Customs, Excise and Gold Tribunal - Delhi
Noble Soya House Ltd. vs Collector Of Central Excise on 20 August, 1991
Equivalent citations: 1992(40)ECR4(TRI.-DELHI)
ORDER N.K. Bajpai, Member (T)
1. This stay application is directed against the orders of the Collector of Central of Central Excise, Indore, demanding duty of Rs. 11,82,509,68 (Rupees Eleven lakhs eighty two thousand five hundred nine and paise sixty eight only)" under Rule 9(2) of the Central Excise Rules, read with Section 11A of the Central Excises & Salt Act, 1944 and imposing a penalty of Rs. 1 lakh on the applicants under Rule 173Q for violation of the provisions of Central Excise Rules. The allegation against them was that they had manufactured soya milk beverage which was liable to duty under sub-heading 2202.90 of the Central Excise Tariff whereas they misstated it as soya milk and claimed exemption under notification 286/86 dated 5.5.1986 (now 20/89 dated 1.3.1989). The duty was demanded in four different show cause notices issued under Rule 9(2) read with Section 11 A, as per details given below:
a) SCN dt. 9.12.1988 - Period 1.5.1988 to 31.10.1988
issued by Asst.Collector.
answerable to Collector.
(b) SCN dt. 28.4.1989 - Period 1.11.1988 to 31.12.1988
issued by Supdt. answerable
to Asst. Collector.
(c) SCNdt. 27.6.1989 - Period 1.1.1989 to 30.4.1989 - do -
(d) SCN dt. 22.9.1989 - Period 1.1.1989 to 31.8.1989 - do -
2. Thus, while the first show cause notice covered a period of slightly more than one month beyond six months, all the other notices covered periods well within six months.
3. In their reply dated 7 February, 1989 to the first Show Cause Notice, the allegation that they had manufactured soya milk beverage was contested. Reference was also made to the intimation dated 27 January, 1987 sent to the Assistant Collector, Central Excise, Bhopal that they had set up a plant for the manufacture of soya milk and that they were within the scope of exemption notification 286/86 dated 5 May, 1986. Thereafter, on receipt of a letter dated 16.2.1987 from the Superintendent of Central Excise, Range IV, Bhopal, they had submitted a declaration as required under notification 111/78 dated 9.5.1978 issued under Rule 174 about general exemption from licensing control. It was submitted that they were not liable to pay any duty in view of the declaration made by them. The replies to the other show cause notices also adopted the arguments taken in reply to the first one.
4. Although only the first show cause notice was answerable to the Collector and the other three to the Assistant Collector, at the request of the applicants, the proceedings in the latter were also transferred to the Collector who passed a common order. After the usual proceedings and hearing the appellants the demand was confirmed. The Collector has held the view that inasmuch as the applicants did not correctly describe the product manufactured by them and mis-stated it as soya milk whereas it is not soya milk but soya milk based product, they were liable to pay duty. He held that the extended period of limitation in respect of the first show cause notice would be applicable in view of the mis-statement by the applicants. He has placed reliance on the decision of the Tribunal in the case of Rishi Enterprises v. Collector of Central Excise, Bombay in which it was held that Rule 9(2) was applicable where there was a contravention of Rule 9(1) in the form of failure to obtain Central Excise licence, maintenance of records and removal of goods without payment of duty.
5. It has been stated in the Stay Application that the impugned order has been passed without jurisdiction in as much as the show cause notices were issued by the Assistant Collector and the Superintendent invoking the powers vested in the proviso to Section 11A whereas, according to the well-settled position of law, it is only the Collector who could have done so. It is also claimed that the order has been passed on grounds which were not taken in the show cause notice. Applicants also claim that they had at all material times disclosed all the information, including their claim for exemption under notification 286/86.
6. Reiterating the grounds taken in the application, Shri R. Ravindran, the learned Counsel for the applicants, submitted that according to the ratio of the unreported decision of the Tribunal in the case of Alcobex Metals v. Collector of Central Excise, Jaipur Order No. Misc/59/90-NRB/Case A/192/91-NRB dated 25.3.1991 : 1992 (38) ECR 569 (Cegat NRB)] no demand for duty on the grounds of mis-statement and suppression of facts could have been issued by the Assistant Collector/Superintendent even for the six months period and the order was therefore, without jurisdiction. He explained that a demand under Rule 9(2), according to the Rule itself, had to be issued 'within the period specified in Section 11A of the Act.' Since a longer period was prescribed for covering demands for mis-statement, suppression etc., it necessarily followed that the authority competent for this purpose specified in the proviso to Section 11A being the Collector, even a demand under Rule 9(2) read with Section 11A could be issued only by the Collector. The demands in the present case having been issued by the Assistant Collector/Superintendent, the order was liable to be quashed.
7. He also pleaded financial hardship and urged that the order demanding duty and penalty be stayed.
8. Shri L.C. Chakrabarti, the learned SDR, submitted that the decision of the Tribunal in Alcobex case (supra) related to a demand under Section 11A and no consideration of Rule 9(2) whatsoever was involved in that case whereas the demand in, the present case was issued under Rule 9(2). He referred to the case of Mahavir Products v. Collector of Central Excise in which it was held by the Tribunal that proceedings instituted under Rule 9(2) were distinct from those under Section 11A since a demand under Rule 9(2) could be issued by the proper officer. He referred to para 8 of the decision, which, being relevant, is reproduced below:
8. Their objections proceed on the assumption that the proceedings before the Collector were proceedings under Section 11A. This assumption is factually, incorrect. The proceedings were not under Section 11A. They were really penal proceedings under Rules 9(2) and 173Q for the alleged Clandestine manufacture and removal of the goods, without a licence and without payment of duty and in contravention of the statutory procedures prescribed by a host of other Rules cited in the show cause notice. Section 11A was also, no doubt, cited in the notices along with Rule 9(2) but this was for the limited purpose of applying time limit for the demand of duty under Rule 9(2) because this Rule required the demand to be made "within the period specified in Section 11A of the Act." Thus, the same time limit as in Section 11A was applicable to the demands for duty made under Rule 9(2). But that did not mean that the proceedings themselves became as under Section 11A and not under Rules 9(2) and 173Q. However, even if it be assumed that if the extended time limit was applied, the other attendant requirement of Section 11A had also to be fulfilled, still we find no merit in the preliminary objections taken by the appellants. In the succeeding paragraphs we shall deal with each of their objections item-wise.
9. In the case of Lotus Chemicals Industries v. Collector of Central Excise, Indore, (Order No. 458-59/91-C dated 21.5.1991), the Tribunal had held that period under Section 11A is referred to in Rule 9(2) only to specify the outer limits for demanding duty. Shri Chakrabarti strenuously argued that while a demand under Section 11A could only be raised in cases in which assessment had been made, what Rule 9(2) involved were cases of removal of goods without any assessment or payment of duty. Since no central excise licence was taken in the present case nor any duty paid, the demand was rightly raised under Rule 9(2). The reference to Section 11A was for the limited purpose of following the period specified therein for raising demands and none of the other conditions stipulated in that section would apply to a demand under Rule 9(2). He submitted that the scope of demands under these two provisions were mutually exclusive: Cases of clandestine removal such as the present one were covered by Rule 9(2) alone and there was therefore, no illegality in the confirming the demand. He also placed reliance, for this purpose, on the judgment of the Supreme Court in the case of N.B. Sanjana v. The Elphinstone Spinning & Weaving Mills 1978 ELT J399 (SC) : 1973 July Cen-Cus (vi) SC : 1990 (28) ECR 582 (SC) : ECR C 368 SCI.
10. We have carefully considered the Stay Application and the arguments of both sides. We observe that the question on the merits of the demand is a contentious one and needs to be argued at length. Although there is no doubt that the decision of the Tribunal in Alcobex's case (supra) involved a demand under Section 11A, one could perhaps canvass the view that the same ratio would apply to a demand under Rule 9(2) also. This again is a matter of detailed arguments. In these circumstances, we consider that the balance of convenience would lie in staying recovery of 50% of the demand of duty and directing the applicants to deposit the remaining 50% while totally staying the recovery of the penalty in full. Thus, we direct the applicants to deposit an amount of Rs. 5.90 lakhs (Rupees Five lakhs Ninety thousand only) by 25th October, 1991 on account of duty and to report compliance by 25th October, 1991. On deposit of this amount, the requirement of pre-deposit of the balance amount of duty and the full amount of penalty shall stand waived under Section 35F of the Act. Failure to comply with this order may entail dismissal of the appeal without any notice to the appellants.