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TMI Blog2009 (10) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice dated 27/28th September, 1994 issued to the appellants has confirmed the duty liability of the appellants as well as has imposed the penalty while denying the benefit under Notification No. 223/88 dated 23-6-88 in relation to certain products manufactured by the appellants on the ground that those products were subjected to machining and therefore, not entitled to avail the benefit at concessional rate of duty under the said notification. 2. Brief facts relevant for the decision are that the appellants were engaged in manufacture of Steel Castings falling under sub-heading No. 8607 of the Central Excise Tariff Act, 1985 at their factory situated at Birlanagar, Gwalior. Pursuant to the intelligence report that the appellants were evading the payment of excise duty on cast articles by wrongly paying concessional rate of duty under Notification No. 223/88, the premises of the appellant were inspected and the investigation was carried out pursuant thereto three show cause notices came to be issued dated 20-9-94 for the period from Nov 89 to Dec 93, another dated 25-11-94 for the period from Jan 94 to Aug 94 and third show cause notice dated 10-3-95 for the period from Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d articles and accordingly had been disclosing the said fact to the Department, he submitted that merely on the basis of the statement of the deponent, the Commissioner could not have arrived at the finding that the casting articles produced by the appellant were subjected to machining as alleged. He further submitted that even the statement of Shri Bhadoria is purely of general nature and does not relate to the product in question which was subject matter of dispute for the relevant period and therefore, statement properly read would rather support the case of the appellants rather than that of the Department. Being so, the finding arrived at by the Commissioner regarding machining of the cast articles in relation to the product in question is totally perverse. He further submitted that in any case it is a matter of record that at the time the show cause notices were issued, the assessment was yet to be finalized in relation to the product in question and being so, no show cause notice could have been issued on the ground on which the notices in question were issued. According to the learned Advocate cause for initiating such action in terms of Section 11A could arise only after f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a drilling operation on the cast articles manufactured by the appellants and in answer he had clearly admitted that whenever required those cast articles were subjected to drilling and to that extent, there was machining activity in relation to such products. Further it is also a matter of record that in the classification list dt. 6-3-92, the Asstt. Collector had clearly observed that the goods were required to be presented for inspection to ascertain the description thereof before removal of the goods and the goods were not produced for such inspection. In the background of these facts according to the learned DR, the Commissioner was justified in arriving at the finding that the cast articles for a relevant period were subjected to machining and therefore, were not entitled to avail the concessional rate of duty under Notification No. 223/88. From fact that undisputedly the appellants were manufacturing cast articles as well as fully machined articles and it is not in dispute that cast articles were subjected to drilling whenever required it was necessary for the appellants to produce sufficient evidence to deny the charge levelled against them and in answer to the sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty should not be demanded w.e.f. 10-6-79 and why penalty should not be imposed under Rule 173Q of the said Rules. Meanwhile by order dt. 21-3-80, the Asstt. Collector had modified the price list filed by the manufacturer and had disallowed the deductions claimed by them except for trade discount. The matter was carried before the Apex Court and after considering the provisions of law and various other decisions, the Apex Court held that - 17. Section 11A deals with recovery of duty not levied or not paid or short-levied or short-paid or erroneously refunded. Proceedings under Section 11A have to be commenced with a show cause notice issued within six months from the relevant date. Relevant date has been defined under sub-section 3(ii) to mean in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof. 18. After final assessment, a copy of the order on the return filed by the assessee has to be sent to him. Duty has to be paid by the assessee on the basis of the final assessment within ten days time from the receipt of the return. No question of giving any notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -levied or short-paid. Such a proceeding can be initiated within six months from the relevant date which in terms of sub-section (3)(ii)(b) of Section 11A of the Act (which is applicable in the instant case) in a case where duty of excise is provisionally assessed under the Act or the Rules made thereunder, the date of adjustment of duty after the final assessment thereof. A proceeding under Section 11A of the Act cannot, therefore, be initiated without completing the assessment proceedings. 21. Concededly, in terms of the provisions of the Act and the Rules framed thereunder, the amount becomes payable only in the event, the assessee does not deposit the amount levied within a period of ten days from the date of completion of the order of assessment. A provisional assessment is made in terms of Rule 9B inter alia at the instance of the assessee. Such a recourse is resorted to only when the conditions laid down therein are satisfied, viz., where the assessee is found to be unable to produce any document or furnish any information necessary for assessment of duty on any excisable goods. 22. Whereas provisional duty is levied in terms of Sub-Rule (1) of Rule 9B, final assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgments relates to the point as to whether the bar prescribed for issuance of the show cause notice during the pendency of the finalization of the assessment can apply even in cases where the finalization of assessment relates to a particular issue which is totally independent of the subject matter of the proposed show cause notice or not. In fact, as rightly pointed out by learned DR, the said issue was dealt with by the Larger Bench of the Tribunal in the case of L.D. Textile Industries (supra) wherein it was held that - 26. The learned Advocate for the appellants then argued that Section 28 of the Customs Act is not invokable when the assessments were provisional. It is a fact that out of three Bills of Entry presented at Veraval, two were provisionally assessed. The show cause notice issued by Collector of Customs, Gujarat seeks to demand duty under Section 28. 27. A similar question arose in the case of Reliance Industries Ltd. v. Union of India - 1988 (36) E.L.T. 49 (Bom.). M/s. RIL cleared goods under Project Import Regulations, which were assessed provisionally. Without finalizing the Bills of Entry a show cause notice was issued alleging misdeclaration and demandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty while adjudicating a case even when the initial assessments were provisional. We are aware that this decision and the one in Duncan Agro are in the context of provisional assessments made under Central Excise Act. We have merely referred to these decisions to indicate that both in the Customs Act as well as in the Central Excise Act, action to proceed against the offending goods can be started and concluded even when the assessments were provisional. In the present case two Bills of Entry were provisionally assessed and one finally . 12. In the course of dictation of this order, learned DR drew our attention to the decision of Hon ble Delhi High Court in Duncans Agro Industries Ltd. v. Union of India Others reported in 1989 (39) E.L.T. 511 (Del.) wherein the grievance of the manufacturer was that the show cause notices issued alleging contravention of the provisions of Central Excise Rules for evading payment of excise duty in respect of the cigarettes manufactured and cleared from their factory at Agarpara during the period from Sept 1981 to February 83 were in excess of jurisdiction and/or without authority of law in-as-much as that the manufacturer had been paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equential execution of the bonds could not allow insulation against mis-presentation or fraud or collusion and the consequential evasion of the excise duty in respect of various components or elements not at all offered for calculation of the assessable value. Some of the elements may be overlapping, we do not know and, therefore, have to leave them for investigation and adjudication by the authorities under the Act. May be the provisional assessment is final in respect of some components and others which are the subject matter of the dispute before the Calcutta High Court or as a consequence of the judgments of the Supreme Court in Union of India Ors. v. Bombay Tyres International Ltd. etc. , [(1983) 14 E.L.T. 1896 = ECR C 663 (SC)] and Assistant Collector of Central Excise and Others v. Madras Rubber Factory Ltd. and Others , 1987 (27) E.L.T. 553, are to be reopened. It is for these reasons that we leave its determination with the adjudicating authorities, one relating to the fmalisation of the provisional assessments and the other relating to the evasion of the excise duty as detailed in the impugned show cause notices 13. It is sought to be contended on behalf of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he finaiization of the assessment was merely in relation to the non-inclusion of Modvat credit in the assessable value of the finished goods cleared by the manufacturer, the show cause notices in question being unconnected to the said issue, the department cannot be said to be prohibited from initiating such action. For the same reason, therefore, the contention which has sought to be canvassed about lack of authority to issue show cause notices on the ground of pendency of the finaiization of the provisional assessment referred to above cannot be accepted. 15. As regards the second ground which pertains to the merits of the case undoubtedly, the Department apart from the returns filed by the appellants and statement of Shri B.S. Bhadoria has not produced any other material in support of the allegation against the appellants that all the cast articles were subjected to machining during the relevant period and that therefore, they are not entitled to avail benefit of concessional rate of excise duty. 16. It is true that Shri Bhadoria was specifically asked as to whether drilling operation was done on the cast articles. In answer he had stated that whenever in the casting drillin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he product for the inspection of the departmental authorities inspite of observation made in the classification list dt. 6-3-92 and that the same would justify adverse inference against the appellant is also without any substance. It is pertinent to note that the noting dt. 25-9-92 in respect of classification list No. 142 clearly discloses that the product was produced for inspection of the authority and product so produced was cast article and authority was satisfied that it was not subjected to machining. The cross-examination of the Departmental Officer also discloses that though there was a noting under classification list dt. 6-3-92 to the effect that the manufacturer was required to present the product for inspection and though it is now sought to be alleged that the manufacturer had failed to produce such product for inspection, the concerned officer had never made any grievance of any such failure nor had taken steps to ensure production of the articles before the authority for inspection. The Department cannot be helpless if the manufacturer fails to comply with the directions issued by the department. There are sufficient provisions in law to empower the department to ta ..... 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