Customs, Excise and Gold Tribunal - Delhi
Rajasthan Processors (India) Ltd. vs Collector Of C. Excise on 23 May, 1994
Equivalent citations: 1995(75)ELT427(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. These are five appeals filed by (1) M/s. Rajasthan Processors (India) Ltd., (RPIL, for the short), (2) M/s. Bhilwara Textiles Pvt. Ltd. (BTPL, for short) (3) M/s. Venus Engg. Corporation (VEC, for short), and (4) M/s. Bhilwara Processors Ltd. (BPL, for short), all of Bhilwara (Rajasthan). Two appeals being Appeal No. 4830 and 4831 have been filed by RPIL, while one appeal has been filed by each of BTPL, VEC and BPL. All the five appeals arise out of the two orders passed by the Collector of Central Excise, Jaipur, Order No. 57/92- Collector - C.E., Jaipur, dated 14-8-1992 is against RPIL and BTPL, while Order No. 61/92-Collr. C.E., Jaipur, dated 26-8-1992 is against RPIL, BPL and VEC. Since the issues involved in all the five appeals are common, they were heard together and are being disposed of by this common order.
2. BTPL and VEC the merchant manufacturers of man-made fabrics. They got their grey (unprocessed) man-made fabrics processed on job work basis from the processors RPIL and BPL. Additional excise duty under the provisions of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) (hereinafter referred to as the 'Act of 1957'), were levied on man-made fabrics at specific rates, and the specific rates of additional excise duty were related to the value range of the processed fabrics. The value of the processed fabrics was declared by the processors on the basis of the information supplied to them by the merchant manufacturers, on whose behalf the unprocessed fabrics were being processed by such processors, in terms of the authorisation filed by the merchant manufacturers, and accepted by the processors, under notification dated 5-11-1977. In the two show cause notices issued by the Collector of Central Excise, Jaipur, Under (1) No. V(55)15-64/Off./89 dated 15-2-1990 and (2) No. V(22) 15/9/Off./89 dated 1-8-1990, it was alleged that the processors RPIL and BPL have wilfully suppressed/mis-declared the real price of man-made fabrics, have not declared the manufacture of some varieties, and have misdelcared the quality of some other varieties. It was also alleged that the merchant manufacturers VEC and BTPL have under-declared the prices, were maintaining duplicate/fake accounts/invoices. Both the processors and the merchant manufacturers were charged with the evasion of additional excise duty under Section 11A(1) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act'). Both the processors and the merchant manufacturers were also charged with the various contraventions under the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'), making them liable to penalty under various provisions of the Rules. The cases were adjudicated by the Collector of Central Excise, Jaipur, and the various allegations as levelled against the appellants in the show cause notices, referred to above, were found established against them. In A. No. 4830 and 5001 vide order dated 14-8-1992 the Collector of Central Excise, Jaipur demanded the duty of Rs. 10.70,162.16 from RPIL. A penalty of Rs. 2.5 lakh was imposed on BTPL. In appeal No. 4831, 5023 and 5043, vide order dated 26-8-1992, duty of Rs. 5,62,864.32 was demanded from RPIL, and duty of Rs. 10,001,03 was demanded from BPL. A penalty of Rs. 1.50 lakh was imposed on VEC.
3. The appellant RPIL had agitated the matter (after the stay orders have been passed by the Tribunal) before the Rajasthan High Court, and the Hon. Rajasthan High Court have passed some interim orders and issued directions to the Tribunal for early disposal of the matter. M/s. BPL also filed a writ petition in Delhi High Court, and the Hon. Delhi Court have also passed some interim orders and issued directions for early disposal of the appeal.
4. The matters came up for final hearing on 13-4-1994, when Shri Jitender Singh, Advocate appeared for the appellants. Smt. C.G. Lal, SDR represented the respondent.
5. Shri Jitender Singh, the learned Advocate referred to the provisions of Notification No. 305/77-C.E., dated 5-11-1977 issued under Rule 174A of the Rules, and submitted that under the provisions of that notification, there was no responsibility of the processor for declaring the correct value, and he was required to declare only the value as intimated to him by the merchant manufacturer, on whose behalf the fabrics were being processed by such processor. The processors were doing job work for a number of traders and they were required to file declaration only on the basis of the information supplied to them by the traders. The price lists as submitted by the processors in these cases have been approved by the department and their RT-12 returns have also been assessed. As what was happening in the factory of the supplier was no concern of the processor. Their records have been duly checked by the department from time to time. In this connection the learned Advocate relied upon the decision of the Hon. Supreme Court in the case of Ujagar Prints v. Union of India, reported at 1988 (38) E.L.T. 535 (S.C.), and the clarificatory decision reported at 1989 (39) E.L.T. 493 (S.C.). Reliance was also placed on the Supreme Court decision in the case of Empire Industries Ltd. v. Union of India reported at 1985 (20) E.L.T. 179 (S.C.). He submitted that the excise duty could only be levied on the basis of the declared prices, and in any case the trader's profit was not includible while arriving at the assessable value of processed fabrics. In support of his contention the learned Advocate relied upon the Gujarat High Court's decisions in the cases of (1) J.B. Khanvar Sons v. Union of India - 1992 (61) E.L.T. 58 (Guj.) and (2) Kwality Silk Mills v. Union of India -1992 (61) E.L.T. 242 (Guj.), and the Tribunal's decisions in the cases of (1) Collector of Central Excise, Vadodara v. N.J. Metal Screens Manufacturing Co. Limited, -1991 (37) E.C.R. 655 (CEGAT-SB-A) and (2) Collector of C. Excise v. Vardhman Fabrics (P) Ltd. -1993 (65) E.L.T. 232 (Tri.). The learned Advocate admitted that there were double set of invoices maintained by the manufacturers, but pleaded that these double set of invoices were not relevant and that the value was to be determined on the basis of the cost of grey fabrics plus processing charges and processing profit, if any. The authenticity of any of these components as declared by the processors was not doubted. Any further invoice raised by the traders was of no consequence, and the value addition by the traders could be on different account not relevant to the levy of excise duty. A point was also raised that under the provisions of the Act of 1957 no penalty could be imposed on the processors or the merchant manufacturers who had filed declarations under Notification No. 305/77-C.E., dated 5-11-1977. In this connection he referred to the Tribunal's decision in the case of Shri Pawan Kumar, Simplex Trading Co. Syntex Processors v. Collector of Central Excise, Chandigarh reported at 1994 (1) R.L.T. 33 (CEGAT-NRB).
6. Smt. C.G. Lal the learned SDR referred to the facts of the case and mentioned that admittedly the appellants have maintained two sets of accounts showing different value - lower value for excise purposes, and higher value for their own account. She also referred to the tariff structure with regard to man-made fabrics at the relevant time. The additional excise duty was leviable at specific rates, and these specific rates of duty were applicable to different value ranges. Thus the valuation provisions were relevant only for arriving at the particular value range of the processed man-made fabrics. Duplicate invoices were being issued and this fact has not been disputed. The appellants have admitted that the duplicate invoices were being issued and that only the invoices with lower value were being shown to the department, while the goods were being marketed at higher value, and this fact was not disclosed to the department. There was thus a deliberate and mala fide attempt to remain within the lower value range to evade payment of appropriate duty chargeable on appropriate value range. The goods were being sold at much higher value than declared. The contraventions of the law have been admitted by the responsible officers of the appellant's company and none of those statements have been retracted. The adjudicating Collector of C. Excise, taking note of the various facts in the case, has not imposed any penalty on the processors. As regards VEC they were a merchant manufacturer. They were issuing set of invoices with the same serial number. Certain varieties of fabrics were cleared without filing price lists. Similarly BTPL had only shown yellow colour invoices to the department. The learned SDR referred to the contention (e) (para 26) of the Ujagar Prints case 1988 (38) E.L.T. 535 (SC), and paras 28 and 31 of the Empire Industries case 1985 (20) E.L.T. 179 (SC), and stated that the intrinsic value of the fabrics had to be taken. She stated that in the various citations referred to by the learned Advocate, the question related only to the trader's profit in cases where the rate of duty was ad valorem. As regards the contention of the learned Advocate that no penalty could be imposed under the provisions of the Act of 1957, the learned SDR submitted that all the provisions relating to levy and collection as contained in the Act, are applicable to the Act of 1957. In support of her various arguments she relied upon the following decisions :
(1) Ashoka Dyeing & Finishing Mills v. Collector of Central Excise, 1993 (66) E.L.T. 435 (Tribunal).
(2) C.A. Abraham Uppottil Kottayam v. Income Tax Officer, Kottayam, 1961 (2) S.C.R. 765.
(3) Parekh Prints v. Union of India, 1992 (62) E.L.T. 253 (Del).
7. In rejoinder Shri Dushyant Dave learned Advocate who appeared at this stage of the proceedings stated that the department was not concerned with the second set of invoices and the differential in the two invoices was on account of the trader's profit and that no penalty was imposable in these cases. In support of his arguments the learned Advocate relied upon the following decisions:
(1) Ujagar Prints v. Union of India -1989 (39) 493 (S.C.) - trader's profit being post manufacturing profit not includible.
(2) Indian Oxygen Ltd. v. Collector of C. Excise -1988 (36) E.L.T. 723 (S.C.) - Ex-factory prices to be the basis of value under Section 4 of the Act.
8. We have carefully gone through the facts and circumstances of the cases and have given our due thought and consideration to the submissions made by both the sides.
9. The matter relates to the demand of the additional excise duty levied and collected under the provisions of the Act of 1975 read with the provisions of the Act of 1944. The additional excise duty has been alleged to be evaded by declaring incorrect description of the processed man-made fabrics so as to attract a lower specific duty rate, lower than the rate otherwise leviable, had the correct description been declared. Under the relevant provisions while the rates of additional excise duty were specific - Rupees - per square metre of the fabric, different specific rates were to be applied to the different category of fabrics based on their value range per square metre of the fabric. Thus the particular duty rate depended upon the particular value range of the fabric per square metre. For the fabric whose value did not exceed a particular Value per square metre, a given specific rate of additional excise duty was attracted; if the value exceeded the above but did not exceed the next higher specified value, a higher rate of duty was attracted and if the value further exceeded but did not exceed the further higher value, the next higher rate of duty was to be levied, and so on. Thus the levy of duty depended upon the correct declaration of the value of the fabric.
10. BTPL and VEC were engaged in the manufacture of grey (unprocessed) man-made fabrics woven on their power looms. The unprocessed man-made fabrics manufactured on their power looms were sent by them for processing/further manufacturing on their behalf and return, on job work basis, to RPIL and BPL. Processing of fabric is a process of manufacture and as the fabrics of BTPL and VEC were processed/manufactured on their behalf on job work basis by RPIL and BPL, BTPL and VEC were required to take out a central excise licence under provisions of Rule 174 of the Rules, and were obliged to follow the prescribed procedure, observe requisite formalities and pay proper excise duty. Under Rule 174A of the Rules, exemption to any class of manufacturers who get their goods manufactured on their account from other person or persons, from the operation of Rule 174 could be provided by notification, subject to such conditions or limitations as may be specified in such notification. Notification No. 305/77-C.E., dated 5-11-1977 was issued in exercise of the powers conferred by Rule 174A of the Rules. In persuance of this notification dated 5-11-1977, BTPL and VEC as manufacturers filed authorisation in favour of RPIL and BPL, the processors, to manufacture excisable goods that is man-made fabrics under Tariff Item No. 22(1) of the erstwhile First Schedule to the Act, on their behalf and to comply with all provisions of the Act, and the Rules on their behalf. BTPL and VEC also authorised RPIL and BPL to furnish information relating to the price at which they were selling the said goods. The whole-sale market price of finished fabrics with break-up of such a price, was declared by BTPL and VEC. They also filed a declaration that the particulars furnished were true and correct and complete to the best of their knowledge, and in the event of their being found incorrect in any respect, they agreed to discharge the consequential liabilities. They under took and agreed to pay differential duty if demanded by the central excise authorities in case of final assessment in the event of their finding that the selling prices declared by them were incorrect. RPIL and BPL accepted the above authoritsation and agreed to comply with all the requirements of and discharge all the liabilities under the Act, and the Rules in respect of the said goods manufactured from time to time by them on behalf of BTPL and VEC.
11. It is seen that BTPL and VEC did not correctly declare the value of the fabrics which resulted in the evasion of duty. They did not correctly discharge their obligations cast upon them under Notification No. 305/77-C.E., and violated the conditions under which exemption from the provisions of Rule 174 was extended to them. They also contravened other provisions of the Rules as held by the Collector of Central Excise, Jaipur under his Order-in-Original.
12. Admittedly M/s. BTPL and VEC were maintaining duplicate accounts. Their different copies of the Bills did not tally with each other. In the case of BTPL office copies of the Bills in yellow colour were presented to the Central Excise Department in which lower prices were shown while their original copies were in white colour and showed higher prices. The higher of the two prices were the prices at which the processed man-made fabrics were actually sold while excise duty was calculated on the lower of the two prices. Some of the invoices were found to be forged. They were having two set of invoices bearing same serial number, date and name of the party, one yellow coloured and another pink coloured with which packing slips were attached. Entry in their sales Registers was made from pink coloured copies of invoices while yellow coloured invoices in which lower prices were shown, were according to the prices declared to the department. At the time of the investigation the Director of the Company BTPL had admitted that there were two type of invoices - one yellow coloured and another pink coloured. In yellow coloured copies of invoices sale price of some qualities differed with the sale price shown in pink coloured copies of invoices. Yellow coloured invoices were according to the prices declared to the department, which they had been presenting to central excise officers at the time of price verification. He stated that the quality, quantity and sale price shown in the pink coloured invoices were correct. He stated that he could not conceal the truth and admitted that some of the qualities of fabrics viz., Park Avenue, Dorma, Trend 89 etc. had been sold by them at higher prices than the declared prices. VEC were also producing the forged set of invoices for price verification, such invoices showing the fake lowered prices. Shri Radhay Shyam Chechani partner VEC had admitted that they were selling man-made fabrics at higher prices than the declared prices and had assured the central excise officers that the short levy calculated by the department would be deposited by them.
13. The appellants had pleaded that their issuing second set of invoices in no way effects the essentials to the case and that it was immaterial even if second set of invoices were issued by them. It is very strange argument. In the, second set of invoices higher correct value was shown. They have admitted: that these higher value were the actual value. In other words the declared value was not the actual value. When the rate of specific excise duty is related to the value then how it could be said that the second set of invoices in which the actual correct value was shown is not relevant.
14. As has been mentioned above the rate of additional excise duty is leviable with reference to the length-breadth of the fabric - x Rupees per square metre. This specific rate of duty is however, related to the given value range of the fabric, a particular specific rate of duty per square metre if the value exceeds - does not exceed the specified value per square metre. The value of the fabric even for the purposes of the exemption notification has to be computed under Section 4 of the Act. The Hon. Supreme Court in the case of Bata Shoe Co. (P) Ltd. v. Collector of Central Excise reported in 1985 (21) E.L.T. 9 (SC), had held in para 8 of their judgment that:
"the expression for the purposes of duty occurring in Section 4 has a wide import. For all purposes connected with the determination of chargeability and levy of duty the provisions of the section are to be applied for computation of the value of the article."
15. In these cases the independent processors were processing the fabrics on job work basis in their processing units. The grey fabrics were supplied by the merchant manufacturers for processing to the processors. After processing the processed fabrics were returned back to the merchant manufacturers. The additional excise duty was paid by the processors after applying the specific rate of duty on the value as declared to them by the merchant manufacturers. The principles for the determination of the value are laid down under Section 4 of the Act. With regard to processed fabrics, the Hon. Supreme Court in the case of Ujagar Prints v. Union of India -1988 (38) E.L.T. 535 (S.C.) have held in para 37 of their judgment that the value for the assessment under Section 4 of the Act will be "the intrinsic value of the processed fabrics which is the price at which the fabrics are sold for the first time in the wholesale market." Earlier in the case of Empire Industries Ltd. v. Union of India - 1985 (20) E.L.T. 179 (S.C.) the Hon. Supreme Court in para 47 of their judgment have observed as under:
"When the textile fabrics are subjected to the processes like bleaching, dyeing and printing etc. by independent processors, whether on their own account or , on job charges basis, the value for the purposes of assessment under Section 4 of the Central Excise Act will not be the processing charges alone, but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market."
In their clarificatory decision in the case of Ujagar Prints v. Union of India as reported at 1989 (39) E.L.T. 493 (S.C.) the Hon. Supreme Court have clarified that "the assessable value of the processed fabric would be the value of the grey cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses whatever these may be which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric." They added that "the factory gate here means the 'deemed' factory gate as if the processed fabric was sold by the processor." It was further clarified that "it is necessary to include the processor's expenses, costs and charges plus profit but it is not necessary to include the trader's profits who gets the fabrics processed, because those would be post manufacturing profits."
16. It is seen from the authorisation filed by the merchant manufacturers that at the time of filing the authorisation no claim was made for exclusion of any trader's profit. They had declared the break-up of the value under the following heads :
(1) Grey fabric cost (including weaving charges) (2) Shrinkage (3) Processing charges (4) Selling and other expenses (5) Valueless (6) Cost of sales (7) Profit
17. Excise duty was paid on the basis of declared value in which no claim for trader's profit was made. As held by the Hon. Supreme Court the profit of the processor has to be the part of the value of the processed fabrics. The actual value admittedly was higher than the declared value. The fact of charging value was suppressed from the department, and came to notice only on investigation and inquiry. In the circumstances we are of the view that the declared value was correctly rejected, and the value range was correctly determined on the basis of the higher value as culled out from the duplicate invoices. Accordingly we find that the duty liability has been correctly arrived at.
18. Now coming to the question of the trader's profit, on behalf of the appellants it has been contended that even if it is assumed that the value has been under declared and the higher value as reflected in their private accounts has to be taken for the purposes of arriving at the correct value of the processed fabrics, the trader's profit included in such value has to be excluded. It is seen from the authorisation filed by the merchant manufacturers and as accepted by the processors, that at the time of filing the authorisation no claim was made for exclusion of any trader's profit. To repeat, the break-up of the value has been declared under the following heads :
(1) Grey fabric cost (including weaving charges) (2) Shrinkage (3) Processing charges (4) Selling and other expenses (5) Value loss (6) Cost of sales (7) Profit
19. Nowhere it has been explained that the profit shown at SI. No. 7 above was the trader's profit. In the matter before us the value of the processed fabric is relevant to identify the value slab/the value range under which the fabric under assessment falls so that a particular specific rate of duty per square metre of the fabric could be applied thereon. Even if it is assumed that the profit shown at Sl. No. 7 above was the trader's profit, we find that it will make no difference to the value slab or the value range in view of the fact that the differential between the declared prices and the selling prices was much more than the profit shown in the authorisation against SI. No. 7 of the heads of the 'value'. In the show cause notice dt. 15-2-1990 the declared and selling prices have been shown as under in para 10.
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"Quality Name Declared price per sq. Selling price per L. Mtr.
mtr. as per declaration as per invoices
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Rs. Rs. 1. Trend 89 39.42 64.80 to 72.00 2. Rosy Crown 39.78 70.32 to 75.00 3. Market Pulse 39.05 69.16 to 85.00 4. Heeman 39.48 80.00 to 100.00 5. Democrat 38.69 60.86 to 70.00 6. Park Avenue 38.69 72.00 to 80.00 7. Dorma 37.96 60.00 to 66.00 8. Rangoli 37.96 60.00 to 65.00 9. Geetanjali 38.69 60.00 to 63.00 10. Bestseller 38.42 64.00 to 69.00 11. SeaRoack 24.82 47.50 to 55.00 12. 2004 24.82 37.50 to 39.00 13. Fabulous 24.82 40.00 to 47.00 14. 2019 to 2040 24.82 39.00 to 42.00"
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Similarly in show cause notice dated 1-8-1990 the declared prices and selling prices have been shown in para 6 as under :
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Sl. No. Quality name Declared price Selling price (as per in-
per sq. mtr. voices) per mtr. In-
exclusive of clusive of Excise duty
duty (Rs.) (Rs.)
--------------------------------------------------------------------------------1 2 3 4
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1. Nikharika Rs. 24.96 Rs. 39/- to 46/-
2. Anamika Rs. 38.91 Rs. 60/- to 70/-
3. President Rs. 24.82 Rs. 38/- to 48/-
4. Lok Priya Rs. 24.89 Rs. 32/- to 37.50
5. High fashion Rs. 36.13 Rs. 65/- to 67.00
6. Classic Rs. 30.66 Rs. 60/- to 61 /-
7. Parishta Rs. 24.96 Rs. 50/- to 55/-
8. Gwalior coin Rs. 24.96 Rs. 48/-
9. Green summer Rs. 24.96 Rs. 42/- to 54/-
10. Chirag Rs. 39.85 Rs. 90/- to 93/-
11. Chinar Rs. 38.07 Rs. 61 /- to 65/-
12. Promen Rs. 39.12 Rs. 61 /- to 68/-
13. Suzaki Rs. 24.96 Rs. 40/- to 46.50
14. Galaxy Rs. 24.94 Rs. 38/- to 46/-
15. New Look Rs. 37.08 Rs. 60/- to 65/-"
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20. While we agree that from the value the traders profit if it is already included therein has to be excluded before the particular rate of duty is applied on such value, we do not find that in the particular circumstances of this case this exclusion (to the extent of the amount as shown against SI. No. 7 of the heads of the value) from the higher selling prices as culled out from their private records will make any difference to the conclusions drawn and the duty liability arrived at.
21. Although we have come to a finding that even if it is assumed that the profit as shown in the authorisation was really the trader's profit its exclusion from the selling price (as per private records of merchant manufacturers) will have no effect on the duty liability (in view of the fact that differential was much more than such a profit), we consider that in the interest of justice, if the appellants in any particular case could prove to the satisfaction of the jurisdictional Asstt. Collector of Central Excise that after deducting from the higher invoice value the profit as shown in the authorisation, the value range will be lower than the value range on which duty has been demanded, in the particular case, then appropriate relief be extended to them.
22. In so far as the imposition of penalty is concerned we find that a penalty of Rs. 2.50 lakhs has been imposed on BTPL under Rule 209A read with Rule 173Q of the Rules, and a penalty of Rs. 1.50 lakhs has been imposed on VEC under Rule 209A of the Rules.
23. It has been argued on behalf of the appellants that for contravention of the provisions of the Act of 1957 no penalty could be imposed. A reference has been made to the Delhi High Court's decision in the case of Pioneer Silk Mills Pvt. Ltd. and Ors. v. Union of India reported in 1991 (4) Delhi Lawyers 75, which has been followed by the Tribunal in the case of Shri Pawan Kumar, Simplex Trading Company, Syntex Processors v. Collector of C. Excise, Chandigarh reported in 1994 (1) R.L.T. 33 (CEGAT-NRB).
24. Sub-section (3) of Section 3 of the Act of 1957 provides as under :
"The provisions of the Central Excises and Salt Act, 1944 (1 of 1944), and the rules made thereunder, including those relating to refunds and exemptions from duty, shall so far as may be, apply in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in Sub-section (1)."
Sub-section (1) of Section 3 of the Act of 1957 provides as under :
"There shall be levied and collected in respect of the goods described in column (3) of the First Schedule produced or manufactured in India and on all such goods lying in stock within the precincts of any factory, warehouse or other premises where the said goods were manufactured, stored or produced or in any premises appurtenant thereto duties of excise at the rate or rates specified in column (4) of the said Schedule".
25. The expression 'including' in Sub-section (3) of Section 3 of the Act of 1957 has a wide cannotation. In the case of Krishi Utpadan Mandi Samiti v. Shanker Industries - AIR 1993 SCW 762, the Hon'ble Supreme Court in para 9 of their judgment had held as under :
"Where the legislature uses the words 'means' and 'includes' such definition is to be given a wider meaning and is not exhaustive or restricted to the items contained or included in such definition".
In Heeral Enterprises, Bombay v. Collector of Customs, Bombay -1986 (25) E.L.T. 269 (Tribunal), the Tribunal observed that the word 'including' not only enlarges the scope of a term/expression but also what comes after it cannot be read in isolation from what comes before it. In Collector of Central Excise v. Indian Petrochemicals Corporation Ltd. 1990 (46) E.L.T. 173 (Tribunal), the Tribunal (relying upon the Supreme Court decision in the case of State of Bombay v. Hospital Majdoor Sabha - AIR 1960 S.C. 610), had observed in para 32 of their decision that the word 'including' used in an inclusive definition denote extension and cannot be treated as restricted in any sense.
26. Levy and collection of duties of excise are not an act in isolation. They are related to the mechanism of imposition of levy and the mode of and manner of collection. By necessary implication any infraction with regard to the levy and collection had to invite appropriate measures for enforcing the levy and collection. In the case of C.A. Abraham Uppottil Kottayam v. Income Tax Officer, Kottayam 1961 (2) SCR 765 the Hon. Supreme Court have held that a penalty is imposed as a part of the machinery for assessment of tax liability. The Delhi High Court in para 15 of their decision in the case of Parekh Prints v. Union of India - 1992 (62) E.L.T. 253 (Del.), while dealing with the additional duty levied under the Act of 1957 have held that "the Act leaves no room for doubt that it imposes duties of excise which are in addition to the duties of excise under the Act of 1944 and all provisions of 1944 Act in so far those are applicable, apply to the provisions of Act." In the case of Ashok Dyeing and Finishing Mills v. Collector of Central Excise -1993 (66) E.L.T. 435 (Tribunal) the Tribunal have observed in para 7 of their decision that "the provisions of die Central Excises & Salt Act, relating to confiscation for contravention of the provisions of the excise law would also be within the ambit of the phrase 'levy and collection' as mentioned in Section 3(3) of the Act 58 of 1957."
27. The validity of the levy of additional duty of excise under the Act has been specifically upheld by the Supreme Court in the Ujagar Prints case where it is said that the additional duty under the Act is of the same nature as the union duty of excise.
28. In the case before us we find that in addition to the demand of duty under the provisions of the additional duties Act, contravention of the provisions of the Central Excises & Salt Act, 1944 have been independently alleged against the merchant manufacturers on whom penalty has been imposed. In the show cause notice dated 15-2-1990, M/s. Bhilwara Textiles (P) Ltd., Bhilwara were required to show cause as to why penalty should not be imposed upon them under Rule 173Q and Rule 209A of the Central Excise Rules, 1944 for contravention of provisions of Rule 174A read with Notification No. 305/77-C.E., by their wilful mis-declaration of value of fabrics and their acquiring possession of, depositing and dealing with those fabrics which had not discharged the proper central excise duty and as such were liable to confiscation. In the show cause notice dated 1-8-1990 Venus Engg. Corporation were called upon to show cause and explain as to why penalty should not be imposed on them under Rule 209A of Central Excise Rules as they acquired possession of the fabrics on which appropriate amount of duty had not been paid and they sold the said fabrics for which they knew or had reason to believe that the due amount of duty has not been discharged.
29. During the relevant period no basic excise duty was leviable on the fabrics in question. The tariff rate itself for basic excise duty was nil. Only additional excise duty as effective in terms of exemption notification [issued in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Rules read with Sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act 1957], was leviable. The goods in question were excisable goods and the manufacturers both who were engaged in the processing of the fabrics and those on whose behalf the processing activities were undertaken, were obliged to comply with the procedure and to fulfil the requirements as laid down in the central excise rules, and thus for contravention of the specific provisions of the central excise rules, independently if the provisions of the Additional Duties Act, appropriate penalty under relevant rules could be imposed thereon. In this connection reference may be made to the Madras High Court decision in the case of Tamilnadu (Madras State) Handloom Weavers Cooperative Society Ltd. v. Asstt. Collector of Central Excise, Erode 1978 (2) E.L.T. J57. It is however, seen that in these cases penalties have been imposed not for non-compliance of legal requirements under the Act of 1944 (in spite of the allegations to that effect in the show cause notices), but for the evasion of additional duty of excise. At the same time we find that the Hon..Delhi High Court in the case of Pioneer Silk Mills Pvt. Ltd. and Ors. v. Union of India reported in 1991 (4) Delhi Lawyer 75 [which has been followed by the Tribunal in the case of Shri Pawan Kumar, Simplex Trading Co. Syntex Processors v. Collector of C. Excise, Chandigarh - 1994 (1) R.L.T. 33 (CEGAT-NRB)], has held that there is no mandate in the Additional Duties Act for levy of penalty, and the Central Excise Act and the Rules made thereunder cannot be imported in the Additional Duties Act for the purpose of levy of penalty. Extracts from paras 33,37 and 39 of that order are given below :
"A distinction was sought to be created by the Revenue though there was no charge for penalty for non-payment, late payment or short deposit of the additional duty, but there could be a penalty without there being any sanction for charge thereof if there was contravention of the rules regarding maintenance of records, etc. This distinction, to our mind, does not appear to be based on any sound reasoning. The object of the maintenance of records and for doing other acts as per rules is only to collect proper amount of tax and within the prescribed period and the object for levying penalty for non-payment or late payment etc. is also the same. Confiscation or forfeiture of property is also a form of penalty. To appropriate the property of the assessee of the value equal to an amount of taxes due from him is one thing but to confiscate his property for contravening certain provision of the Rules is an other and partakes the form of penalty. It is not that there are no teeth for levy and collection of additional duty of excise under the Additional Act inasmuch as under Section 11 of the Central Excise Act the officer authorised to levy excise duty may "deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such persons resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrears of land revenue." Provisions of Chapter X of Indian Penal Code, especially Sections 176 and 177 (Omission to give notice or information to public servant by person legally bound to give it and furnishing false information) falling therein can also be made use of by the Revenue.
When penalty is additional law, constitutional mandate requires a clear authority of law for imposition thereof. If long drawn arguments are needed to explain if the Act by referential legislation or legislation by incorporation levies penalty or not, it is better for the Court to lean in favour of the tax payer. There is no room for presumption in such a case. The mere fact that all these years the Additional Duty Act has not been challenged on this ground is of no consequence if authority of law as mandated by the Constitution is lacking. We may also note in the passing that it was submitted before us that penalty so realised earlier has never been distributed amoung the collection of the additional duties of excise under the Additional Duties Act. This statement made at the Bar was not challenged. Since, however, this point was not raised in the writ petition and the revenue had no opportunity to reply in its counter-affidavit, we leave the matter at that Levy of penalty which is an additional tax has to be under the authority of law which should be clear, specific and explicit. 39. We have given our considerable thought to various arguments raised by the parties. We find there is no mandate in the Additional Duties Act for levy of penalty and the Central Excise Act and the Rules made thereunder cannot be imported in the Additional Duties Act for the purpose of levy of penalty. We have spent anxious moments as the interpretation we have put has grave consequences for the revenue as similar terminology as used in Section 3(3) of the Additional Duties Act has been used in various Finance Acts and other enactments, but then Article 265 of the Constitution mandates that no tax shall be levied and collected except by authority of law. There being no such authority of law to levy penalty. We have to held so."
30. Following the Hon. Delhi High Court decision in the case of Pioneer Silk Mills (P) Ltd. v. Union of India (supra), we set aside the penalties imposed on BTPL and VEC, and accept the appeals filed by M/s. Bhilwara Textiles (P) Ltd., and M/s. Venus Engineering Corporation. At the same time, subject to what is stated in para 21 above, both the impugned orders in so far as demand of duty is concerned are hereby confirmed, the appeals filed by M/s. Rajasthan Processors (India) Ltd. and M/s. Bhilwara Processors Ltd. are rejected and we order accordingly.