ORDER
Jyoti Balasundaram, Member (J)
1. The order of the Collector of G.E. Bombay, dated 30.6.1982, levying duty on processed art silk fabrics removed without payment of duty from April 1973 to March 1974 and imposing a penalty, has been challenged in the appeal before us
2. The appellants are licensed processors of man-made fabrics and cotton fabrics. A show cause notice was issued to them on 28.3.1977, alleging that
(a) they manufactured and removed art silk fabrics measuring 2,52, 883.20 L. Mtrs. valued at Rs. 21,11,547.1 during the period from April, 1973 to March, 1974 without determining and payment of Central Excise Duty by debit entry in their personal ledger account prior to the removal of the said goods without the cover of valid Central Excise transport documents viz, G.P. is and without accounting the said goods in the statutory Central Excise Accounts.
(b) they misdeclared the description of a quantity of 8,56,971.15 L. Mtrs. of processed art silk fabrics removed by them during the period from April, 1973 to March, 1974 without determining and payment of the correct Central Excise duty thereon.
3. The appellants were asked to show cause as to why C.E. duty of Rs. 13,33,594.54 should not be demanded and recovered from them under Rule 9 (2) of the CE Rules and why a penalty should not be imposed upon them under Rules 52A/226/173Q. In the reply to the show cause notice, the appellant denied the contravention of any of the CE Rules and stated that the quantity of art silk fabrics alleged to have been removed without gate pass etc., included goods brought for re-packing, goods purchased from the open market for trading and that they had issued bills for excess quantity (Havala Transactions) in order to get loans from banks by showing large transactions.
4. The Collector of C.E. rejected their contentions and passed the impugned order, dropping the demand for duty of Rs. 10,13,800.71 on the quantity of 8,56,971.15 L. Mtrs. of processed art silk fabrics as time-barred and levying duty of Rs. 3,19,793.83 on the quantity of 2,52,883.20 L, Mtrs. of processed art silk fabrics removed without payment of duty during the period from April 1973 to March 1974 under Rule 9(2) and imposing a penalty of Rs 1 lakh under Rule 173Q read with Rule 52A and Rule 226 of the CE Rules 1944. Aggrieved by this order the appellants have preferred the above appeal.
5. We have heard Shri A.K. Jain, learned Advocate and Mrs Zutsi learned SDR.
6. The learned Counsel’s contention are fourfold:
(a) The demand for duty is barred by time as it has been served beyond a period of 5 years as stipulated under Rule 9(2). According to him a demand for duty is made by an order passed by the Asstt. Collector (in this case, the Collector) and the Collector’s order having being passed more than 5 years from the date of clearance of the goods, is hit by limitation. The learned Counsel refers to extracts from dictionaries defining the words “demand” and “within”.
(b) The second contention is that the demand is not maintainable because it is based upon assumption and presumption in the absence of proof of clandestine manufacture or removal According to him the evidence placed before the Collector regarding goods purchased from the open market and repacked for the purpose of trading has been rejected. The Collector has also rejected their contention regarding inflated sales figures for the purpose of obtaining bank loans. The learned advocate relies upon the decisions and 1981 ELT 851 for the proposition that Rule 9(2) cannot be invoked when there is no evidence of clandestine manufacture and removal.
(c) The third argument of the appellants is that duty has been wrongly calculated without granting them the benefit of exemption notifications 60/73 dated 1.3.1973, 61/73 dated 1.3.1973, 175/72 dated 24.7.1972 and 179/72 dated 247.1972.
(d) The fourth and final contention of the appellant is that penalty was not imposable as on the date of the alleged removal of art silk fabrics, processing of grey fabrics did not amount to manufacture and therefore, no offence was committed by the appellant, justifying the composition of above penalty.
7. In reply Mrs. Zutsi argues that the words ‘demand’ and ‘within’ have to be construed within the four corners of the Central Excise Act and Rules, according to which the proceedings commence with the issue of the show cause notice calling upon assessees to pay duty and the show cause notice is the starting point of proceedings under the Act and this would be the demand for duty. The show cause notice having being issued within time, she submits that the demand is not barred by limitation. On the merits of the case the learned SDR submits that the Collector has passed his findings upon available material and not upon any assumption Regarding the availability of exemption notifications, the learned SDR contends that the benefit of the notifications was never claimed by the appellant earlier and therefore, there was nothing wrong in the Collector’s calculation of duty payable by the appellants.
8. We have heard both sides and carefully considered their submissions.
9. The ‘demand for duty’ has to be construed within the frame work of the CESA and CE Rules, 1944. The word ‘damand’ has been defined in the Oxford University Press Business Dictionary as “asking for payment” and in Words and Phrases Legally Defined Vol. 2, as “there must be a clear intimation that payment is required to constitute a demand”. The Law lexicon defines demand as “something more positive than a requisition.” The word “within” has been defined in the Law lexicon as “in relation to time, means in the limits of (a period of a time), “before the end of” and “after not more than”. Under the Scheme of the Central Excise Act and Rules, the proceedings commence with the issue of a show cause notice calling upon the assessee to show cause why duty should not be demanded. A definite demand is contained in the show cause notice which is clear and unequivocal and more positive than a requisition. (Under the CESA and Rules there is no provision for a requisition). The show cause notice having been issued within time, the demand is not barred by limitation, The arguments of the appellants on this count fall to the ground.
10. On the merits Of the case we find that the Collector has based his findings on the material placed before him He has not accepted their argument on purchase of processed fabrics because the copy of the balance sheet submitted along with the reply to the show cause notice showing purchase of “fabrics” valued at Rs. 12,11,742 has not been attested by a Chartered Accountant and moreover, there is no indication whether the fabrics are “processed or finished” and therefore may be “grey fabrics”. The appellants did not produce any purchase invoices/challans/bills to substantiate their claim, and hence no deduction on this ground was allowed to them. The Collector has rejected their submission on “repacked goods” as follows:
It has also been mentioned that the quantity of 2,52,883.20 L. Mtrs also includes goods valued at Rs. 81,477 30 which have been repacked and sold under fresh bills and also includes grey goods valued at Rs. 55,984 76, They have also pleaded that in respect of goods valued at Rs. 7,56,188.16 they have only issued bills without actually supplying any goods under the said bills. They are supposed to have done this in order to obtain bank loans by showing inflated sales. Verification of the bills for the so-called repacked and grey goods shows that the bills do not contain any reference to the bills previously issued. There is also no mention in the bills that the bills were being issued afresh for repacked goods As regards the bills for grey goods it is seen that the description of the goods sold under these bills is crimp dress material sold to a dealer which indicates that the goods sold were not in grey condition. The bills also do not mention that the goods were in grey condition. It is, therefore, difficult to accept the contention of Ellora Silk Mills Pvt. Ltd claiming deduction on account of repacked and grey goods from the total quantity of 2,52,883.20 L. Mtrs. on which duty has been demanded. Verification of bills for the total amount of Rs. 7,56,188.16 which are said to have been issued to show inflated sales without actually selling any quantity shows that these bills give details such as the name of the buyer, description, number of piece brokerage and hundi charges etc., which show that in fact goods have been supplied under the said bills. Some of these bills also furnish details of cheque numbers with the name of bank under which the payment of the bill was received, e.g. bill No. 17303 dated 4.10.1973 and 17347 dated 19.10.1973. It is difficult to imagine that Ellora Silk Mills Pvt. Ltd have received payments by cheque without selling any goods. I do not therefore accept their contention that the said bills for Rs. 7,56,188.16 were issued to show inflated sales without actually selling any goods and hence this quantity also cannot be deducted from the total quantity of 2,52,883.20 L. Mtrs. on which duty has been demanded. The charge of removal of this quantity without payment of duty etc , is thus clearly established.
11. The cases cited by the learned Counsel in this regard are not applicable to the facts of this case, as the impugned order has not been passed on assumption and presumption, but on the basis of available materials after consideration of all the evidence. There was sufficient evidence before the Collector of clandestine and surreptitious removal and we see no reason to interfere with his findings on this score.
12. The next issue for decision the eligibility of the appellants for the benefit of certain exemption notifications applicable to fents and rags of processed rayon and artificial silk fabrics falling under Tariff Item 22(1) and processed rayon and artificial silk fabrics falling under T.I. 22(j). This is a new plea which has been raised for the first time in appeal, and was not taken up before the adjudicating authority. We are not inclined to go into this issue and are of the opinion that it would be more appropriate for the Collector to go into this question. We therefore remand the claim of the eligibility of the appellants for the benefit of Notifications 60/73 and 61/73 dated 1.3.1973 and 175/72 and 179/72 dated 24.71972 to the Collector who shall examine the claim on the basis of the materials on record and pass orders after granting a personal hearing to the appellants.
13. Finally, on the question of penalty, we see great force in the contention of the appellants that no penalty can be imposed in the absence of commission of an offence. On the date of removal of art silk fabrics, i.e. during the period from April 1973 to March 1974, the processing of grey fabrics did not amount to manufacture. The Bombay High Court in the case of Empire Dyeing and Manufacturing Co. Ltd. v. V.P. Bhide 1977 ELT J 34 : 1975 Con-Cus 90) and the Gujarat High Court in the case of Vijay Textile v. Union of India 1979 ELT J 181 : 1979 Cen-Cus 1451 took the view that processing of cotton fabric or man-made fabric cannot amount to manufacture. This was the prevailing judicial opinion. It is a well known proportion of law that no one can be penalised for conduct which was not penal on the day of commission Therefore we hold that the imposition of penalty was not warranted and accordingly, we set aside the penalty.
14. In view of the foregoing discussion, we hold that
(a) the demand for duty is not barred by limitation.
(b) the levy of duty is maintainable as it has been imposed on the basis of materials on record.
(c) the imposition of penalty is not justified and is set aside
(d) the claim of eligibility for the benefit of exemption notifications is remanded to the Collector for de nova adjudication on the basis of available materials after observing the principles of natural justice.
15. The appeal is dismissed subject to the above modifications.