ORDER
S.L. Peeran, Member (J)
1. This is a Revenue appeal against the Order-in-Original passed by the Commissioner of Central Excise in Order No. 26/97, dated 23-4-97 by which he has held that the demands raised by the Revenue is barred by time as there was no suppression in the matter with an intent to evade payment of duty. It is also held that the assessee had been declaring the price in the price list from time to time, which had been approved and that the RT-12 returns had been actually filed indicating the production, consumption of Hydrochloric acid with its value and duty paid. The finding recorded by him in Paras 10 to 14 are reproduced herein below :-
“10. I have gone through the records of the case and their written submissions dated 12-3-97 and 1-4-97. In the earlier order passed by the Collector of Central Excise vide order No. 3/89, dated 6-3-89 in Paras 30 and 31 he had observed that the learned Counsel for the assessee had admitted that by declaring hydrochloric acid of concentration of 100% the company was able to manufacture and captively consume two-thirds of quantity in excess and that the company accepted the basic allegation in the show cause notice and agreed to pay the differential duty.
11. These observations were challenged by the Counsel before the Hon’ble High Court of Madras and the proceedings ultimately resulted in CEGAT passing the de novo order remanding the matter to the adjudicating authority for disposal afresh in accordance with law. It was also observed by the Tribunal that the present Collector of Central Excise is different, from the officer who passed the earlier order. The tacit implication is that the observations regarding alleged concession of the Counsel for the defence admitting guilt are not to be taken cognisance of.
12. The only question to be decided in this case is whether or not there is wilful suppression of any material information warranting invoking the larger period of limitation. The records disclose that M/s. DCW have been maintaining production records of hydrochloric acid on 100% basis. Their balance sheet, industrial licence, the classification list and price list filed by them, all have indicated that hydrochloric acid produced is on 100% basis. To a specific query by Superintendent of Central Excise vide his letter dated 29-4-81 as to why they have declared hydrochloric acid on 100% basis in the classification list filed by them, M/s. DCW had replied vide their letters dated 15-5-81 and 19-1-82 that they were accounting at all stages hydrochloric acid on 100% basis and that is why they have mentioned on 100% basis in the classification list filed by them. Further the assessable value sought for approval at the rate of Rs. 25.84 per MT had also been revised upwardly to Rs. 175/- per MT on the basis of comparable goods sold by M/s. Meltur Chemical Corporation. On 28-2-79, 15-12-79, 28-2-80, 26-6-81 and again on 18-2-82. Stock taking had been conducted and the closing stock of HCL has been ascertained with no discrepancies.
13. In the above background, could it be alleged that the Department was not aware that the assessee is recording production on 100% basis and that the approval given by the Department for the assessable value per MT was not on 100% basis but on the actual diluted quantity. To clarify, 100% basis would mean that although the concentration of the hydrochloric acid might be varying from 30 to 33 or 35%, the production is recorded by dividing the above quantity with the factor of 3.28. For example, if 328 tonne of a concentration of hydrochloric acid varying between 30 to 35% is manufactured in a day, it will be accounted as 100 tonne of hydrochloric acid on 100% basis. This was the practice adopted by the assessee and this was known to the Department. Therefore, when the Department approved the price for one MT, they should have made it clear as to whether the MT represents 100% basis hydrochloric acid or 30 to 35% concentration of hydrochloric acid. The prices should have been approved accordingly. In addition during the relevant period RT 12s have been regularly filed indicating production, consumption of HCL with its value and duty paid. It would have been a simple matter to verify whether the production, and clearances shown in these returns are correct and whether there is any short-levy. Therefore I am not able to sustain the allegation that the assessee concealed the actual production from the Department. Before approving the price, the Department should have made it specific that the approval is for a MT of 100% concentration or 30 to 33% concentration of hydrochloric acid. In view of the above discussions I hold that there is no suppression of any material information and therefore, the demand made for the period from 1-3-79 to 31-5-81 by the show cause notice dated 12-5-83 is time-barred.
14. Accordingly further proceedings are dropped.”
2. Revenue in this appeal contends that the assessee had disclosed the fact of concentration of HCL as 100% while the investigations carried out with M/s. Mettur Chemicals Industrial Corpn. Ltd., disclosed that the actual strength of HCL was ranging from 30 to 33% and appellants had mis-declared and not given details of payment of duty. Therefore, there was clear mis-declaration and suppression of facts with intention to evade payment of duty and hence the Commissioner has committed serious error and has not passed the speaking order which requires to be set aside.
3. We have heard ld. DR Shri A. Jayachandran and ld. Counsel Shri P.S. Raman for the respondents.
4. ld. DR took us through the grounds of appeal and narrated the facts of the case as under :-
“1.1 As the exemption available for these goods was withdrawn from 1-3-79 vide Notification No. 48/79, dated 1-3-79, the assessees had filed classification lists describing the goods as “Hydrochloric Acid (on 100% basis)” on 16-4-79 and 19-6-80 and the same was approved on 2-6-79 and 7-7-80 respectively. The assessees had also filed a price list describing the goods as “Hydrochloric Acid (on 100% basis)” in form part VI on 17-4-79. In this price list, the value claimed for approval is only Rs. 25.27 per M.T. on the basis of cost construction. However, the Assistant Collector, Tirunelveli approved the same on 2-6-79 fixing the value at Rs. 175/- per M.T. inasmuch as they have sold the goods to independent buyers at this rate prior to 1-3-79. During 1981, it came to the knowledge of the department that M/s. Mettur Chemicals and Industrial Corporation Ltd., Mettur were also manufacturing Caustic Soda and Hydrochloric Acid by the same process as like the assessees. Such Hydrochloric Acid manufactured by M/s. Mettur Chemicals and Industrial Corporation Ltd. are captively consumed and sold outside also; they were adopting the normal price applicable to the outside sales, to the said goods captively consumed also.
1.2 Since, the goods manufactured by the assessees are comparable with that of M/s. Mettur Chemicals Industrial Corpn. Ltd. the adoption of comparable price is in order for the goods as per Rule 6(b)(I) of Central Excise Valuation Rules, 1975. M/s. Mettur Chemicals Industrial Corpn. Ltd. had adopted the price of Rs. 205.56 per M.T. from 1-3-79 to 18-6-80 and of Rs. 220.56 per M.T from 19-6-80 onwards, for the hydrochloric acid of 30% concentration.
1.3 Hence, a show cause notice dated 25-8-81 was issued demanding the differential duty to the tune of Rs. 1,62,689.83 arrived at on the basis of the value adopted by M/s. The Mettur Chemicals & Industrial Corporation Ltd. as value of comparable goods, on the quantity of the goods produced and captively consumed during the period from 1-3-79 to 31-5-81. The assessees paid the above said differential duty voluntarily and insisted for final settlement of assessment for the goods for the period from 1-3-79 to 31-5-81. Further, the assessees were specifically informed by the jurisdictional Assistant Collector that the payment of duty on the basis of the said show cause notice would be without prejudice to any further action that may be taken as a result of investigation taken by him.
1.4 As a result of the investigations conducted, the following points had come to light : (i) Even though the assessees have been manufacturing hydrochloric acid of 30% to 33% concentration, they have been accounting a lesser quantity in RG 1, reportedly arrived at for hydrochloric acid of 100% basis theoretically. (ii) According to Rule 173B, the assessees should file a classification list furnishing therein the full description of the goods manufactured by them. The assessees should have therefore furnished the correct description of hydrochloric acid in this list with the actual concentration of 30% to 33% whereas, they have furnished the description as "Hydrochloric acid (100% basis)" in the lists filed on 16-4-79 and 19-6-80. (iii) Even though the assessees filed a revised classification list on 14-4-81 with the correct description, they failed to file revised price list for the changed description. Though the assessee was reminded on 23-5-81, 6-6-81, 17-6-81, 17-7-81, 25-7-81, 13-8-81, 29-8-81, 18-9-81 and 14-10-91, they did not file price list for the changed description. (iv) the assessee filed the price list on 9-3-82, and it was noticed that the correct description as shown in the classification list filed on 14-4-81 was not given in the price list and hence the same was returned. The price list was subsequently received and finally approved on 1-12-82 by Assistant Collector w.e.f. 1-12-82 fixing the assessable value as Rs. 220.56 per M.T of hydrochloric acid (about 30 to 33% strength). 1.5 The assessees have stated in their letters No. I & M (sales) 853/3016, dated 5-5-81 and No. I & M (sale) 853/25950, dated 19-1-82 that the accounts of the hydrochloric acid has been maintained by them on 100% basis at all stages. However, verification of the records relating to the sale of hydrochloric acid had revealed that they were not maintaining the account of hydrochloric acid at all stages on 100% basis as claimed and mis-stated by them. Thus, it appeared that the mis-statement had been made by the unit deliberately to underestimate and account for the production of hydrochloric acid only to the extent of 1/3rd (Approximately) of the actual quantity produced by them in the guise of maintaining the hydrochloric acid on 100% basis. 1.6 Since it appeared that the assessees have been showing the production of hydrochloric acid on 100% basis thus showing lesser quantity in the records only with the intention to mislead the department and to evade duty on the 2/3rd quantity of acid produced and consumed in the factory, a show cause notice dated 12-5-83 was issued demanding a differential duty to the tune of Rs. 36,18,045.40 due on the hydrochloric acid cleared from 1-3-79 to 30-11-82 by adopting the assessable value approved in the case of M/s. Mettur Chemicals and Industrial Corpn. Ltd. This was adjudicated and an order was passed by the Collector on the issues of limitation and jurisdictions of the Collector vide O.I.O. No. 40/87, dated 24-4-87.
1.7 Against this order, the assessees filed an appeal to the CEGAT, Madras and the Tribunal directed the assessees to pursue with the case on merits before the Collector. In reply to the above said show cause notice, the assessees made further submission on 11-6-88. On adjudication, Collector of Central Excise in his O.I.O. No. 31/88, dated 10-6-88 confirmed duty to the tune of Rs. 20,40,809.68 on the hydrochloric acid manufactured and consumed during the period from 1-3-79 to 31-5-81. In the said order, Collector observed that the demand for the period from 1-6-81 to 30-11-82 would be decided by the concerned Assistant Collector. This Order was challenged before the High Court of Madras and in pursuance of the above order of High Court, Collector passed another order, O.I.O. No. 3/89, dated 6-3-89 confirming the demand of duty.
1.8 Against the above said order, the assessees filed an appeal before the CEGAT, Madras. Tribunal in its Order No. 232/93, dated 29-7-93 set aside the order in question and remanded the case for de novo adjudication. 1.9 On the basis of CEGAT's order mentioned above, a notice dated 4-12-96 was issued to the assessees. In their replies dated 12-3-97 and 1-4-97, the assessees contended that the show cause notice dated 12-5-83 fixing the rate of hydrochloric acid on 33% basis between Rs. 205.56 to 220.56 based on the sales made by M/s. Mettur Chemical is not only arbitrary but also against the valuation rules. 2.0 On adjudication, the Commissioner of Central Excise, Madurai in his O.I.O. No. 26/97, dt. 23-4-97, has observed that. - (i) the allegation regarding the concealment of actual production by the assessees from the department is not sustainable. (ii) before approving the price, the department should have made it specific that the approval is for a M.T of 100% concentration or 30 to 33% concentration of hydrochloric acid. Accordingly, Commissioner dropped the proceedings initiated in the SCN, after holding that the demand for the period from 1-3-79 to 31-5-81 is time-barred".
5. Ld. Counsel, on the other hand, submitted that the process of manufacture has been same from 1963 onwards; that in industrial licence, the percentage had been shown as 100%; that they had paid duty accordingly and there was no suppression to the extent of three times of the value as contended. He contended that the hydrochloric acid cannot exist in 100% form as it will be in gaseous state. It has to be dissolved in water to make it 30 to 33%. The department was fully aware of the process of manufacture and that they had been approving the price list and RT-12 returns from time to time. They have taken the changed view after a lapse of time and that this does not give room to allege suppression of the fact of the process of manufacture and come to a conclusion that they suppressed any material facts to evade duty. The Counsel, further, contended that the matter had been gone into in great detail by him. Hence, there was no question of holding that they had suppressed any material facts requiring the order to be set aside. He heavily relied on the order passed by the Commissioner (Appeals) which, according to Counsel, is a detailed order analyzing all the evidence and facts.
6. We have carefully considered the submissions made by both sides. We notice that the order passed by the Commissioner (Appeals) is after due consideration of all the facts in the matter. The Revenue is required to show that the assessee had suppressed material facts. In the present case, it is on record that assessee had been filing the classification list and the price lists which had been approved from time to time. The RT-12 returns also had been filed which have been scrutinized and approved. The department officials have visited the assessee’s firm and the manufacturing process has been observed and seen. Before the classification list is approved, it is the duty of the proper officer to ascertain the manufacturing process and verify the declarations filed by them. Although, the declaration made in the classification list is “Hydrochloric Acid (on 100% basis)” and duty has been paid as such, but the department’s contention is that 100% HCL acid does not exist and they are manufacturers of 30 to 33%. All these aspects of the matter have been explained by the assessee and they have clearly contended that HCL does not exist as 100% as it will be in gaseous stage and requires to be liquidified on lesser percentage. The hydrochloric acid fumes are taken to the HCL absorber where it is absorbed by water to form hydrochloric add of 30 to 33% concentration and the unabsorbed fumes along with the inert gas are vented out through the discharge side of the tail end blower. It is the assessee’s case that absorption of HCL fumes with water is an exothermic reaction and hence the HCL absorber is necessarily cooled by water. The manufacturing process has been filed with the department in November, 1979 itself which clearly disclosed the formation of HCL of 30 to 33% concentration and that the other materials are also produced. It shows about the correct manufacture and entries which have been checked by the Inspector of Central Excise. Therefore, it cannot be said that department was not fully aware of the manufacturing process and the assessee had suppressed any material facts with an intention to evade duty. There has been scrutiny of documents on several occasions and it is only at a later date, the department intended to change their view regarding tariff classification. The Commissioner has duly examined the matter and clearly upheld the assessee’s contention that there was no mis-declaration, mis-representation or suppression of material facts in the matter with an intention to evade duty. The order is legal and proper order which does not require any interference. Hence we reject the Revenue’s appeal.