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TMI Blog1983 (11) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Central Excises and Salt Act, 1944, read with Rule 174 of the Rules framed thereunder, (hereinafter referred to as the Act and the Rules respectively). Infringement of other provisions of the Rules was also alleged; such as clearance without filing and obtaining approval of the classification list as required under Rule 173B of the Rules, as well as, of the price lists, and without having the duty liability determined and paid, and without maintaining and submitting records and accounts as required by the Rules. Appellants were thus called upon to show cause as to why penalty should not be imposed on them under Rule 173Q of the Rules, and also as to why duty amounting to ₹ 43,702.03 be not recovered from them on the nib slitting wheels manufactured and cleared during the aforesaid period; the number whereof was determined to be 3,81,087. The demand of duty for the entire period of manufacture and clearance was made with reference to the provisions of the Rule 9(2) of the Rules. 3. The appellants contested the show cause notice by initially filing reply on 9-1-1978, followed by another one dated 23-1-1979; pleading that there had been no contravention on their part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture had been taking place within the knowledge of the Central Excise officers, and they had full opportunity to decide that dutiable goods were being manufactured and to levy duty accordingly and that there had been no clandestine removal on their part nor any intention to evade duty. 5. The Assistant Collector after affording opportunity of hearing to the party and after taking into consideration the contention set up, and documents produced by them, recorded the finding that they had been manufacturing nib slitting wheels since some time in August 1972 and that they had obtained electrical power connection since 13-2-1973, and admitted that after installation of the power connection, they had been manufacturing all their other items, such as fountain pens, nibs, fountain pen caps with the aid of power; but contended they had not employed the same for the purpose of manufacture of these nib slitting wheels. This contention he did not consider to be carrying conviction, on the view, that when they had power connection in the premises, and used the same for manufacturing all other goods, no valid reason had been advanced and established, as to why power was not used in the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He accordingly, while confirming the order of the Assistant Collector on merits, reduced the period of demand for enforcement of duty liability from 13-2-1973 to October 1976. He also felt that penalty amount of ₹ 250 would meet ends of justice. 7. The party still felt aggrieved and has come up in second appeal, reiterating their pleas that there had been frequent visits of officers of the Excise Department right from the year 1975. They made a specific reference to the visit of Inspectors, O.P. Kumar on 7-3-1975, pleading that the Appellate Collector had erred that this visit was not proved. They further asserted that at least up to April 1977, they were never informed, that T.I. 51 could be attracted to these goods, in spite of the fact that manufacture on their part was known to the Department and they themselves had sought clarification in January, 1977. They further contend that petitioners have definite information that there was doubt in the Department itself about the excisability of this product, and the matter had been referred to the Collectors Conference, and that only by letter dated 24-8-1977 the concerned Assistant Collector had finally informed that corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereby demand for the period; November 1976 to 10-4-1977, was held to be not enforceable, on the finding that at least since November 1976 when certain named officers of the Department surveyed the factory, knowledge had to be assumed. 10. Since both the appeals involve identical questions of facts and law, they have been taken up together for hearing, and disposal. However, for the purpose of discussion party s appeal is kept in focus, particularly, for reference as appellants, and respondent. 11. On the hearing, the appellants were represented by Shri J.M. Patel, Advocate whereas Shri K.D. Tayal, SDR appeared for the respondent. Shri Patel addressed arguments, in the hearing held on 8-11-1983. At the outset, he formulated questions which arise for consideration in these appeals, which he put as under :- (1) Whether it was a case of clandestine removal? (2) Validity of the show cause notice given under Rule 9(2) when the demand had been confirmed under Rule 10A. (3) Can a demand be confirmed under Rule 10A which was not there, having been repealed, when show cause notice was given? (4) Effect on the proceedings for not deciding classification issue raised prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act by itself negatived existence of circumstances, attracting provisions of Rule 9(2), adding that in face `of the visits of the officers which the appellants have definitely asserted and which act Assistant Collector had not refuted in his order, any inference of clandestine removal was not warranted and that the case fell squarely within the scope of the authorities cited by him; namely, Murugan and Company, and N.B. Sanjana v. Elphinstone Spinning and Weaving Mills (supra). 14. Shri Patel went on to argue to the effect that a notice which had been issued under Rule 9(2), on being confirmed under Rule 10A, ceased to be a valid notice. In support of this contention, he relied on another Tribunal decision reported as 1983 E.L.T. 533 (CEGAT) = 1983 ECR 448D (CEGAT) in M/s. Hydraulics Limited, Madras v. Collector of Central Excise, Madras. On being pointed out that this was the minority view, expressed by means of a dissenting order by one of the learned Members of that Bench, the learned Counsel had no further comments to offer in this respect, stating that he did not notice this fact, while going through the authority, and did not press his arguments further, on this aspect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, addressed to the party on 24-8-1977, and that since this communication was not challenged in appeal, though it was an appealable order, by virtue of the provisions of Rule 213, as it then existed, which made all decisions appealable, this question could not now be reopened, and that the lower authorities were justified in proceeding as if the classification issue stood settled, further asserting that it was a clear case where the nib slitting wheels would fall within the description of products covered by T.I. 51(2) read with the Explanation thereto. 19. Regarding the question of applicability of the provisions of Rule 9(2), he contended, that these provisions applied not only to cases of clandestine removal, but to all cases where there had been removal of goods, without complying with the requisite provisions of the rules, and that in this case, admittedly, licence was obtained for the first time on 11-4-1977 under directions of the Department, and prior to that date there was obviously no compliance with any of the provisions of the Act and the Rules, making it to be a case of clearances, as contemplated by Rule 9(1) so as to attract Rule 9(2). He further contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise, holding that Rule 10 would apply only if a demand notice is issued after assessment, laying further stress that provisions of Rule 9(2) were not confined to cases of clandestine removal, and that in cases where there were no assessment, Rule 9(2) would apply. Shri Tayal urged that the Tribunal has also subscribed to the same view in a number of cases; some of which he cited as Goodwin Rubber s case : 1983 E.L.T. 718 (CEGAT); Re. Rekha Industries, Bombay v. Central Board of Excise Customs, [1983 E.L.T. 1163 (CEGAT)] and Ceakay Rubber Industries v. Collector of Central Excise, Madras, 1983 (2) ETR 473. 21. He also addressed arguments with reference to departmental appeal urging that visits of certain Inspectors to the factory in the years 1975 and 1976 was not conclusive on the question of knowledge of the concerned Central Excise authorities because apart from the fact that there was no evidence that the goods were being manufactured or were lying in stock or otherwise sealed by the concerned Inspector during the respective visit, presumably the visits of Inspectors, particularly that of Mr. Kumar, was with reference to the applicability of newly introduced T.I. 68 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the appellants to further agitate the matter would have the effect of the issue having become concluded in this regard, and it was not now open to them to reagitate the matter. This is so, particularly in view of the fact that the appellants had been told earlier also in April 1977 itself, that L-4 licence was required for the purpose of manufacture of these goods and the appellants had obtained the same and had started paying duty under protest and thereafter addressed a detailed representation by means of letter dated 17-4-1977. It was thus in the context of the controversy raised by the appellants, so much so that they clearly communicated to the authorities that they were submitting to the directions for obtaining L-4 licence under protest, which action was followed up by their representation dated 17-4-1977. It is to be assumed, therefore, that the decision, which was conveyed by means of letter dated 24-8-1977, was in the light of the stand taken by the appellants, and has to be deemed to be a final decision unless challenged before appropriate authority by way of appeal or any other statutory mode that might have been available. But the appellants having not resorted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was of the considered view that all these charges levelled in the show cause notice against the party stood proved and central excise duty was rightly recoverable from them. He had applied full mind to the controversy, as revealed by the detailed discussion, as to the use of power for the manufacture of these products, and although the notice to show cause related to the year of commencement of manufacture; namely, 1972, the Assistant Collector held that these would be excisable only from the date they were manufactured with the aid of power, and that being from February 1973, no duty was recoverable for the period prior to February 1973. This aspect has been highlighted to pinpoint the fact that the order passed by the Assistant Collector is a well-considered order based on discussion of facts, establishing clearance of excisable goods without central excise licence having been obtained, and without payment of excise duty, and without complying with other requisite procedure, such as maintenance of accounts, approval of price lists, submission of classification lists and filing of returns, etc. When the circumstances, set out in the notice to show cause, were found to be estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubber Industries (supra) that in the case before Supreme Court in what is referred to as N.B. Sanjana, Assistant Collector v. Elphinstone Spinning and Weaving Mills Co. Ltd. (supra), it was not a case of manufacture or removal of goods without any information to the Excise authorities but it was clearly a case where the party had filed classification lists, showing the factum of both manufacture and clearance indicating their view that no excise duty was payable, to which the Excise authorities had acquiesced. It was in this context that the Hon ble Supreme Court had held that it was not a case where the provisions of Rule 9(2) could be invoked. Similarly, in the case decided by the Madras High Court referred to as Murugan Co. (supra), the Excise authorities themselves had entertained a doubt in the first instance, as to whether the goods were excisable or not, and had not objected to the clearance without payment of duty, and it was in that setting of facts that it was held that subsequently the authorities were prevented from raising demand with reference to Rule 9(2). 31. In the case decided by the Tribunal, on which also the learned Counsel for the appellants placed relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting wheels with the aid of power as is clear from their letter addressed on 7-3-1975 with reference to the visit of Inspector Kumar to their factory on the said date. After this communication was addressed to the authorities, though at the level of Inspector, it is not possible to hold that there was no information at all to the Excise authorities. We, therefore, feel that during the period commencing from March 1975, it is not possible to draw the conclusion that manufacture and clearance had gone on without information to the Excise authorities, so as to bring home to the appellants charge of contravention of the provisions of Rule 9(1) of the Rules, because it was incumbent upon the Excise authorities also to take appropriate steps. We accordingly are of the view that demand for the period March 1975 onwards cannot be enforced by resorting to Rule 9(2) of the Rules. It would be thus barred under Rule 10 having been made by means of notice issued on 2-1-1978. 35. In the result, the appeal filed by the appellants is partially allowed inasmuch as demand for the period starting from March 1975 is held unenforceable under Rule 9(2). As a consequence, the appeal filed by the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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