U.L. Bhat, J. (President)
1. This appeal directed against the order passed by the Collector of Central Excise, Baroda confirming the demand of differential duty and imposing penalty of Rs. 50,000/-.
2. Appellant, manufacturer of printed labels and wrappers commenced manufacture of printed cartons in the financial year 1983-84, availing benefit of the exemption under Notification No. 83/83. This notification provided full exemption upto the clearances of the value of Rs. 7.5 lakhs and exemption of duty in excess of 75% of the duty payable for the next clearances of the value of Rs. 17.5 lakhs. The notification also prescribed that the benefit of exemption will not be available if the previous year’s clearances had exceeded Rs. 25 lakhs in value or if current year’s clearances exceed Rs. 25 lakhs in value. The requirement under the notification was that the manufacturer should file a declaration with the Assistant Collector that the aggregate value of clearances of all excisable goods by him or on his behalf from one or more factories during the financial year is not likely to exceed Rs. 25 lakhs, and that the aggregate value of clearances of all excisable goods by him or on his behalf from one or more factories during the financial year does not exceed rupees twenty-five lakhs. The appellant filed a declaration in May, 1983 that the clearances during the financial year is not likely to exceed rupees twenty-five lakhs in value. With this declaration the appellant started availing the benefit of exemption. When the limit of clearances crossed Rs. 7.5 lakhs in value, appellant started clearing the goods on payment of 75% of the prescribed duty. With effect from 9-2-1984, when the total clearances exceeded Rs. 25 lakhs in value, appellant started clearing goods on payment of full duty. Verification of invoices and other records showed that with effect from 30-8-1983 appellant was collecting full duty from the buyers. One of the Directors of the appellant company was questioned on several occasions. Finally notice was issued to the appellant stating the above facts and further alleging that since the total clearances during the financial year exceeded rupees twenty-five lakhs, appellant lost the benefit of exemption and was liable to pay full duty on all the clearances and that in any event, the duty collected would form part of the wholesale price ^, leading to re-determination of the assessable value and computation of the duty payable. The notice alleged suppression of the fact that the appellant was collecting full duty from the buyers. The notice also alleged deliberate and wilful mis-statement in the declaration that the total clearances was not likely to exceed rupees twenty-five lakhs in value. On the basis of these allegations the notice proposed demand of duty on all the clearances and imposition of penalty. Appellant resisted the notice. However, the adjudicating authority confirmed the demand and imposed penalty under Rule 173Q of the Central Excise Rules, 1944. This order is now being challenged.
3. At the outset, the Learned Counsel for the appellant submitted that the appellant is prepared to pay the duty demanded and therefore, the legality or otherwise of the duty demand need not be considered by us. Appellant’s submission is confined to challenge against the imposition of penalty and finding of suppression and mis-statement.
4. The show cause notice alleged that the value of clearances during the financial year was Rs. 28,24,478.71. This amount includes excise duty collected by the appellant from the buyers. The show cause notice proposed inclusion in the wholesale price and the assessable value of the duty collected from the buyers. This could be only on the basis that the appellant would not be liable to pay duty. But in view of the order passed by the Collector confirming the demand of duty, it must follow that the collection of duty by the appellant from the buyers was a justified action and the duty element of the price collected has been excluded from the assessable value. If that be so, the value of total clearances during the financial year would be Rs. 26,90,953.55. This would represent only a marginal increase from the eligibility limit of Rs. 25 lakhs prescribed under the notification.
5. It is contended for the appellant that the factory was newly established one and manufacture of printed cartons was taken up only in the preceding financial year and it was the bonafide estimate of the appellant that the total clearances was not likely to exceed rupees twenty-five lakhs and it was in that bonafide belief that the declaration was given and benefit of exemption was claimed. It is also stated in explaining the conduct of the appellant in collecting duty from the buyers from 30-8-1983 to 1-9-1983 onwards, that by that time the appellant had an apprehension that there may be possibility of the total clearances marginally exceeding Rs. 25 lakhs in the financial year, in which case the Department may demand duty from the appellant and after the expiry of the financial year it will be impossible for the appellant to collect duty from the buyers and therefore, as a provisional measure and by way of abundant caution duty was being collected a few months after the commencement of the financial year. The grievance of the appellant is that the adjudicating authority did not properly appreciate these contentions. Shri M. Ali, JDR rebutted these contentions and contended that the very fact that the appellant was collecting duty in spite of claiming exemption indicated that the appellant believed at that time that the clearances would exceed Rs. 25 lakhs in value.
6. We may now consider the facts significant to the discussion. The factory itself was set up in the preceding financial year (October, 1982). According to the appellant, previous year’s clearances amounted only to Rs. 1,23,931/-. Appellant claims to have believed that the total clearances would not exceed Rs. 25 lakhs and on that basis availed exemption. When the clearances reached Rs. 7.5 lakhs appellant obtained licence and started clearing goods on payment of 75% of the duty as contemplated in the notification. When the clearances reached Rs. 25 lakhs, appellant submitted a letter dated 9-2-1984 to the Superintendent informing him about the facts and readiness of the appellant to pay duty and thereafter the appellant was clearing goods on payment of full duty. Total value of clearances was marginally in excess of the limit of rupees twenty-five lakhs. Appellant was filing monthly RT 12 returns showing the correct value of clearances. What the notification contemplated was a declaration relating to “likelihood”. The circumstances of the case do not warrant an inference that likelihood of the value of clearances exceeding Rupees twenty-five lakhs was within the knowledge or contemplation of the appellant. Having regard to all the circumstances it is difficult to come to the conclusion that the declaration given at the beginning of the year was given in the full knowledge that the clearances were likely to exceed Rupees twenty-five lakhs. In a similar situation in Raman Air-Conditioners Pvt. Ltd. v. CCE -1997 (29) ETR 52 the Tribunal held that there was no deliberate mis-declaration or wilful suppression of true facts. We are of the view that the same view has to be arrived at in the present case also. Therefore, there was no justification for imposition of penalty.
7. For the reasons indicated above, we set aside the penalty imposed on the appellant but confirm the demand contained in the order. The appeal is allowed in part as indicated above.