ORDER
V.K. Agrawal, Member (T)
1. In this appeal, M/s. The Gopal Mills have challenged the Annual Capacity of Productions of the rolled products of steel as determined by the Commissioner of Central Excise and demand of Central Excise duty and penalty imposed on them under the impugned Order.
2. At the outset, Shri A.K. Jain, learned Advocate, mentioned that a Misc. application has been moved by the Appellants for taking on record additional evidence; that all the documents now sought to be brought on record are statutory in nature. The learned DR has no objection in taking these documents on record. Accordingly the Misc. Application No. 435/2000-NB is allowed.
3.1 The learned Advocate raised the preliminary objection that the show cause notice has been issued to them leveling allegations of wilful mis-declaration, suppression of facts and obtaining the Chartered Engineer’s Certificate fraudulently by the Assistant Commissioner; that a show cause notice with such allegations could be issued only by the Commissioner and hence the show cause notice is without jurisdiction and so too the proceedings based thereon. He relied upon the following decisions :
(i) CCE, Indore v. ONGC -1998 (103) E.L.T. 3 (S.C.) (ii) Sun Beverages Pvt. Ltd. v. CCE, Kanpur - 2000 (36) RLT 684 (CEGAT) (iii) Bharat Paints & Chemicals v. CCE, Vadodara - 2000 (119) E.L.T. 145 (T) (iv) Calcutta Steel Industries v. CCE, Chandigarh - 2000 (120) E.L.T. 691 (T) (v) Jayant Vitamins Ltd. v. CCE, Indore -1996 (81) E.L.T. 421 (T). 3.2 The learned Advocate also mentioned that as per Board's Circular No. 299/15/97/CX., dated 27-2-1997, such a show cause notice can be issued only by the Commissioner; that Board's Circular is fully binding on the Department. Reliance is placed on the following decisions : (i) CCE, Chandigarh v. J.K. Textiles Ltd. -1998 (99) E.L.T. 390 (T) (ii) CCE, Calcutta-I v. ABB Ltd. - 1999 (106) E.L.T. 473 (T) (iii) CCE, Nagpur v. Paradise. Conductor Pvt. Ltd. - 1999 (84) ECR 900 (T). 3.3 He also relied upon the decision in the case of Frick India Ltd. v. CCE, New Delhi. Final Order No. 522/99-A, dated 18-2-99 wherein it was held that "It is settled position now that the Assistant Collector was not the competent authority to issue show cause notice alleging suppression during the relevant period;" that the Supreme Court has dismissed Civil Appeal Nos. 4421-4422 of 2000.
4.1 Shri Jagdish Singh, learned DR, countered the arguments by submitting that the Appellants had never challenged the jurisdiction before the Adjudicating Authority; that once they had submitted to the jurisdiction, they are precluded from challenging the same in subsequent proceedings; that in any case demand is only for a period of six months which can be validly issued by the Assistant Commissioner; that these words were used to describe the charge against the Appellants. He also submitted that the circular issued by the Board is an administrative circular and is meant for administrative convenience as under the provisions of Section 11A(1) of the Central Excise Act, a Central Excise Officer is empowered to issue the show cause notice; that this has been mentioned by the Apex Court in CCE, New Delhi v. Frick India, (supra), as under :
“… in view of the fact that Section 11A of the Central Excises and Salt Act, 1944 prior to its amendment in 1992 has been interpreted by the Government itself as meaning that if there is a fraud etc., then the competent authority to issue notice would be the Collector of Central Excise.”
4.2 The learned DR also mentioned that in the decisions relied upon by the learned Counsel, the period of demand of duty involved was prior to 1992; that for example in the case of Frick India Ltd. the period involved was 1-3-1986 to 1-10-1986.
5. We find substance in the submissions of the learned DR. Section 11A(1) was amended in 1985 and it was provided that where any duty has not been levied or short levied, etc. by reason of fraud, collusion, etc. Commissioner of Central Excise would only issue the show cause notice. The provision was again amended in 1992 and a Central Excise Officer was empowered to issue show cause notice even in cases of fraud etc. The demand in Jayant Vitamins Ltd. was issued prior to 1992 amendment as is apparent from the fact that the appeal was filed in 1989. The Supreme Court also in the case of ONGC, (supra), has interpreted “Section 11A(1) as it stood at the relevant time (before it was amended by Act 18 of 1992). In the said judgment, show cause notices were issued on 25-11-1986 and 7-11-1986 when the law required that the show cause notice was to be issued by the Collector of Central Excise. In the case of Calcutta Steel Industries, though the Tribunal agreed with the view taken by the Commissioner (Appeals) that the Assistant Collector had adjudicated the case involving duty more than Rs. 50,000/- beyond his competency and jurisdiction, the Tribunal also took note of the decisions in (1) CCE, Jaipur v. Jaypee Agro Chemicals Ltd. 1999 (109) E.L.T. 819 (T), and (2) CCE v. Jaipur Polyspin Ltd. – 1999 (113) E.L.T. 265 wherein, it was observed that “by issue of Circular No. 3/92-CX.6, dated 14-5-92 and Circular No. 299/15/97-CX., dated 27-2-1997, the Central Board of Excise and Customs had administratively limited the powers of Assistant Collector of Central Excise and that exceeding these powers could not be treated as a legal infirmity.” The Tribunal then remanded the matter to the jurisdictional Adjudicating authority for decision on merit. In the case of Jay Pee Agro Chemical, the Tribunal considered the circulars issued by Board on 14-5-92 and 29-2-97 prescribing certain limits for adjudication and held that “by issue of these circulars, the Central Board of Excise and Customs have administratively limited the powers of Asstt. Collectors and thus exceeding these powers cannot be treated as a legal infirmity. Exceeding these powers will, at the best, be an administrative irregularity.” Similar views were expressed by the Tribunal in the case of Jaipur Polyspin Ltd. (supra) and Usha Rectifier Corporation (I) Ltd. v. CCE, New Delhi – 2001 (130) E.L.T. 485 (T), wherein it was held as under :
“The statutory position after amendment of Section 11A(1) w.e.f. 14-5-1992 was that Central Excise Officers was competent to issue the show cause notice even where proviso to Section 11A has been invoked.”
Accordingly, we hold that no infirmity has been caused in the present matter on account of issuance of the show cause notice by the Assistant Commissioner.
6. The learned Advocate submitted, on merit, that Section 3A of the Central Excise Act, Rule 96ZP of the Central Excise Rules and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 talk of determination of the capacity by the Commissioner, preceded by a verification, that therefore, until that verification/determination, they are free to withdraw their option to work under the Compounded Levy Scheme; that they had filed a declaration under Rule 96ZP(4); that they in their letter dated 15-11-1997, withdrew their option of paying duty under the said Section; that even then the verification was conducted by the Department on 29-1-1998 and the Commissioner determined their Annual Capacity of Production on provisional basis on 18-2-1998 and final determination was ordered by the Commissioner on 25-4-1998; that as per Section 5 of the Contract Act, unless the offer/proposal has been accepted by the other party, the person making the offer/proposal has a legal right to withdraw his offer, which withdrawal shall be as goods as non-offer. He relied upon the decision in the case of Dharampal v. State of Haryana – 1988 (2) PLR 342 (P & H). The learned Advocate, further, submitted that from 15-11-97, while the Appellants opted out of the procedure under Rule 96ZP(3) informing therein that they would be paying duty on monthly basis under Rule 96ZP(1) from November 1997, the Supreme Court’s judgment in the case of CCE v. Venus Castings Pvt. Ltd. – 2000 (117) E.L.T. 273 (S.C.) directly favours their case wherein the Supreme Court held that “If the assessee opts for procedure under Rule 96ZO(1), he may opt out of the procedure under Rule 96ZO(3) for subsequent period and seek the determination of annual capacity of production. He also relied upon the decision in the case of Ranjeev Alloys Ltd. v. CCE – 2001 (135) E.L.T. 671 (T) = 2001 (75) ECC 653; Ganpate. Industries v. CCE – 2000 (122) E.L.T. 406 (T), Kishan Chand Steel Re-rolling Mills v. CCE – 2000 (121) E.L.T. 551 (T) and Final Order No. A/494/2000-NB, dated 14-6-2000 in the case of Shivaji Steels v. CCE. He also contended that the ‘d’ parameter of Rolling Mill ‘B’ is 350 mm and not 405 mm as alleged in the impugned Order; that Shri Nirmal Kumar, a Chartered Engineer had given a Certificate dated 28-1-98; that the parameter should be accepted in accordance with the report of the Chartered Engineer; that ‘d’ factor of pinion-stand being 405 is not maintainable in view of the subsequent physical verification carried out by the Central Excise Officers on 28-1-98 and 29-1-98; that it is not possible to only change the gear-dia, and not the rolls and other items namely couplings and boxes; that in Order to change the rolls, it is a must that the stands have to be taken out from their concrete base and then reinstalled after changing the rolls again by concrete foundation; that all this requires more than a month’s time whereas only four days after the visit on 24-1-98 i.e. on 28-1-98 the Officers verified the rolling mills and found the same conforming to the declaration. He also mentioned that the Order is contrary to the Commission’s subsequent Order dated 27-4-98 (after physical verification done by the Department on 29-1-1998) finalizing and accepting the declared capacity, as against the capacity alleged in this case.
7. Countering the arguments, Shri Jagdish Singh, the learned DR, submitted that Central Excise Officers, on visit of the Appellant’s factory premises, verified factor ‘d’ of both the rolling mills in the presence of Shri Sushil Mitral, partner of the Appellants; that the measurement was carried out by Shri Gurdeep Singh, Foreman of the Appellants; that on measurement, the factor ‘d’ of pinion stand of rolling mills ‘B’ was found to be 405 mm instead of 350 mm declared by them in their declaration dated 26-9-97; that the Verification Report, prepared on the spot was signed by the Partner, Sushil Mittal and the Foreman; that in addition Shri Mittal admitted these facts in his statement dated 24-1-1998 and deposed that they had changed the factor ‘d’ of Rolling Mill ‘B’ in November, 1997; that Shri Mittal in his further statement dated 11-3-1998 deposed that the pinions were manufactured by their employees in their factory itself from old rough rolls; that no Departmental Officer was associated with the measurement done by Chartered Engineer. The learned DR also relied upon the decision of the Apex Court in the case of Venus Castings (P) Ltd. – 2000 (117) E.L.T. 273 (S.C.) to emphasize that once the assessee has opted for a procedure, he can change the option only subsequently and that too from the new financial year as capacity is determined on annual basis.
8. We have considered the submissions of both the sides. Section 3A(1) of the Central Excise Act empowers the Central Government, with a view to safeguard the revenue, to specify by Notification goods on which duty of excise shall be levied and collected in accordance with the provisions of Section 3A. The Central Government has specified certain non-alloy steel hot re-rolled under Sub-section (1). In exercise of Powers conferred under Sub-section (2) of Section 3A, the Central Government has made Hot-Re-rolling Steel Mills Annual Capacity Determination Rules, 1997. Further, according to Sub-section (2) such annual capacity of production shall be deemed to be annual production of such goods by the factory and as per the provisions of Sub-section (3), the duty of excise shall be levied at such rate as may be specified by Notification. Rule 96ZP of the Central Excise Rules contains the procedure to be followed by the manufacturer of hot re-rolled products. It is not in dispute that the Appellants had filed a declaration along with a Certificate from a Chartered Engineer for determination of Annual Capacity of Production. The Commissioner has determined their Annual Capacity of Production to be 10736 MT per annum under Order dated 27-2-98 provisionally under Rule 3(3) of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules. The learned Advocate has contended that the Appellants under their letter dated had withdrawn his option to work under the Compounded Levy Scheme. We do not find any substance in their argument that they are free to withdraw their option until the same is accepted by the Government. The provisions of Contract Act do not apply in respect of taxation statute. Under Section 3A of the Central Excise Act they have to discharge their liability to pay duty in accordance with the provisions of Section 3A of the Act read with Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 and Rule 96ZP of the Central Excise Rules, 1944, They do not have any option not to work under the Compounded Levy Scheme. The provisions of Sub-section (3) of Section 3(A) are very specific which provides as under:
“(3) The duty of excise on notified goods shall be levied, at such rates as the Central Government may by notification in the Official Gazette specify, and collected in such manner ,is may be prescribed.”
9. We have already referred to Sub-section (2) of Section 3A which clearly provides that “annual capacity of production shall be deemed to be the annual production of such goods by such factory”. In view of these provisions Section 5 of the Contract Act has no relevance and accordingly the decision in Dharampal v. State of Haryana (supra), is not applicable. Moreover the Apex Court in the case of Venus Castings (P) Ltd. – 2000 (117) E.L.T. 273 (S.C.) has held that the assesse may opt out of the procedure under Rule 96ZO(3) for a subsequent period. This judgment does not mention anywhere that the assessee may opt out of the Scheme. In their letter dated 15-11-97 they had not specifically mentioned that they would be paying duty on monthly basis under Rule 96ZO(1) as they had mentioned only that they had “discharged to work out the production and duty liability on pro rata basis for both the mill on the basis of the working of the mill during last four months”. Further, the duty payment as per Rules is for financial year and the option cannot be changed in between. It has also not been mentioned by the Appellants that whether they have challenged the determination of annual production capacity by the Commissioner under Order dated 27-2-1998.
10. The present proceedings have been started by the Department as the Central Excise Officers on visit of their factory premises on 24-1-1998 found variation in factor ‘d’ of Mill ‘B’. According to the Revenue the factor ‘d’ was measured by the Foreman of the Appellants in the presence of one of their partner, Shri Sushil Mittal, who admitted the increase in factor ‘d’ from 350 mm to 405 mm in his statement dated 24-1-98. The Appellants have not mentioned that the statement tendered by the partner was retracted or both their partner and foreman denied to have signed the verification report prepared on 24-1-1998. The Appellants have only mentioned that the partner Shri Sushil Mittal, “observing that the staff was mentally prepared, as usual, to book a case against the party, obliged the visiting staff by tendering his statement according to their suitability and wishes.” Nothing prevented him to retract his statement. The Adjudicating Authority has referred to the judgment in the case of K.I. Pavunny v. Asstt. Collector – 1997 (90) E.L.T. 241 (S.C.) wherein the Apex Court observed that the confessional statement if found to be voluntary can form the sole basis of conviction. The Appellants’ claim to have taken a Certificate dated 28-1-1998 from a chartered engineer according to which there was no change in ‘d’ factor. Strangely enough, there is nothing on record to show that even the Certificate was sent to Department immediately on receipt of the same. It appears that the said Certificate was only sent on 5-3-98 in reply to letter-dated 4-3-98 of the Range Superintendent. We, therefore, find no infirmity in rejecting the said Certificate by the Adjudicating Authority in the impugned Order. The learned Advocate has referred to another visit of the Central Excise Officer of the factory on 29-1-98. This visit, it appears from the Record was paid by Range Superintendent to verify as to whether the furnace was of Batch type or pusher type. The Order dated 27-4-98 was issued by the Commissioner based on the declaration filed initially by the Appellants. The impugned Order has been passed after completion of investigation and on the basis of preventive checks carried out by the preservative staff and the measurement of ‘d’ factor of Mill ‘B’ done by the Foreman and the statement of Shri Sushil Mittal, Partner. We, however, observe that there is no evidence with the Department to come to the conclusion that the factor ‘d’ was changed with effect from 1-10-1997. According to the statement of the partner recorded on 24-1-98, the change was effected in the first week of November, 1997. The change in factor ‘d’ of Mill ‘B’ is to be taken into consideration only from November, 1997 and hot from October, 1997. The Adjudicating Authority is required to recompute the duty liability and intimate the same to the Appellants who are liable to pay the same. Taking into consideration all the facts and circumstances of the case, we are of the view that penalty imposed is on the higher side. We reduce the same to Rs. 10 lakhs (Rupees Ten lakhs only).
11. The appeal is disposed of in these above terms.