Ambica Steel Rolling vs Customs Excise And Gold Control ...
1990 Latest Caselaw 431 Del

JUDGMENT

S.C. Jain, J.

(1) The facts giving rise to this writ petition are that the petitioners are manufacturing iron bars falling under Tariff Item No. 26AA (ia) of the Central Excise Tariff. On 15th April, 1978, the Preventive Officers of the Central Excise Saharanpur Division, visited the factory of the petitioners and found that the petitioners had cleared 307.326 Mt of iron bars made out of steel ingots (on which duty had already been paid prior to 18-6-77) free of duty as against the duty payable at the rate of Rs. 130.00 per M.T. in terms of notification No. 152/77 dated 18.6.77 as amended by notification No. 235/77 dated 15-7-1977. A show cause notice dated 2nd April, 1979 was issued and as a result of the adjudicating proceedings the Collector of Central Excise, Meerut, held that there was contravention of Rules 9(1). 173F, 173G read with 173Q and ordered that excise duty at the appropriate rate be paid on the said quantity of iron bars under Rule 9(2) read with Rule 10 and also imposed a penalty of Rs. 10,000.00 under Rule 173Q. As per the Collector, there was willful mis-statement and suppression of fact, the fact of the date prior to which the raw-material i.e. the steel ingots were cleared and on that basis he held that the demand of duty as stated in the show cause notice was within the prescribed period of limitation i.e. five years.

(2) In appeal before the Central Board of Excise and Custom (hereinafter referred to as the 'Board'), the Board vide order dated 31st December, 1981, confirmed the order of the Collector regarding demand of duty, but waived and set aside the penalty of Rs. 10.000.00 by observing that evidence did not indicate that there was deliberate or willful mis-statement of facts.

(3) A revision petition was filed against the order dated 31st December, 1981, passed by the Board which stood transferred to the Custom, Excise and Gold (Control) Appellate Tribunal by virtue of Section 35(P) of the Central Excise and Salt Act, 1944.

(4) The Appellate Tribunal vide order in Appeal No. B-722/83 dated 5th August, 1983, upheld the Board's order and observed : "EVEN if there was no willful mis-statement the use of the description' exempted ingots' claiming 'nil' duty on the products manufactured, when there were two types of exempted ingots, namely, those which had discharged Rs. 330 Mt and those which had paid only Rs. 200 Mt leading to complete exemption of the products in one case and liability @ Rs. 130 Mt in the other, smacks of deliberate ambiguity. This tantamounts to suppression within the meaning of Rule 10. That the local officers could have or ought to have verified the factum of duty borne by the ingots actually used, mitigates the suppression but does not extinguish it. In this view of the matter, there was adequate justification on the part of the Board in setting aside the penalty."

(5) Reliance has "been placed on the decision of the Supreme Court in Padmini Products vs. Collector of Central Excise, 1989(43) E.L.T. 195(S.C.) wherein it has been held that ex tended period of five years is inapplicable for mere failure or negligence to pay duty when there was scope for doubt that the goods were not dutiable unless there is evidence that the manufacturer knew that the goods were liable to duty and he due to fraud or collusion or willful mis-statement or suppression of facts in contravention of any provision of the Act and the Rules, cleared the goods without payment of duty, the extended period of five years limitation could be invoked.

(6) As per the facts on record, which are not disputed, the petitioners were at the relevant time operating under the Self Removal Procedure, by which classification lists are to be filed, accounts maintained and goods removed on the basis of statutory documents. In addition, monthly returns in respect of raw material used and goods manufactured have to be maintained and submitted. At the end of the month, proper officer is required under the Rules to verify all records kept and returns made and assess the same. The petitioner duly filed RT-12 returns and proper officer had assessed the same .and no objections were raised until the issue of the show cause notice. In the classification list the petitioners had clearly indicated that they were availing of the benefit of the notification No. 152/77-CE dated 18-6-77 as amended by notification No. 235/77-CE dated 15-7-77. It might be a case of misinterpretation of notification in question but it cannot be a case of willful mis-statement or suppression of facts. The findings of the Board that evidence does not indicate clearly that suppression was deliberate or misstatement was willful has not been set aside even by the appellate Tribunal.

(7) By now it is well settled that rule 9(2) is in the nature of penal provision and would apply only to a case where there has been a conscious evasion of payment of duty. A clear finding about the clandestine removal of goods with a view to evade excise duty is a condition precedent to the application of rule 9(2). The Gujarat High Court in Surgichem, by its partner NatverlalP.Mehta\s. Union of India and others, 1980 Census Id, had the occasion to deal with almost a similar case and in paragraph 12 of the case it was held : "IF the petitioner having posted the departmental authorities with all the necessary facts as regards type of goods manufactured by it had been clearing them from time to time under the self removal procedure, after filing necessary classification lists with the departmental authorities and if the departmental authorities failed to raise proper demands for the levy of excise on these two disputed items, it cannot be said that the .removal by the petitioner of these goods was in any clandestine manner, or in any way it was a clandestine removal with a view to evade payment of excise duty." Hence, it must be held that the very condition precedent to the invocation of power under rule 9(2) in the present case is missing. The petitioner can by no stretch of imagination be said to have removed the concerned items of goods in any clandestine manner so as to incur liability under rule 9(2)."

(8) The petitioner believing that the iron bars manufactured by them were exempt from payment of duty vide notification No. 152/77-CD dated 18-6-1977 as amended by notification No. 237/77-CE dated 15-7-77, cleared the same without payment of duty and in such circumstances the extended period of limitation of five years as provide in rule 9(2) read with rule 10 (now Section 11A) cannot be invoked and the authorities below have gone wrong on the point. We, therefore, quash the order dated 5th August, 1983 passed by Custom Excise & Gold (Control) Appellate Tribunal (Respondent No. 1). Parties are left to bear their own costs.