levied on the circles which are made out of the plywood blocks or panels."
We find that item 16B of the tariff relating to plywood itself fixed the form in which plywood was to be taxed -- "in sheets, blocks, boards or the like." It was in this context that the Supreme Court ruled that plywood was to be taxed when it was produced in the form of sheets, blocks or panels and not when circles were cut out of it later. The position is quite different in the case of item 43. Here, the entry makes it abundantly clear that blended tops containing more than 50% wool are to be taxed under it. The analogy of plywood case is, therefore, not apt in the case of item 43. In any case, there is absolutely no basis for the scare of double taxation created by the appellants. We have already stated in paragraph 3 earlier that all that the appellants are virtually being called upon to pay is the single stage duty on blended wool tops and nothing more. The appellants have also tried to confuse the issue by citing the earlier heavy duty payment on synthetic/cellulosic fibre constituent of the blended tops. We note that such payment is under separate tariff items (18 etc.) relating to man-made fibres. Such multi-point taxation of various raw-materials and components of the same end-product is a deliberate policy decision in our country. It may be open to attack on policy grounds but its legality is not open to question.
(vi) The appellants complained of discrimination vis-a-vis un-integrated units. "It also leads to the anomaly", they stated, "that two units 'A' and 'B' can arrange to exchange their pure wool tops and both avoid duty at the second stage. "The scheme of Rule 9(1), no doubt, enabled a unit to pay duty at the pure wool top stage if it wanted to remove pure wool tops out of its factory. The appellants stated that they too benefitted by purchasing duty paid pure wool tops from other units and the authorities did not demand further duty or differential duty when they blended such duty paid wool tops. We can only say that it is for the Government to take notice of such loop-holes in the taxation scheme and to eliminate the scope for manipulations. But that cannot be a sanction for not paying the duty which is clearly due under the law.
(vii) The last plea of the appellants concerning the substantive issue is that the Collector relied on the order dated 20.7.1982 of the Central Government passed in the case of M/s. Modella Woollen Mills but that the Government's Order stood on Rule 51-A which the Collector had not invoked against the appellants and, therefore, the impugned orders of the Collector should fall. We find that this argument is fallacious for two reasons. First, the Collector has not relied on the Government's order; he has exhaustively dealt with all the arguments of the appellants with his own reasoning and repelled them. Secondly, the Government's Order was principally based on the authority of Rules 9 and 49; Rule 51-A was taken to support the Government's conclusion arrived at in terms of Rules 9 and 49. There is no merit in this plea of the appellants.
7. (i) Coming now to the plea of time bar, we find that the periods to which the demands relate and the dates on which the show cause notices were issued are as under:
Period Date of Issue of SCN
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 12.6.84) 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 G.P.T. Thus M/s B.I.C. Ltd.; N.E.W. Mills, Dhariwal and 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 contravention 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 conies out from this record read together.
(ii) We now come to the question whether in fact there was any suppression on the part of the appellants. The appellants say that there was no suppression as their factory was working under the production based control, that the central excise officers were visiting their factory frequently, that they were aware of the fact of production of blended yarn and blended fabrics in their factory and that they were also aware of the fact of the appellants bringing in duty paid pure wool tops from outside. We find that under the self removal procedure (later called as the production based control), the primary responsibility to file the declaration of his operations and to submit assessment documents regularly is on the assessee. As already stated, the appellants admitted that they had not filed any such declaration or submitted any such documents. Under the production based control, the visits by the Central Excise Officers are selective and are usually in exercise of a particular check or intended to collect a particular information. The entire gamut of an assessee's operations may not come to the knowledge of the visiting officer during such selective checks. The officers were, no doubt, receiving D-3 intimations regarding receipt of duty paid pure wool tops by the appellants from outside. But it was hardly possible to deduce from these intimations whether the appellants would use such wool tops in the pure form or mix them with other fibres to a blend of over 50% wool or less than 50% wool. The appellants cannot absolve themselves of their primary responsibility of making the prescribed declarations and submitting the prescribed assessment documents and expect the authorities to gain knowledge of their operations through involved and doubtful deductions from D-3 intimations and production of other commodities.
(iii) The appellants rely on the old tariff advice of 1976 and plead for the benefit of Promissory Estoppel, relying on the Supreme Court Judgment reported at 1986 (8) ECC 26 (SC): 1985 (22) ELT 306 (SC) (U.O.I and Ors. v. Godfrey Philips India Ltd. and Ors.). The Collector has relied on his subsequent trade notice dated 3.12.1980. The appellants argue that "there is no evidence that the trade notice was received in Dhariwal at all" and in any case the Collector could not supersede the Government of India's tariff advice of 1976. During the hearing before us, the learned representative of the department stated that the Collector's trade notice dated 3.12.80 had been issued on the authority of the Ministry of Finance letter F. No. 56/1/80-CX-2 dated 21.8.1980 and that the issue of a tariff advice directly by the Government was not considered necessary because at that time all the other collectorates were reportedly already following the correct practice of assessing the blended wool tops if they contained more than 50% by weight of wool. He also stated that the practice was to send copies of trade notices to recognized Associations and to affix one copy on the office notice board; it was not the practice to send copies of trade notices to individual assessees. The concerned Associations were expected to inform their member assessees either by endorsing copies of trade notices to them or by publishing the trade notices in their industry journal or by both these methods. It was, therefore, not for the Collector or the department to prove service of the trade notice dated 3.12.1980 on the appellants. We agree with the learned representative of the department. The trade notice dated 3.12.1980, having been issued on the specific authority of the Government, superseded the earlier tariff advice of 1976 issued by the Government. We also note that during adjudication proceedings before the Collector, the appellants never stated that they had not received the trade notice dated 3.12.1980. Before us, they first stated that they had "probably" not received it. A little later, they became more positive and asserted that they had not received the trade notice. We were told that the appellants--had two woollen manufacturing units -- one at Dhariwal and the other at Kanpur. Their Head Office was also located at Kanpur. As stated by the learned representative of the department, all other factories in India were, by August 1980, correctly paying duty at the blended wool tops stage. The only exception was the appellants' Dhariwal unit. In other words, their Kanpur unit was paying the duty at the blended wool tops stage and their Head Office was quite aware of this practice of assessment. Yet, we find that at Dhariwal they adopted a different posture. There were only two units manufacturing wool tops in Chandigarh collectorate for whose benefit the Collector's trade notice dated 3.12.80 had been issued. It is hardly believable that the appellants could remain ignorant of the trade notice. The chart of events set out in paragraph 4 above would show that they had been closely following the proceedings in the case of their competitor M/s. Modella Woollen Mills, located in the same Collectorate. How could then they be unaware of the change of assessment practice brought about by the Collector? They have cited before us the Bangalore Collectorate trade notice of 1976. It is really surprising that they were aware of what was going on about their industry in the far away Bangalore Collectorate but plead ignorance of the change of practice in their own Collectorate. Further, their conduct after February 1982, when the audit party visited their factory and a note regarding wrong assessment practice followed by them was made in their production register, shows that even when they were pointedly made aware of the change of practice, they defaulted in complying with the directives issued by the authorities. The plea of ignorance of the trade notice of 3.12.1980 is, therefore, not at all convincing. We are satisfied that they were quite aware of the trade notice and so was their Head Office at Kanpur regarding the change in assessment practice. There is, therefore, no question of any Promissory Estoppel on and from 3.12.1980.
(iv) The appellants contend that the real reason for non-implementation of the changed practice of assessment was not any omission on their part but it was because of the fact that the central excise authorities themselves were in doubt. In support of this contention, they cite the Board's Order-in-Appeal dated 28.4.1981 in the case of M/s Modella Woollen Mills and the Superintendent's endorsement on the appellants' letter dated 27.5.1982 which allowed the appellants to clear blended tops as usual till further clarification. We find that so far as the authorities at the level of the Government and the Collector were concerned, there was never any doubt after the issue of the Collector's trade notice dated 3.12.1980 which brought about the change in practice on the authority of the Government. The Member of the Board who took a particular view in deciding the appeal of M/s Modella Woollen Mills had acted in a quasi-judicial capacity which he was entitled to while so acting. But that did not affect the Collector's trade notice which had been issued on the authority of the Central Government, a higher body than the Board. In any case, the view taken in the appeal of M/s Modella Woollen Mills did not survive for long since within about four months the Central Government issued a show cause notice proposing to revise the Board's order and ultimately did revise it on 20.7.82 in conformity with the practice stated in the Collector's trade notice.
The chart of events in paragraph 4 above would also bear it out that the Superintendent was confused when the appellants raised a cry of double taxation in their letter dated 27.5.82. We have already discussed earlier that there was no substance in the plea of double taxation under the same entry 43; the earlier tax on synthetic/cellulosic fibres had been paid under different tariff items. The Superintendent too realized this within two days of making his aforesaid endorsement and on 29.5.1982 asked the appellants to submit their production records for blended tops and to maintain prescribed records in future. From then onwards, it was a story of the Superintendent issuing threatening letters to the appellants to change their practice of assessment in conformity with the Collector's trade notice dated 3.12.1980 and the appellants not complying.
(v) Relying on the Madras High Court judgment in the case of Murugan & Company reported at 1977 ELT (J 193), the appellants argued that Rule 9(2) could not be applied unless there had been specification of the time, place and manner under Rule 9(1), which had not been done in their case, and secondly, Rule 9(2) could not be invoked for the purpose of recovering escaped revenue; the only provision available under the Act for such recovery was Section 11A which had not been cited in the show cause notices issued to them. We find no substance in their arguments. The appellants' unit was duly licensed under the Central Excise Act and Rules for all the commodities manufactured by them and we take it that the attendant formality of approving the ground plans must have been gone through also. The time, place and manner for payment of duty by the licensed assessees are set out in the Rules (9, 9A, 49 etc.) for information and compliance of all the assessees. So far as the blended wool tops are concerned, the time, place and manner were further specified in the Collector's trade notice dated 3.12.1980. Secondly, the case before us is not one of escaped revenues in the sense of an unknown manufacturer having removed his goods without payment of any duty whatsoever. What really happened in the appellants' case was that they were required by Rule 9(1) to pay duty at the stage when they removed wool tops for manufacture of another commodity within their factory. Instead, they paid the duty at an earlier stage when wool tops were still in the course of intermediate processing into blended wool tops. Their practice was a specific contravention of Rule 9(1). "To attract Sub-rule (2) of Rule 9, the goods should have been removed in contravention of Sub-rule (1)". [S.C. in the case of N.B. Sanjana v. The Elphinstone Spinning & Weaving Mills Co. Ltd., 1978 ELT (J. 399)]. Reliance of the appellants on the Murugan case judgment is, therefore, misplaced.
(vi) All the same, we feel that since the change in practice of assessment took place on the issue of the Collector's trade notice dated 3.12.1980 and Collector's orders-in-original also rely heavily on this trade notice, it is only fair that demand for differential duty on blended wool tops should be on and from 3.12.1980 only and not for the period prior to that. Therefore, so far as the demand for the year 1980-81 is concerned, we confirm it only for the period from 3.12.1980 and if the demand includes any amount for the earlier period, we set aside the same.
8. Coming to the question of penalty, we agree with the Collector that the appellants were guilty of contravention of Rule 9(1). First, they suppressed the fact of production of blended wool tops by not filing any declaration or classification list for it. We have not believed their version that they were not aware of the Collector's trade notice dated 3.12.1980. After May 1982, when the change in practice had already been pointedly brought to their notice by way of a notation in their production register, they persisted in not complying with it. A reading of the Superintendent's various ultimatums addressed to them as set out by us in the chart of events in paragraph 4 above would show that they were in no mood to comply with the changed practice. Because of the suppression, and worse, defiance on their part the contravention of Rule 9(1) by them has to be viewed seriously. The penalties imposed on them by the Collector totalling Rs. 2.75 lakhs were, therefore, justified and were not excessive.
9. The appellants raised an additional ground during the hearing saying that there were some obvious mistakes in the computation of the demand amounts inasmuch as, they stated, differential duty had been demanded even in respect of the blended wool tops which contained less than 50% by weight of wool, or blended wool tops made out of duty paid pure wool tops brought from outside had been included, or certain batches of blended wool tops were included in the demand twice by mistake, etc. We wish that the appellants had taken up these instances of error in their reply to the show cause notice or during hearing before the Collector. Even so, we do not consider it fair that the appellants should be called upon to pay any amount because of some errors in computation. We, therefore, order that the Assistant Collector should hear the appellants on instances of such computation mistakes and exclude the amount which were due to any obvious errors.
10. In the two cross-objections filed by the department, no further relief has been asked for. The prayer made in these cross-objections only was that the appeals filed by the appellants should be dismissed. It is, therefore, not necessary to pass any separate order in respect of the cross-objections. They stand disposed of in terms of the orders passed on the appeals themselves.
11. To sum up, the reliefs which we grant to the appellants are confined to -- (i) exclusion of the duty demand, if any, relating to the period prior to 3.12.1980; and (ii) exclusion of the duty amount attributable to obvious computation mistakes. But for these reliefs, the four appeals are rejected.