ORDER
Harish Chander, Vice-President
1. The applicants have made a prayer for dispensing with the pre-deposit of the duly amount of Rs. 48,04,726.79 and penalty of Rs. 50.000/-. Shri D.N. Kohli, learned Consultant, has appeared on behalf of the applicants and pleaded that there was a Calcutta High Court’s decision in favour of the applicants, and as such, the applicant was of the honest belief that the value of the inserts is not to be calculated in the assessable value. He referred to a decision reported in 1988 (17) ECR 737. Shri Kohli pleaded that the period involved is 1985 to 1990, and the show cause notice is dated 3rd May, 1990, and at the worst, the applicants can be desired to pay the demand which is within six months and that comes to about Rs. 4 lakhs. Shri Kohli fairly staled that a Larger Bench decision of the Tribunal and a decision of the Supreme Court is against the applicants on merits. But he also stated that he had been filing the price lists repeatedly from time to lime and with the price lists, the applicants had duly mentioned that the inserts are to be supplied by Railways free of cost, and a copy of the contract was duly attached/On financial aspect, Shri Kohli drew the attention of the Bench o the profit & loss account of the applicant, appearing on page 48 of the balance-sheet for the year ending 1989-90, and there is a loss of Rs. 1,10,70,486/- and after bringing forward the previous year’s losses the not loss works out to Rs. 1,30,57,237/- and after adding back the previous year’s losses the figure will go further high. He pleaded for the grant of stay and stated that in case the applicants are desired to deposit the full duly and penalty amounts, it will amount to undue hardship.
2. Shri Satish Kumar, learned JDR, who has appeared on behalf of the respondent, opposed the gram of slay and stated that after the decision of the Tribunal and of the Supreme Court on merits in favour of the Revenue, he pleaded for the rejection of the slay application.
3. We have heard both the sides and have gone through the facts and circumstances of the case. The applicant is a regular central excise licensee. He had been filing price lists repeatedly from lime to time, and the activity of the applicant was well within the knowledge of the Revenue. Hon’ble Supreme Court in Padmini Products case had held that when there was a trade notice in favour of an assessee the “extended period of five years inapplicable for mere failure or negligence of the manufacturer to lake out licence or pay duly when there was scope for doubt that goods were not dutiabledu-liability of goods in doubt because of Trade notices. Para No. 8 from the said judgment is reproduced below:
8. Shri V. Lakshmi Kumaran, Id. Counsel for the appellant drew our attention to the observations of this Court in Collector of C. Excise, Hyderabad v. Mis. Chemphar Drugs & Liniments, Hyderabad at page 131 of the report, this Court observed that in order to sustain an order of the Tribunal beyond a period of six months and up to a period of 5 years in view of the proviso to Sub-section (1) of Section 11-A of the Act, it had to be established that the duty of excise had not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. It was observed by this Court that something positive other than mere inaction of 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 beyond the period of six months had to be established. 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. The Tribunal, however, had held contrary to the contention of the appellants. The Tribunal noted that dhoop sticks are different products from agar-baties even though they belonged to the same category and the Tribunal was of the view that these were to be treated differently. Therefore, the clarification given in the context of the agarbaties could not be applicable to dhoop sticks etc., and the Tribunal came to the conclusion that inasmuch as the appellant had manufactured the goods without informing the Central Excise authorities and had been removing these without payment of duty, these would have to be taken to attract the mischief of the provisions of Rule 9(2) and the longer period of limitation was available. But the Tribunal reduced the penalty. Counsel for the appellants contended before us that in view of the trade notices which were referred 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., 55/15, 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 misstate-ment or suppression of facts or contravention of any provision of the Act. Suppression of facts is not failure to disclose the legal consequences of a certain provision. Shri Ganguli, appearing for the Revenue, contended before us that the appellants should have taken out a licence under Rule 174 of the said Rules because all the goods were not handicrafts and as such were not exempted under Notification No. 55/75 and therefore, the appellants were obliged to take out a licence. The failure to take but the licence and thereafter to take the goods out of the factory gate without payment of duty was itself sufficient, according to Shri Ganguli, to infer that the appellants came within the mischief of Section 11-A of the Act. We are unable to accept this position canvassed on behalf of the revenue. As mentioned hereinbefore, mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of the Act. In the facts and circumstances of this case, there were materials, as indicated to suggest that there was scope for confusion and the appellants believing that the goods came within the purview of the concept of handicrafts and as such were exempt. If there was scope for such a belief or opinion, then failure either to take out a licence or to pay duty on that belief, When there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licensed, would not attract the penal provisions of Section 11-A of the Act. If the facts are otherwise, then the position would be different. It is true that the Tribunal has come to a conclusion that there was failure in terms of Section 11-A of the Act. Section 35-L of the Act, inter alia, provides that an appeal shall be to this Court from any order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Therefore, in this appeal, we have to examine the correctness of the decision of the Tribunal. For the reasons, indicated above, the Tribunal was in error in applying the provisions of Section 11-A of the Act. There were no materials 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. 5000/- 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.
In the matter before us, the applicant had a bonafide belief in view of the decision reported in 1988 (17) ECR 737 that the value of the railway inserts is not to be included. After the decision of the Hon. Calcutta High Court, the Larger Bench of the Tribunal had occasion to deal with identical situation where the Tribunal had held that value of the inserts is to be included in the assessable value in the case of CCE v. Manibhai and Brothers reported in 1990 (15) ETR 113 : 1990 (28) ECR 33 (Cegat SB-A) and later ‘ on the Supreme Court also confirmed the same. The applicants’ main contention for grant of stay is the bonafide belief on the basis of the judgment reported in 1988 (17) ECR 737 and 1985 ECR 216 (Andhra Pradesh High Court) on MCI inserts. Later on the decision of the Tribunal was against the assessee, viz., present applicant. We have looked into the profit & loss account of the applicant for the year ending 31st March, 1990 and also for the year ending 31st March, 1989, there was loss of Rs. 1,10,70,4861- and for the year ending 31st March, 1989, there was a loss of Rs. 78,57,691/-. Hon. Supreme Court in the case of Spencer & Co. v. Union of India which was followed by the Tribunal in the case of Sonodyne Television Co. v. CCE, Meerut had held in para No. 12 as under:
12. The question of balance of convenience will considerably depend on the liquidity position of the petitioner-company. Before proceeding further, we think it relevant to cite the following observations of the Supreme Court made in Application No. 332/84 in Appeal No. 693/84 (Mis. Spencer & Co. Ltd., Madras v. CCE):
We are in agreement with the contention of the counsel for the petitioner that the expression ‘undue hardship’ occurring in the proviso to Section 35F of the Central Excises & Salt Act, 1944, would include consideration, inter alia, of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that aspect has been completely ignored as was contended by counsel. With these observations, the special leave petition is dismissed.
Keeping in view the above discussion, legal position and totality of the facts and circumstances of the case, we are of the view that if the applicants are desired to deposit the full duty amount of Rs. 48,04,726.79 and penalty of Rs. 50,0001-, it will amount to undue hardship. We dispense with the pre-deposit of the same on the condition of the applicants depositing Rs. 6 lakhs (Rupees six lakhs only) in cash within 10 (ten) weeks from today. The applicants shall report compliance of this order to the Registry within 12 weeks from today. In case the applicants fail to comply with the terms of this order, the stay order shall stand automatically vacated.
(Pronounced and dictated in open court).