1991 (3) TMI 270 - AT - Central Excise

Issues Involved:
1. Limitation period for issuing the show cause notice.
2. Calculation of duty amount.
3. Validity of the show cause notice.
4. Allegations of suppression or misstatement.

Detailed Analysis:

1. Limitation Period for Issuing the Show Cause Notice:
The primary issue revolved around whether the show cause notice dated 31-10-1980 was barred by limitation. The appellants argued that the notice was issued beyond the permissible period without any allegations of suppression of material facts, thus invoking the extended period of five years was unjustified. The appellants highlighted correspondence, particularly their letter dated 11-5-1978, which disclosed the use of tools in their Ballabgarh factory, asserting that the department was aware of the facts early on, making the extended period inapplicable. The department countered by referencing their letter dated 8-12-1977, which, according to them, could be considered a notice of demand within the five-year period. The Tribunal, however, concluded that the show cause notice dated 31-10-1980 was within the normal period of limitation since the necessary particulars for duty computation were furnished only around 25-8-1980.

2. Calculation of Duty Amount:
The appellants contended that there was an error in calculating the duty amount. They argued that the basic excise duty during the material period was 10% and not 15%, and that special excise duty was not applicable. The Tribunal acknowledged this discrepancy and directed the Assistant Collector to recalculate the duty applying the correct rate of duty in force during the relevant period.

3. Validity of the Show Cause Notice:
The validity of the show cause notice was questioned on the grounds that it did not allege any of the necessary ingredients (such as suppression of facts) required to invoke the extended period of limitation under Rule 10 of the Central Excise Rules. The Tribunal noted that the letter dated 8-12-1977, which the department considered as a notice of demand, did not fulfill the requirements of a proper show cause notice. It lacked the necessary details such as the amount of duty and the period covered, and it did not provide the appellants an opportunity to show cause.

4. Allegations of Suppression or Misstatement:
The appellants argued that there were no allegations of suppression or misstatement in the show cause notice, which is a prerequisite for invoking the extended period of limitation. The Tribunal agreed, noting that the show cause notice dated 31-10-1980 did not contain any such allegations. The Tribunal referenced several judicial precedents, including decisions by the Supreme Court and various High Courts, which held that mere failure or negligence on the part of the manufacturer does not attract the extended limitation unless there is evidence of intentional evasion of duty.

Separate Judgments Delivered:
- The Senior Vice President concluded that the department acted within time and upheld the demand but directed a recalculation of the duty amount.
- The Judicial Member disagreed, holding that the demand was barred by time as the show cause notice did not allege suppression or misstatement.
- The Vice President, agreeing with the Judicial Member, concluded that the letter dated 8-12-1977 could not be considered a show cause notice and that the demand was time-barred.

Final Order:
In light of the majority opinion, the demand was held to be barred by time, and the appeal was allowed, setting aside the orders of the lower authorities.

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