Custom, Excise & Service Tax Tribunal
M/S. Mittal Alloys vs Commissioner Of Central Excise on 20 May, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. I
Excise Appeal No. 2952 /2004- Ex(BR)
[Arising out of Order-in-Original No. 13/Ldh/2004 dated 27.02.2004 passed by Commissioner of Central Excise, Ludhiana.]
Excise Appeal No. 4242 /2004- Ex(BR)
[Arising out of Order-in-Original No. 243-247/Ldh/2003 dated 9.10.2003 passed by Commissioner of Central Excise, Ludhiana.]
For approval and signature:
Hon'ble Mr. Justice R.M.S. Khandeparkar, President
Hon'ble Mr. M. Veeraiyan, Member (Technical)
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 :
of the CESTAT (Procedure) Rules, 1982 for
publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair :
copy of the Order?
4. Whether Order is to be circulated to the :
Departmental authorities?
------------------------------------------------------------------------------------------------------------
M/s. Mittal Alloys Appellant
Vs.
Commissioner of Central Excise Respondent
Ludhiana
Appearance:
Shri K.K. Anand, Advocate for the Appellant
Shri Amit Jain, SDR for the Respondent
CORAM:
Hon'ble Shri Justice R.M.S. Khandeparkar, President
Hon'ble Shri M. Veeraiyan, Member (Technical)
Date of Hearing/decision : 20.5.2009
ORAL ORDER NO . ________________________
Per Shri Justice R.M.S. Khandeparkar (for the Bench):
Heard the learned advocate for the appellants and learned SDR. These appeals arise from the orders passed by the Revenue authorities one disallowing the abatement claim by the appellants and the other confirming the demand of duty with interest thereon and imposition of penalty. However, since the common questions of law and facts arise in both the matters, they were heard together and are being disposed of by this common order.
2. The appellants herein are the manufacturers of non-alloy steel ingots classifiable under sub-heading 7206.90 of the first Schedule to the Central Excise Tariff Act, 1985, having induction furnace of 3MT capacity in their factory premises. The appellants had opted for payment of duty on lump sum basis in terms of Rule 96ZO(3) of the Central Excise Rules, 1944. The duty liability in that regard was worked out to be Rs. 60 lakh per annum of their 3MT furnance by the Commissioner of Central Excise, Chandigarh vide order dated 14.10.97. The appellants were accordingly required to discharge their duty liability on monthly basis in two equal instalments, the first instalment by 15th and second instalment by last working day of the month.
3. In Appeal No. 4242/2004 (hereinafter referred to as abatement appeal), the proceedings came to be initiated pursuant to the abatement claim submitted by the appellants for the periods mentioned in their application. In the Appeal No. 2952/2004, (hereinafter referred to as duty appeal), the proceedings were initiated consequent to show cause notice issued under section 11A of the Central Excise Act, 1944 for recovery of amount of duty for the period from September, 1997 to July, 1999 and interest thereon as well as penalty under Section 11AB and 11AC respectively read with Rule 96ZO(3) of the said Rules.
4. In the abatement appeal, it is the case of the appellants that they had submitted necessary intimation regarding closure of furnace for the periods from 2.12.97 to 9.12.97, 20.12.97 to 1.1.98, 10.1.98 to 27.1.98, 4.2.98 to 14.2.98 and 4.3.98 to 17.3.98 under their intimation letters dated 2.12.97, 19.12.97, 1.1.98, 9.1.98, 27.1.98, 3rd and 4th February, 1998. Consequent to such intimations, the show cause notice came to be issued on 12.1.99 regarding the abatement claim and Commissioner, by order dated 9.10.03 disallowed the same.
5.. In the duty appeal, the Department had issued a show cause notice dated 29.8.02 on account of failure of the appellants to discharge the duty liability to the tune of Rs.92,16,668/- for the period September, 1997 to July, 1999 and the adjudicating authority i.e. the Commissioner by his order dated 27.2.2004 confirmed the demand duty to the tune of Rs.15,91,398/- and directed the payment of interest thereon besides equal amount of penalty while exercising powers under Rule 96ZO (3) (ii) along with the powers under section 11A, 11AB and 11AC of the said Act.
6. The appellants have challenged both the orders on various grounds. The order rejecting the abatement claim is sought to be challenged on the ground that Revenue authority erred in rejecting the abatement claim merely on technical ground and procedural lapse on the part of the appellants inspite of the fact that the procedure adopted by the appellant to establish the abatement claim disclosed substantial compliance of the procedure prescribed for justifying such claim. It is further sought to be challenged on the ground that authorities ignored the fact that the unit had remained closed during the period claimed by the appellants and the same was clearly established on the basis of dis-connection of electricity supply to the factory premises.
7. The order regarding confirmation of duty and demand of interest as well as imposition of penalty is sought to be challenged on the ground that authority could not have proceeded with the matter relating to demand of duty when the appellants had already filed their abatement claim and same was pending before the authority. It is also the ground of challenge on behalf of the appellants that the Revenue authorities failed to take note of the fact that the appellants were dis-possessed of the premises from 21.3.98 and therefore, there was no duty liability upon the appellants thereafter. It is also challenged on the ground that there was no case for exercising the extended period of limitation in the facts and circumstances of the case and therefore, the Revenue authorities erred in confirming the demand and hence, there was also no case for imposition of penalty.
8. Learned Advocate appearing for the appellants placed reliance in the decision of Apex Court in Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner reported in [1991 (55) ELT 437 (SC)]; Union of India vs. Wood Papers Ltd. reported in [1990 (47) ELT 500 (SC)]; Union of India vs. M/s. Krishna Processors delivered on 5.5.2009 in Civil Appeal No.3397 of 2003 along with some other appeals and displayed on 2009 TIOL 62-SC-CX, decisions of the Tribunal in Bata Steel Pvt. Ltd. vs. CCE, Chandigarh reported in [2007 (219) ELT 539 (Tri-Del)]; Mohinder Steels Ltd. vs. CCE, Chandigarh reported in [2002 (145) ELT 290 (Tri-LB)]; and unreported decision of Punjab and Haryana High Court in the matter of CCE, Chandigarh vs. M/s. Dhiman Steel Rolling Mills in Civil Appeal No. 123/2002 delivered on 8.1.2004, and submitted that the Revenue authorities while passing the impugned orders totally ignored the most important fact that the factory premises of the appellants had remained closed for a considerable time as stated in various intimation letters as also the appellants were dis-possessed of the said premises on 21.3.98. The factum of closure of the premises was also established from the fact that electric supply was disconnected. He further submitted that considering the law laid down by the Apex Court which is revealed from the judgements relied upon by the Revenue authorities themselves, is that the authorities could not have merely on the basis of non-compliance of technicalities in relation to the procedural matters denied the abatement claim of the appellants, nor could have demanded the duty and imposed penalty. He further submitted that there was no case made out by the Department for invoking the extended period of limitation in relation to demand of duty and for the same reason, there was no occasion for imposition of penalty. He also submitted that once the Revenue authorities themselves had found it necessary to issue the show cause notice, it was highly improper for the Commissioner to observe that there was no need to issue show cause notice to the appellants in the matter in hand.
9. Learned SDR on the other hand, placed reliance in the decisions of the Apex Court in the matter of Kedarnath Jute Mfg. Co. Ltd. vs. CTO reported in [AIR 1966 SC 12]; Chandra Kishore Jha vs. Mahavir Prasad and others reported in [(1999) 8 Supreme Court Cases 266]; Union of India vs. Dharamendra Textile Processors [2008 (231) ELT 3 (SC)]; Metal Forgings vs. Union of India [2002 (146) ELT 241 (SC)]; Mohinder Steels Ltd. vs. CCE, Chandigarh [2002 (145) ELT 290 (Tri-LB)]; Commissioner of C.Ex and Customs vs. Venus Castings (P) Ltd. [2000) 117) ELT 273 (SC)]; Collector of Central Excise, Jaipur vs. Raghuvar (India) Ltd. [2000 (118) ELT 311 (SC)]; Serai Kella Glass Works Pvt. Ltd. vs. CCE, Patna [1997 (91) ELT 497 (SC) and of the Tribunal in the matter of CCE, New Delhi vs. Avis Electronics Pvt. Ltd. [2000 (117) ELT 571 (Tri-LB) ]; Uppal Steels Alloys Ltd. vs. Commissioner of Central Excise, Meerut [2000 (120) ELT 452 (Tri) ] and of Supreme Court in the matter of India Aluminium Company Ltd. vs. Thane Municipal Corporation [1991 (55) ELT 454 (SC)]; of Himachal Pradesh High Court in the matter of CCE vs. Spectra Electronics Pvt. Ltd. [ 2009 (235) ELT 795 (HP)]; of the Tribunal in Mahanadi Casting Private Ltd. vs. CCE, Bhubaneswar I [ 2006 (206) ELT 673 (Tri- Kolkata)]; Kalaimagal Alloys Steel Pvt. Ltd. vs. CCE, Coimbatore [2007 (219) ELT 955 (Tri-Chennai)]; CCE, Hyderabad vs. Sheetal Shipping & Metal Processors Ltd. [2004 (175) ELT 535 (Tri-Bang)]. He submitted that the appellant had opted for payment of duty in terms of Rule 96ZO (3) of the Central Excise Rules, 1944 and that the proceedings under the said provision of law are independent of the proceedings under other provisions of the said Act. The procedure to be followed in relation to the action to be taken for non-compliance of the said Rules is in terms of those Rules themselves and considering the same, the departmental authorities have clearly followed the said procedure and there is complete compliance of principles of natural justice. He further submitted that the appellants inspite of having afforded ample opportunity to place on record the materials in support of their contention, failed to come forward with any such material and therefore the authorities were left with no alternative than to decide the matter on the basis of whatever material available on record. It is, his further submission that the authorities have taken into consideration the provisions of law and failure to comply thereof by the appellant and bearing in mind the law laid down by the Apex Court in that regard, it cannot be said that the authorities have acted either arbitrarily or in contravention of provisions of law. He also submitted that it is settled law that when the statute requires a particular thing to be done in a particular manner, it has to be done in the same manner and in no other manner. That being the law, the appellant cannot be allowed to contend that they could have followed the procedure of their own choice which had no support from the statutory provisions and therefore their contention about substantial compliance of the procedural requirement has to be rejected. He further submitted that the procedural provisions have been made in order to enable the Revenue authorities to verify the factual situation in the matter of manufacture of products so as to have appropriate check and the records maintained by the assessee are not allowed to manipulate to enable the assessee to evade the duty liability which it has to discharge, in accordance with the provisions of law. It is also sought to be contended on behalf of the respondent that the provisions of law comprised under 96ZO are special provisions in relation to the scheme contemplated thereunder and the proceedings thereunder are to be conducted in accordance with those provisions and therefore the question of invoking power under section 11A of the said Act in such proceedings does not arise. Learned SDR also drew our attention to section 3A of the said Act, in particular sub-section (3) while highlighting the legislative intend to make provision to deal with the situations leading to evasion of duties, and therefore, submitted that the specific scheme in terms of provisions of law comprised under Rule 96ZO was formulated. In that regard, he drew our attention to the decision of the Apex Court also. He also submitted that in the matter of penalty, the statutory provision leaves no discretionary power to the authority and the law in that regard has been well settled by the decision of Supreme Court.
10. Considering the rival contentions in the matter, the following points arise for consideration in these appeals:
1) Whether the appellant on the basis of materials placed before the authority had made out a case of abatement claim for the period disclosed in their intimation letters, in terms of provision of law comprised under Rule 96ZO of the said Rules?
2) Whether the demand of duty was barred by law of limitation in terms of provision of law comprised under Section 11A of the said Act, bearing in mind the fact that appellant had opted for the scheme in terms of provisions of law comprised under Rule 96ZO of the said Rules?
3) Whether the appellant had established that there was no duty liability after 21.3.98 consequent to the alleged dis-possession?
4) Whether in the facts and circumstances of the case, the authorities are justified in imposing the penalty?
11. In Kedarnath Jute Mfg. case(supra), the Apex Court while dealing with the scope of section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 held that when exemption available to an assessee from payment of duty provides for a condition that a person claiming exemption shall furnish a declaration form in the manner prescribed under the statutory provision, any deviation therefrom under the guise of the liberal construction is not permissible as the same could facilitate the commission of fraud and may introduce administrative inconvenience. It was specifically ruled that presumably to achieve the twofold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the provision of law.
12. In Chandra Kishore Jha case(supra), the Apex Court held that it is well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner.
13. In Indian Aluminium Co. case(supra), the Apex Court while dealing with the requirement of declaration in a prescribed form in terms of Octroi Rules applicable to the area under jurisdiction of Thane Municipality in the State of Maharashtra held that the declaration contemplated in Form 14 is to the effect that the goods imported shall not be used for any other purpose, for sale or otherwise etc. It can thus be seen that an incentive sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilised in the industrial undertaking without selling or disposing of otherwise. That being the object, a verification at the relevant time by the octroi authorities becomes very much necessary before a concession can be given. In the absence of filing such a declaration in the required Form 14, there is no opportunity for the authorities to verify. Therefore the petitioner company has definitely failed to fulfil an important obligation under the law though procedural. The Apex Court also held that a concession has to be availed at the time when it was available and in the manner prescribed. Referring to the facts of the said case, the Apex Court held that the concession could have been granted only in a case where the raw material is used in the industrial undertaking and not otherwise. For that a verification was necessary and that is why in the rule itself it was mentioned that a declaration had to be filed in Form 14 in order to facilitate the verification. Failure to file the same would automatically disentitle the Company from claiming any such concession. The Apex Court therein had reiterated its earlier decision in Kedarnath Jute Manufacturing Cos case and it was specifically ruled that a dealer without filing a declaration in the prescribed form can not be later allowed to prove his case by producing other evidence.
14. In Venus Castings case(supra), the Apex Court while dealing with the scheme under Rule 96ZO and 96ZP held that Rules 96ZO and 96ZP provide for procedure to be followed by the manufacturer of ingots and billets and hot re-rolled products respectively. The scheme envisaged under these provisions is identical. These two Rules come into play after the Commissioner of Central Excise determines the annual capacity of the factory or mills manufacturing ingots or billets and hot re-rolled steel products under Section 3A of the Act read with the relevant annual capacity determination rules. Rules 96ZO and 96ZP proceed to lay down the manner of payment of duty, claim for abatement non-payment, payment of interest/penalty and such other incidental matters. Rule 96ZO classifies the manufacturers into two classes, those whose furnace capacity is 3 tonnes and other manufacturers with high capacity of furnaces. The rate of duty payable, except for period from 1-1-1997 to 31-3-1998 which was the transitional period, is Rs. 750/- per tonne, at the time of clearance. Total amount of duty should be paid by the 31st March of relevant financial year, otherwise interest at the rate of 18 per cent per annum is payable and if the duty has not been paid by this date penalty is also payable which is equal to outstanding duty or Rs. Five thousand whichever is greater. Sub-rule (2) thereof provides that if no ingots and billets are produced for a continuous period of seven days, the manufacturer may claim abatement by following appropriate procedure. Sub-rule (3) thereof envisages a composition method of payment of duty. Manufacturers of ingots and billets with furnace capacity of 3 tonnes have an option of paying duty of Rs. Five lakhs per month in two equal instalments prior to 15th of a month and by last date of that month. Such payment is treated to be in full discharge of duty liability. The Rule specifically excludes application of Section 3A(4). But manufacturers opting for this composite scheme cannot claim abatement. If the furnace capacity is less than or more than 3 tonnes payment of Rs. 5 lakhs can be varied on pro rata basis. The manufacturer opting for this composite scheme has to give a declaration to the Jurisdictional Assistant Commissioner as provided under the Rules. There are similar provisions in relation to hot re-rolled products. By reason of the assessee having exercised his desire of paying duty based on total furnace capacity the determination of annual capacity of production is not determined by the Revenue as the procedure adopted obviates determination of production. In the absence of determination of production the question of its determination on the basis of actual production as detailed in Section 3A(4) of the Act does not arise.
15. The Apex Court further held that The schemes contained in Section 3A(4) of the Act and Rule 96ZO(3) or Rule 96ZP(3) of the Excise Rules are two alternative procedures to be adopted at the option of the assessee. Thus the two procedures do not clash with each other. If the assessee opts for procedure under Rule 96ZO(1) he may opt out of the procedure under Rule 96ZO(3) for a subsequent period and seek the determination of annual capacity of production. An assessee cannot have a hybrid procedure of combining the procedure under Rule 96ZO(1) to which Section 3A(4) of the Act is attracted. The claim by the respondents is a hybrid procedure of taking advantage of the payment of lumpsum on the basis of total furnace capacity and not on the basis of actual capacity of production. Such a procedure cannot be adopted at all, for the two procedures are alternative schemes of payment of tax. (Emphasis supplied)
16. The Apex Court also held that the manufacturers, if they have availed of the procedure under Rule 96ZO(3) at their option, cannot claim the benefit of determination of production capacity under section 3A(4) of the Act which is specifically excluded.
17. In Mangalore Chemical and Fertilisers Ltd. (supra), the Apex Court held that There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve.
18. In Wood Paper Ltd. case(supra), the Apex Court held that when the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. It was also held therein that construction which result in inequitable results and is incongruous has to be avoided.
19. The Himachal Pradesh High Court in Spectra Electronics case(supra) referred to the decision of Apex Court in Indian Aluminium Co.Ltd. vs. Thane Municipal Corporation [1992 Supp (1) SC 480] while holding that even the procedural requirement of law are required to be fulfilled once they are found to be mandatory in nature.
20. If one peruses the provisions comprised under Rule 96ZO, the same prescribe in detail the procedure to be followed in the matter of valuation and payment of duty relating to manufacture of ingots and billets. Undisputedly, these provisions are in furtherance of the object to be attained in terms of Section 3A of the said Act. The Apex Court in Venus Casting (supra) has dealt with in detail about the procedure to be followed by the manufacture of ingots and billets in terms of Rule 96ZO and ZP. It has been specifically ruled therein that sub-rule (2) of 96ZO provides that if no ingots and billets are produced for a continuous period of 7 days, the manufacturer can claim abatement by following appropriate procedure as laid down under the said provisions of law. In terms of sub-rule (2) therefore, the manufacturer can claim abatement on account of continuous non-manufacture of concerned product for a period of not less than 7 days, subject however, to the fulfilment of conditions specified in the said sub-rule.
21. Sub-rule (3) of Rule 96ZO provides that in a case where manufacturer has total furnace capacity of 3MT installed in his factory, he may, if so desire, opt for payment of duty in the manner specified thereunder subject to compliance of the conditions specified in the said sub-rule. There is no dispute that the appellants had opted for payment of duty in terms of sub-rule (3) of Rule 96ZO. It is also not in dispute that during the period from 2.9.97 till 29.7.99, the appellants had not paid any duty in relation to the products manufactured in the concerned factory premises. The contention of the appellants in that regard is that the appellants had already applied for abatement claim on account of closure of the factory premises during the period specified under various intimation letters and the said claim was pending before the adjudicating authority. On the other hand, it is the contention of the Department that considering the mandatory nature of the provisions comprised under sub-rule (3) of Rule 96ZO, mere filing of such applications would not absolve the appellants from their responsibility to discharge liability under said provisions of law. The authorities below under the impugned order in relation to rejection of the abatement claim has held that the appellants had not complied with the conditions of sub-rule (2) of Rule 96ZO which deal with various requirements which are to be complied with for the purpose of availing abatement claim. It is also the contention on behalf of respondents that abatement claim cannot be entertained in view of the obligation of the manufacturer to clear the duty liability once the manufacturer has opted for payment of duty in terms of sub-rule (3) of Rule 96ZO.
22. The Rule 96ZO (2), as already seen above, deals with right of manufacturer to make abatement claim in the circumstances specified thereunder, subject to the conditions which are required to be fulfilled to avail such facility. The conditions prescribed thereunder are to the effect that manufacturer shall inform in writing about the closure to the Assistant Commissioner either prior to the date of closure or on the date of closure. He shall intimate the reading of the electricity meter immediately after the production in his factory has stopped alongwith the closing balance of ingots and billets of non-alloy steel; he shall inform in writing about the starting of production either prior to the date of starting the production or on the date of starting of production, he shall also intimate about the start of the production along with closing balance of stock on restarting of the factory and the intimation regarding the restarting of the production should be sent with a declaration that the factory had remained closed for a continuous period starting from the time to be specified along with the date and till the time along with the date, i.e. a period during which the factory has remained closed.
23 It is not in dispute that the appellants did not inform about the closure and starting of the factory in the manner it was required to be intimated in terms of sub-rule (2) of Rule 96ZO. The contention on behalf of the appellants is that there was substantial compliance of the provisions of law as intimation regarding non-functioning of the factory was duly communicated under the letters written from time to time.
24. A perusal of the letters about intimation of closure, particularly letter dated 2nd December, 1997 discloses that the same was presented in the office of Department only on 5th December, 1997. The letter dated 19th December, 1997 was presented on 23rd December, 1997. The letter dated 1.1.98 was presented on 2.1.98. The letter regarding restarting of the furnace dated 1.1.98 was presented on 5.1.98. The letter dated 9.1.98 regarding the closure was presented on 9th January itself. The letter dated 10.1.98 regarding the closure of furnace with effect from 10th January was presented on 12.1.98. The letter dated 12.1.98 regarding further intimation pertaining to the shutting down of furnace from 10.1.98 was presented on 12th January. The letter dated 27.1.98 regarding restarting of furnace was presented on the very day. Similarly, the letter of closing down of furnace from 4th of February was also presented on 4th February itself. Again the letter of restarting of furnace dated 18th of February was also presented on 18th February, itself. Perusal of these letters therefore, would disclose that some of the letters intimating the closure and/or commencement of functioning of furnace were sent on the very date on which the furnace was shut down or had commenced functioning. But in some cases, it was submitted on a day or two later than the date or subsequent to the day it was written.
25. As already seen above, the abatement claim in terms of 96ZO (2), has to be subjected to fulfilment of the conditions enumerated thereunder. Condition specifically provides that intimation of closure has to be either prior to the date of closure or on the date of closure. Similarly the intimation regarding restarting of production should be either prior to the date of actual commencement of production or on the date of commencement of production. Apart from these requirements, there are two other requirements specified under the said sub-rule and they relate (1) to the closing balance of stock of ingots and the billets of non-alloy steel at a time of closure as well as at a time of recommencement of production; and (2) the exact time of closure of factory and the timing at which the closure comes to an end. Undisputedly, some of the letters disclose the closing stock of ingots and other items with the appellant at a time of closure as well as recommencement of the furnace. The letters also refer to timing of closure or the commencement of the furnace. However, the letter dated 2nd December does not disclose exact time of the closure, apart from the fact that it was submitted on 5th of December though the closure was from 2nd December. Then, the letter dated 9th December informs shutting down of furnace from the following day at 8 hours but does not disclose the closing stock. The letter dated 1st January regarding recommencement of furnace disclose the time to be of 8 hours on 1st January. However, it was submitted on 2nd January and does not disclose the opening stock. The letter dated 1st January which was submitted on 5th January disclose that the furnace had restarted at 8 hours on 1st January and it also refers to the closing stock at the time of start of the furnace. The letter dated 9th January is regarding the closure of furnace from 10th January at 8 hours but it does not disclose the balance stock. The letter dated 12th of January informs closure of furnace from 10th January at 8.30 hours and refers to closing stock. The letter dated 27th of January is about commencement of furnace from the very date at 8.30 hours. But it does not disclose the opening stock. The letter dated 4th of January is about shutting down of furnace from 4th of February at 7.10 hours and disclose the closing stock. It was submitted on the very day. The letter dated 3rd February was submitted on 5th February regarding shutting down of furnace from 4.2.98 at 8 hours. The letter dated 18th of February is about restarting of the furnace but on the very day at 8 hours but it does not disclose the opening stock. In other words, except letter dated 4th February, 1998, no other letter is complete in respect of all the information as is required to be furnished under sub-rule (2) of Rule 96ZO. But the contents of the letter dated 4th February do not tally with the contents of letter dated 3th February in relation to the time of closure of furnace from 4th February, 1998. It is pertinent to note that the letter dated 4th February was presented on 4th February itself but letter dated 3rd February was submitted on 5th February. While the first letter speaks of closure from 7.10 hours, subsequent letter speaks of closure from 8 hours.
26. It is to be noted that requirement of intimation regarding the date and timing of the closure and recommencement of production is not an empty formality. It is with the specific purpose for proper check and control by the Revenue authorities to ensure proper supervision and to avoid evasion of payment of the duty in respect of production by the manufacturer. The requirement of timing and date along with closing and opening balance of stock would reveal that sufficient material is required to be placed at the disposal of the Revenue authorities in order to enable them to verify whether any clandestine production is in progress which may result in clandestine removal of the products by evading the duty thereon. The exact time regarding the commencement and closure and corresponding information regarding the availability of stock required for the utilisation of the manufacture of the product, all those information can help revenue authorities to ascertain the exact amount of production during the time factory is in operation.
27.. The contention on behalf of the appellant that it is a procedural requirement and therefore, bearing in mind the law laid down by the Apex Court in Managalore Chemical & Fertilisers Ltd., the same cannot be construed as mandatory requirement and a substantive compliance thereof should be construed as sufficient to enable the manufacturer to avail the benefit thereunder, cannot be accepted. The Apex court has nowhere held that requirement of the nature of conditions provided under sub-rule (2) of Rule 96ZO are non-mandatory in nature, nor the Apex Court has held that every procedural requirement to be considered as non-mandatory.
28. The Apex Court in Managalore Chemical & Fertilisers case(supra) was dealing with a notification issued by Government of Karnataka under section 8A of the Karnataka Sales Tax Act, 1957 for giving certain incentives to entrepreneurs by starting new industries in the State, pursuant to States policy for rapid industrialisation. In that case, one of the entrepreneurs who had applied for benefit under said notification was not granted the same on account of certain outstanding inter-departmental issues between Department of Sales Tax and the Department of Industries regarding the final impact of concession. In the process, the time limit during which the benefit was available lapsed and a question arose whether grant of exemption could at all be made after the period itself had expired. The Revenue authorities were against the grant of such benefit after the period. The Apex Court in that connection held that the stand of the Revenue suffers from certain basic fallacies, besides being wholly technical. In Kedarnaths case, the question for consideration was whether the requirement of the declaration under the proviso to Section 5(2)(a)(ii) of the Bengal Finance (Sales-Tax) Act, 1941 could be established by the evidence aliunde. . The Court said that the intention of the legislature was to grant exemption only upon the satisfaction of the substantive condition of the provision and the condition in the proviso was held to be of substance embodying considerations of policy. Shri Narasimhamurthy would say the position in the present case was no different. He says that the notification of 11th August, 1975 was statutory in character and the condition as to prior permission for adjustment stipulated therein must also be held to be statutory. Such a condition must, will be equated with the requirement of production of the declaration form in Kedaranaths case and thus finds some consequences that would ensue for the non-compliance. Shri Narasimhamurthy says that there was no way out of this situation and no adjustment was permissible, whatever be the other remedies of the appellant There is a fallacy in the emphasis of this argument. The consequence which Shri Narasimhamurthy suggests should flow from the non-compliance would, indeed, be the result if the condition was a substantive one and one fundamental to the policy underlying the exemption. Its stringency and mandatory nature must be justified by the purpose intended to be served. The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve. (emphasis supplied)
29. Plain reading of the decision of the Apex Court in Managalore Chemical & Fertiliser case(supra) therefore reveals that Apex Court has clearly held that the conditions attached to any exemption notification are concerned, the right of assessee to avail such exemption should be considered on the basis of the purpose which is intended to be served by compliance of conditions attached to such exemption notification. The Apex Court in Managalore Chemical & Fertiliser case has clearly held that the authorities are required to ascertain the stringency and mandatory nature of the notification on the basis of purpose which is intended to be served by the condition attached to the notification. The expression There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure cannot be read dehors the context in which the said observation has been made by the Apex Court in the facts and circumstances of the case before it. It is true that in most of the cases, the conditions relating to a procedure can be construed as non-mandatory, but it is not an universal rule and it would depend upon the nature of the conditions and purpose which is intended to be attained by enforcing such conditions. In tax matters, if the condition is essentially to enable the authority to have check over clandestine production and clandestine removal of the goods, than by no stretch of imagination such a condition can be said to be non-mandatory. It is to be construed as mandatory.
30. A bare perusal of the conditions imposed for the purpose of pursuing abatement claim under sub-rule 2 of Rule 96ZO, as already observed above, is to have proper check over evasion of excise duty and to eliminate the possibility of clandestine production and clandestine removal of the goods. Bearing the same in mind, the intimation given by the appellant under the various letters which did not disclose the due compliance of the requirement of sub-rule (2) of Rule 96ZO, it cannot be said that the appellant had established his case of abatement claim. The findings arrived at by the Revenue authority, in this regard, also disclose non-compliance of the said conditions. Obviously, the failure on the part of the appellants to comply with these conditions with the required strictness in the matter has resulted in not having proper check over possible clandestine production in the factory of the appellants.
31. That apart, as rightly submitted by the learned SDR Apex Court in Venus Casting case has clearly held that manufacturers opting for composite scheme cannot have abatement claim. It has been further held that the manufacturers, availing procedure under Rule 96Z(3) at their option, cannot claim abatement of production capacity under section 3A (4) of the said Act as the same is specifically excluded. Undoubtedly, the decision of the Commissioner has not been on the basis of law laid down by the Apex Court in Venus Casting case in this regard. However, that being the law laid down by the Apex Court, it is binding on the Courts and Tribunals in the country. Being so, apart from the fact that materials on record do not disclose compliance of sub rule (2) of Rule 96ZO of the said Rules, even otherwise, in view of the fact that the appellant had opted for procedure under Rule 96ZO (3) at their option, the question of taking resort to sub-rule (2) and to make the abatement claim does not arise at all.
32. The first point for consideration is therefore, has to be answered in negative and against the appellants and is accordingly answered .
33. As regards the demand of duty it is seen that the same has been confirmed for the period from 2.9.97 to 6.4.98 and further from 14.7.99 to 29.7.99, after giving crediting the amount already paid, the balance due has been confirmed to be Rs. 15,91,398/-. It is pertinent to note that the issue regarding limitation in terms of Section 11A of the said Act was neither raised before the lower authorities nor even in the memorandum of appeal filed in this Tribunal. In fact, the point was sought to be raised for the first time in the course of arguments. The point of limitation is not a pure question of law. It is essentially mixed question of law and facts. The point of limitation would depend upon the facts which could reveal whether the action had been initiated within a period prescribed for the same or not. For that purpose, the date on which the cause for initiating action had arisen is of great importance. Fixing of such date would depend upon the facts of each case. Consequently, therefore, the issue of limitation cannot be held to be a pure question of law. Such an issue requires to be specifically raised at the earliest opportunity. The party required to answer the issue must have opportunity to defend the same with necessary evidence in support of its defence. Even otherwise, there is no substance in the point sought to be canvassed.
34. It is the contention on behalf of the appellants that taking into consideration the provisions of section 11A of the said Act, the demand of duty is barred as it relates to a period of more than one year prior to issuance of show cause notice. Undisputedly in the case in hand, the show cause notice was issued on 29.8.02 in relation to the period from September, 1997 to July, 1999. Being so, apparently if we accept the contention on behalf of the appellants, the notice will have to be held as barred under Section 11A of the said Act. However it is the contention of the learned SDR that provisions of section 11A are not at all attracted in the facts of the case. It is contended that proceedings in terms of Rule 96ZO are independent from other provisions of the Act and in that regard reliance is sought to be placed in the decision of the Tribunal in Mohinder Steels Ltd. case (supra). The Larger Bench of the Tribunal in Mohinder Steels Ltd. case while dealing with the issue as to whether the provision of time limit prescribed under section 11A of the Central Excise Act are applicable to the recovery of amounts due under the compounded levy scheme for hot rerolling steel mills, while observing that Rule 96P contains detailed provisions regarding time and manner of payment and also contains provision relating to payment of interest and penalty in the event of delay in payment or non-payment of dues and that there is a comprehensive scheme thereunder which excludes general provisions of Central Excise Act and Rules and held that Time limit prescribed for one scheme could be wholly inappropriate for another scheme and time limit under Section 11A has no exception. Therefore, in the light of judgement of Apex Court in the case of Venus Casting and Raghuvar (India) Ltd., we hold that recoveries of amounts under the compounded levy scheme for re-rollers is not covered by the general time limit prescribed under section 11A of the Central Excise Act.
35. In Raghuvar (India) Ltd. case(supra), the Apex Court while considering the scope of Rule 57 I of the Central Excise Rules, 1944 had held that any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and therefore must be specifically enacted and prescribed therefore. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the said Act or the Rules framed thereunder but will be attracted only to cases where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded. The section also provides for an extended period on certain contingencies and situations. The situation which has to be dealt with under Rule 57-I as it stood unamended would not fall under any of those contingencies provided for in Section 11A of the Act. In Venus Casting case, the Apex Court had clearly ruled that Section 3A empowers Government to charge excise duty on the basis of capacity of production in respect of notified goods.
36. Considering the said two decisions of the Apex Courts, the Larger Bench of this Tribunal in Mohinder Steels case, as seen above, has clearly ruled that the time limit prescribed under section 11A would not be attracted in relation to scheme under Rule 96ZO. Being so, we do not find any substance in the objections sought to be raised on the ground of bar of limitation under Section 11A of the said Act.
37. The second point of consideration therefore, has to be answered in negative and against the appellants, and is accordingly answered.
38. The proviso to sub-rule (3) of Rule 96ZO clearly specifies the rate of interest to be charged on account of delay in payment of duty in terms of sub-rule (3) of Rule 96ZO. Obviously, therefore, the rate of interest in the impugned order has to be in terms of said provisions of law.
39. As regards the duty liability after 21.3.98, it is the contention that the appellants could not have been compelled to pay the duty from that date as the appellants were dis-possessed from the premises. In that regard, attention is drawn to letter dated 21.3.98 written by the appellants and addressed to the Asstt. Commissioner of Central Excise. The said letter dated 21.3.98 reads thus:
Assistant Commissioner of Central Excise Central Excise Division, Dandi Swami Chowk, Ludhiana.
Sub: Intimation for close down of M/s. Mittal Alloys C/o Ishar Alloys (P) Ltd.
Sir, This is to inform you that our unit has been forcefully closed down by Directors of ISHAR ALLOYS (P) LTD. w.e.f. 21.3.98 and since than there is no production in the unit. Even our accounts books and other Excise records which were lying in the factory premises at MITTAL ALLOYS are in the custody of M/s. ISHAR ALLOYS (P) LTD. and kept by them under lock and key. As at present there is deadlock and there is no possibility of production to resume in rear future. We shall intimate you the progress as & when we arrive at some decision taking point. This is for your kind information and record.
Thanks Yours faithfully For MITTAL ALLOYS Sd/-
PARTNER PLACE: LUDHIANA Dated: 21.3.98 C.C. The Superintendent Central Excise Range V, Ludhiana
40. Plain reading of the letter quoted above would disclose that it does not anywhere deal with the issue of alleged dispossession of the appellants from the premises. The said letter refers to the closure of the premises. In other words, at the most, it could have been treated as an intimation of closure of factory. It is also pertinent to note that inspite of ample number of opportunities given to the appellants, they failed to appear before the authority. In other words, even assuming that the appellants wanted to contend that letter dated 21.3.98 was in respect of intimation pertaining to dis-possession of the appellants from the premises, there was no occasion for the authority to read any such thing in the said letter in the absence of proper explanation in that regard in the matter as admittedly no such explanation as regards the said letter dated 21.3.98 was ever forwarded to the Revenue authorities. Besides, as already stated above, the provision of sub-rule (2) of Rule 96ZO are not attracted in the case of appellants factory in question. Being so, we wonder as to how the letter dated 21.3.98 could convey and establish the claim of alleged dis-possession from the factory premises. Besides, the question of dispossession from the factory premises is a question of fact to be established by producing proper evidence in that regard on record. It cannot be by way of inference to be drawn from the letter dated 21.3.98.
41. In any case, the authorities on their part having noted letter dated 21.3.98, had made necessary inquiries and ascertained that electricity connection of the factory was temporarily disconnected on 7.4.98 on account of non-payment of power dues for the month of March, 98. Further, the power connection was dis-connected permanently on 28.4.98 for non-clearance of outstanding dues and it remained disconnected for the period from 29.4.98 till 14.7.99. The power company or PSEB raised bills of minimum charges to the tune of Rs. 1.36 crores. On 14.7.99, the power connection was restored and the furnace restarted on the very day.
42. The departmental authorities thus ascertained the fact that the power supply to the premises remained disconnected from 7.4.98 till 13.7.99 and excluded the said period from the duty liability of the appellants. This is apparent from the para 4.7 read with 4.4 and 4.6 of the impugned order.
43. Being so, the third point for consideration has also to be answered in negative and against the appellants, and is accordingly answered.
44. The last point for consideration is on account of penalty. The impugned order discloses the imposition of penalty to the tune of amount of duty demanded. It is the contention of the appellant that the facts on record do not disclose intention to evade the payment of duty but the circumstances which could not enable the appellant to continuously manufacture the product and therefore, it is not a fit case for levy of penalty. He also submitted that there were already applications filed for abatement claim and this aspect ought to have been considered while dealing with the aspect of penalty. On the other hand, the learned SDR submitted that there is no discretion left to the authorities in the matter for imposition of penalty and hence according to the learned SDR the imposition of penalty does not warrant interference in the facts of the case. Attention is also drawn in this regard to the decision of the Apex Court in Dharamendra Textile Processors case(supra).
45. In the matter in hand, records apparently disclose that the appellant had been pursuing the remedy under sub-rule(2) of Rule 96ZO i.e. abatement claim, that the appellants were not able to establish the claim is totally different thing. It has also been the case of the appellant right from the beginning that there was stoppage of production intermittently as also disturbance to the production by some other company M/s. Ishar Alloy (P) Ltd. Undoubtedly, the Revenue authorities do not appear to have considered all these aspects while dealing with the matter of imposition of penalty. It is however, submitted on behalf of the respondent that there is no discretion left for the authorities and once the manufacturer is found to have defaulted, consequence provided under the statute would have follow and result in imposition of penalty. It has also to be noted that the Apex Court in Dharamendra Textile Processors case has clearly ruled that the concept of discretion in the matter of imposition of penalty is foreign to the proceedings under Rule 96ZO. However, one aspect is required to be considered and that is the provision regarding penalty in relation to the default in payment of duty under Rule 96ZO (3) was introduced by way of amendment to the said Rules which came into force with effect from 1.5.98. Considering the same, it is the contention on behalf of the appellant that penalty, if at all, could be levied for the period from 14.7.98 and thereafter and not prior to that. The learned SDR however, submits that the proviso to sub-rule (3) of 96ZO required the arrears of duty to be paid by 10th March, 98 failing which the manufacturer would be liable to pay the penalty.
46. At the outset, it is to be noted that all these arguments which are adduced on the basis of amendment of sub-rule (3) of 96ZO were not canvassed before the original authority either by the appellant or the respondent nor the impugned order disclose application of mind by the adjudicating authority in that regard. It is for the first time, and that too at the time of disposal of the appeal, the issue is sought to be raised. Nevertheless, the fact remains that the proviso requires the manufacturer to clear the dues by 30.4.98 and at the same time it is not in dispute that amended part of the rule and notification came into force with effect from 1.5.98. It is nowhere on record that appellant had opportunity to know the contents of those provisions prior to 1.5.98. In order to apply any penal provision it is necessary that party should get the opportunity to defend its right in that regard. This proviso was not applied to the matter in hand at the original stage and on the basis of such amended provision, the Revenue wants to saddle appellants with the penalty. The same cannot be allowed unless it is established by the department that the appellants had opportunity to know the amended notification. Being so, in our considered opinion, mere failure on the part of the appellant to clear the dues by 30.4.98 in terms of such proviso could not warrant levy of penalty as the said amendment had come into force on 1.5.98 and whatever dues remained after 1.5.98, those could be subject to levy of penalty. In this view of the matter, the penalty imposed in relation to the amount of duty demanded for the period starting from 2.9.97 to 6.4.98 amounting to Rs.13,33,334/-, the same could not be imposed. The penalty would be leviable only in relation to the amount of duty for the period from 14.7.98 to 29th July, 99 to the extent of Rs.2,58,064/-. The fourth point for consideration is answered accordingly.
47. As no other point is canvassed, and for the reasons stated above, the appeal partly succeeds. The appeal against the order of rejection of abatement claim stands dismissed and the appeal against the order of demand of duty and interest also stands dismissed. The appeal as far as the penalty is concerned, it stands partly allowed to the extent of amount of penalty of Rs.13,33,334/-. The impugned order regarding the penalty is, therefore, modified by reducing the penalty to Rs.2,58,064/- (Rupees Two lakh fiftyeight thousand and sixtyfour only) instead of Rs.15,91,398/- (Rupees Fifteen lakh, ninetyone thousand, three hundred and ninetyeight only). Rest of the impugned order is not interfered with.
48. The appeals accordingly stand disposed of in the above terms.
( Justice R.M.S. Khandeparkar ) President ( M. Veeraiyan ) Member(Technical) ss