2009 (1) TMI 388 - AT - Central Excise

Invocation of extended period for raising demand Penalty Ratio decidendi - Manufacturing activity came to knowledge of department when a statement of the appellant s legal and fiscal advisor was recorded on 2-9-87 - A show cause notice was thereafter issued on 10-2-89 seeking to demand duty - notice was issued within 16 to 17 months of the date of recording of 1st statement which appears to be more than reasonable - It has to be taken that all facts became known to the department only when this show cause notice was issued in February 89 giving margin for drafting of show cause notice and its process and approval from the Commissioner. Contention of appellant that larger period not invocable after date of knowledge of revenue on 2.9.87 and SCN should have been issued within normal period of limitation only thereafter, is not sustainable - We therefore hold that the extended period has been rightly invoked - Regarding their plea that principle of natural justice has not been followed as co-noticees were not heard together we do find that The appellants have never asked for the same.- demand is sustainable since in so many case laws it has been held that Goods manufactured for execution of work contract, will be dutiable, plea of bonafide belief is not acceptable penalty is imposable - A decision is an authority for what decides and not what can logically be deduced therefrom. The ratio of any decision must be understood in the back ground of the facts of that case. A case is only an authority for what it actually decides and not what logically follows from it. Even a difference in one fact can make a world of difference and the outcome may be totally different. An opinion of the court on any issue, not necessary for deciding the dispute, cannot be considered as ratio of that case. Ratio decidendi is a rule deductible from the application of law to the facts and circumstance of a case and not some conclusion based upon facts which may appear to be similar.

Issues Involved:
1. Dutiability of RCC pipes.
2. Invocation of the extended period for issuing a show cause notice.
3. Allegations of suppression of facts and intent to evade duty.
4. Compliance with principles of natural justice.
5. Imposition of penalty under Rule 173Q.

Detailed Analysis:

Dutiability of RCC Pipes:
The appellants did not seriously dispute the dutiability of the RCC pipes manufactured during the execution of the works contract. They admitted to manufacturing 512 RCC pipes without informing the Central Excise department and without paying the duty. This was confirmed by the Bombay Municipal Corporation.

Invocation of Extended Period for Issuing Show Cause Notice:
The primary contention of the appellants was that the demand was time-barred. They argued that the department became aware of the manufacture of the pipes on 2-9-87 when the statement of their legal advisor was recorded. Since the show cause notice was issued on 10-2-1989, it was beyond the one-year period from the date of knowledge, making it time-barred. They relied on several judicial precedents, including the Supreme Court decisions in Nizam Sugar Factory and Karnataka High Court in Bripanil Synthetics, to support their argument that the extended period could not be invoked once the department had knowledge of the facts.

Allegations of Suppression of Facts and Intent to Evade Duty:
The appellants argued that there was no deliberate suppression with intent to evade duty. They claimed a bona fide belief that no excise duty was payable on the RCC pipes used in the execution of the works contract. This belief was based on earlier Tribunal decisions and the understanding of the law at the relevant time. However, the department contended that the appellants, being a large company, should have been aware of the excisability of the manufactured products, especially given the contractual clauses that indicated potential duty liability.

Compliance with Principles of Natural Justice:
The appellants claimed a breach of natural justice, arguing that all co-noticees were not heard in each other's presence. However, the Tribunal found no merit in this argument, noting that the appellants had not requested such a hearing.

Imposition of Penalty under Rule 173Q:
The appellants contended that no penalty should be imposed as there was no intent to evade duty, and the issue was debatable. They also argued that the penalty was imposed under Rule 173Q without specifying the sub-rule, which, according to them, was improper. The department, however, maintained that the charges were clearly brought out in the show cause notice, and the imposition of penalty was justified.

Tribunal's Findings:
1. Extended Period Justified: The Tribunal held that the extended period was rightly invoked. The department's knowledge on 2-9-87 was not sufficient to issue a show cause notice immediately, as further investigations were required to ascertain the full facts and value of the pipes. The show cause notice issued on 10-2-89 was within a reasonable time frame given the complexity of the case.

2. No Bona Fide Belief: The Tribunal rejected the appellants' plea of bona fide belief, noting that the contractual clauses should have prompted the appellants to inquire about the duty liability. The Tribunal also highlighted that there were several judicial precedents indicating the excisability of RCC pipes, which the appellants should have been aware of.

3. Principles of Natural Justice: The Tribunal found no breach of natural justice, as the appellants had not requested a joint hearing with the co-noticees.

4. Penalty Imposition: The Tribunal upheld the imposition of the penalty, stating that the charges were clearly brought out in the show cause notice and the appellants' actions indicated a disregard for the duty liability.

Conclusion:
The appeal was dismissed, and the Tribunal upheld the demand for duty and the imposition of the penalty. The extended period for issuing the show cause notice was deemed justified, and the appellants' arguments regarding bona fide belief and breach of natural justice were rejected.

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