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TMI Blog2010 (8) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... or the goods cleared by the Petitioner during the period from December, 1992 to 15th March, 1995. 3. The facts involved in the above Petition can be stated in a nutshell thus :- The Petitioner No. 1 is a Public Limited Company engaged in manufacturing forgings which are used in the manufacture of Shafts, Gear, Pinion, Lever Coupling etc. The Petitioners in connection with the said manufacture had filed Classification Lists with the Respondents in respect of the said products claiming exemption under Notification No. 223/88, dated 23rd June, 1988. The Petitioners had initially classified the said products as other articles of iron and steel under Head 7326.90 of the Central Excise Tariff Act, 1985 (hereinafter referred to as the "Tariff Act") and later on under Chapter 84 of the said Tariff. The manufacturing process involved in the manufacture of the said forge articles inter alia involves heating and beating of material (Ingots). Thereafter the process of machining is undertaken for which the Petitioners used to send the said goods to the job workers along with a drawing which is sent to the job workers with drawing is known as "proof machined job" for the guidance of the job wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for invoking extended period of five years under Section 11A of the CESA Act, 1944 on the ground that the Petitioner had misdeclared the products as "proof machined" and, the misstatement and suppression of facts appear to be totally intentional. It was further averred in the said show cause notice that the Petitioner has intentionally mis-stated/suppressed the facts in order to evade payment of duty and therefore the provisions of Section 11A of the CESA Act, 1944 were applicable. The Petitioners were therefore called upon to show cause as to why differential central excise duty amounting to Rs. 20,05,042/- on the goods valued at Rs. 2,89,80,132/- cleared by the Petitioners during the period December, 1992 to 15th March 1995 should not be demanded and recovered from them and the differential duty amounting to Rs. 7,05,747/- involved in the clearances of scrap of iron and steel falling under CH. 7204.30 of the Tariff during the period from December, 1992 to 15th March, 1995 should not be demanded and recovered from them. 6. The Petitioners replied to the said show cause notice by their letter dated 29th August, 1996. Whilst denying the allegations as regards mis-declaration by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the Petitioners further submitted that both the authorities below though have concurrently held that the Petitioners are liable to pay duty and penalty have not recorded a finding that there has been mis-statement or fraud which would entitle the Respondents' to the extended period of limitation under Section 11A of the CESA Act, 1944. The learned counsel for the Petitioner relied upon the judgment of the Apex Court reported in 1989 (40) E.L.T. 276 (S.C.) in the matter of Collector of Central Excise v. Chemphar Drugs & Liniments, 1997 (94) E.L.T. 481 (S.C.) in the matter of Collector of Central Excise, Jaipur v. Rajasthan Textile Mills and 2005 (179) E.L.T. 3 (S.C.) in the matter of Sarabhai M Chemicals v. Commissioner of Central Excise, Vadodara. The said judgments of the Apex Court were relied upon by the learned counsel for the Petitioners to buttress his submission that only in the event that the ingredients mentioned in Section 11A of the CESA Act, 1944 are available then the Respondents would be entitled to the extended period of limitation. However, according to the learned counsel for the Petitioners, the facts of the present case do not meet the requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were also not informed that a new name has been given to the products. The applicability and functions of the new products was also not clearly stated. The new and distinct product which had come into existence was sold and known in the commercial world under a separate name having different and distinct qualities. The appellant had not produced sample of the subject goods along with the letter. For the afore-stated reasons, it cannot be held that the authorities had full knowledge about the activities undertaken by the appellant." 10. We have heard the learned counsel for the parties and have given our anxious consideration to the rival contentions. 11. Though the issue of classification has been raised by the Respondents and though there is an allegation of the Respondents that there has been misdeclaration by the Petitioners, since the Petitioners have raised issue as regards extended period of limitation under Section 11A of the CESA Act and whether the same is available to the Respondents, in our view, since the said issue goes to the root of the matter, is therefore, required to be addressed at the outset. It would apposite to reproduce Section 11A of the CESA Act, 1944 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent 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 misstatement 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. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The assessee declared the goods on the basis of their belief of the interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an unconditional exemption. The said notification had a proviso. Under the proviso, the manufacturer was required to furnish to the Competent Authority a certificate from the Drugs Controller to the effect that the drug for which exemption was claimed was a "bulk drug" within the meaning of the expression "bulk drug" given in the explanation to the notification and, which was normally used for diagnosis, treatment etc. in human beings or animals and used as such or as an ingredient in any formulation. The explanation to the notification defines "bulk drugs" to mean any chemical, biological or plant product, normally used for diagnosis, treatment etc. in human beings or animals and used as such or as an ingredient in any formulation. The question is - whether in the said exemption notification, end use of the bulk drug was made imperative. According to the appellant, mere production of the certificate from the Drugs Controller was sufficient to attract the benefit of the exemption notification. We do not find any merit in this argument. The bulk drug is defined under section 2(a) of the Drugs (Prices Control) Order, 1979 to mean any substance including pharmaceutical, chemical, bio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said audit party in respect of scrap generated and have informed the authorities that they were debiting Rs. 80,000/- at the rate of Rs. 1,000/- per Metric Tonne and that they were also debiting differential duty totaling to Rs. 63,318/- in respect of Mill Rollers which was debited under PLA dated 3rd September 1993. Therefore, the Petitioners vide their letter dated 5th July 1995 have informed the Superintendent of the Respondents that they had debited Rs. 2,08,760/- against the Scrap Generation at Sub-contractor end, where material is sent for processing under Rule 57F(3) for the period January, 94 to March, 95. Therefore by the said letters the Petitioner had made the Respondents aware of the payment of duty on the scrap as well as on the Mill Rollers and considering the fact that the Respondents had carried out audit on the dates mentioned herein above, the said fact is conclusive in so far as the knowledge of the Petitioners' activities to the Respondents is concerned. Therefore, in our view, in the light of the audit carried out by the Respondents of the Petitioners' factory and the correspondence that is addressed by the Petitioners to the Respondents, it cannot be said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply to the show-cause-notice is therefore absolutely wrong. It has also been claimed by them that the Department was informed of the fact of generation of scrap at job worker's end as they have mentioned in their 57F(3) application, "NO", in answer to the question whether scrap, if any, arising during the manufacturing process would be returned to the factory or not. They have nowhere mentioned that the duty would be paid by them at the job process of inputs in respect of which credit has been taken may be removed on payment of duty as if such waste is manufactured in the factory. Once M/s. Rajkumar Forge Ltd. has availed of MODVAT credit on the inputs the duty is payable by them on the scrap which is dutiable under the Central Excise Tariff. In view of this, they are liable to pay the duty on scrap for the extended period." The Respondent No. 2, after recording that any reference to anything anywhere will not put the Department on notice, has not thereafter recorded that there is misstatement of facts by the Petitioners. 15. In so far as order passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench at Mumbai dated 21st May, 2004 is concerned, Para-5 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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