THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO. 196 OF 2006
M/s.Sunsuk Industries, a proprietorship
firm engaged in manufacture of articles
of plastics and having its office at B/35,
Girikunj Industrial Estate, Mahakali
Caves Road, Andheri (East),
Commissioner of Central Excise, MumbaiIV,
Central Excise Building,
Maharshi Karve Road,
Opp. Churchgate Station,
CENTRAL EXCISE APPEAL NO. 198 OF 2006
M/s.Shandar Products, a proprietorship
firm engaged in manufacture of articles
of plastics and having its office at B/33,
Girikunj Industrial Estate, Mahakali
Caves Road, Andheri (East),
Commissioner of Central Excise, Mumbai IV,
Central Excise Building,
Maharshi Karve Road,
Opp. Churchgate Station,
V.Shridharan, Senior Advocate with Mr.Jas Sanghvi i/b. PDS Legal for the appellants (in both appeals).
Mr.Swapnil Bangur with Mr.Shyam Walve for the respondent.
CORAM : A.S.OKA AND A.K.MENON, JJ.
RESERVED ON : 12th October 2017.
PRONOUNCED ON : 4th May 2018.
JUDGMENT : (Per A.S.Oka, J.)
These two appeals were admitted by a common order dated 18th January 2007 on the following two substantial questions of law:
1) Whether in the facts and circumstances of the case, the CESTAT erred in confirming the duty invoking the extended period of limitation when the finding on suppression by the CESTAT falls way short of the requirements of proviso to section 11A(1) of the Central Excise Act, 1944?
2) Whether in the facts and in the circumstances, the CESTAT erred in demanding duty both from the appellant (M/s.Shansuk Industries) and also M/s.Shankar Products after holding that the clearances of both the units are to be clubbed, contrary to the decision of Supreme Court in Gajanan Fabrics Distributors [1997 (92) E.L.T. 451 (S.C.)] said order also records that the substantial question of law framed in ground (f) of paragraph 21 of the memorandum of appeal is not pressed.
2. These two appeals take exception to the common judgment and order dated 21st February 2006 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (for short “Appellate Tribunal”) in Appeal Nos.E/690, 691 and 692 of 2002.
3. The appellant in Appeal No.196/2006 is engaged in manufacture of articles of plastic. It is a proprietary business of one Shri R.S.Shanbag. The articles of plastic are made from granules purchased by the appellant on payment of duty. The articles manufactured by the appellant are used as filters in various diverse applications. It is the case of the appellant that the articles of plastic made from duty paid granules are exempted from duty since the inception. The appellant in Appeal No.198 of 2006 is also carrying on a similar business. Members of the family of Shri R.S.Shanbag are the partners of the said appellant. A show cause notice cum demand notice was issued on 15th September 1999 to the appellant by the Commissioner of Central Excise, Mumbai IV.
It is a common show cause notice addressed to the appellant in both the appeals.
The notice is issued on the basis of visit of the Officer of the Preventive Section to the factories of the appellants on 31st July 1999. The allegation in the show cause notice is that the appellants have suppressed the fact that the goods produced by the appellants fall under Chapters84, 85 and 91 as parts of the machinery depending upon end use and the goods do fall under Chapter 39. Hence, the same attract excise duty. It is stated in the show cause notice that the appellant in Appeal No.196 of 2006 gave declarations for the years 199495 to 199899 declaring that the goods manufactured by them are “articles of plastic, plastic water filter elements, cylinders, disks” falling under SH 3926.90. The appellant in the other appeal submitted declarations for the same period claiming that it was manufacturing “Articles of PlasticPlastic articles reinforced by moulded components” falling under SH 3926.90. It was further alleged that from the invoices and the statements of the customers, it is found that apart from the manufacture of the items stated in the declarations, the appellants were manufacturing complete filters, battery parts, compressor parts, solenoid valve parts which have not been mentioned in the declarations filed with the department. It was alleged that the appellants have suppressed the production and clearance of the aforesaid goods actually manufactured by them and consequently, extended period of limitation provided in the proviso of section 11A(1) of the Central Excise Act, 1944 (for short “the Act of 1944”) is invokable. Thirdly, it was alleged that the partnership firm in the name and style of M/s.Shandar Products ( appellant in Appeal No. 198 of 2006) is an independent unit of the appellant in Appeal No.196 of 2006 and, therefore, clearances effected by both the units are required to be clubbed. Therefore, a duty was demanded from both the appellants calling upon them to show cause as to why their products should not be classified under various subheadings specified in the paragraph 4.1 of the show cause notice. They were called upon to show cause as to why different amounts towards duty should not recovered from them. The appellants were called upon to show cause as to why penalty should not be imposed upon them under section 11A(1) of the said Act of 1944 and various Rules of the Central Excise Rules, 1944 (for short “the said Rules of 1944”). A demand was also made for payment of interest at the rate of 20% per annum in accordance with section 11AB of the said Act of 1944.
4. The demand notice was contested by the appellants in both the appeals by submitting separate replies. In the reply, it was pointed out that being SSI units they filed declarations from time to time claiming exemption from registration under Rule 174 of the said Rules of 1944. In the declarations, they have specified that the articles manufactured by them can be described as “Articles of Plastics: Plastic water filter elements, cylinders, discs.” and “Articles of Plastic Plastic articles reinforced by moulded components” respectively. Reliance was placed on various declarations filed from the year 198788 to 199495.
We must note here that the show causes notice relates to the period from 199495 to 199899.
The appellant pointed out as to how they are entitled to exemption. It was pointed out that the appellants in both these appeals are different and independent legal entities. It was pointed that the demand of duty on account of clubbing is time barred. The the details about the composition of both the entities were furnished to the Department and, therefore, the case made out in the show cause notice could have been made out earlier. It was submitted that the extended period of limitation cannot be invoked.
The order-in-original was passed on 20th December 2001 by the Commissioner confirming the demand and imposing penalty as set out in the order. He proceeded to confiscate the plant, land, building, machinery belonging to the appellants. Being aggrieved by the said order, appeals were preferred before the Appellate Tribunal which have been decided by the impugned Judgment and order. We must note here that in the impugned order, it is specifically recorded that the advocate for the appellants stated that the dispute in relation to classification of filter and parts, humidifier parts, valve parts and gauges is not being contested considering the small amounts involved. The first finding recorded in the impugned Judgment is that the appellant in Appeal No.196/2006 is a proprietary concern belonging to one Shri R.S.Shanbhag and the appellant in Appeal No.198/2006 is a partnership firm of Shri R.S.Shanbhag's wife and son. It was found that the factories of these two appellants are functioning in two nearby premises at B35 and B33, Girikunj Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai. The Appellate Tribunal has found that both the units have claimed SSI exemption under Notification No.1/93CE which provides for aggregating the value of clearances from a factory even if the clearances are on behalf of one or more manufactures. It was observed that though the appellants are two different manufacturers, since the finished goods are produced using the machinery and production facilities in the unit of the appellant in Appeal No.196/2006, the clearances are required to be aggregated in terms of the exemption notification. Another finding recorded by the Appellate is that it is not in dispute that the impugned battery parts in question described in paragraph 4 are being used in batteries. The Tribunal observed that the appellants claimed classification under heading 39.26. The Department classified the same under headings 84.21, 84.79, 84.21 and 90.31. We must note here that an alternative submission was made on behalf of the appellants was that the battery parts should be classified under heading 84.21 which was not accepted.
6. On the issue of extended period of limitation, the Appellate Tribunal held that in the declarations filed from time to time by the appellants seeking exemption from registration, they have described the goods in question as “Articles of Plastics:Plastic water filter elements, cylinders, discs”. However, at no point of time they disclosed that the goods manufactured by them are vent plugs of various types. The Appellate Tribunal observed that it was not a question of declaration of wrong classification of items, but it was a case where goods were not properly described in the declaration.
7. Though the demand of duty was confirmed, the penalty amounts were considerably reduced by the Appellate Tribunal. The Appellate Tribunal held that confiscation was not warranted and proceeded to set aside the same along with redemption fine. The Appellate Tribunal observed that in view of confirmation of duty demand against the appellants, they should be allowed to take credit of input duty which was not taken by them earlier in view of exemption availed by It was also found that while quantifying the demand, the Commissioner has not taken into account the fact that the value realized by the appellants is to be taken as cumdutyprice for computing the duty demand. With a view to allow the appellants to avail input duty credit subject to verification and for treating the sale price as cum duty price, a limited order of remand was made by the Appellate Tribunal.
8. The learned senior counsel appearing for the appellants has taken us through the impugned orders and the findings recorded. He invited our attention to paragraph7.2 of the show cause notice and urged that as far as the appellant in Appeal No.196/2006 is concerned, the suppression of fact cannot be established and, therefore, extended period of limitation cannot be applied. The learned senior counsel firstly pointed out that there is no suppression of material facts with the intention of evading tax. He invited our attention to declarations made from time to time by the appellants. He pointed out that the appellants declared that they manufacture articles of plastic. They also mentioned headings or subheadings.
He pointed out that the process of manufacture is also disclosed in the declarations made. He relied upon various notifications.
He invited our attention to the decision of the Apex Court in the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay1. He submitted that in proviso to subsection (1) of section 11A of the Central Excise Act, extension of limitation is permissible only when there is nonpayment of duty or shortlevied or shortpaid duty by reason of fraud, 1 1995 (75) ELT 721 (SC) or any willful misstatement or suppression of facts or contravention of any of the provisions of the said Act of 1944 or the said Rules of 1944 with intent to evade payment of duty. He submitted that in the show cause notice, there is no such allegation. He also relied upon another decision of the Apex Court in the case of Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay2.
He submitted that for attracting proviso to subsection (1) of section 11A, the act or omission must be deliberate and there has to a deliberate omission to disclose information to escape from payment of duty. Further reliance was placed by him on the decision of the Apex Court in the case of Densons Pultretaknik v. Commissioner of Central Excise3. He also invited our attention to another decision of the Apex Court in the case of Gajanan Fabrics Distributors v. Collector of Central Excise, Pune4.
Lastly, he relied upon the decision of the Apex Court in the case of Collector of Central Excise v. H.M.M. Limited5 9. He submitted that as far as clubbing is concerned, the test has been laid down by the Apex Court in the case of Gajanan Fabrics Distributors (supra). He submitted that even assuming that clubbing is correct, a duty cannot be demanded from the appellant in Appeal No.198/2006.
10. The learned counsel appearing for the Revenue invited our 2 1995 (78) ELT 401 (SC) to the findings of fact. He submitted that in show cause notice there are specific allegations made about the suppression of material facts with the intention of evading duties. He pointed out that there is a specific allegation that interdependency in relation to machines, manufacturing activities and financial interests between both the units have also not been mentioned or declared in the respective central excise declarations of both the appellants. He invited our attention to the findings of fact recorded by the Commissioner which have been confirmed by the Appellate Tribunal. He submitted that there are findings of fact regarding suppression of material facts with intent to evade payment of duty. He submitted that in the light of findings of fact, no interference can be made.
11. We have considered the submissions. Before we go to the show cause notice, it will be necessary to make reference to the extent of factual dispute before the adjudicating authority and the Appellate Tribunal. In paragraphs29 and 30 of the order of the Commissioner (adjudicating authority), it is stated thus:
“29. I have gone through the case records and oral as well as written submissions made by the noticees.
In the SCN the main allegation is regarding classification of 8 items as under:
a. Filter/filter elements parts 8421.00 199495
b. Filter 8421.00 199596 to 199899 Filter elements/parts 8421.00 d
d. Battery Parts (Vent plugs etc.) 8507.00 199495 to 199899
e. Humidifier parts 8479.90 do
f.Compressor parts 8414.99 do
g. Solenoid Valve Parts 8481.99 do
h. Gauges 9031.00 do
The second allegation is regarding clubbing of the clearances.
30. With regards to the first allegation above, I find that the noticee's defence mainly revolve around the classification of Battery Parts, as majority of the demand in the present case pertains to Battery Parts, classifying these under Ch.85.07 which has been classified under Ch.3926.90 by the Noticees claiming benefit on Notification no53/88CE dt. 1.3.1988 and no.5/99 CE dtd. 28.2.1999” As far as allegations in the show cause notice are concerned, in paragraph 4.1, 5 and 5.1, it is alleged as under:
4.1 It is observed from the nature and use of the products as submitted in the statements of the various customers of letters (AnnexureB) and the description of invoices of the years 199495 to 199899 of M/s.Sansuk Industries and M/s.Shandar Products (Annexure C1 to C5), apart from filter elements/parts, are also engaged in the manufacture of other products not declared in their Central Excise declarations as under:
No Description CH. SubHeading
1. Filter Elements/parts 8421.90 (8421.00 for 9495)
2. Filters 8421.10 (8421.00 for 9495)
3. Battery Parts e.g. Vent Plugs etc. 8507
4. Humidifier parts e.g. microbubblers 8479.90
5. Compressor parts e.g. Nozzles etc. 8414.99
6. Valve parts e.g. BSP silencers etc. 8481.99
7. Gauges 9031
5. It is however seen from the Central Excise declarations for the years 199495 to 199899 filed by M/s.Sansuk Industries that the full description of the goods manufactured by them has been mentioned s “articles of plastic, plastic water filter elements, cylinders, disks”, falling under S.H. 3926.90. Whereas from the actual invoices (AnnexureC1 to C5) and as confirmed by their customers (Annexure B) it is found that apart from the filter elements/parts i.e elements, cylinders and discs.
M/s.Sansuk Industries are also engaged in manufacture and clearance of complete filters, battery parts, compressor parts, solenoid valve parts which have not been mentioned or declared in the Central Excise Declaration filed by them.
5.1 In the case of M/s.Shandar Products it is seen from the Central Excise declarations filed by them for the years 199495 to 199899 that the full description of the goods manufactured by them has mentioned as “Articles of plastics – Plastic Articles reinforced by moulded components”, falling under S.H. 3926.90. Whereas from actual invoices (AnnexureC1 to C6) and as confirmed by their customers (Annexure B) it is found that M/s. Shandar Products are factually engaged in manufacture and clearance of complete filters, filter elements parts, battery parts, compressor parts, solenoid valve parts which have not been mentioned or declared in the Central Excise Declaration filed by them.”
Therefore, the allegation in paragraph5.2 is that both the appellants have not only misclassified their products in their declarations, but they have not declared the goods actually manufactured by them which amounts to suppression of facts.
12. As regards clubbing, the allegations are in paragraph6.1 of the show cause notice. The relevant part of the said paragraph6.1 reads thus:
6.1 It is therefore seen that M/s.Shandar Products has the machinery and equipments of carrying out the process of pulverizing and sieving only and the further process of moulding, heating/sintering and packing are necessarily required to be carried out at the premises of M/s.Sansuk Industries who have the machinery and equipments thereof. It is also seen from the purchase register and purchase bills (documents No.6 to 10 and 16 to 21 of Annexure B2 to Panchnama dated 31.7.99) of M/s.Shandar Products that no purchases of complete filters, filter elements parts, battery parts, battery parts, compressor parts, solenoid valve parts have been made and this further establishes that whatever clearances of said products that have been shown to be made under the invoices of M/s.Shandar Products have actually been finished (further manufactured) at M/s.Sansuk Industries only. Similarly M/s.Sansuk Industries do not have the machinery/ equipments for the initial processes of pulverizing/ sieving and no purchases of pulverized/ sieved powder are available in their purchase registers/ file (document nos.5 to 8 and a5 to 20 of Annexure B1 to Panchnama dated 31.7.99) and this further establishes that the initial processes of pulverizing and sieving of all the products cleared under the invoices of M/s.Sansuk Industries have been necessarily carried out at M/s. Shandar Products only. It is therefore established that both M/s. Sansuk Industries Ltd. and M/s. Shandar Products do not have the facility to independently manufacture a single piece of any of the products shown to independently manufacture a single piece of any of the products shown to have been cleared under their respective invoices. Thus both M/s. Sansuk Industries Ltd. and M/s. Shandar Products are not independent manufacturers having independent factories. So far as the said finished goods cleared under the invoices of M/s. Sansuk Industries Ltd. and M/s. Shandar Products are concerned, the premises of both M/s. Sansuk Industries and M/s. Shandar Products have to be collectively treated as one factory and not as two independent factories in terms of Section 2(e) of CEA, 1944. The clearances of the said finished products will therefore have to be treated as clearances as two manufacturers from one factory.......”
13. Ultimately, in paragraph6.2, it is alleged thus:
“6.2 These facts of interdependency in installation of machines, manufacturing activities and financial interest both the said units have also been not mentioned or declared in the respective Central Excise Declaration for the years 199495 to 199899 of M/s. Sansuk Industries and M/s. Shandar Products. This also appears to amounts to willful suppression of the facts with the intention of evading Central Excise Duty.”
14. A reply was given to the show cause notice. There is a reference to the declarations made by the appellants for the years 198788 to 199495.
In reply, a legislative history of classification of articles of plastic has been set out. It was pointed out in the reply that majority of the demand has been raised in respect of goods classified as battery parts.
It was contended in the reply that so called battery parts are nothing but filters. It was contended that the same are made wholly out of plastic by using plastic granules.
15. As regards the extended period of limitation, it was contended that as far as clearances of M/s. Sansuk Industries (appellant in Appeal No.196/2006) are concerned, wherever the description on the invoices matches or corresponds to the above description i.e. filter elements/ parts, the allegation of suppression facts cannot be effectively established and, therefore, extended period of five years cannot be invoked. It is pointed out that this aspect has been set out in paragraph7.2 of the show cause notice. It was further contended in reply that the noticees/ appellants have filed declarations from time to time describing the goods as filters and classifying it under Chapter 39 as articles of The Department did not dispute the said classification adopted in the declarations. It was contended that there was a common understanding of both the appellants and the Department that articles of plastic, even if they are parts of machinery, are classifiable under Chapter 39. It is contended that this belief which led the Department to accept the declarations filed filed under Chapter 39 would equally apply to the so called battery party namely vent plugs. It was contended that bona fide belief was entertained by the appellants that battery parts i.e. vent plugs were classified in a particular manner under Chapter 39. Quantum of demand was also disputed. Apart from disputing the demand, even the clubbing to clearances of the the appellants was disputed.
16. As far as findings of fact are concerned, the Commissioner acting an an adjudicating authority noted that the defence of the appellants mainly revolves around the classification of battery parts as the major demand is in respect of battery parts. The appellants classified the battery parts under CH 3926.90 claiming benefit of the notification dated 1st March 1988 and 28th February 1999. The Commissioner referred to the contention of the appellants that the battery parts are nothing but filters. The technical material produced by the appellants is considered by the Commissioner in paragraphs32 to 36 and, ultimately, a finding of fact was recorded that the vent plugs manufactures by the appellants are not covered by the list and cannot be called as filters falling under Chapter 84.21. Therefore, it was held that vent plugs are classifiable under Chapter 85.07 as battery parts. Thereafter the Commissioner proceeded deal with the classification of other products such as filter parts, humidifier, valve parts and gauges. A finding of fact was recorded that the said items are classifiable as under:
“1. Filter Parts Ch. 84.21
2. Humidifier Ch. 8481.99
3. Valve Parts Ch. 84.79
4. Gauges Ch. 90.31”
Thereafter the Commissioner proceeded to decide the issue of clubbing.
17. As regards the extended period of limitation, it was held that the appellants never declared manufacture or clearance of Plastic Spill, Proof Vent Plugs, Microporous Vent Plugs, Aqua Trap Vent Plugs etc. in their declarations.
18. Now, coming to the impugned judgment of the Appellate Tribunal, we must note here that in paragraph2 of the order, a concession of the learned counsel for the appellants is noted that the appellants are not disputing classification of Filter Parts, Humidifier Parts, Valve Parts and Gauges. As noticed in the earlier part of the judgment, the major dispute raised was as regards the Battery Parts. The appellants claimed that the Battery Parts fall under the heading 39.26 whereas the Department treated it as falling under the heading 85.07. In paragraph4, the Appellate Tribunal noted that it was not disputed that Plastic Spill Proof Vent Plugs, Flame Retardant Microporous Vent Plugs, Ceramic Vent Microporous Vent Plug, Aqua Trap Vent Plug and Microporous Filter Discs are used in Batteries as battery parts. A finding was recorded that heading 39.26 is for residual plastic items. The entries under heading 84.21 are of filtering or purifying machinery apparatus and parts thereof.
The Appellate Tribunal placed reliance on Section Note2 of Section XVI which provided that parts of the battery have to be classified under heading 85.07. We have perused the Section Note2 referred by the Appellate Tribunal. We have also perused the relevant entries under heading 39.26. It is a residual heading containing plastics which are not covered by any other item.
19. As regards clubbing, the Appellate Tribunal held that the appellants in these appeals are two different manufactures, but finished goods are produced using the machinery and product facilities in the unit of the appellant in appeal no. 196 of 2005. We must note here that even in the reply of the appellants in both the appeals to the show cause notice, this factual allegation is not disputed. Therefore, it was rightly held that the clearances are required to be aggregated in terms of the Notification No.1/93CE.
We have perused the decision in the case of Gajanan Fabrics relied upon by the appellants. The said decision deals with the peculiar facts of the case before it. In the present case, in view of the admitted facts, clause 3 of the amended Notification No.1/93CE will apply. Hence, on the aspect of clubbing, it is not possible to find fault with the finding in the impugned Judgment.
Now we come to the invocation of the extended period of limitation. In the case of Cosmic Dye Chemical (supra), the Apex Court held thus:
“6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘willful’ preceding the words “misstatement or suppression of facts” which means with intent to evade duty.
The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not willful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be willful.”
In the case of Pushpam pharmaceuticals (supra), it was held thus:
“4. Section 11A empowers the Department to reopen proceedings if the levy has been shortlevied or not levied within six months from the relevant date.
But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts.
The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate.
In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”
In the case of Densons (supra), the Apex Court held thus:
“7. Next question is — whether the Tribunal was justified in invoking the first proviso to subsection (1) of Section 11A. Prima facie, it is apparent that there was no justifiable reason for invoking a larger period of limitation. There is no suppression on the part of the appellantfirm in mentioning the goods manufactured by it. The appellant claimed it on the ground that the goods manufactured by it were other articles of plastic. For the insulating fittings manufactured by it, the tariff entry was correctly stated. The officers concerned of the Department, as noted above, after verification approved the said classification list. This Court has repeatedly held that for invoking an extended period of limitation under the said provision duty should not have been paid, shortlevied or shortpaid by a suppression of fact or in contravention of any provision or rules but there should be wilful suppression. [Re: s.Easland Combines, Coimbatore v. The Collector of Central Excise, Coimbatore, C.A.No.2693 of 2000 etc. decided on 1312003].
By merely claiming it under heading 3926.90 it cannot be said that there was any wilful misstatement or suppression of fact. Hence, there was no justifiable ground for the Tribunal for invoking the first proviso to subsection (1) of Section 11A of the Act.”
In the case of Collector of Central Excise v. HMM Ltd (supra), the Apex Court held thus:
“2. The assessee contended before the Additional Collector of central Excise that the show cause notice was time barred under the main part of Section 11A since it was issued after the expiry of the period of six months stipulated therein but the Additional Collector sustained the notice on the ground that it was within five years impliedly holding that the purported action was under the proviso to Section 11A of the Act.
There is no dispute that the show cause notice cannot be sustained under subsection (1) of Section 11A unless the proviso is attracted. Admittedly, it is beyond the period of limitation of six months prescribed under Section 11A(1) but it is within the extended period of 5 years under the proviso to that subsection.
Now in order to attract the proviso it must be shown that the excise duty escaped payment by reason of fraud, collusion or willful misstatement or suppression of fact or contravention of any provision of the Act or of the Rules made thereunder with intent to evade payment of duty. In that case the period of six months would stand extended to 5 years as provided by the proviso. Therefore, in order to attract the proviso to Section 11A (1) it must be alleged in the show cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice.
There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been noticed or that the assessee was guilty of willful misstatement or suppression of fact. In the absence of any such averments in the show cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11A(1) of the Act. The Additional Collector while conceding that the notice had been issued after the period of six months prescribed in Section 11A(1) of the Act had proceeded to observe that there was willfull action of withholding of vital information apparently for evasion of excise duty due on this waste/by product but counsel for the assessee contended that in the absence of any such allegation in the show cause notice the assessee was not put to notice regarding the specific allegation under the proviso to that subsection.
The mere nondeclaration of the waste/byproduct in their classification list cannot establish any wilful withholding of vital information for the purpose of evasion of excise duty due on the said product. There could be, counsel contended, bona fide belief on the part of the assessee that the said waste or byproduct did not attract excise duty and hence it may not have been included in their classification list. But that per se cannot go to prove that there was the intention to evade payment of duty that the assessee was guilty of fraud, collusion, misconduct or suppression to attract the proviso to Section 11A(1) of the Act. There is considerable force in this contention. 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 six 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 subsection 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. 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 assessee but merely drew the inference that since the classification list did not make any mention in regard to this waste product it could be inferred that the assessee had apparently tried to evade the payment of excise duty.”
21. In the show cause notice, in paragraph 4.1 which we have quoted above, the list of articles manufactured by the appellants has been set out which are not declared in the declarations filed by them with the department. In paragraph 5.2 of the show cause notice, it is specifically that there is a willful suppression of facts with the intention of evading duty. Copies of the declarations filed by the appellants in both the appeals have been filed on record in both the cases along with an additional affidavit of Shri Sanjay Shanbag dated 19th September 2006. In case of the appellant in Appeal No. 196 of 2006, against the description of the goods manufactured, the goods have been described as “Articles of Plastic: Plastic Water Filter Elements, Cylinders, Discs” In the other appeal, the appellant has described the goods manufactured by it in the declarations filed with the Department as “ Articles of PlasticPlastic articles reinforced by moulded components”. The declarations do not mention that they were manufacturing Plastic Spill Proof Vent Plugs, Flame Retardant Microporous Vent Plugs, Ceramic Vent Plug, Microporous Vent Plug, Aqua Trap Vent Plug and Microporous Filter Discs which as noted by the Appellate Tribunal are used in the batteries as battery parts.
22. That is how the Appellate Tribunal has recorded a finding of fact that at no point of time, the appellants have disclosed to the department that they were manufacturing battery parts such as vent plugs etc. Thus, in this case, the finding of fact based on the material on record is that in the declarations made by the appellants there is an omission to mention the fact that various battery parts were being manufactured by them. If we see the description of the goods manufactured in the declarations filed by the appellants, the case made out in the show cause notice is substantiated that the appellants did not disclose that they were manufacturing the battery parts. As the Battery parts were not disclosed, did not disclose the classification of the said Battery parts in their declarations. There is a specific allegation in the show cause notice that the goods actually manufactured were not declared which amounts to willful suppression of material facts with the intention of evading the duty on Battery parts. The show cause notice is based on what was revealed in the visit of the Preventive Section to the factories and investigation carried out thereafter. The Appellate Tribunal held that it was not merely a question of wrong classification, but it was a case of suppression. We agree with the findings of fact recorded by the Appellate Tribunal on this issue.
23. Hence, there is no merit in the Appeals and the same are dismissed. No costs.
(A.K.MENON, J.) (A.S.OKA, J.)
1 1995 (75) ELT 721 (SC)
2 1995 (78) ELT 401 (SC)
3 2003 (155) ELT 211 (SC)
4 1997 (92) ELT 451 (SC)
5 1995 (76) ELT 497 (SC)