1994 (10) TMI 60 - SC - Central Excise

Whether in the set of facts and circumstances of the instant case, the Collector and Tribunal were justified in concluding that the appellant was guilty of wilful mis-statement and suppression of facts? Held that - A reasonable conclusion can certainly and legitimately be drawn that the appellants wilfully and deliberately made mis-statements and suppressed material facts to avoid payment of excise duty. In other words it is not a case of simple inaction or failure on the part of the appellants to furnish material information. As already found that the appellants have acted in conscious disregard of their statutory obligations and deliberately suppressed material facts the above contention can neither be accepted nor the above-quoted passage pressed into service. Appeal dismissed.

Issues Involved:
1. Whether the Chromic Acid section constitutes a separate unit or factory.
2. Applicability of Notification No. 46/81 for exemption from excise duty.
3. Validity of the extended period for demand under Section 11A(1) of the Central Excises and Salt Act, 1944.
4. Imposition of penalty and confiscation of goods.

Detailed Analysis:

1. Whether the Chromic Acid section constitutes a separate unit or factory:
The appellants contended that the Chromic Acid section of their premises is a different unit from where Sodium Bichromate is manufactured, and since the workers employed in that section are not more than four, it cannot be classified as a 'factory' under Section 2(m) of the Factories Act, 1948. The Excise authorities, however, asserted that the Chromic Acid section does constitute a factory and thus, the appellants are liable to pay duty under the Notification.

The Collector, upon reviewing the materials, concluded that the entire premises, including the Chromic Acid section, formed a single unit. The Tribunal concurred, noting the interconnected operations such as common water and power connections, common payments for facilities, and common delivery challans.

The Supreme Court agreed, stating that the definition of 'factory' under Section 2(m) of the Factories Act includes any premises where ten or more workers are working and a manufacturing process is carried out with the aid of power. The Court found no reason to overturn the findings of the Collector and the Tribunal, thus rejecting the appellants' contention.

2. Applicability of Notification No. 46/81 for exemption from excise duty:
The appellants argued that their Chromic Acid section was exempt from excise duty under Notification No. 46/81, which exempts goods manufactured in a non-factory setting. However, the Excise authorities and the Tribunal held that since the Chromic Acid section was part of a larger factory, the exemption did not apply.

The Supreme Court upheld this view, emphasizing that the entire premises, including the Chromic Acid section, constituted a factory due to the interconnected operations and shared resources. Therefore, the exemption under Notification No. 46/81 was not applicable.

3. Validity of the extended period for demand under Section 11A(1) of the Central Excises and Salt Act, 1944:
The appellants contended that even if their Chromic Acid section was considered a factory, the excise authorities could only demand duty for a period of six months prior to the issuance of the show-cause notice, as per Section 11A(1) of the Act. They argued that there was no fraud, collusion, wilful misstatement, or suppression of facts to justify invoking the extended period under the proviso to Section 11A(1).

The Supreme Court examined the record and found that the appellants had made wilful misstatements and suppressed material facts, such as misleading references in their declarations and discrepancies in the ground plans submitted to different authorities. The Court concluded that these actions justified the invocation of the extended period for demand.

4. Imposition of penalty and confiscation of goods:
The appellants argued that the penalty should not be imposed as their actions were based on a bona fide belief that they were not liable to pay excise duty. They cited the judgment in Hindustan Steel Ltd. v. State of Orissa, which states that penalties should not be imposed unless the party acted in conscious disregard of its obligations.

The Supreme Court rejected this argument, noting that the appellants had acted in conscious disregard of their statutory obligations and deliberately suppressed material facts. Consequently, the imposition of penalty and the order for confiscation of goods were upheld.

Conclusion:
The Supreme Court dismissed the appeal, upholding the findings of the Collector and the Tribunal. The Chromic Acid section was deemed part of a larger factory, making it ineligible for the exemption under Notification No. 46/81. The extended period for demand was justified due to the appellants' wilful misstatements and suppression of facts. The penalty and confiscation orders were also upheld, as the appellants acted in conscious disregard of their obligations. No order as to costs was made.

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