ORDER
K.S. Venkataramani, Member (T)
1. This is an application for dispensing with the pre-deposit of Rs. 84,32,790.00 as duty and a penalty of Rs. 10 lakhs as per the impugned order dated 17-2-1993 passed by the Collector of Customs and Central Excise, Bhubaneswar. Shri Gopal Prasad, the learned Consultant appearing for the applicants submitted that the duty has been demanded in this case as the duty due on MEG used in the manufacture of Man-Made Staple Fibre (MMSF). The learned Consultant contended that the demand has been made for the period March, 1987 to December, 1990 by a show cause notice dated 27-2-1992. The demand is thus beyond six months’ period under Section 11A of the Central Excises and Salt Act, 1944. There is also no ground according to the applicants involved to extend the period of demand under that Section by alleging suppression of facts by the applicants herein because the learned Consultant pointed out, that the applicants’ Unit is one operating physical control by the Department, and in such a context, the Deptt. cannot allege suppression of facts for which proposition the learned Consultant relied upon the Tribunal decision in the case of Indian Petrochemicals Ltd. v. Collector of Central Excise, reported in 1992 (61) E.L.T. 138 (Tribunal). In this context, it was further submitted that procedure followed by the applicants in availing of the set-off of duty under Notification No. 225/86-C.E. on MEG used as input in MMSF was very well known to the Department. The ground which the Collector has taken in the impugned order is at variance with that those mentioned in the show cause notice which is an infirmity vitiating the order itself. Relying on the Supreme Court decision in the case of Collector of Central Excise v. Chemphar Drugs and Liniments, reported in 1989 (43) E.L.T. 276 (S.C.), the learned Consultant urged that there was no conscious holding back of information by the applicants and, therefore, the longer period for demanding duty cannot be invoked. It was further pleaded that in this case, there was no loss of Revenue since on the quantity exported by using the input, the applicants would be entitled to rebate of duty paid on the input. The pre-deposit of the duty and penalty would also cause them undue hardship. The applicants have been declared as a sick unit by a communication dated 31-8-1990 from the Board for Industrial and Financial Reconstruction which was produced to indicate that their unit has been registered with the Board. They have an accumulated loss of over Rs. 63 Crores without depreciation. The learned Senior Departmental Representative opposed the stay. On the question of limitation she submitted that the demand is made under Rule 9(2) of the Central Excise Rule, 1944 read with Section 11A which covers contravention of the Act provision with intention to evade payment of duty. The Collector in his order has referred to a Trade Notice which has been issued in the matter of the procedure to be followed for availing the exemption under Notification No. 225/86-C.E. and the learned Senior Departmental Representative contended that such notices are given wide publicity through the various bodies of manufacturers and assessees like Chambers of Commerce and, therefore, an assessee cannot plead ignorance about such trade notice. The learned Senior Departmental Representative further referred to the finding in the Collector’s order indicating that there had been three occasions in the past during the material period when the factory officer deputed to their unit has drawn their attention to the necessity of following prescribed procedure. This has been ignored by the applicants. In such a situation, the ratio of the Supreme Court decision in Chemphar Drugs and Liniments (Supra) according to the learned Senior Departmental Representative would not apply. As regards their financial position, though the applicants claim to be a sick unit, they have sufficient liquidity to raise the pre-deposit amount as is evident from their sales turnover of over Rs. 64 crores and an amount of Rs. 9 crores due to them from Sundry Debtors and over a crore in cash in Bank balance as on the period ending 31-3-1992 in their annual report.
2. We have carefully considered the submission made by both the sides. The question of limitation is contentious, having regard to the finding and details given by the Collector in the impugned order wherein he has stated that “I find from the records that the Factory Officer of Central Excise posted at their factory has time and again requested them to follow the Set Off procedure vide his letter Nos. 12-13 dated 2-1-1988, 108 dated 2-4-1988, 162 dated 20-5-1988 and 229 dated 8-7-1988. But they have not paid any heed to his request and deliberately followed a wrong procedure to avail under benefit under Notification No. 225/86-C.E. dated 3-4-1986 and utilised the duty credit so earned towards payment of duty on clearances of MMSF for home consumption with an intent to evade payment of duty to the extent of utilisation of such wrongly availed duty credit”. On merits also the question is about the eligibility of quantity exported for set off of duty by way of input relief which is granted by Notification No. 225/86-C.E. In this context, the Collectors observed in the impugned order is “there is no defence by M/s O.S.L. to the fact that no set off of duty is available on the quantity of MEG used in the manufacture of MMSF which were cleared for export without payment of duty, under Notification No. 225/86-C.E. dated 3-4-1986 as amended. A reading of the aforesaid notification also confirmed the above position.” There are, therefore, certain features which prima facie would differentiate the present case from that Indian Petrochemicals Ltd. case cited by the learned Consultant supra. In such a situation we are of the view that it cannot be held that a prima facie case for totally dispensing with the duty and penalty has been made out. Having regard to their financial position as disclosed in the Annual Report of the applicants for the period 1991-92 and the fact that their application has been registered with the Board for Industrial and Financial Reconstruction, we are of the view, a partial pre-deposit of the duty demanded in this case will be appropriate for the purposes of Section 35F of Central Excises and Salt Act, 1944. Accordingly, we direct that the applicants should pre-deposit an amount of Rs. 20 lakhs on or before 31st October, 1993 and the whole of the penalty is dispensed with and its recovery stayed. Matter to come up for ascertaining compliance on 8th November, 1993.