JUDGMENT
S.B. Wad, J.
1. In this writ petition the petitioners are challenging the order passed by the Collector, Customs & Central Excise, New Delhi, dated 20-8-1983. The Collector had held that the Srigopal Unit of the petitioner at Yamuna Nagar was guilty of disregarding the provisions of Rule 173(F) of the Central Excise Rules, 1944, and that the petitioners were liable to pay duty amounting to Rs. 10,05,1899/- and Rs. 15,377.17 under Rule 10 and the penalty of Rs. 5,00,000/-.
2. The petitioner company manufactures white printing paper. During the relevant period white printing paper was covered by item No. 17 of the 1st Schedule to the Central Excises and Salt Act, 1944 and was liable to pay ad valorem duty @ 25%. By Notification No. 68/76-C.E. and 69/76-C.E., dated 16-3-1976 concessional rate of duty @ 5.5% ad valorem was made available to the manufacturers of white paper for the quantities of paper supplied by them to the Director General of Supplier and Disposal and supplied to other agencies for educational purposes. The said notifications reads :-
Notification No. 68/76-Central Excise
“In exercise of the powers ‘conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (2) of the Table hereto annexed and falling under Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty of excise leviable thereon as is in excess of the duty specified, and subject to the conditions laid down, in the corresponding entries in columns (3) and (4), respectively, of the said table :
TABLE
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S. No. Description Duty Conditions
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1. 2. 3. 4.
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1. White printing paper 5.5 per cent Provided that the
of a substance not ad valorem proper officer is
exceeding 60 grams satisfied that such
per square metre, paper is supplied -
conforming to the
specifications for (i) to the Directorate
white printing paper General of Supplies
notified by the Indian and Disposals; or
Standards Institute.
(ii) for various
educational purposes
(such as, for text
books, exercise books,
university examinations)
at the actual
wholesale cash price,
that is to say, the
wholesale ex-factory
price excluding all
Central and State
levies not exceeding
Rs. 2750.00 per
metric tonne.
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3. At the relevant time the retention price of white paper was fixed at Rs. 2750/- per metric tonne under the paper control order. By a separate order the maximum price of the exercise books was also fixed. Under the scheme a quota was allotted to paper manufacturing concerns for supply of paper for educational purposes. The object of the duty concession under the said notifications was to ensure that the students get the exercise books at a reasonable controlled price. Paper supplied through DGS&D was also made entitled to the duty concession.
4. During the relevant period the petitioner supplied certain quantities of paper to DGS&D after cutting it. So also the petitioner supplied the paper for educational purposes after ruling the same. Both the cutting and ruling operations were done in the same factory premises of the petitioner. The petitioner claimed concessional duty at 5.5% ad valorem on the fixed price of Rs. 2,750/- per metric tonne on the paper supplied for educational purposes and through DGS&D. The ruled paper was supplied by the petitioner to its own agency M/s. Capital Stationary Works. The Collector came to the conclusion that the notifications in question entitle the supplies of white paper to a concessional . duty rate only on such paper whose actual wholesale price does not exceed Rs. 2,750/- per metric tonne. The Collector also came to the conclusion that the petitioner had made mis-statements and had suppressed vital facts thereby subjecting themselves to the penalty under the Rules.
5. The petitioners submit that on the correct interpretation of the notifications in question, the petitioners were entitled to the concessional rate of duty on the white paper supplied by them to the said institution @ Rs. 2,750/- per metric tonne. But, apart from this, there are two other submissions made by the petitioners. The petitioners submit that under Rule 10(1) of the Central Excise Rules applicable at the relevant time the Revenue can claim duty on the goods which have escaped duty only for six months prior to the date of the show cause notice to the assessed. A show cause notice in relation to the ruled paper was issued on 6-4-1978. Therefore, the liability to pay the duty prior to 5-10-1977 is barred by limitation. So also the notice in regard to the goods supplied to DGS&D was issued on 2-9-1978 and, therefore, there was no liability to pay duty prior to 3-3-1978. The answer of the respondents is that because of the mis-statements and suppression of facts by the petitioners the period for recovery of the tax liability is enhanced to five years from the date of the discovery of such suppression/mis-statements under proviso to Rule 10(1) of the Central Excise Rules. The petitioners have denied the allegations in regard to mis-statement and suppression. Another submission of the petitioners is that since there was no mis-statement or suppression on their part, they were not liable to any penalty under Rule 173, as imposed by the Collector. For appreciating these submissions of the parties it is necessary to know Rule 10(1) of the Central Excise Rules, 1944 and Rule 173F also of the said Rules :-
Rule 9 :
Power and manner of payment of duty. – (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form.
Explanation :- For the purposes of this rule, excisable goods produced, cured or manufactured in any place and consumed or utilised –
(i) as such or after subjection to any process or processes; or
(ii) for the manufacture of any other commodity
whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation.
Rule 10(1) :
Where any duty has not been levied or paid or has been short levied or erroneously refunded or any duty assessed has not been paid in full, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid, or which has been short levied, or to whom the refund has erroneously been made, or which has not been paid in full, requiring him to show cause why he should not pay the amount specified in the notice :
Provided that –
(a) where any duty has not been levied or paid, has been short-levied or has not been paid in full, by reason of fraud, collusion or any willful mis-statement or suppression of facts by such person or his agent, or
(b) where any person or his agent, contravenes any of the provisions of these rules with intent to evade payment of duty and has not paid the duty in full, or
(c) where any duty has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts by such person or his agent, the provisions of this sub-section shall, in any of the cases referred to above, have effect as if for the words “six months”, the words “five years” were substituted.
Rule 173F :
assessed to determine the duty due on the goods and to remove them on payment thereof. – Where the assessed has complied with the provisions of Rules 173B, 173D and, where applicable, 173C, (or 173CC) he shall himself determine his liability for the duty due on the excisable goods intended to be removed and shall not, except as otherwise expressly provided in these rules, remove such goods unless he has paid the duty so determined.
6. Before going to the question of interpretation of the impugned notifications, it is easier to dispose of the submission of the petitioners in regard to limitation of the Revenue’s claim and also on the question of their liability to pay penalty. It is clear from the evidence that the petitioners have filed the classification list, the proper return and the price list and invoices. The price list bears the endorsement “approved” from the Excise Department. In the price list and invoices, in addition to the price of Rs. 2,750/- per metric tonne, the cutting and ruling charges were expressly stated and the concessional duty was claimed on the said amount. In the face of this documentary evidence supplied by the petitioners themselves, it is difficult to understand as to how the Revenue has concluded that there was mis-statement or suppression of facts. The alleged mis-statement or suppression was not mentioned in the show cause notices. The finding of the Revenue, therefore, that the petitioners have made mis-statement and suppressed the facts is without any evidence and therefore, perverse [1988 (35) E.L.T. 605] and [1989 (44) E.L.T. 552]. Even if it is assumed that the petitioners’ interpretation of the notification is wrong and that they cannot claim duty concession of the paper cut and ruled, can it in law be said that they have made any mis-statement or suppressed any material. Mis-statements and suppressions relate to the information on facts and not interpretation of notifications in the realm of law. The Revenue cannot on its own interpretation of the notifications hold that petitioners guilty of mis-statement or suppression [1985 (21) E.L.T. 299]. This is the decision of the CEGAT. Having gone through the same we are of the opinion that it lays down a sound principle of law and, therefore, adopt the same.
7. Since we are clearly of the view that there is no mis-statement or suppression by the petitioners, the relevant provision for limitation is six months under Rule 10(1) of the Act and the period is not extended to five years under the proviso. The finding of the Collector in this regard is, therefore, set aside. We hold that the petitioners are not liable to pay duty in regard to the first show cause notice for the period prior to 5-10-1977 and for the period prior to 3-3-1978 in regard to the second show cause notice. Similarly, since we have held that there is no mis-statement or suppression on the part of the petitioners, they are not liable to pay any penalty under Rule 173 of the Act. We, therefore, quash the impugned order in regard to the petitioners’ tax liability for the periods indicated above and the penalty imposed on the petitioners by the Collector, Central Excise.
8. That leaves us to the first submission of the petitioners in regard to the correct interpretation of the impugned notifications. The submission of the petitioners on this question is that when he filed the writ petition he had claimed the refund of the duty paid @ 25% ad valorem on the white paper supplied to DGS&D and to the other agency (for educational purposes), because the said manufacture was a captive manufacture and, therefore, did not attract any duty. But after the filing of the writ petition Section 9 of the Act has been amended by the Amending Act of 1982, imposing the concept of deemed removal for the purpose of excise duty. He cannot, therefore claim any refund on this ground. The Counsel for the petitioner further submits that by virtue of the Amending Act of 1982 the removal of white paper manufactured is deemed to have been completed at the initial stage itself. The incidence of duty falls at that stage itself. At that stage the price was Rs. 2,750/- per metric tonne and it was on that price that the white paper was, in fact, supplied to DGS&D and for educational purposes.
9. Counsel for the petitioner further submits that they had duly filed the classification list showing the white paper supplied by them as falling under Tariff Item No. 17. They had also filed a proforma for determination of the value under Section 4 of the Central Excises and Salt Act, 1944, showing Rs. 2.75 per kg. as the price. This was approved by the Assistant Collector of Central Excise and Customs. Since the invoice price was higher than Rs. 2,750/- per MT the break-up of that price in the form of the invoice and price list was submitted. In the said price list the cutting and ruling charges were separately shown. The price list was also approved by the Assistant Collector. According to the petitioners, the price list enables the Department to know that the cost of the white paper supplied to the DGS&D and educational institutions was Rs. 2,750/- per MT only. The petitioner, thus, claims duty concession on the white paper supplied to the DGS&D and for educational purposes only @ Rs. 2,750/- per metric tonne. The Counsel has referred to the observations of the Collector in the impugned order, viz. that for the ex-factory sale at the factory gate the paper was cut to sizes and was ruled and that the ruling and cutting charges were incurred as manufacturing cost prior to the clearance of the goods. The Counsel submits that these assumptions are wrong. The Counsel also submits that the Collector was wrong in holding that because the invoice price is higher than Rs. 2,750/- per metric tonne, the petitioner was not entitled to duty concession at all.
10. There is great deal of merit in the submissions of the counsel for the petitioner. In the prescribed proforma the petitioner has shown the price of the white paper for the purposes of Section 4 of the Act at Rs. 2.57 per kg., i.e. Rs. 2,750/- per metric tonne. The same was approved by the Department. In the invoice also the same was shown as the price of the white paper. Cutting and ruling charges were shown separately. When the petitioner is not claiming the benefit of the entire invoice amount for the purposes of duty concession and restricting it only to the amount of Rs. 2,750/- per metric tonne, one fails to understand how the Department could take a contrary view. It appears that the learned Collector made certain assumptions and recorded his findings on the law prior to the amendment of Section 9 in 1982. It may be that the petitioner was also thinking in terms of the provisions of earlier law and had, therefore, shown cutting and printing charges. Under the old law, perhaps, the petitioner could have secured the exemption on the entire amount being a captive manufacture. We have no hesitation in holding that the reasoning of the Collector is erroneous, particularly in the light of the change in law. The manufactured goods attract excise duty at the initial stage of manufacture itself by application of the concept of deemed removal introduced by the Amending Act of 1982 with retrospective effect. Once the white paper attracts duty at that stage, subsequent processes such as cutting and ruling would not make any difference in law. The real test for getting the duty concession is whether the petitioner could have got the duty concession if he had supplied white paper to the said institutions without cutting or ruling. The statutory notification of exemption does not require that the paper should be cut or ruled before it is supplied to the said institutions. As a matter of fact the white paper without cutting or ruling can also be supplied to the said institutions. The question is whether by ruling and cutting the paper will it lose its original character as white paper ? Obviously not. If without cutting and ruling the white paper supplied to these institutions could have been eligible for duty concession, would they lose the concession merely by cutting and ruling the paper. It is true that the exemption notification mentions the figure of Rs. 2,750/- per metric tonne as the ex-factory price. It only means that the manufacturer cannot get the duty concession even if his manufacturing cost is more than Rs. 2,750/- per metric tonne. In other words, irrespective of the manufacturing cost, he would be entitled to duty concession only on the amount of Rs. 2,750/- per metric tonne and not more. The object of fixing the absolute price of Rs. 2,750/- per metric tonne for attracting duty concession was that the students should get text books and exercise books at a reasonable price fixed under the Price Fixation Order. The Collector erroneously believed that this object would be defeated because of the invoice price in the present case. Then the petitioner would not have cut or ruled the paper the same could have been done by the manufacturers of the text books by incurring additional costs. Therefore, in neither case the price of the exercise books would be higher than the prescribed price.
11. For the reasons stated above we hold that the petitioner was entitled to duty concession of 5.5% duty on the entire stock supplied by them to DGS&D and educational institutions. However, the duty concession would be available only on the sum of Rs. 2,750/- per metric tonne. The show cause notices and the impugned order of the Collector are, therefore, quashed and set aside. The petition is allowed with costs. Rule is made absolute.