Customs, Excise and Gold Tribunal - Delhi
Jenson And Nicholson (India) Ltd. vs Collector Of Central Excise on 14 June, 1988
Equivalent citations: 1988(18)ECR598(TRI.-DELHI)
ORDER V.T. Raghavachari, Member (J)
1. Show cause notice dated 10.2.1978 was issued to the appellants M/s. Jenson & Nicholson (India) Ltd. alleging that after having obtained classification of their product "Linseed Oil Modified Glycerol Alkyd" under item 14-11(i) of the Central Excise Tariff, they had, during the period 7.11.1969 to 23.6.1974, altered the constituents of the product in such a manner that it became classifiable under item 15-A(1)(i) CET but without intimation of this change to the Central Excise authorities and, therefore, their removals of the same during the said period without payment of duty was not proper. They were, therefore, called upon to show cause why duty on the said product during the said period should not be recovered and penalty also imposed. It was further mentioned in the notice that when, after a search of the premises, the relevant documents were seized it was found that the documents had been tampered with in order to make out a case for exemption. The appellants replied denying the allegations and claiming that they had committed no irregularity. After adjudication the Collector under his order dated 10.10.1984 held the charges fully established. He confirmed the demand for Rs. 3,76,243/- and also imposed a penalty of Rs. 1,00,000/-. This appeal is against the said order.
2. We have heard Shri K.K. Banerjee, Advocate for the appellants and Smt. Nisha Chaturvedi for the Department.
3. The allegation in the show cause notice is that the product of the appellants during the relevant period did not satisfy the definition of "alkyd resin" as under notification No. 122/71-CE dated 1.6.1971 and hence the exemption claimed by the appellants was not available to them. Shri Banerjee submits that the 2% test laid down in the notification became effective only alter the amendment of the notification under notification No. 10/72 dated 22.1.1972 and hence till 22.1.1972 the 2% test could not be applied. However it appears to us that on the facts and in the circumstances of this case it is unnecessary to enter into this controversy.
4. This is for the reason that the demand for duty was for the period 7 11.1969 to 23 6.1974 but the notice had been issued on 10.2.1978 only. The notice was issued under Rule 10-A of the Central Excise Rules. This Was evidently for the reason that under that rule there was no time limit for raising the demand.
5. However, it is rightly pointed out for the appellants that Rule-10A had been deleted much prior to the issue of the notice. The Collector himself has taken note of this circumstance and had confirmed the demand under Rule 10 of the Central Excise Rules. But under Rule 10 the demand could be confirmed either for the normal period of six months or, in suitable cases, for the larger period of 5 years. Even applying the 5 year rule the demand could not extend to any period preceding 10.2.1973.
6 The case for the Department is that after having obtained classification on the particular item based on the results of a sample drawn in 1966 the appellants subsequently changed the constituents of the products without disclosing the same to the Department and without filing a fresh classification list on the basis of the new composition. The fact that the composition had been changed is not disputed by the appellants. Their explanation is that because of the shortage of raw materials a change in the composition was effected. While it would be permissible for the appellants to change the composition to suit their needs and the availability of the raw materials they should, if they should want to do so, obtain permission from the Department by filing a fresh classification list disclosing the new composition. Since they had admittedly failed to do so, the charge of suppression of material facts is established. When the classification of the product itself changes and, consequently, the eligibility for duty free clearances, the suppression of material facts should certainly be held to have been made with intent to evade payment of duty. This intention becomes clear when it is seen, as discussed in the show cause notice and in the order of the Collector, that the relevant records had also been tampered with by the appellants.
7. Either under Rule V or under Rule 10, as they stood at the time of issue of the notice, the larger period of limitation available to the Department was 5 years, As earlier stated, this 5 year period could not extend to any date before 10.2.1973. It is for this reason that we had earlier observed that, in the circumstances of this case, it is unnecessary to go into the submisions as to the amendment in 1972 only of notification 122/71.
8. Shri Banerjee's contention on the question of time bar was that even on 14.1.1976 the Department had become aware of the alleged suppression on the part of the appellants as is evident from the letter dated 14.1.1976 (Annexure C in the paper book of the appellants) and hence the show cause notice should have been issued within six months from that date. He, therefore, contended that since the notice was not issued on or before 14.7.76 (and was issued on 10.2.1978) the demand is barred by time. We are unable to accept this submission. In respect of any duty not paid the demand should be raised within the period of limitation prescribed therefore, the starting point of limitation being the date on which duty ought to have been paid. Therefore, in normal cases the demand should be raised within six months from the date of payment of duty or, in cases of larger period of limitation, within 5 years from the date of payment of duty. In the present instance the demand was raised with reference to the period 7.11.1969 to 23.6.1974. The entire period is prior to 14.1.1976. Therefore, in respect of duty not paid during this period the Department was entitled to issue notice within a period of 5 years calculated from each of the dates on which duty ought to have been paid. It is only in respect of duty that would have become payable after 14.1.1976 that the Department was bound to have issued notice within six months from the date of payment of duty. We, therefore, hold that the contention that notice issued on 10.2.1978 was barred by time, though it related to the period prior to 14.1.1976 is not correct. We, therefore, hold that the demand for duty should be confined to the period 10.2.1973 to 23.6.1974.
9. As earlier mentioned the Collector has imposed a penalty of Rs. 1,00,000/-. We have already held that the appellants had been guilty of Suppression of facts with intent to evade payment of duty. This would, therefore, be a case for imposition of penalty in so far as the goods have been removed without filing a proper classification list and without payment of duty. In addition it should be noted that when, after a search of the premises, the appellants were intimated of their infractions they had, in order to cover up their lapses, tampered with their records in order to make it appear that they were eligible for the exemption claimed. This matter has been fully disclosed in the notice itself and has been discussed by the Collector in his order. As pointed out by the Collector the corrections appear to have been made after the audit objection in order to make out a case that no maleic anhydride had been used by the appellants in the batches in question. Taking into consideration this fact as also the fact that the. appellants are a big business house and also the quantity of duty evaded (though the demand is to be confined to a particular period only) we are satisfied that no reduction is called for in the quantum of penalty.
10. The appeal is accordingly dismissed except to the extent of confining the demand for duty to the period 10.2.1973 to 23.6.1974.