Customs, Excise and Gold Tribunal - Delhi
Century Cement vs Collector Of Central Excise on 10 August, 1992
Equivalent citations: 1996(82)ELT610(TRI-DEL)
ORDER N.K. Bajpai, Member (T)
1. This is an appeal against the orders of Collector of Central Excise, Raipur demanding a duty of Rs. 27,15,029.76 from the appellants under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises & Salt Act on Crushed Lime Stone consumed by them in their factory in the manufacture of cement during the period 20th March, 1990 to 16th September, 1990. The order has also been challenged on the ground of imposition of penalty of Rs. 3 lakhs under Rule 173Q ibid. On an application for dispensing with the pre-deposit of duty and penalty under Section 35F of the Act, filed by the appellants, the Tribunal had, vide its Stay Order No. 75/92-C, dated 18th March, 1992 decided that upon deposit of an amount of Rs. 14 laces towards duty, the requirement of deposit of the balance amount of duty and full amount of penalty shall stand waived till the disposal of the appeal. Thereafter, the appellants filed a Writ Petition in the High Court of Madhya Pradesh at Jabalpur some time in the month of April, 1992 challenging the order of the Tribunal requiring pre-deposit of duty whereupon the following order was passed by a Division Bench of the High Court on 23rd June, 1992 :-
"M.P. No. 1588/92:-
Petition by Shri Abhay Sapre. He is heard on the question of admission.
Having regard Shri Sapre, we think this petition can be disposed of at this stage itself.
The writ petition is rejected, but we must observe that respondent No. 1, Appellate Tribunal Customs, Excise & Gold (Control) shall dispose of the appeal pending before it as soon as possible, preferably within a period of three weeks from receipt of this Court's order. C.C on usual terms".
2. It is seen from the records that on 26th May, 1992 the appellants deposited an amount of Rs. 14 laces in the Central Bank of India, Civil Lines Branch, Raipur in pursuance of the Stay Order, dated 18-3-1992 of the Tribunal.
3. In pursuance of the orders of the High Court, the appeal was taken up for hearing on a priority basis and it was heard on 31st July, 1992. The following questions arise for our consideration :-
(a) Whether Limestone became liable to duty after Notification 448 /86- C.E., dated 30th November 1986 exempting Limestone from duty was rescinded on 20th March 1990 by Notification 86/90-C.E., dated 20th March, 1990, till it was once again exempted by issue of Notification 143/90-CE, dated 17th September, 1990. Thus, the question is whether limestone became liable to duty during the intervening period from 20th March 1990 to 16th September 1990.
(b) Whether the allegation of deliberate evasion of duty can, on the basis of the facts stated in the show cause notice, dated 7th May 1991 be sustained against the appellants whereby the extended time limit stipulated under the proviso to Section 11A(1) of the Act [Vol. 82 has been invoked.
(c) Whether, in the circumstances' of the case the appellants had rendered1 themselves liable to penalty under Rule 173Q and .Whether the penalty of Rs.: 3 laces imposed on. them is reasonable.
4. We have heard Shri D.Dave, the learned Counsel for the appellants and Smt.Artariya Ray, the learned Departmental Representative for the respondent-Collector.
5. Shri Dave submitted that since "Lime" was specifically covered by Entry 2505.00, and this is the sub-heading under which the authorities have sought,to levy duty on crushed limestone which does not find a specific mention in the sub-heading, the duty liability as well as the benefit of exemption must necessarily flow from the,same entry namely lime. He referred to the provision of Section 20 of .the General Clauses Act, 1897 and submitted that in terms of this provision the, expression used in the exemption notification shall have the same meaning as in the Act under which the Notification is issued. Notification 16/90-CE., dated 20th March l990 was issued under Section 5A of the Central Excises and Salt Act and: the word "Lime" appearing in subheading 2505.00 in the Schedule to the Central Excise Tariff Act should by virtue of the definition of "excisable goods appearing in Section 2(d) of the Act should have the same meaning. He, therefore, contended that since duty was being demanded on crushed lime stone by virtue of the fact that it falls in the definition of "Lime", the appellants would also become entitled to the exemption under Notification 16/90 by the same token. To a question from the Bench that if this was the correct interpretation, why did it become necessary for the Central Government to issue a notification1 under Section 11C of the Act for the period 28-3-1986; to 12-11-1986 and to exempt limestone by Notification 448/86, dated 13-11-1986, and subsequently by; Notification 143/90, dated 17-9-1990, Shri Dave replied that this was done by way of abundant caution. His contention was that the legislature at all times intended to exempt "limestone" from excise duty and it became necessary to issue Notification merely to clarify the legislative intent. In this context, he referred to the decision of the Tribunal in the case of Steel Authority of India Limited v. Collector of Central Excise [1991 (54) E.L.T. 414] in which it was decided that crushing of limestone into lime fine did not amount to manufacture in terms of the definition of manufacture as given in Chapter Note (2) of Chapter 25 of the Central Excise Tariff Act. He fairly submitted that there was a contrary decision of the Tribunal in the case of Ajanta Marble and Chemical Industries v. Collector of Central Excise - 1991 (53) E.L.T. 457. While the decision in the case of SAIL (supra) is dated 6th February 1991, the decision in Ajanta Marbles case (supra) is dated 21st December 1990 and when the latter case was decided the ratio of the former was not cited before the Tribunal. It can, therefore, be said, argued Shri Dave, that it was per incur am the statute and also the decision of the Supreme Court in the case of Bhor Industries Limited v. Collector of Central Excise - 1989 (40) E.L.T. 280 (SC). The Supreme Court had held that in order for the goods to be dutiable, it was necessary that they should be marketable, and since crushed lime which was further used in the manufacture of cement in the appellants' own factory was not marketable, there should be no liability to duty on it in terms of Bhor Industries judgment (supra). He read out the following portion from this judgment:-
"After considering the definition of the word manufacture', and several, authorities and Words and Phrases, Permanent Edition, Vol. 18, from a judge-, ment of the New York Court and also other relevant authorities, this Court held that the definitions made it clear that to become "goods", an article must be something which can ordinarily come to the market to be bought and sold. (Emphasis supplied). In that view of the, matter this Court agreed, with, the High Court and dismissed the appeal. Therefore, the first principle that emerges is that Excise was a duty on goods specified in the Schedule. In order to be goods, an article must be something which can ordinarily come to the market and is brought for sale and must be known to the market as such. Therefore, the marketability in the sense that the goods are known in the market or are capable of being sold and purchased in the market is essential."
6. As regards the allegation of 'intention to evade payment of duty', Shri Dave contested it by saying that they had maintained a truthful account of limestone which was used as a raw material in the Form IV Account and there could, therefore, be no suppression of facts against them. He referred to the decision of the Supreme Court in the case of Padmini Products v.' Collector of Central Excise - 1989 (43) E.L.T. 195 (SC), in which it was held that something positive other than mere inaction or failure on the part of the manufacturer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability beyond the period of six months. Shri Dave contended that in the facts of this case when the appellants were maintaining a truthful account of limestone in the prescribed form, it could not be said that they were guilty of any action with intent to evade payment of duty.
7. Arguing for the respondent-Collector, Smt. Ananya Ray, the learned Senior Departmental Representative submitted that the question for determination by the Tribunal was whether limestone was covered by the entry "lime" in Notification No. 16/90. She referred to the Condensed Chemical Dictionary, (Tenth Edition), Revised by Gessner G. Hawley and submitted that while the chemical composition of limestone was Calcium Carbonate, that of lime was Calcium Oxide. Lime was obtained by roasting of limestone by which Carbon-Dy-Oxide was removed. Thus, chemically lime and limestone were two different articles. She disputed Shri Dave's claim that the entry "lime" in Notification 16/90 would cover limestone too. She also distinguished the judg-ment of the Tribunal in the case of SAIL (supra) and submitted that it was not applicable to the present case inasmuch as it referred to crushing of limestone into lime fine and not to limestone. The decision most appropriate to the present case was that of Ajanta Marbles (supra) in which it was held that crushing of limestone to obtain limestone chips and powder amounts to manufacture in terms of Note (2) of Chapter 25. In particular, she referred to paragraph of the judgment in which it was clearly held that limestone chips and limestone powder which emerged after crushing, grinding and sieving of limestone, brings into existence a new product which has a different name, character and use and is also traded besides being put to different vises. With such a finding in Ajanta Marbles case. being on record the argument of Shri Dave that crushed limestone did not pass the test of marketability laid down by the Supreme Court in Bhor Industries case (supra) could not be accepted.
8. On the question of extending the time limit beyond six months, Smt. Ananya Ray submitted that there was an allegation in the show cause notice that the appellants used to crush limestone in the crushers within their factory premises and this fact had not been brought to the notice of the Central Excise Authorities. They had neither obtained the Central Excise licence nor followed the provisions of the rules in respect of crushed limestone manufactured and consumed within their factory for further manufacture of cement. Such conduct on their part was with the intention to evade payment of duty. She submitted that Shri Dave's argument that an officer of the Department was posted within the appellants' factory and the entire working of the factory was supervised and scrutinized by the officer was a total mis-reading of the provisions of the law inasmuch as the appellants' unit was functioning under the Self Removal Procedure and the stationing of the Central Excise Office within the factory premises did not mean that the officers exercised any supervision whatsoever over their activities. She referred to the decision of the Tribunal in the case of British India Corporation Limited, Dhariwal v. Collector of Central Excise, Chandigarh - 1986 (25) E.L.T. 727 (Tri.), in paragraph-7 (ii) of which the Tribunal had held as under: -
"...Under the production based control, the visits by the Central Excise Officers are selective and are usually in exercise of a particular check or intended to collect a particular information. The entire gamut of an assessor's operations may not come to the knowledge of the visiting officer during such selective checks. The officers were, no doubt, receiving D-3 intimations regarding receipt of duty paid pure wool tops by the appellants from outside. But it was hardly possible to deduce from these intimations whether the appellants would use such wool tops in the pure form or mix them with other fibers to a blend of over 50% wool or less than 50% wool. The appellants cannot absolve themselves of their primary responsibility of making the prescribed declarations and submitting the prescribed assessment documents and expect the authorities to gain knowledge of their operations through involved and doubtful deductions from D-3 intimations and production of other commodities.
(Emphasis supplied)
9. She also referred to the decision of the Supreme Court in the case of Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise - 1989 (40) E.L.T. 214 (SC), in which the Supreme Court while dealing with the question of invoking the proviso to Section 11A(1) had held in paragraph-10 of its judgment as under:-
10. Therefore, we have to find out whether there was any fraud, collusion, wilful misstatement or suppression of facts for the Department to be justified to claim duty beyond a period of six months. This is a question of fact. It was found by the Tribunal that it was not possible for the appellant to contend that the appellant had made a correct statement. The Tribunal noted that the appellant could hardly contend that it discharged the onus of making correct declaration if it had withheld the description which was commonly used in respect of the goods not only by itself, but also by those from whom it bought or to whom it sold the products. The appellant itself was both buying and selling these nuts and as such there was no conceivable reason why these nuts were described as end-fittings in the declaration to the Department. It may be noted that in the declaration it was so described. The Tribunal was of the view, and it cannot be said not without justification that these goods should have been described as nuts because the appellant itself had treated these as nuts. Therefore, from this conduct suppression is established.The fact that the Department visited the factory of the appellant and they should have been aware of the production of the goods in question, were no reason for the appellant not to truly and properly describe these goods. As a matter of fact, not only did the appellant, as found by the Tribunal described these goods properly [sic] but also gave a misleading description."
(Emphasis supplied)
10. Summing up, she submitted that when the legal position about the liability of limestone to duty was clear because of the issue of several Notifications about it from time to time, the appellants could not contend that because they were maintaining the account of limestone in Form IV or because the Central Excise Office was stationed within their factory premises, they had no obligation under the law to declare to the authorities that they are crushing limestone within their factory and that they needed a Central Excise licence for the purpose. This being a statutory requirement, failure to discharge it, in the circumstances of the case, did show their intention to evade payment of duty. The authorities had, therefore, correctly invoked the extended period of limitation for the purpose of raising the demand under Section 11A and had also rightly imposed penalty on them.
11. Replying Shri Sanjay Grover, the learned Counsel, referred to the Form IV Account and reiterated that the appellants could not be charged with intention to evade payment of duty. In the light of the reference to the Chemical Dictionary for definitions of lime' and 'limestone' by the learned Departmental Representative, Shri Grover did not dispute that the two were different.
12. We have carefully considered the matter and perused the appeal and the Cross Objections filed by the respondent - Collector. We observe that the factual position is as under: -
(a) By Notification 271 /88-C.E., dated 24-10-1988, issued under Section 11C of the Act, the Central Government had directed that the whole of the duty payable under the Central Excise Tariff Act, 1985 on limestone in any form during the period commencing on 28th Day of February, 1986 and ending with the 12th day of November, 1986 which was not being levied shall not be required to be paid in accordance with a practice that was generally prevalent.
(b) From 13th November 1986, limestone in any form was exempt from duty by Notification 448/86-C.E., dated 13-11-1986 until this Notification was rescinded on 20 the March, 1990 by Notification 86/90-C.E.
(c) From 17th September 1990, limestone was again exempt from duty when Notification 143/90-C.E., dated 17-9-1990 was issued.
(d) There was no notification exempting limestone during the period 20th March 1990 to 16th September 1990 and the demand which has been issued to the appellants relates to this very period.
13. It is thus evident that although duty was livable on limestone from 28th February 1986, the new tariff was introduced and, by taking into consideration the practice of not levying duty during the period from 28th February 1986 to 12th November 1986, Government issued a Notification under Section 11C, and subsequently granted exemption from 13th November 1986 and this continued till 19th March 1990. It was only during the intervening period from 20th March 1990 to 16th September 1990 that there was no exemption notification. In the absence of an exemption notification during this period, duty was livable and if it was not paid, it could be recovered under the provisions of Section HA and Rule 9(2). This is what the authorities have sought to do by these proceedings.
14. The appellants' argument is that "limestone" was covered by the exemption available to "lime" by virtue of entry at Serial No. 13 in the Table annexed to Notification 16/90-C.E., dated 20th March 1990. If such was the case, where was the need to insert "limestone" in the same entry by amending the Notification on 17th September 1990 (Vide Notification 143/90 dated 17-9-1990)? All these facts are on record and the appellants cannot take shelter behind the plea that the intention of the legislature was not to levy duty on limestone and this was made clear by issue of Notification 143/90-C.E., dated 17-9-1990, which was in the nature of a clarification. We have to see the conduct of the appellants with a view to determine whether the allegation of intention to evade payment of duty is borne out by the facts on record. It was stated in the show cause notice that appellants are one of the prominent cement manufacturers of the region and are well-conversant with the requirement of taking out a licence and following the provisions of Central Excise law and of removing the goods only after discharging proper duty liability of excisable goods. After explaining how limestone became dutiable from 28th February 1986 and how various Notifications were issued from time to time in respect of limestone, the notice proceeds to state that by not taking out a licence and not paying duty on limestone the appellants had deliberately evaded payment of duty. In the light of such an allegation, the only defense of the appellant was that limestone was not dutiable. The Collector has held that merely making entries of limestone in Form IV was not sufficient inasmuch as they did not file any classification list for limestone and such action on their part amounted to suppression of facts. We agree with the findings of the Collector on this point and in the light of the decision of the Supreme Court in Jaishri Engineering (supra) and of the Tribunal in British India Corporation (supra), the allegation of intention to evade payment of duty stands proved.
15. The reliance of Shri Dave on the provisions of the General Clauses Act for interpreting the exemption Notification may be otherwise valid but is not relevant because 'limestone' has been held by us to be dutiable without recourse to the interpretation placed by the learned Counsel on the word 'lime' in Notification 16/90. We need not, therefore, go into that question.
1.6. after consideration of all facts we come to the conclusion that limestone was not exempt during the material period and was, therefore, dutiable. Since duty was not paid, it was recoverable under Rule 9(2) read with Section 11 A, and the proceedings were correctly instituted. The appeal fails on this score and is rejected. We, however, consider that in the facts and circumstances of the case, the imposition of penalty of Rs. 3 laces was on the high side and reduce it to Rs. 1 lakh (Rupees one laky).
17. Before we part, it is necessary to refer to a ground taken in the Memorandum of Appeal that the date indicated on the impugned order is 1/18/09/91 and the order was passed even before hearing the appellants on 19th September. We observe that in the cross objections filed by the respondent-Collector, it has been stated that the order was passed by the Collector on 15-10-1991 and the confusion has been caused by a typographical error of the date in the impugned order. This point was not pressed during the hearing and we accordingly conclude that the appellants have no longer any dispute on this question. We need not, therefore, go into this ground.
18. The Cross objections filed by the respondent-Collector are also disposed of in terms of this order as indicated in para-16.