Customs, Excise and Gold Tribunal - Delhi
Amrit Protein Foods Ltd. vs Collector Of Central Excise on 22 September, 1994
Equivalent citations: 1994ECR399(TRI.-DELHI), 1994(74)ELT163(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 4-2-1993 passed by the Collector of Central Excise, Meerut. Briefly stated the facts of the case are that the appellants are engaged in the manufacture and sale of Soya Milk of different variety. They commenced the manufacturing of different varieties of Soya Milk on trial basis from 16-5-1989. In April, 1989 they filed Classification List No. 1/89 effective from 11-4-1989 classifying the Soya Milk under Heading 2202.90 as "non alcoholic beverages" and claimed exemption under the provisions of Notification No. 20/89-C.E., dated 1-3-1989 under which Soya Milk was exempted from the whole of the duty of excise leviable thereon. Since the appellants were under the impression that their products were exempted from duty, they did not file L-4 application for obtaining Central Excise licence. On 14-9-1990, the preventive officers visited the appellants factory and seized 3896 cartons of Soya Milk sold under the brand name Big Sipp on the ground that Big Sipp Soya Milk was not entitled for exemption under Notification 20/89. Thereafter the appellants obtained a Central Excise licence in Form L-4 in respect of the goods manufactured by them and started paying duty on the goods manufactured and sold under the brand name Big Sipp 'under protest'. The appellants were served with a show cause notice dated 26-9-1990 issued by the Assistant Collector, Central Excise requiring them to show cause to the Collector, Central Excise, Meerut as to why duty amounting to Rs. 16,15,831.09 leviable on Soya Milk flavoured and Soya Milk with admixture of fruit pulp cleared from the factory during the period 27-3-1990 to 13-9-1990 should not be demanded under Rule 9(2) read with Section 11A of the Central Excises and Salt Act, 1944 and why penalty should not be imposed on them under Rule 173Q, Rule 9(2) and Rule 52A of the Central Excise Rules, 1944. The show cause notice further alleged that Soya Beverages flavoured and added with fruit pulp attracted Central Excise duty @ 10% ad valorem in terms of Notification No. 103/90, dated 16-5-1990 since exemption under Notification 20/89 read with Notification 103/90 was applicable only to soya milk and not soya beverages containing flavour and .fruit pulp. The appellants submitted a reply to the show cause notice vide their letter dated 29-12-1990 in which they denied that their products with some flavour and small quantity of fruit pulp were not eligible for exemption under the Notification 103/90, as amended. They also contended that the invocation of the provisions relating to penalty were misconceived in the absence of any allegation of fraud, mis-statement, suppression of fact or contravention of the Act/Rules with the intent to evade payment of duty. Thereafter by his order dated 21-8-1991 the Collector of Central Excise, Meerut held that products sold under the brand name "Big Sipp", Mango, Banana, Rose and Pinakool, Golden Glow and under the brand name "Vig" had to be deemed as Soya Milk products and not Soya Milk and, therefore, they were not eligible for exemption in respect of Soya Milk under Notification No. 20/89. The Collector also held that the appellants resorted to misdeclaration and suppression of facts but he refrained from confirming the demand of duty on the grounds that the show cause notice invoking the extended period had been issued by the Assistant Collector whereas as provided in law it should have been issued by the Collector of Central Excise. The appellants filed an appeal against the order dated 21-8-1991 passed by the Collector. The Tribunal vide Final Order No. E/15/93-D held that the disputed non-alcoholic beverages manufactured by the assessee with several additives such as sugar, fruit pulp, etc. were not eligible for exemption under Notification No. 20/89 (as amended) under which only Soya Milk was exempted. The Collector's finding that the extended period under the proviso to Section 11A of the Act was invokable was also held as not sustainable by the Tribunal on the ground that the appellants had clearly given an indication in the Classification List filed by them that the Soya Milk in question had other additives like fruit pulp and under these circumstances it was for the Department to make enquiries for satisfying itself as to whether the products in question were eligible for exemption. The Tribunal held that for the failure of the Department to carry out the necessary enquiry, the assessees could not be held responsible. However, the appellants were served with another Show Cause Notice dated 11-3-1992 issued by the Collector of Central Excise requiring them to show cause as to why duty amounting to Rs. 29,01,430 for the period 16-5-1989 to 13-9-1990 should not be demanded on soya milk based products flavoured with fruit pulp cleared from the appellants factory and why penalty should not be imposed on them. Thereafter by the impugned order dated 4-2-1993 the Collector confirmed the demand of Rs. 29,01,430 under proviso to Section 11A. He also imposed a penalty of Rs. 1 lakh on the appellants under Rule 173Q. The Collector observed that there was no infirmity in the second show cause notice issued by him by invoking the extended period since the earlier show cause notice dated 26-9-1990 issued by the Assistant Collector was adjudicated by him only to settle the question of classification, and whether the seized goods were liable for confiscation.
2. On behalf of the appellants, Shri N. Khaitan, Learned Advocate with Smt. Malini Sud, Advocate appeared before us. He stated that the question regarding classification of the goods is covered against the appellants by the Tribunal's order in the case of Noble Soya House Ltd. v. Collector of Central Excise -1992 (20) ETR 20 and in the appellants own case by Final Order No. E/15/93-D dated 13-1-1993. He added that in his order dated 21-8-1991 the Collector had given his finding on the charges in the show cause notice dated 26-9-1990 which was issued in respect of the goods removed during the period 27-3-1990 to 13-9-1990. He stated that in that order while upholding the charge of mis-declaration and suppression of fact, the Collector had refrained from confirming the demand on the ground that the show cause notice had been issued by the Assistant Collector who was not competent to invoke the extended period under the proviso to Section 11A of the Central Excises and Salt Act, 1944. Shri Khaitan submitted that the Tribunal in its Final Order E/15/93-D dated 13-1-1993 had held that the Collector's finding in Order-in-Original No. 5/Collector/91/92 dated 21-8-1991 that the appellants had resorted to mis-declaration or suppression of fact with the intent to evade central excise duty was not sustainable. He stated that on the same fact the second show cause notice dated 11-3-1992 was issued by the Collector demanding duty amounting to Rs. 29,01,430 for the period 16-5-1989 to 13-9-1990 and by the impugned order dated 4-2-1993 he confirmed the demand by invoking the proviso to Section 11A. He submitted that the demand confirmed by the Collector was illegal and not sustainable in view of the Tribunal's finding in Order No. E/15/93-D that the appellants could not be charged with mis-declaration or suppression of fact since it was for the Department to find out whether the appellants were entitled to the benefit of the exemption under Notification No. 20/89 after investigation keeping in view the indication given by the appellants in the classification list that their product contained along with Soya Milk other additives like sugar, fruit pulp. Shri Khaitan contended that the Collector's order confirming the demand by invoking extended period under the proviso to Section 11A is not sustainable since in Order No. E/15/93-D dated 13-1-1993 passed by the Tribunal in the case initiated on identical facts and overlapping period the Tribunal had held that the charge of suppression, mis-declaration etc. was not sustainable. He therefore pleaded that the impugned order confirming the demand by invoking extended period may be set aside. In support of his contention, he cited the following case law :-
M.P. Tobacco Ltd. v. Collector of Central Excise, Raipur -1994 (53) ECR 2;
Collector of Central Excise, Bangalore v. A.V.R.A. & Co., Bangalore -1987 (31) E.L.T. 238;
Sandoz (India) Ltd. v. Collector of Central Excise -1990 (50) E.L.T. 403.
3. On behalf of the respondent, Shri R.K. Kapoor, SDR stated that the appellants had filed a classification list in which they have declared their product as Soya Milk and had claimed exemption under the provisions of Notification No. 20/89-C.E., dated 1-3-1989. He added that the classification list was returned to them by the Superintendent who advised them to file a declaration in respect of their product in terms of Rule 174. Shri Kapoor contended that the Collector had correctly arrived at the finding regarding mis-declaration and suppression of fact since the appellants after claiming their product as exempt under Notification No. 20/89 had failed to file the required declaration under Rule 174 giving the details of the ingredients. He stated that the failure on the part of the appellants to file a declaration giving the particulars of the ingredient of their product amounted to suppression of fact and, therefore, the Collector was justified in invoking the extended period under the proviso to Section 11A for confirmation of the demand and imposition of penalty. In support of his contention he placed reliance on the following case law :-
Steel Authority of India Ltd., Rourkela v. Collector of Central Excise, Calcutta - 1984 (18) E.L.T. 555;
British India Corporation Ltd., Dhariwal v. Collector of Central Excise, Chandigarh - 1986 (25) E.L.T. 727;
Punjab National Fertilizers & Chemicals Ltd. v. Collector of Central Excise -1988 (37) E.L.T. 155; and Tube Investment of India Ltd. v. Collector of Central Excise - 1989 (42) E.L.T. 484.
4. In his rejoinder, Shri Khaitan stated that both the show cause notices were issued on the basis of the same fact and once having held that the show cause notice issued by the Assistant Collector invoking the extended period was without jurisdiction and could not be confirmed the Collector was barred from initiating fresh proceedings on the basis of the same facts. He contended that the second show cause notice was illegal since having been issued on the same facts it could not be deemed as in continuation of earlier show cause notice. He stated that in the appeal filed against the first order passed by the Collector the Tribunal set aside the penalty imposed on the appellants on the ground that there was no suppression or mis-declaration. He contended that under these circumstances the Collector's finding regarding suppression of facts and mis-declaration in the second show cause notice which was issued on identical facts has to be held as illegal and not sustainable. As regards the point made by the Learned SDR that the appellants had failed to file the declaration as required under Rule 174A Shri Khaitan submitted that at the relevant time they were not required to file the said declaration in terms of Notification No. 11/88.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the issue relating to the classification of the goods in question has already been settled by the Tribunal's order in the case of Noble Soya House Ltd. v. Collector of Central Excise -1992 (20) ETR 20 and in the appellants own case by Final Order No. E/15/93-D, dated 13-1-1993. Hence, the only issue to be examined is whether the demand for the period 27-3-1990 to 13-9-1990 amounting to Rs. 29,01,430 confirmed under the proviso to Section 11A of the Central Excises and Salt Act, 1944 and the penalty of Rs. 1 lakh imposed on the appellants are sustainable. It is seen that the Collector held that the extended period for confirmation of the demand under proviso to Section 11A of the Central Excises and Salt Act was invokable mainly on the ground that the appellants had failed to file the declaration as required under Rule 174 of the Central Excise Rules even after the Superintendent had directed them to do so while returning the classification list filed by them, in which they had claimed their product as Soya Milk exempted under Notification 20/89-C.E. The Collector has held that the failure on the part of the appellants to file the declaration in terms of Rule 174 resulted in the clearance of the goods without levy of proper duty. For proper appreciation of the Collector's finding on the point of limitation, we refer to the relevant extract from the impugned order, which is reproduced below :-
"Regarding the point of limitation of the subject demand SCN, the noticees have contended that APF had bonafide belief and still believed that product manufactured by them are exempt under Notification No. 20/89 as amended. Under this belief they did not apply for CE licence and they also did not file any declaration. Reliance was placed on the statement dated 14-9-1990 of Shri Chitale. CL filed by them also clearly conveyed that Soya milk manufactured would contain sweetening and flavouring matters. It has been submitted that fruit pulp is also a flavour as given in Howley's "Condensed Chemical Dictionary". From all these averments and submissions it is amply evident that the noticees totally depended on their own interpretation of excisability of their product. The basis of their interpretation was not conveyed to the Department before starting production and clearance of their product. They also failed to follow the instructions given to them by their jurisdictional Range Superintendent to file declaration under Rule 174 of Central Excise Rules. This act/omission on the part of the noticees resulted in escapement of Rs. 29,01,430/- of Central Excise duty during the period from May, 1989 to 13-9-1990 on Soya milk based beverages (Products) by them. Facts and circumstances of case laws cited in this regard have not been amplified in the arguments to show that this case is pari materia with these cases cited. I, therefore, do not like to discuss the cited cases. I uphold the validity of demand raised on the ground that the noticees should have got it amply clarified by the Department that the product manufactured by them is not excisable, arguments given later on regarding their bona fide belief that the product is non-excisable can only be treated as after thought to defend their act of omission or commission in this regard."
6. We are inclined to agree with the Learned Counsel for the appellants that two different proceedings were initiated by the Department by issuing show cause notices for overlapping periods on the basis of identical facts. In the first proceeding arising out of the show cause notice dated 26-9-1990 issued by the Assistant Collector of Central Excise for the period 27-3-1990 to 13-9-1990, the Collector in his order dated 21-8-1991 while arriving at the finding that the appellants had resorted to mis-declaration or suppression of certain facts in the classification list with the intent to evade duty refrained from confirming the demand on the ground that the Assistant Collector was not competent to issue a show cause notice invoking the extended period under the proviso to Section 11A of the Central Excises and Salt Act. Even though the demand for extended period was not confirmed by the Collector, the Tribunal in its order No. E/15/93-D while arriving at the finding on the question of classification of the disputed product also examined the question whether the extended period under the proviso to Section HA of the Central Excises and Salt Act, for confirmation of the demand, was invokable. The Tribunal's findings in paragraphs 18 and 19 of the said order being relevant are reproduced below :-
"18. The second question for our consideration is pertaining to the extension of the proviso of Section 11A of the Act. It has been alleged against the appellant that they have suppressed material facts and has not furnished all the material details and thus the extended period under the proviso of Section 11A of the Act can be inforced on them. The learned Counsel has vehemently argued on this point and attempted to show that there has been no suppression, or withholding of information or misdeclararion or fraud so as to enable the department to proceed for recovery for extended period. Here, he also argued that the appellants have not attempted to evade Central Excise duty and that they were holding a bona fide belief that their product is exempted for duty. Their belief has been arisen from the technical details and information they were having and also on the basis of definition of Soya Milk as is available in Glossary of Soya Milk terms. The Learned Counsel has also argued that in Trade and Commercial Parlance, Soya Milk could include also the non-alcoholic beverage manufactured and marketed in the manner the appellants have done. The appellants are very strongly relying on the Classification List No. 1 of 3/89 and letters addressed by them to the Department about the commencement of their production and on this basis have vehemently contended that the department cannot plead ignorance of the manufacturing process and hence there is no suppression, as the department had been made fully aware of the manufacturing activity. The department has taken a view that the appellants have not disclosed about the manufacturing process or of use of additives, sugar and fruit pulp in the Soya Milk manufactured by them and hence there is misdeclaration. The whole case is to be viewed from the context of this rival contention by the authorities. The material before us is the Classification List No. 1 /89 filed by the appellants and the correspondence to the appellants and the department in this context. The declaration made by in the Classification list in column No. 2 is as reproduced herein :-
"Natural or artificial mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured; other non-alcoholic beverages, not including fruit or vegetable juices of Heading No. 20.01 Others : 1. Soya Milk - 'Golden Glow', 'Big Sipp' - Mango, Rose Pinakool and Banana"
19. On receipt of this covering letter and Classification List, the Superintendent has returned the same alongwith a covering letter. In this, the Supdt. has informed that their product is fully exempted under Notification 20/89 dated 1-3-1989 and as they have also not taken Central Excise Licence, the Classification List filed by them is returned. The Supdt. also informed them to file annual declaration to Assistant Collector. The appellants filed a reply to this letter and protested about their filing annual returns as they were exempted under the said Notification. The question that arises for our consideration is as to whether there is suppression in the details given by the party in the Classification List filed by them. As has been extracted above, the Classification List clearly indicates the product 'Golden Glow' and 'Big Sipp the Big Sipp and they have also clearly indicated, 'Mango, Rose, Pinakool and Banana'. These four items indicate use of fruit and flower-essence. This should have given very clear indication to the department about the addition of fruit pulp in the Soya Milk. They have also clearly indicated that they are going to sell these in pouches, in cans of plastic and metal. Therefore, when they were to market in cartons with a brand name, any Reasonable person would certainly come to the conclusion that what the party is marketing is not plain Soya Milk for which exemption is granted in the said notification but it is a separate product manufactured by using Soya Milk as a base. Therefore, the department before returning the Classification List to the party was duty bound to have made further inquiries and satisfy itself about the exemption. In case if the Party had not given the details or had suppressed any material information on being asked by the department: then a reasonable conclusion can be drawn that the appellant had withheld material facts and hence it had been done with mala fide intention to evade duty. The Department has not shown any material by which such a conclusion can be drawn. The Department alone is to blame itself for not making sufficient inquiries before returning the Classification List and informing them that their product is exempted under Notification No. 20/89. Therefore, taking into consideration the several citations cited by the learned Counsel, we are unable to agree with the Department's contention that the Party has attempted to suppress and evade duty and the larger period is available to the department to recover the duty. The learned SDR has placed reliance on the ruling of the Supreme Court rendered in the case of Jayshree Industries Co. Pvt. Ltd.'s case and has argued that the rulings would apply and that the department's charge of suppression should be up-held. In this particular case there was a clear findings that the information given in the Classification List was not sufficient and there had been a dear indication that the up-holding of the information resulted in granting of the benefit. In the case in hand the Party has clearly given the indication that they are not clearing Soya Milk alone but they were clearing it by adding fruit pulp like Mango, Rose, Pinakool and Banana. In such a circumstance it was for the department to have further investigated by making inquiries and satisfy itself as to whether they were entitled to the benefit or not. There is a failure on the department's part in carrying out the necessary enquiries and for such a failure, the party cannot be held responsible. In this context, the ruling rendered in the case of Muzaffarnagar Steels (supra) is applicable and we rely on the same. The Collector however has not confirm the duty but has only held that he is refraining from confirming part-demand as the department could raise further demands for post period. The Collector has also not confirmed duty for six months in the present case."
7. In the case of Padmini Products v. Collector of Central Excise, reported in 1989 (43) E.L.T. 195, the Hon'ble Supreme Court has held that mere failure or negligence on the part of the manufacturer either to take out a licence or not to pay duty in case where there was scope for doubt does not attract the extended limitation unless there is evidence that the manufacturer knew that the goods were liable to duty or he was required to take out a licence. The Supreme Court further held that for invoking the extended period of five years limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion or wilful mis-statement or suppression of facts or contravention of any provisions of the Act or Rules made thereunder. On a plain reading of the Tribunal's finding in Order No. E/15/93-D, it follows that the appellants had acted on the basis of a bonafide belief that their product was eligible for exemption under Notification No. 20/89, dated 1-3-1989. As observed by the Tribunal in the Classification list No. 1 /89 submitted by them to the Superintendent of Central Excise they had given the description of the goods which gave clear indication that the product consisted of not only Soya Milk but also other ingredient and it was for the Department to make further enquiry on receipt of the Classification List to satisfy themselves as to whether the appellants were entitled to the benefit of the exemption under Notification No. 20/89, dated 1-3-1989 and by not making any further enquiries the Department had failed to carry out its function which it was expected to perform and for its failure the party could not be held responsible. In view of the finding of the Tribunal in Order No. E/15/93-D, dated 13-1-1993 in a case in which proceedings were initiated on the basis of the same facts, we hold that the impugned order confirming the demand invoking the extended period under proviso to Section 11A of the Central Excises and Salt Act is not sustainable. For these reasons, the case law cited on behalf of the respondents cannot be of any assistance to them.
8. In view of the above discussion, the impugned order confirming the demand is set aside and the appeal is allowed with consequential relief to the appellants.