ORDER
S.L. Peeran, Member
1. This appeal arises from Order-in-Original dated 5.6.90 by which a demand of Rs. 53,349/- has been confirmed under Rule 9(2) read with proviso to Section 11A(1) of the Central Excises and Salt Act, 1944. There is a penalty of Rs. 15,000/- on M/s. Duraiappa Lime Products and further penalty of Rs. 5,000/- on M/s. Thangam Industries under Rule 173 and rule 209A respectively.
2. There are two appeals filed one by M/s Duraiappa lime Products against confirmation of duty and penalty and the other by M/s. Thangam Industries against penalty only.
3. The proceedings against the appellants were commenced by issue of show cause notice dated 11.1.90 for invoking of larger period on the ground that the appellants are engaged in the manufacture of lime powder falling under Heading No. 2505.00 of Central Excise Tariff Act, 1985. The departmental officers visited the factory and recorded statements and after detailed investigation, show cause notice was issued directing the appellants to show cause as to why duty amount as confirmed should not be recovered for the said period.
4. The appellants before us today are not contesting the merits of the matter as it is covered by large number of judgments against them. More particularly, with the judgment of the Madhya Pradesh High Court rendered in the case of S.N. Sunderson (Minerals) Ltd. v. Superintendent (Preventive), Central Excise, Indore . However, it is the contention of the appellants that the appeals are barred by time and penalty is not leviable in view of the fact that there was controversy with regard to-the excisability of the product itself and there were contradictory judgments in this regard.
5. Learned Advocate submits that the aspect pertaining to invokation of larger period itself was considered in large number of judgments and in the Madhya Pradesh High Court judgment in the case of S.N. Sundereson (Minerals) Ltd. supra held that penalty is not imposable where acts of omission and commission on assessee’s part were due to bona fide belief borne out of conflicting Court and Tribunal decisions on excisability of the product. He also relied on the judgment in the case of Hindustan Construction Co. Ltd. v. CCE where the 3 Member Bench held that extended time limit is not applicable when classification of the goods was itself in doubt. It has been held that issue as regards classification of stones after crushing was not being free from doubt, benefit of doubt is to be given to the appellants and larger period of limitation is not invokable.
6. The Tribunal again examined the issued pertaining to extension of larger period in identical case as in the case of Bhawanthadi Minerals v. CCE, reported in 1997(23) RLT 260, wherein the Tribunal after noting all the judgments on the issue held that the appellants held bona fide belief with regard to the non-excisability of the item and hence larger period cannot be invoked in the present case.
7. Learned SDR reiterates the department’s contention. He submits that there is clear suppression in the matter. The party had not raised the issue pertaining to the bona fide belief held by them and hence the judgments cited are distinguishable.
8. Learned Advocate in counter pointed out to para 4 of the order, wherein, during the personal hearing the Consultant had informed the Commissioner that the parties did not have intention to evade payment of duty.
9. On a careful consideration of the submissions, we notice that the issue both on merits as well as larger period is no longer res integra. The aspect pertaining to the excisability of lime stones has been examined in several judgments and it is now well settled that the crushing of lime stone amounts to manufacture and dutiable and excisable in terms of the Madhya Pradesh Division Bench judgment in the case of S. N. Sunderson (Minerals) Ltd. In the same judgment the Madhya Pradesh High Court has observed that the matter was not free from doubt and after examining large number of judgments the High Court held that “the aforesaid state of affair clearly indicate that the breach in payment of excise duty flows from a bona fide belief of the company that they are not liable to pay excise duty, as they were not engaged in the ‘manufacture’ of lime stone chips. Conversion of lime stone lumps into lime stone chips was never taken to be a ‘manufacturing’ process by the petitioners”. The High Court further went on to examine whether penal provisions can be initiated. It was held in para 18 of the judgment as follows:
18. The proceeding for imposition of penalty being quasi-criminal in nature, the burden to prove the alleged offence is on the excise department. No. facts or circumstances are brought about by the department nor are considered by the 2nd respondent to show deliberate avoidance of payment of duty. There is nothing in the Excise Act or the Rules thereunder that the authority is bound to impose penalty, the moment there is default in payment of duty. The petitioners were under a bona fide belief that they are not liable to pay excise duty on the lime stone chips. The Collector of Central Excise, while passing orders (Annexures M & N) imposing penalty has not at all taken into consideration this aspect of the case. Therefore, we are of the opinion, that as the petitioners were under a bona fide belief about their liability to pay excise duty, the Collector, Central Excise has acted rather harshly imposing penalty of Rs. 5,00,000/- and Rs. 50,000/- under Annexures M & N.
10. Thus the High Court examined the issue both on excisability and penal provisions and held that penalty in the present case cannot be imposed in view of conflicting judgments of the High Court and Tribunal on this aspect.
11. Thus the aspect pertaining to extension of larger period was again examined by Larger Bench in the case of Hindustan Construction Co. Ltd. and it was noted that there were contradictory judgments on the aspect of excisability and, therefore, it was held that longer period of limitation could not be applicable as the issue cannot be said to have been free from doubt and the appellants were held to be entitled to the benefit of doubt.
12. The same view was expressed by the Tribunal again after re-considering the issue in the case of Bhawanthadi Minerals in para 4 of the order which is noted herein below:
4. On a careful consideration of the submissions made by the Learned Advocate, we are satisfied that the Additional Collector while raising the demand in the show cause notice has not made out grounds for invocation of provisions of Section 11A. The proviso to Section 11A has also been not invoked. He has only invoked Section 11A(1) which refers to clandestine removal. There has been no clandestine removal as the appellants has filed the declaration and thereafter, they had obtained the licence. In the present case, the appellants have also taken a stand that they were under bona fide belief that the item is not dutiable in view of the M.P. High Court judgment in the case of Mahavir” Minerals holding that the item has to be non-dutiable. The M.P. High Court in the case of S.N. Sunderson (Minerals) Ltd. v. Supld. (Preventive) Central Excise as , wherein the question of confirmation of larger period was considerable. The M.P. High Court held that in view of the contrary judgments of Tribunal and the High Court, their existed bona fide belief regarding the non-dutiability of the item. The Hon’ble High Court therefore, held that the invocation of larger period by alleging suppression does not arise and the plea of bona fide belief held by the assessee is required to be accepted. Nothing the judgment of the Hon’ble Supreme Court on the point pertaining to ingredients of proviso to Section 11A to be incorporated in the show cause notice and the fact that the department has not brought out such ingredients and also the Learned Additional Collector has not given any finding nor he has given a hearing in the matter and in view of the fact that the appellants held bona fide belief with regard to the non-excisability of the item, the demands raised for extended period is required to be set aside by allowing the appeal. Thus the appeal is allowed.
13. Thus as can be seen from the judgments noted and extracts from those judgments that on excisability and on dutiability, we are required to hold that the crushing of lime stone amounts to manufacture and brings into existence a new product and it is dutiable.
14. However, in the present case the show cause notice has been issued on 11.1.90, the appellants had pleaded that they had no intention to evade payment of duty. This plea had been made by large majority of lime stone manufacturers and such a plea has been accepted both by Division Bench of Madhya Pradesh High Court and Larger Bench of Tribunal which has been subsequently followed in the case of Bhawanthadi Minerals. The High Court and Tribunal has given benefit to the appellants and held that there was no intention to evade duty and, therefore, in view of the findings recorded on this aspect of the matter, we have to hold that larger period in the present case is not invokable and so also the penalty could not be imposed on the parties. The appellants succeeds in their appeal only on the aspect pertaining to time bar and on penalty.
15. The appeals are disposed of accordingly.
Pronounced and Dictated in open Court.