ORDER
R.K. Abichandani, J. (President)
1. The appellant challenges the order of the Collector of Central Excise, Sarvodaya Nagar, Kanpur made on 30.6.92 confirming the demand of Rs. 6,73,835/- comprising of additional excise duty of Rs. 6,73,370.57P and Cess of Rs. 463.99 on the ground that it was clearly established that excisable goods of the value of Rs. 97,29,450.25P were cleared by the appellant company from their factory without payment of Central Excise duty under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11-A of the Central Excises & Salt Act and imposing a penalty of Rs. 5 lakh on the appellant under Rules 9(2), 52-A, 173-Q and 226 of the said Rules for such contraventions.
2. A show notice was issued on 15.3.91 to the appellant on the ground that the appellant had received and stored a quantity of 44,610.71 L. Mtrs. gray and in-process fabrics, 48,876.26 L. Mtrs. fully processed fabrics, without accountal in the statutory Central Excise records, and further, removed a quantity of 1,50,666.91 L. Mtrs. (2,06,454.86 sq. Mtrs.) of suiting and 1,30,464.86 L.Mtrs (1,16,102.90 sq. Mtrs.) of shirtings of processed cotton/manmade fabric valued Rs. 97,29,450.21 and attracting Central Excise duty to the tune of Rs. 6,73,834.56 without accountal and without payment of duty, during the period from 19.8.89 to 17.9.90 and thereby had contravened the provisions of Rules 9(1), 52-A and 53 read with Rules 173C, 173F, 173G and 226 of the Rules. It was alleged in paragraph 19 of the show cause notice that appellant had received and stored fully manufactured excisable goods including raw materials thereof in the manner otherwise than as provided under the Rules, suppressed production of excisable goods and had removed such suppressed production during the said period without accountal in contravention of the provisions of the said Rules with intent to evade payment of duty leviable thereon, thereby attracting proviso (1) of Section 11A of the said Act for recovery of dues for extended period of limitation beyond six months.
3. On the basis of material on record, the Collector held that the whole exercise was a deliberate exercise in creating evidence after the event. In respect of the contention of the appellant that it was undertaking “single processing” of certain goods on job work basis, it was held that, the contention that the goods were exempt from duty as they were subjected to single processing was belied by the very fact that the price list was submitted in respect of some of these goods. Moreover, despite this elaborate statement tendered on 19.2.91 i.e. almost five months after the date on which various discrepancies came to light in the factory, the Director of the company did not mention anything about subjecting of some of the goods into single processing. It was apparent that the party had deliberately not accounted such gray fabrics in their records so as to facilitate surreptitious removal of the processed fabrics manufactured from such gray fabrics. It was also held on the basis of material on record that fully processed fabrics appeared to have been cleared without cover of any Central Excise document. Strong evidence was found about clearance of unaccounted goods and no clarification was forthcoming from the party. The demand of additional excise duty and cess was accordingly confirmed and penalty imposed, as stated above.
4. It appears from the record that on 5th August, 1993, this appeal was dismissed by the then President, Mr. Harish Chander and Mr. Lajja Ram, Member (T) on the ground that though repeated opportunities were given to the appellant for furnishing information as to the fact of payment of Rs. 5 lakhs, there was no information forthcoming. It appears from the record that by order dated 20.1.2005 made by the High Court of Judicature at Allahabad it was directed that in case deposit of Rs. 5 lakhs in pursuance to the initial order of the Tribunal dated 2.3.93 was made within four weeks, the appeal shall be heard and decided on merits.
5. It was contended by the learned Counsel Mr. Lajja Ram now appearing for the appellant, that the fabrics in respect of which the impugned demand was made were exempt due to single processing and there was no valid reason for rejecting the plea of the appellant on the ground that it was an afterthought. He further argued that the demand for the period from 19.8.89 to 19.9.90 was made under the show cause notice dated 15.3.91 and, since during the relevant period the limitation prescribed was six months, the whole of the demand was time barred. It was submitted that this aspect with respect to the justification for extended period of limitation has not been considered in the impugned order. The learned Counsel further argued that since the matter related to additional excise duty for the period from 19.8.89 to 18.9.90, no penalty could have been imposed, in view of the ratio of the decision of the Supreme Court in Collector of Central Excise, Ahmedabad v. Orient Fabrics Pvt. Ltd. reported in 2002 AIR SCW 6529 and the decision of the Delhi High Court in Pioneer Silk Mills Pvt. Ltd. v. Union of India , which was confirmed by the Supreme Court in the decision reported in 2002 (145) E.L.T. A 74.
6. The learned authorized representative for the department supported the reasoning contained in the impugned order and submitted that in the classification list the appellant never mentioned anything about “single process” eligible to exemption nor to the fact that any goods were to be cleared under exemption. By referring to the impugned order, the learned authorized representative pointed out that the question of surreptitious removal of goods was duly considered for invoking the extended period. As regards the penalty imposed, he argued that such penalty could be imposed for breach of the Rules and may be upheld. According to him, the decisions in Pioneer Silk Mills Pvt. Ltd. and Orient Fabrics Pvt. Ltd. were not attracted in this case because penalty could be imposed simply for violation of the Rules, apart from the aspect of penalty for evasion of the additional excise duty.
7. We may record that, at the outset, it was made clear by the learned counsel appearing for the appellant that he was not challenging the impugned order on the ground that the levy and demand of additional duty on manmade fabrics and cotton fabrics processed on job-work basis was against the scheme of the Act or that it was not the intention of Parliament to levy additional duty of excise on goods and activities which were subjected to sales tax.
8. It is clear from the record that in the various classification lists submitted by the appellant there was no mention made whatsoever about their undertaking the job-work involving “single processing” of fabrics no was the Notification No. 253/82, dated 8.11.82 or Notification No. 297/79, dated 24.11.79 mentioned in the classification lists of the relevant period. Ravi Shankar, Senior Commercial Officer of the appellant had produced copies of the classification lists on 17.1.91, and these classification lists admittedly made no mention of the exemption notification nor did they contain any reference to “single processing”. Even the director of the appellant Shri P.K. Jain and other officers did not raise any such plea before the seizing officers in their statements. When confronted with the evidence about the clearance of fully processed fabrics from the appellant’s unit during the period from 19.8.89 to 18.9.90 which were not accounted for in the statutory record, Ravi Shankar stated that he was not aware as to why in respect of these goods no GP. 1 or GP. 2 had been issued. In the chart showing quantity, value and amount of duty involved in respect of fully processed fabrics cleared without payment of duty and without accountal as per outward gate register and daily despatch reports as well as the chart showing quantity, value and duty involved in respect of fully processed fabrics without accountal partly as per outward gate register and partly as daily despatch register which were supplied at Sl. Nos. 16 and 17 of the list of “relied upon documents” annexed with the show cause notice it was revealed that the goods were removed without cover of Central Excise documents. The entries in the gate register indicated that they were made about the number of bales whenever the fabrics had been cleared and the charts had been prepared incorporating details of the clearances of such fully processed fabrics which were entered in the daily receipt and despatch reports and found non-accounted for in the Central Excise statutory records. The co-relation of the records with the chart (RDU 16 and 17) made it apparent that the document at Sl. No. 13 was the chart which gave the details of the clearances of fully processed fabrics which appeared to have been cleared without cover of Central Excise documents. The entries of such clearances were made in the private records of the party i.e. date wise gate register. The adjudicating authority, therefore, rightly found that there was strong evidence showing that clearances of unaccounted goods were made for which no clarification was forthcoming.
9. It would thus be seen that there is no basis for the appellant’s contention that the appellant was entitled to any exemption under the single processing exemption notification. In fact, there is nothing available on record to show how many number of processes or what process was undertaken on job-work basis, in respect of the goods in question by the appellant. The surreptitious removal of goods without cover of documents was noted by the Collector clearly in the context of the justification for the extended time for initiating the action and the contention that the show cause notice was time barred, is without any basis.
10. So far as the imposition of penalty is concerned, we find that since the penalty was admittedly imposed in the context of the additional excise duty which was payable and in respect of which there was violation of various rules, no such penalty could have been imposed for the period in question which was 19.8.89 to 18.9.90 being much prior to the amendment made in Section 3(3) of Additional Duties of Excise (Goods of Special Importance Act, 1957. The provision of Section 3(3) was substituted by Section 63(a) of the Finance Act, 1994. Under the amended provisions, the provisions of the Central Excise & Salt Act, 1944 and the rules made thereunder relating to “offences and penalties are” also incorporated by reference in their application in relation to levy and collection of the additional duties under the said Act of 1957. As held by the Supreme Court in Orient Fabrics Pvt. Ltd. the Parliament by reason of the said amending Act, 1994 consciously brought in the expression “offences and penalties” in Section 3(3) of the said Act. The cause of action for imposing the penalty and directions of confiscation had arisen in the year 1987, and therefore it was held that the amended Act had no application to the facts of the case. Even in the present case for the relevant period from 19.8.89 to 18.9.90 being prior to said amendment, penalty could not have been imposed under the amended provisions of Section 3(3). Therefore, following the ratio of the decisions in Orient Fabrics Pvt. Ltd. and Pioneer Silk Mills Pvt. Ltd. (supra), we hereby set aside the penalty of Rs. 5 lakhs imposed under the impugned order while upholding the same on all other counts. The appeal is, accordingly, partly allowed by setting aside the penalty of Rs. 5 lakhs imposed on the appellant thereunder and modifying the impugned order only to that extent.
(Dictated and pronounced in the open Court on 5-5-2005)