ORDER
S.L. Peeran, Member (J)
1. This appeal arises from the order-in-original dtd. 21-1-1992 passed by Collector of Central Excise, New Delhi. By this order, the ld. Collector has confirmed duty demand of Rs. 36,92,424.18 said to be short paid during the period 1986-87 to 1990-91 (upto 7-9-1990) under Rule 9(2) of Central Excise Rules, 1944 read with proviso to Section 11A of Central Excises & Salt Act, 1944.
2. He has also confirmed duty demand amounting to Rs. 8141.06 payable on the shortage detected on 7-9-1990 and which had since been debited by the party under PLA entry No. 10 dtd. 7-9-1990 under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A(i) proviso of the Central Excises & Salt Act, 1944.
A penalty of Rs. one lakh has also been imposed under Rule 173Q read with Rule 226 of Central Excise Rules, 1944.
3. The facts of the case are that the officers of Central Excise Anti Evasion Branch, Central Excise Collectorate, New Delhi visited the factory premises of the appellants on 7-9-1990 and found them engaged in the manufacture of complete auto seats and seat cushions made of cellular rubber for scooters, motor cycles, mopeds and three wheelers falling under Chapter Heading 9401.00 and 4016.11 of Central Excise Tariff, 1985 respectively. They were holding licence L-4/Chapter 40/MOR-IV/MOD-86 and had cleared the goods on payment of CED @ less levy 10% of the effective rate upto the aggregate value of clearance of Rs. 75 lakhs in a financial year in terms of the provisions of Notification No. 175/86 dt. 1st March, 1986 as amended.
The Officers scrutinized the classification lists submitted by the party as required under Rule 173B of the Central Excise Rules, 1944 which revealed that the party had in the classification list inscribed that they were registered as an SSI vide SSI No. 55/55/18008/PR/58 dtd. 11-4-1986 whereas scrutiny of the SSI certificate issued to the party by the Directorate of Industries (REGN), Delhi Administration, Delhi under letter No. Regn. (588/86/DI/2852 dtd 11-4-1986 revealed that the same had been issued on a provisional basis with the remarks as appended in the body of the certificate that the unit will be set up in an approved Industrial area where land use permitted for this item and will obtain NCL and will obtain NOC from PCB.
4. The department has alleged that the said SSI certificate was initially issued for one year subject to certain conditions and further was stated to have been subsequently revalidated upto 10-4-1987. However, it appears that no proof of revalidation was furnished by the party. It is stated that the party had set up their factory in street No. 2 Bawana Road, Samaipur Badli, an area other than that approved for the product being manufactured by them and, therefore, it is alleged that the SSI certificate became infructuous and, therefore, the benefit flowing from this certificate thus was not apparently available to the party. It is alleged that the scrutiny of the records of the party revealed that Central Excise Duty amounting to Rs. 1,15,173/- for the period 1986-87 to 1990-91 have been short levied by way of mis-statement of facts in the classification list filed by the party.
On further verification, it is alleged that they found on physical verification of stocks of finished goods then in the presence of one Shri M.M. Seth that goods valued at Rs. 12,922.31 were found to be short in the RG I Register. A statement was recorded from the said person who admitted that they were issued a provisional SSI certificate which was valid upto 10-4-1987 and further renewed upto 10-10-1987 and could not be got renewed after 10-10-1987. Their case for permanent registration was still pending with the concerned department. He had further stated that they had filed classification list after expiry of provisional Regn. certificate for the period effective from 1-4-1988 to 1-4-1989 and 1-4-1990 inscribing a declaration therein that they were registered SSI unit having the said SSI certificate. Shri Seth had also admitted the shortage noticed and stated that he was prepared to debit the duty amount of Rs. 8,141.06 in their PLA, which was debited in the PLA as against entry No. 10 dtd. 7-9-1990. In view of these facts, the department issued a show-cause notice dtd. 2-4-1991 calling upon the party to explain as to why the duty amounts should not be recovered by invoking the extended period under the proviso of Sub-section [(1) of Section] 11A of the Act and as to why the penalty should not be imposed upon them.
In their written reply dtd. Nil received by the department on 24-9-1991, they stated that they had received an identical show cause notice from the Supdt. of Central Excise Range VI, New Delhi relating to the period from April 1989 to September 1989 and decision of which had not been conveyed to them. It is pleaded by them that the present show-cause notice also covers the same period and therefore, it is ab initio illegal and deserves to be withdrawn. They also submitted that the shortage was due to the reason that the goods were sent back for getting some minor defects rectified; that they were entitled to the exemption under Notification No. 175/86-CE dtd. 1-3-1986 being a SSI unit during 1986-87 and, therefore, SSI exemptions remained continued to be available to them in the succeeding years even without the said notification. They denied the charge of mis-statement and suppression of facts and stated that the classification list as well as RT 12 returns submitted by them were approved by the department. They appeared before the Collector and putforth the submissions. The ld. Collector after consideration of the case has rejected their pleas. Ld. Collector has held that the SSI certificate had been issued on a conditional basis to them. A close scrutiny of the certificate shows that this had been issued in their name at their office address “74 MM Road, New Delhi -110055”. Further the following condition has been enlarged on the certificate :
“The unit will (be) set up in approved Industrial Area where land use permits for this item, will obtain MCL & also obtain NEC from PCB”.
The certificate was valid for one year.
5. The ld. Collector has, therefore, held that to begin with the benefits available under the Notification 175/86, dated 1-3-1986 were available to them as per para 4 of the said notification. He has held that in short it implies that the registration is to be with relation to the factory. Therefore, he has held that in this case the provisional SSI certificate has been issued to the party office in anticipation of their setting up a factory (unit) in the “approved industrial area”. Therefore, the ld. Collector has held that this certificate has as such not been issued to the factory i.e. the factory is to be registered as an SSI and not the office (emphasis supplied by us). Therefore, the ld. Collector has held as follows :
“They set up their factory (unit) at “Street No.2 Bawana Road, Samaipur Badli, Delhi-110042″. This area is not an approved industrial area – and the party has not brought forward any proof to show that it is such an area. No dispension has also been given by the SSI authorities uptill date to waive this condition. This is probably the reason as to why they have not as yet converted their provisional certificate into a permanent one. No benefits under the said notification are available to factory which are holders of a provisional SSI certificate. (In this case it is only the office of Management which was provisionally registered). In view of above the SSI certificate produced by the party would not be the appropriate one for purpose of getting benefit under Notification No. 175/86, dt. 1-3-1986”.
The ld. Collector has also after considering the facts of the case held that the extended period of 5 years under Section 11A proviso is applicable to the facts of the present case. He has also held that they had clandestinely removed the goods involving Central Excise Duty of Rs. 8,141.06 which had been found short on physical verification.
6. We have heard Shri V. Sridharan, ld. Advocate for the appellant and Shri Sharad Bhansali, ld. SDR for the Revenue.
7. The ld. Advocate submitted that the department has accepted the certificate for the subsequent period and classification list 86/94 has been approved by the department. He submitted that the provisional certificate had been renewed upto 1989. He submitted that the classification list had been approved under Heading 87.14 as parts for motor vehicle and tractor and bus seats under sub-heading 94.01. Therefore, in the show-cause notice, the Department invoking a different Tariff Heading 40.15 is not sustainable in law for larger period. He submitted that at best the claim can be confirmed for six months only. He also submitted that during the relevant period, the duty had been paid at lower rate namely 20% and 25% respectively whereas they had paid the duty at a higher rate of 50% (60% – 10%) which is also double the amount of duty actually payable by the appellants. Therefore, he submitted that even if it is assumed without admitting that the applicants were not eligible for the benefit of Notification No. 175/86-CE., no short levy would arise as they had discharged the duty liability at the rate of 50% ad valorem during the relevant period. He submitted that the party had not suppressed any facts and hence larger period was not invokable. He submitted that the party during the period 1986 to 1987 has specifically quoted the SSI certificate number from which it is evident that the same is provisional registration certificate. The Asstt. Collector, had called for and perused the SSI certificate and thereafter, he approved the classification list extending the benefit after due application of mind. Even for the subsequent years, they had filed classification list quoting the same SSI certificate No. claiming the benefit of the said notification. These classification lists were approved after necessary application of mind.
They had filed RT 12 returns for those periods which had been assessed finally. In that view of the matter, he submitted that there was no violation of the said notification. It is also submitted that during the pendency of one show cause notice issued by the Supdt., the subsequent proceedings issued by the Collector will not be valid in law. It is submitted that they were entitled for the exemption for subsequent financial years from the year 1986-87 and this is supported by the ruling of the decision of the Tribunal rendered in the case of Accura Industries v. Collector of Central Exicse as reported in 1992 (58) E.L.T. 98. The ld. Advocate relied on the following rulings :
i. Lilifoam Industries Pvt. Ltd. v. Collr. of C. Ex. -1990 (46) E.L.T. 462;
ii. Rajasthan Spinning & Weaving Mills v. Collector of Central Excise -1990 (45) E.L.T. 654.
8. Ld. SDR, Shri Sharad Bhansali submitted that the grounds raised by the party pertaining to the approved classification list under Tariff Heading 87.94 and under Tariff Heading 94.01 and their paying 50% ad valorem duty had not been pleaded by the lower authorities and being additional grounds raised for the first time requires consideration. He also submitted that the ld. Collector had not given his finding on the points raised by the Counsel about the pendency of show cause notice before the Supdt. for the same period.
9. We have carefully considered the submissions made by both the sides and perused the records. The question that arises for our consideration is as to whether that in the face of the approved classification list under the Headings 87.14 and 94.01 after verification of the product and the SSI certificate, the department is entitled to invoke larger period.
(2) Whether the duty paid by the assessee under the said Tariff Item is excess than that which is claimed by the department under a new head.
(3) Whether the demands are barred by time.
As rightly pointed out by both the parties, the issue of approved classification list under one heading and paying high duty thereunder than the one claimed by the department in the show-cause notice has not been agitated by the party before the ld. Collector. This is a question of law and also verification of facts. On a perusal of the records, we find prima facie substance and force in this submission. This point requires further adjudication and it will be proper that the matter is reconsidered by the adjudicating authorities. It has also been pleaded by the ld. Counsel that the department themselves had approved the classification list based on the provisional SSI certificate and after due application of mind, and therefore, the demands would be time barred. If this is a factual position then it has to be reconsidered by the original authorities. The plea that there was a pending show-cause notice issued by Supdt. and that this proceeding is not valid, has not been examined by the original authorities. In that view of the matter, we hold that the order passed by the original authorities is without due application of mind and requires full consideration after giving sufficient opportunity of hearing to the appellants. Therefore, the impugned order is set-aside and remanded to the original authorities for de novo consideration to consider the appellant’s pleas by observing the principle of natural justice and decide the case as per law.
S.K. Bhatnagar, Vice President
10. With due respects to the Hon’ble Member (J) my views and orders are as follows :-
11. I observe that in this case admittedly, the appellants had availed of the benefit of Notification No. 175/86 on the basis of SSI Certificate dtd. 11-4-1986 which had been issued on provisional basis subject to the conditions appended thereon and the appellants had not subsequently produced a permanent certificate for the period in question.
12. In my opinion once an essential document on the basis of which a benefit is claimed is of provisional character then automatically the approval given on that basis also assumes a tentative character. Such a provisional assessment could thereafter be finalised only after production of a permanent SSI Certificate. Since this has not been done it was open to the department to re-consider the matter without reference to time bar.
13 Furthermore, since the appellants had also not produced a re-validation order but continued to avail all the benefits thereof and admittedly could not get it renewed, the declaration after the expiry of the provisional certificate also becomes a mis-declaration. Therefore, whichever way we may look at it the show cause notice could only be construed as in time.
14. It has also been made out that a show-cause-notice was initially issued by the Superintendent and subsequently on the same facts another show cause notice was issued for showing cause to the Collector and therefore, the latter was not valid.
15. However, I consider that once Superintendent had issued the Show cause notice but had not followed it up with any adjudication proceedings then that show cause notice abated and lapsed on the issue of a fresh show cause notice for adjudication by the Collector. (The situation would have of course been different if the notice issued by the Superintendent earlier had been adjudicated upon but admittedly this was not done. In the circumstances, a question of double jeopardy does not arise and the Collector was free to proceed with the matter and adjudicate thereon).
16. Similarly, in the case of goods found short on physical verification the appellants naturally become liable to both duty and penalty and the reasons as to why they were removed without following the proper procedure were irrelevant.
17. Insofar as the question of the exact rate of duty applicable was concerned once the matter was taken up for finalisation of classification, it was open to the appellants also to plead for determining the correct classification and giving the benefit of exemption notification, if any, due.
18. Since, however, according to both the sides this aspect was not urged at the time of hearing before the Collector and no finding has been recorded with reference to the same but was necessary in order to arrive at the correct amount of duty liability, the impugned order is set aside and remanded for de novo consideration in accordance with law, with the observation that the appellants may be given one more opportunity to make their submissions including the aspect of the correct rate of duty and the quantum thereof.
19. It is ordered accordingly.