Customs, Excise and Gold Tribunal - Delhi
Tibrewal Industries vs Collector Of Central Excise on 13 February, 1990
Equivalent citations: 1990(30)ECR292(TRI.-DELHI), 1991(55)ELT130(TRI-DEL)
ORDER
G. Sankaran, Sr. Vice-President
1. This is an appeal against the Order-in-Original No. 49 (4006.10) CE/87-Addl. Collr.-14/89 dated 28.2.1989 passed by the Additional Collector of Central Excise, Bhubancswar.
2. By the impugned order, the Additional Collector of Central Excise:
i) held that the product "Tread Rubber" manufactured by the appellants was classifiable under Item No. 16A(2) of the First Schedule to the Central Excises and Salt Act, 1944, as it stood till 28.2.1986 and under sub-heading 4006.10 of the Schedule to the Central Excise Tariff Act, 1985 from 28.2.1986;
ii) confirmed a demand for duty amounting to Rs. 69,846.85 towards Central Excise duty payable on the aforesaid product cleared from 16.8.1985 to 30.12.1986, holding that the extended period for demand of duty in terms of Section 11A of the Central Excises and Salt Act was appllicable to the case;
iii) confirming the valuation of the product as set out in the show cause notice as the value for the purpose of assessment and demand of duty;
iv) held that the appellants were liable to pay duty on the product at the tariff rate (that is, the rate set out in the Central Excise Tariff Schedule) since the appellants did not fulfil the conditions set out in Central Excise Notification No. 184/85-CE or 232/85-CE, as amended; and
v) imposed a penalty of Rs. 5000/- on the appellants under Central Excise Rules 9(2), 52A(5), 173Q and 210, for contravention of several provisions of the Central Excise Rules.
3. We have heard Shri B. B. Ahuja, Advocate, for the appellants and Shri V. Chandrasekharan, DR, for the respondent.
4.1 Central Excise Notification No. 85/85 dated 17.3.1985 issued by the Central Government under Central Excise Rule 8(1), in supersession of Notification No. 83/83-CE dated 1.3.1983, exempted inter alia rubber products falling under Item No. 16A of the Central Excise Tariff Schedule from the whole of the excise duty leviable thereon up to an aggregate value not exceeding Rs. 7.5 lakhs in the case of first clearances of the goods and from excise duty in excess of 25% of the duty leviable in the case of clearances over, and immediately following, the aforesaid limit but not exceeding another Rs. 7.5 lakhs. There was exemption on a graded scale in respect of further slabs of clearances which are not relevant for our present purpose. There were several conditions set out in the notification. The condition with which we are concerned is that the exemption was applicable to a manufacturer if he filed a declaration with the Assistant Collector of Central Excise that the aggregate value of clearances of all excisable goods by him or on his behalf, for home consumption, from one or more factories, during the financial year was not likely to exceed Rs. 75 lakhs, and if the aggregate value of clearances of all excisable goods by him or on his behalf, for home consumption, from one or more factories, during the financial year did not exceed Rs. 75 lakhs. By amending Notification No. 183/85-CE, dated 9.8.1985, serial number 20 of the Schedule appended to the Notification No. 85/85 reading:
"Rubber Products"
was substituted by the following entry:
"Rubber Products (other than tread rubber and camel back) The effect of this amending notification was that tread rubber and camel back which, till 8.8.1985, were eligible for exemption in terms of Notification No. 85/85, were from 9.8.1985 taken out of the purview of the exemption.
4.2 Simultaneously, another Notification No. 184/85-CE, dated 9.8.1985 was issued specific to tread rubber and camel back. This notification exempted these two products up to a value of Rs. 7.5 lakhs cleared for home consumption, by or on behalf of a manufacturer from one or more factories, or from any factory by or on behalf of one or more manufacturers, during a financial year from the excise duty leviable thereon as was in excess of the amount calculated at 12% ad valorem. This exemption, again, was subject to several conditions set out in the notification. Relevant for our purpose is the one which stated that the exemption contained in the notification shall be applicable to a manufacturer only if he filed a declaration with the Assistant Collector that the aggregate value of clearances of tread rubber and camel back by him or on his behalf, for home consumption, from one or more factories, during the financial year was not likely to exceed Rs. 7.5 lakhs and if the aggregate value of such clearances during the financial year did not exceed Rs. 7.5 lakhs.
4.3. Notification No. 184/85-CE, dated 9.8.1985 was superseded by Notification No. 232/85-CE dated 14.11.1985. This latter notification was also specific to tread rubber and camel back. Unlike the previous notification, this notification provided for two different concessional rates of duty for two different slabs of clearances 12% ad valorem in respect of the first clearances up to Rs. 7.5 lakhs and 18% ad valorem in respect of the next clearances up to Rs. 17.5 lakhs. Again, the requirement of declaration was set out.
5. Though the learned Counsel and the learned D.R. addressed arguments on several aspects of the dispute, we propose first to deal with the aspect of limitation. As noted earlier, the notice of demand covered the period from 16.8.1985 to 30.12.1986. The notice was dated 13.10.1988 and was received by the appellants on 5.11.1988. Therefore, with reference to the normal period of limitation, namely, 6 months from the relevant date, as set out in Section 11A of the Central Excises and Salt Act, the demand notice was clearly barred by limitation. It would, however, be within limitation if the Department could allege and establish that the short-levy or non-levy was the result of suppression of material facts, misstatement of facts, collusion or fraud on the part of the appellants or contravention of the provisions of the Central Excise Rules with intent to evade duty. If the Department succeeds in this respect, the demand would be within limitation, it having been served within 5 years from the relevant dates.
6. The facts relevant for a proper decision on the aspect of limitation may now be set out. The appellants were granted a certificate dated 26.11.1985 by the District Industries Centre, Sundargarh (page 45, paper book) certifying their registration as a small scale industrial unit for the manufacture inter alia of tread rubber. The Rubber Board, Kottayam issued on 2.5.1985 a licence in favour of the appellants to acquire a specified quantity of rubber during the period from 1.4.1985 to 31.3.1986. A similar licence was issued on 26.2.11986 for the period from 1.4.1986 to 31.3.1987. It is true that the appellants did not make a declaration before the Central Excise authorities nor take out a Central Excise licence nor observe the provisions of Central Excise Rules and procedures. But the question is whether, in the face of the circumstances narrated above, it could be said that the appellants engaged themselves in clandestine manufacture and clearance of tread rubber with intent to evade payment of duty thereon, in the process suppressing material facts from the Central Excise department. In this connection, it has to be noted that the total value of clearances in respect of which duty has been demanded by the Additional Collector in the impugned order is Rs. 1,81,389/- spread over a period from 16.8.1985 to 30.12.1986. This value of clearances was well within the concessional duty exemption slab of Rs. 7.5 lakhs as in force during the currency of Notification No. 184/85, that is, from 9.8.1985 to 13.11.1985. From 14.11.1985 also, duty continued to be leviable at 12% ad valorem on clearances up to Rs. 7.5 lakhs. The admitted position is that the appellants did not make a declaration, did not take a licence and did not observe the provisions of the Central Excise Rules and procedures. The question would, therefore, be whether from these circumstances the ingredients spelt out in the proviso to Section 11A(1) of the Central Excises and Salt Act could be inferred so as to enable the department to demand duty beyond the normal period of six months. The only thing held against the appellants was that they did not file a declaration as required under the notification. But for the non-declaration, there is no dispute about the admissibility of duty concession. We are, therefore, of the opinion that the fact of non-declaration would not take away the entitlement to the concession. Non-declaration could be visited with penal action if justified in terms of the provisions of law. In respect of the subsequent period, the Additional Collector has held that the declaration was mandatory and since the appellants did not take out a licence and intimate the department about the manufacture of tread rubber and did not follow the stipulated procedures, there was wilful suppression of the fact of manufacture with intent to evade payment of duty.
7. As we have noted, the manufacturing activity of the appellants was not clandestine. They were registered with the District Industries Centre as a small scale unit. They had applied for and secured licences from the Rubber Board for acquiring rubber. Till 8.8.1985, no duty was payable on the goods and the change effected by Notification No. 184/85 dated 9,8.1985 was a mid-term change. The changes occurred in quick succession on 17.3.1985, 9.8.1985 and 14.11.1985. We are, therefore, inclined to give the benefit of the doubt to the appellants and accept their explanation that they were under a bona fide belief that they were not liable to pay duty, take out a Central Excise licence, make declarations and observe the prescribed formalities. These lapses did not amount to deliberate suppression of material facts or wilful intention of law with intent to evade payment of duty. We are fortified in this view by the observations of the Supreme Court in its judgment in the case of Collector of Central Excise v. Chemphar Drugs & Liniments , wherein the Court observed as follows:
Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months.
8. In the above view of the matter, we set aside the demand for duty contained in the impugned order. On the facts and in the circumstances of the case and in view of our finding regarding 'evasion' of duty, we set aside the penalty also. In the result, the appeal is allowed.