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TMI Blog2000 (11) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... rinted cartons are treated as products of printing industry, they held the bona fide belief that printed cartons does not attract Central Excise duty. It was held that printed cartons would not be treated as products of Printing Industry; that again in the case of Metagraphs Pvt. Ltd. v. CCE - 1996 (88) E.L.T. 630 (S.C.), the Apex Court held the printed aluminium labels as products of printing industry as printing was not incidental to its use but primary in the sense that it communicates to the customer about the product; that however, the Apex Court adopted different reasoning in holding that Printed cartons are not products of printing industry in the case of Rollatainers Ltd. v. U.O.I reported in 1994 (72) E.L.T. 793 (S.C.); that the Apex Court in the case of C.C.E. v. Indian Coated Cartons (P) Ltd. reported in 1997 (92) E.L.T. 459 (S.C.) settled the issue by holding that printed cartons are products of packaging industry. The ld. Counsel submitted that in view of these decisions they entertained the bona fide belief that the cartons in which the printing was done was a product of the printing industry and therefore it did not attract any duty; that the Andhra Pradesh High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y penalty did not arise as the department was not able to sustain its demand whereas in the present matter the entire demand has been paid by the appellants without disputing the same. He also mentioned that the penalty is imposable under Rule 173Q(1) of the Central Excise Rules if a manufacturer removes any excisable goods in contravention of any of the provisions of the rules or does not account for any excisable goods manufactured by him or engages in the manufacture of any excisable goods without having applied for the Registration Certificate; that in the present matter, the appellants have neither taken registration nor accounted for the goods manufactured by them and have removed them in contravention of the provisions as such the penalty has been imposed on them rightly. Finally he submitted that the decision in the case of Siemens Ltd. (supra) is not applicable as in that case the appellants therein were already registered with the department and they had reversed the Modvat credit wrongly taken by them even before the issue of the show cause notice whereas in the present matter the appellants were completely out of control of the Excise officer as they had not even intima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules make clear distinction there is no scope for taking mens rea into consideration. The Appellate Tribunal in the case of Reckitt Colman of India Ltd. v. C.C.E. - 1992 (62) E.L.T. 389 (T), held that unless there is something in the language of the statute indicating the need to establish the elements of mens rea, it is generally sufficient to prove that the default in complying with the statute has occurred. The Tribunal followed the decision of the Supreme Court in the case of Gujarat Travancore Agency v. Commissioner of Income-tax reported in 1989 (42) E.L.T. 350 (S.C.) wherein the Supreme Court held A penalty imposed for a tax delinquency is a civil obligation, remedied and coercive in nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. Similar views were held by the Supreme Court in the case of Director of Enforcement v. M/s. MCT. M. Corporation Pvt. Ltd. Others - 1996 (12) RLT 365 (S.C.) :- It is thus the breach of a civil obligation which attracts penalty under Section 23(1)(a) FERA, 1947 and a finding that the delinquent has contravened Section 10 of FERA, 1947 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at printed cartons are products of packaging industry and the issue involved in Metagraphs P. Ltd. was about aluminium labels and not cartons, it was incumbent on the Appellants to approach the Excise Department. While we hold that the appellants are liable to penalty, the quantum of penalty will depend on the facts and circumstances of each case. As in the present matter the appellants realised their mistake as soon as the department brought it to their notice and they discharged the duty liability even for the past period, in view of this we are of the view that in the interest of justice will be met if they are asked to pay only nominal penalty of Rs. 50,000/-. We accordingly reduce the penalty of Rs. 3 lakhs to Rs. 50,000/-. But for this modification, the appeal is rejected. Sd/- (S.L. Peeran) Member (J) Sd/- (V.K. Agrawal) Member (T) 6. [Contra per : S.L. Peeran, Member (J)]. - We had discussion in this matter in the light of all the case law cited by my Brother and also cited herein. In my humble opinion, the matter of non-imposition of penalty under Rule 173 of Central Excise Rules in the facts and circumstances of this particular case is more covered w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd this serves a definite purpose. Since the printing industry has brought the label into existence that being the position and further the test of trade having understood the label as the product of printing industry, there is no difficulty, the Hon ble Apex Court observed, in holding that the labels in question are the products of printing industry. It referred to its earlier order in the case of Rollatainers Ltd. Another v. U.O.I. as reported in 1994 (72) E.L.T. 793. The Hon ble Apex Court in the case of Johnson Johnson v. CCE as reported in 1997 (94) E.L.T. 286, while dealing with the question under T.I.68 of the erstwhile CET and exemption under Sr. No. 24 of Notification dated 1st November, 1982 held that printed labels fall within Serial Number 24 of the Schedule of exemption, which granted exemption (to all products of printing industry including newspapers and printed periodicals), while following the judgment of its own Court in the case of Metagraphs Ltd. as reported in 1996 (88) E.L.T. 630. However, in the case of U.O.I. v. Vijay Flexible Containers as reported in 1997 (96) E.L.T. 9 the Hon ble Apex Court retained its judgment in the case of Rollatainers v. CCE as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of these rules; or (b) does not account for any excisable goods manufactured, produced or stored by him; From the above provisions, it is clear that there has to be removal of any excisable goods in contravention of any of these provisions of Rules or does not account for any excisable goods manufactured, produced or stored. It follows that this contravention has to be proved in terms of Rule 9, which deals with removal of excisable goods from any place where they are produced until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in this rule or the Commissioner may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the proper form. There has to be a contravention of this rule for the purpose of invocation of Rule 173Q(1)(a) and (b) and in the present case, there has been no such contravention and the question of even going to intention of removals need not be gone into. The allegations are required to be proved under Rule 9 and the other rules quoted for upholding the imposition of penalty under Rule 173Q and there is no specific mention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly used, the demand for duty was held to be in order. However, looking into the facts that the departmental officers had acquiesced in the mis-interpretation of the concession, the Tribunal held the penalty to be not leviable. 8. The law therefore, indicates as on this date that there has to be an intention to evade duty with preparation of mind towards that end. It is not just non-deposit of duty on the belief of item being non-dutiable, that by itself will give rise to penal liability. Penalty is a penal consequence against a person for his action in not following the rigour of law and paying duty at the time of clearances of goods. During the clearance of goods, the party was under bona fide belief that it was not dutiable and had kept clearing it without any intention to evade duty and there were circumstances in the form of various judgments to the effect of goods being non-dutiable in appellants favour. In such circumstances the Courts have ruled that no penalty is to be levied as there was no intention to evade payment of duty while removing the goods. Penalty is a quasi-criminal proceeding to penalise a person for his deliberate action in defaulting in payment of dues to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Golden Press v. DCCE as reported in 1987 (27) E.L.T. 273 in a similar facts and circumstances of the case set aside the penalty imposed on the ground that printed cartons are not products of printing industry but of packaging industry. The party had pleaded in that case also that they had thought bona fide that its products viz. printed cartons, were not liable to duty and that they need not to take out a licence. A similar plea is made out in the present case. This plea has not been negatived in the present case by the department and which was what the High Court also said that their plea had not been negatived by the department. Therefore, in such circumstances, the High Court held that levy of penalty on mere ground of not taking out licence is not warranted in the facts and circumstances of the case. It drew strength from the fact that Government of India itself was previously of the opinion that the printed cartons are exempted. Subsequently, the Central Govt. revised its opinion which had been followed by the Collector, which was also set aside by the High Court and hence the plea of the petitioner and the explanation was held to be not out of place and therefore, held that l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and shall be liable to penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to above has been committed or Rs. 5,000/- whichever is greater. The High Court held that the principal object of the Act is not to levy penalty, its object is calculation and enforcement of payment for Central Excise duty. The manufacturer is liable to pay penalty on account of certain acts or omissions committed by them. The findings given by the High Court on this issue in paras 16 to 19 are re-produced hereinbelow :- 16. The principal object of the Act is not to levy penalty, its object is calculation and enforcement of payment of Central Excise duty. The manufacturer is liable to pay penalty on account of certain acts or omissions committed by them. Under Rule 173Q of the Central Excise Rules, 1944, a maximum limit of penalty which could be levied is provided and, therefore, the penalty could not be wholly disproportionate to the incidence of infringement. In Hindustan Steel Ltd. v. State of Orissa [1978 (2) E.L.T. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of Central Excise, C.E.G.A.T. [1991 (53) E.L.T. 457 (Tri.)] it was held that crushing, grinding and sieving of lime stone to obtain lime stone chips and powder amounts to `manufacture . Thus, there are divergent views of Courts raising bona fide doubt in the mind of the petitioners whether the crushing of lime stone lumps to obtain lime stone chips will amount to manufacture and consequently excisable under the Act? The statement recorded of the Law Officer of the petitioner company also indicates that as on 31-8-1989 there was a bona fide belief in the mind of the petitioner that the process of crushing does not amount to manufacture. The aforesaid state of affair clearly indicate that the breach in payment of excise duty flows from a bona fide belief of the company that they are not liable to pay excise duty, as they were not engaged in the `manufacture of lime stone chips. Conversion of lime stone lumps into lime stone chips was never taken to be a `manufacturing process by the petitioners. 18. The proceeding for imposition of penalty being quasi-criminal in nature, the burden to prove the alleged offence is on the Excise Department. No facts or circumstances are brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done in the above cited judgment. We cannot proceed to look into the provisions of `mens rea as has been defined and gone into in the case of Director of Enforcement v. M/s. MCT. M. Corporation Pvt. Ltd. Others, cited supra, which deals with the provisions of penalty under Section 23(l)(a) of the FERA Act, 1947, which does not have similar provisions under Rule 173Q of the Central Excise Rules. It is well settled principle of interpretation of statute that only those statutes which are akin and are of identical nature and are pari materia, which could be applied. In the present case, the Central Excise Act is a self-contained legislation and the interpretation laid down by the Tribunal/High Court/Apex Court under these provisions are alone to be applied and not of the other legislations which are not pari materia to the Central Excise Act/Customs Act. 12. Likewise the Tribunal in the case of Jumbo Rolls Audio (I) Ltd. held after due analysis of various judgments that the process as noted therein amounted to manufacture as new marketable product has come into existence and confirmed the duty but set aside the penalty on the plea that prior to commencement of investigation by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered by the Tribunal in the case of CCE v. New Jack Printing Works Pvt. Ltd. as reported in 1997 (93) E.L.T. 78 in the light of the Apex Court judgments wherein the issue of classification of printed wrapping paper meant for wrapping cadbury chocolate bars was considered and held that wrapper is not `other product of the paper printing industry as printing function was incidental of packaging. In view of the above controversy being still alive, it cannot be said that the issue came to an end with the decision of the Hon ble Apex Court in the cases of Rollatainers Ltd. and Metagraphs Pvt. Ltd. as the Tribunal and Hon ble Apex Court was still re-considering the issue in subsequent cases and hence there was still controversy lingering in the matter for parties to hold bona fide belief of item being not dutiable. On three occasions, the matter had been referred to Larger Bench of the Tribunal of Five Members in respect of Printed Shells and Printed H.L. Blanks being articles of paper pulp, paper board etc. are items of cartons, boxes, as can be seen from (i) CCE v. Vijay Flexible Containers (P) Ltd. as reported in 1995 (80) E.L.T. 203 (T) (ii) CCE v. Vijay Flexible Containers Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was guilty of fraud, collusion, mis-conduct or suppression to attract the proviso to Section 11A(1) of the Act. There is a considerable force in this contention and if the Department proposes to invoke the proviso to Section 11A(1), the show cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from 6 months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the Department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show cause notice which is the allegation against the assessee falling within the four corners of the said proviso. The Apex Court further held that in the instant case, that having not been specifically stated, the Additional Collector was not justified in inferring (merely because the assessee had failed to make a declaration in regard to waste or by-product) an intention to evade the payment of duty. The Additional Collector did not specifically deal with this contention of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her fraud or collusion of wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intend to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. 16. The same finding was reiterated by the Hon'ble Supreme Court in the case of Padmini Products v. CCE as reported in 1989 (43) E.L.T. 195 (S.C.), wherein also there was invocation of Rule 9(2) of Central Excise Rules and the controversy of not having taken licence on the imported dhoop sticks for levy of duty. The parties had taken a plea that they were under bona fide belief and the impugned goods were exempted under the item `handicrafts . The said plea was accepted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to by the Tribunal, there is scope for believing that agarbaties were entitled to exemption and if that is so, then there is enough scope for believing that there was no need of taking out a licence under Rule 174 of the said Rules and also that there was no need of paying duty at the time of removal of dhoop sticks, etc. Counsel further submitted that in any event apart from the fact that no licence had been taken and for which no licence was required because the whole duty was exempt in view of Notification No. 111/78, referred to hereinbefore, and in view of the fact that there was scope for believing that it was exempt under Schedule annexed to the first notification, i.e., 55/75, being handicrafts, the appellants could not be held to be guilty of the fact that excise duty had not been paid or short-levied or short-paid or erroneously refunded because of either any fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder. These ingredients postulate a positive act. Failure to pay duty or take out a licence is not necessarily due to fraud or collusion or wilful mis-statement or suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from which it could be inferred or established that the duty of excise had not been levied or paid or short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made thereunder. The Tribunal in the appellate order has, however, reduced the penalty to Rs. 5,000/- and had also upheld the order of the confiscation of the goods. In view of the fact that the claim of the revenue is not sustainable beyond a period of six months on the ground that these dhoop sticks, etc. were not handicrafts entitled to exemption, we set aside the order of the Tribunal and remand the matter to the Tribunal to modify the demand by confining it to the period of six months prior to issue of show cause notice and pass consequential orders in the appeal on the question of penalty and confiscation. The appeal is allowed to the extent indicated above and the matter is, therefore, remanded to the Tribunal with the aforesaid directions. This appeal is disposed of accordingly. On a plain reading of the above findings it is clear that mere failure or negligence on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be construed more strictly in such cases where an examinee is competing for Civil Service post. The very nature of the competition requires that it should be fair, above board and must infuse confidence. It held that if this is ignored then, it is not only against the public interest but also erodes the social sense of equality. Therefore, bona fide plea is rejectable only in such circumstances and not in the case of taxation, as it has been held to be a good ground of defence for non-payment of duty, if such a belief is held about an item being non-dutiable. 20. In the case of Lucas Tvs Ltd. as reported in 1993 (67) E.L.T. 81 (T), the Tribunal held that delayed payment of duty was also not a ground for imposition of high penalty as bona fide misapprehension on the part of the appellant with regard to its duty liability was held to be a good ground for minimising the imposition of penalty. 21. In the case of Extrusion v. CC as reported in 1994 (70) E.L.T. 52 (Cal), while examining the provisions of penalty and fine under Sections 112 and 125 of the Customs Act, the High Court took into consideration various judgments of the Hon ble Apex Court to hold that it is well settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llector while imposing the penalty had observed in his order that he was taking a lenient view. In the circumstances of the case, we feel the leniency should extend further and accordingly we allow the appeal and set aside the order imposing penalty. As can be seen from the above ruling that the fact the appellants were apparently not guided by the said judgment in effecting the clearances without payment of duty would not make the position difficult for them. Had they been aware of the judgment even the duty may not have been paid by them. Therefore, the Tribunal held that the leniency given by the Additional Commissioner to impose lesser penalty was in the facts and circumstances of the case is extended further in setting aside the entire penalty. In my humble opinion, this judgment would also squarely apply to the facts of the present case. Hence, I accept the appellants pleas and set aside the impugned order imposing penalty under Rule 173Q of the Central Excise Rules. Sd/- (S.L. Peeran) Member (J) POINTS OF DIFFERENCE In view of the difference of opinion between the two Members, the matter is referred to Third Member to determine the points arising therefrom for dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Supreme Court in the case of Akbar Badruddin as reported in 1990 (47) E.L.T. 161 (S.C.) and for the submission that for bona fide belief, penalty could not be imposed, he relied on the decisions in the case of HMM as reported in 1995 (76) E.L.T. 497 (S.C.) and Siemens Ltd. v. CCE as reported in 1999 (34) RLT 831 (CEGAT) were relied upon wherein the decision of the Govt. of India in the case of Dhampur Sugar Mills Ltd as reported in 1990 (46) E.L.T. 400 (G.O.I.) was relied. The Govt. of India in the case of Dhampur Sugar Mills had observed that penalty was not imposable where the assessee had taken corrective steps before the issue of show cause notice. The Counsel further submitted that there was no case for imposition of penalty. Having the benefit of going through the order of the learned Member (T) and the learned Member (J) and after considering the material on record I find : (a) Learned Member (T) in his order has strongly relied upon the fact that no correspondence was shown for having approached the Central Excise authorities and therefore, there was omission on the part of the appellants and penalty could be imposed in the facts and circumstances and evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of Jay Yuhshin Ltd. v. CCE as reported in 2000 (119) E.L.T. 718 has held that : as regards the contention of the appellants that the SCN issued under Section 11A(1) would apply only to a situation where a duty payment is subsisting at the time of issue of notice and where no such outstanding duty liability exists at the time of issuing the SCN, we are of the view that a careful reading of Section 11A(1) does not allow such construction to be put on the said provision. Inasmuch as Section 11A(1) gives power to the Central Excise Officer to serve a notice within a period of six months from the `relevant date from the date when non-levy/non-payment or short levy/short payment has occurred, we are of the view that so long as it is not in doubt that there has been an occurrence of non-levy/short levy or non-payment/short payment on the relevant date the pre-conditions for issuance of SCN under Section 11A(1) are fully met and notice validly issued. In the instant case there is no dispute that clearance of excisable goods on short payment of duty had taken place. The fact that the differential duty was subsequently debited (albeit voluntarily) by the assessee before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44. Therefore, reliance on the Supreme Court decision for imposition of penalty under Income-tax law and the FERA law will not be applicable in the case under Central Excise law. (e) Though mens rea is not a stipulated ingredient essential in some of the clauses of Rule 173Q, to levy penalty, however, visit of penalty itself would depend upon its existence. Quoting the decision of the Supreme Court in the case of Hindustan Steel Ltd. as reported in 1978 E.L.T. (J159) = AIR 1970 S.C. 253, Badruddin Jiwani v. CCE reported in 1990 (47) E.L.T. 161, Jain Exports P. Ltd reported in 1990 (47) E.L.T. 213 (S.C.), Navinchandra v. UOI reported in 1987 (29) E.L.T. 492 (S.C.), the Tribunal decisions in the case reported in 1984 (16) E.L.T. 534, 1986 (24) E.L.T. 671, would be relevant and relying on them one can come to a finding that penalty could not be imposed if there is a technical violation or venial breach only of any statutory provisions and/or imposition of penalty for failure to carry out statutory obligations is a result of quasi-criminal proceedings and penalty will not be ordinarily imposed unless the party obliged or acted deliberately in defiance of law or was guilty of conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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