Customs, Excise and Gold Tribunal - Delhi
Karnataka Leather Indus. Devp. Corpn. ... vs C.C.E. on 4 September, 1998
Equivalent citations: 1999(106)ELT273(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Briefly stated, facts of this case are as follows :-
1.2 The appellants herein is Karnataka Leather Industrial Development Corporation Ltd. (KLIDCL). Apart from manufacturing footwear they are also imparting training to the local population in manufacture of footwear. Their unit with which we are concerned has been functioning since 1984. On the basis of a Circular No. SSI(I)30(102)/79, dated 25-10-1979 from the Ministry of Industry (Department of Industrial Development) to all the State Leather Corporations through the Under Secretary to that Department, the appellant was of the view and held a belief that all State Leather Corporations were to be treated at par with all State Industrial Corporations registered either with DGS & D or National Small Scale Industries Corporation (NSIC) under the Single Point Registration Scheme and will be eligible to all the concessions and facilities which are admissible to all such units.
1.3 On 29-9-1986 the unit as usual has sent 435 pairs of footwears in hand driven cart accompanied by a person. This was intercepted by the Central Excise Officers. They recorded the statement of cartman and the accompanying one person. The goods loaded in the cart were to the tune of Rs. 36,248.30. Next day i.e. 30-9-1986 the Central Excise Officers visited the unit of the appellants and found 854 pairs of footwear. These were also seized by the Central Excise Officers taking the total seizure of the goods valued at Rs. 1,14,739.30.
1.4 A show cause notice dated 13-2-1987 was issued. The goods were confiscated, though they had been released provisionally under a B-ll bond and security of Rs. 10,000/-. On adjudication, the goods were confiscated, a redemption fine of Rs. 10,000/- was imposed. A penalty of Rs. 20,000/- was also imposed on the appellant and a duty of Rs. 3,36,427.32 was demanded from the appellants for the period 6-6-1985 to 30-9-1986. While demanding the duty the adjudicating officer, namely, Collector of Central Excise, Bangalore did not accept the plea of the appellants that they were within the scope of Notification 88/77-C.E. or within the scope of Small Scale Exemption Notification No. 175/86-C.E. On appeal before the Tribunal against the said order dated 30-7-1987 the Tribunal remanded the matter to the adjudicating authority inasmuch as he had not taken several documents and several pleas of the appellant into consideration before passing the said order.
1.4 In de novo proceedings, the adjudicating authority has again demanded the same amount of duty denying the benefit of the aforesaid two notifications as mentioned above. He has also confiscated the goods again imposing redemption fine of Rs. 10,000/-. However, he has imposed a penalty of Rs. 30,000/- as against the penalty of Rs. 20,000/- imposed earlier by him. Hence this appeal before the Tribunal.
2.1 Learned Advocate, Shri J.P. Kaushik for the appellant has submitted that the impugned order is bad in law in the first instance inasmuch as the adjudicating authority has relied upon his own earlier order which stood duly set aside by the Tribunal and on the basis of which he has now passed the de novo order. He submits that in view of Tribunal's judgment in the case of Pankaj Dial Industries reported in 1997 (21) RLT 5 the impugned order is bad in law and deserves to be set aside only on this ground since the Collector has relied on an order which no longer exists.
2.2 On the main question regarding the eligibility of Notification No. 175/86-C.E. the learned Advocate has submitted that the Notification No. 88/77 stipulates two conditions. One condition is regarding the maximum number of workers that may be employed at any day of the preceding 12 months. In calculating the number of workers, the adjudicating authority has taken into account the trainers and trainees who were in the nature of apprentice learning the trade of shoe making. He submits that this is contrary to the law laid down by the Andhra Pradesh High Court judgment in the case of Golden Press v. Deputy Collector of Central Excise reported in 1987 (27) E.L.T. 273. It has been held by the Honuorable High Court that apprentices are different from workers under Apprentice Act. Therefore, unless the special law treats apprentices as workers, they should not be counted as workers. Accordingly, it was held that the apprentices should not be reckoned towards reckoning the number of workers in a factory. Learned Advocate, therefore, points out that in view of this law laid down by the High Court the number of trainees, namely, 34 persons who have been included by the Collector in para 10 of the impugned order should not be taken into account. If these persons are excluded, he submits that total number of the workers employed by the unit will be far less than 49 as stipulated in Notification No. 88/77-C.E. He has also submitted that the benefit of Notification 88/77-C.E. would be available to the appellants as long as one of the two conditions, namely, the number of workers of the quantum of Horse Power used in manufacture of footwear is satisfied. He, therefore, submits that since the condition of number of workers stands satisfied, as mentioned above, therefore, the benefit of Notification No. 88/77 should not be denied to the appellants. Although the learned advocate had made some plea regarding the quantum of Horse Power used in making a distinction between the Horse Power installed and the Horse Power used but we do not find much substance in the said plea inasmuch as it has been recorded by the Collector as a matter of fact that one of the machines employed in the manufacturing section, namely, the upper slitting machine the Horse Power required for operating that machine is 3 H. P. Therefore, this plea is not of much substance.
2.3 On the question of applicability of Notification 175/86 for the period subsequent to 1-4-1986. Learned Advocate has submitted that the appellants are to be deemed to be the small scale industrial unit in terms of the Ministry of Industry's circular referred to earlier. Therefore, there was no need for a separate registration with the concerned Directorate of Industries or the concerned Development Commissioner as mentioned in the notification in view of the said circular from the Ministry of Industry. Consequently, he submits that the benefit of Notification 175/86-C.E. should also not be denied to the appellants. Nevertheless, he submits that after the incident of seizure in the instant case, the appellants applied to the Directorate of Industries and they have given the registration certificate w.e.f. 18-12-1986. The said certificate also mentions that the date of commencement of the unit was 1-4-1984. Therefore, he submits that this certificate should be deemed to be valid right from 1-4-1984. For this reason also he submits that the benefit of Notification No. 175/76-C.E. should not be denied. As regards the imposition of penalty, learned advocate submits that the question of penalty does not arise inasmuch as the appellant had always been working under a bonafide belief that they are a small scale industry's unit as good as registered with the Directorate of Industries on the strength of the circular of the Ministry of Industry, mentioned supra. Therefore, no mala fides can be attributed to the appellants and the penalty of Rs. 30,000/- imposed by the adjudicating authority is not warranted in the facts and circumstances of this case. For the same reason, he submits that confiscation of the goods should not have been made in the instant case because of the bonafide belief of the appellants. As regards the demand, learned Advocate further submits that bulk of the demand will be barred by time because the show cause notice was issued on 13-2-1987 for the period 6-6-1985 to 30-9-1986. Bonafide belief of the appellants is clearly established on the basis of the circular of the Ministry of Industry. It is a well settled principles, submits the learned Advocate that where the C.E. assessee has been working under a bonafide belief the larger period of limitation of 5 years cannot be invoked. In this connection, he relies on Supreme Court's judgment in the case of Padmini Products [1989 (43) E.L.T. 195 (S.C.)] reported in 1989 (40) E.L.T. 241. On the basis of the above submissions, learned Advocate prays for suitable reliefs, as mentioned earlier.
3.1 Opposing the contentions, learned JDR, Shri R.S. Sangia, submits that benefit of Notification No. 88/77-C.E. has been rightly denied by the adjudicating officer inasmuch as the total number of workers including the apprentices exceeded 49 and the Horse Power installed required to operate the machines installed in the factory definitely called for utilisation of Horse Power of more than 2. Therefore, none of the conditions in the Notification 88/77-C.E. stands fulfilled and the Collector has rightly denied the benefit. On the question of applicability of Notification No. 175/86-C.E., learned JDR again reiterates the finding of the adjudicating authority and submits that the circular of the Ministry of Industry is regarding sale of goods manufactured by State Leather Corporation to DGS & D and the concession given therein cannot be extended to the duty concession under Central Excise law, as rightly held by the adjudicating authority. He submits that Notification No. 175/86 envisages registration with definite authorities; as mentioned in the said notification as also said registration of the unit under consideration was not available with the said authorities, the benefit of the notification cannot be extended.
2.4 Once the benefit of notification is not available to the appellants' unit, submits the learned JDR the plea of confiscation and penalty automatically will fail. On the question of limitation of demand, he submits that subsequent registration by the appellant w.e.f. 18-12-1986 clearly proves that the appellants were not entertaining any bona fide belief, as now contended. Had that been so, they would not have applied for registration with the concerned State authorities and got the registration w.e.f. 18-12-1986. He, therefore, submits that the plea of bona fide is merely an afterthought and should be discarded. He, therefore, prays for upholding the impugned order and dismissing the appeal.
3.1 We have carefully considered the pleas advanced from both sides. We are in the first instance concerned herein this appeal with the applicability of Notification No. 88/77-C.E. for the period 6-6-1985 to 31-3-1986 and of Notification No. 175/86-C.E. from 1-4-1986 to 30-9-1986. Learned Advocate's plea regarding benefit of Notification No. 88/77-C.E. that it would be available if one of the two conditions mentioned in the notification is satisfied, relying upon Tribunal's judgment reported in 1995 (78) E.L.T. 144 in the case of C.C.E. Kanpur v. Jandial Shoe Factory is correct. The two conditions are separated by a disjunctive word 'or'. Therefore, it is clear that if one of the two conditions is satisfied, the benefit of notification can be extended to the appellants. We further observe that the appellants had engaged 18 persons including the Manager on the rolls of the unit, 34 trainers and trainees and 19 pieces rate workers between 20-5-1985 to 25-5-1985. Learned Advocate's plea regarding inclusion of 34 persons being trainers and trainees is well founded on the st-rength of Andhra Pradesh High Court's judgment in the case of Golden Press (supra). Therefore, if we exclude 34 persons the number of workers employed will be less than 49 and therefore, the appellants would be entitled to the benefit of Notification 88/77. Consequently, demand of duty for the period 6-6-1985 to 31-3-1986 is not sustainable.
3.2 As regards the plea of applicability of Notification 175/86-C.E., no doubt, the said notification stipulates the condition of registration with the authorities mentioned therein but we observe that the reliance placed by the learned Advocate on Ministry of Industry's circular dated 25-10-1979 is quite apposite and this plea cannot be lightly discarded. This circular emanates from the department of the Central Government. The notification of the Government of India giving exemption is also from the Central Government. We cannot, therefore, ignore this circular of the Ministry of Industries is so far as the status of a unit as a small scale unit is concerned. Keeping that circular in view, the Ministry of Industry has very clearly stated that the State Leather Corporations will be treated on par with small scale units registered with NSIC under the Single Point Registration Scheme and will be eligible to all concessions and facilities which are admissible to such units. This declaration by the department of the Central Government clearly indicates that the benefit of Notification 175/86-C.E. cannot be denied to the appellants. Consequently, we hold that even though there is no specific registration of the appellants' unit with the Directorate of Industries in a State or the Development Commissioner of Small Scale Industries, as stipulated in the Notification. In view of this finding of ours, demand of duty against the appellant for the period in question is not sustainable.
13.4 In view of the foregoing finding, questions of confiscation and of imposition of penalty do not arise. Therefore, the confiscation of footwears is set aside and the penalty of Rs. 30,000/- is also set aside.
3.5 Further, in view of our finding on demand of duty the question of limitation also loses importance and it is not necessary for us to go into that question.
3.6 In view of our aforesaid findings, in short, appeal is allowed with consequential relief to the appellants after we set aside the impugned order.