ORDER
P.C. Jain, Member (T)
1. Brief facts of the case are as follows :
1.1 On 19-9-1988, Preventive Officers of Central Excise paid a surprise visit to the manufacturing and residential premises of the appellant herein. Consequent upon checking fully, 45 electric fans among other goods were seized. Value of the electric fans seized as shown in the show cause notice dated 17-2-1989 was Rs. 11,2507-.
1.2 After investigation in the matter, the aforesaid show cause notice was issued which alleged as follows :-
(1) The appellant had been manufacturing electric fans without obtaining central excise licence or without making a declaration to that effect. (2) 604 pcs. of Ginni brand electric fans valued at Rs. 2,17,640.00 were cleared without payment of central excise duty to the tune of Rs. 33,979.30 p. in the year 1987-88. (3) 1542 pcs. of electric fans valued at Rs. 6,07,400.00 involving a central excise duty of Rs. 95,605.50 p. were manufactured and cleared during the year 1988-89. (4) The appellant clandestinely manufactured the seized 45 pcs. of electric fans valued at Rs. 11,250/- involving a central excise duty amounting to Rs. 1,771.87 p. and illegally stored the same in his premises which was not approved by the competent Central Excise authority with an intention to remove the same without payment of central excise duty. Accordingly contravention of Section 6 of the Central Excises and Salt Act, 1944 read with Rules 52A, 173B, 173C, 173F, 173G and 174 was alleged and he was asked to show cause as to why (i) seized 45 pcs. of electric fans be not confiscated (ii) the aforesaid amount of duty cleared during the years 1987-88 and 1988-89 be not recovered under Rule 9(2) read with proviso to Section 11-A of the Act and (Hi) penalty should not be imposed on him under Rules 9(2), 52A and 173Q of the Central Excise Rules.
1.2 On adjudication, the Additional Collector of Central Excise, Allahabad has held that the quantity of electric fans manufactured and cleared by the appellant was much below Rs. 15 lakhs which is the exemption limit for payment of duty prescribed under Notification 175/86 dated 1-3-1986 and for taking out Central Excise licence under Rule 174 of the Central Excise Rules, 1944 that is exemption limit Rs. 10 lakhs. Nevertheless, he has held that exemption from licensing control under Rule 174 was available, in terms of Notification 1l/88-C.E.(NT), dated 15-4-1988 under Rule 174A of the said Rules, if the appellant had filed a declaration to the proper officer and thereafter subsequently every year by 15th April of each financial year. The appellant is not entitled to exemption from licensing control in the absence of any declaration filed by him, mentioned above. Result is, according to the adjudicating authority, that the benefit of exemption from licensing control as well as the benefit of exemption from payment of duty under Notification 175/86 dated 1-3-1986 cannot be extended to the appellant.
1.3 In view of the aforesaid findings, the adjudicating authority has upheld violation of Section 6 of the Act read with Rule 174 as also of the other Rules leading to liability of payment of duty, confiscation of the seized goods and imposition of penalty. He has accordingly confiscated these 45 electric fans with an option to the appellant to redeem them on payment of a fine of Rs. 1,50,000/-. He has also imposed a compounding fee of Rs. 25,000/- for obtaining the central excise licence.
2. The present appeal is against the aforesaid order of the Additional Collector.
3. Learned consultant, Shri Y.N. Chopra, states that the order is untenable in law in view of the Additional Collector’s own finding that the production and clearance of the appellant during the relevant years are far below the exemption limits applicable for licensing control as well as for payment of duty. In view of this finding, the learned consultant submits that there is no necessity for the adjudicating authority to upheld contravention of Section 6 read with Rule 174 and deny the benefit of exemption on payment of duty under Notification 175/86. Question of non-filing of declaration which has apparently led the Addl. Collector to impose the liabilities of confiscation, penalty and duty is merely a technical lapse for which the impugned order should not have had imposed such heavy liability on the appellant.
4. Learned JDR, Shri S.K. Sharma, on the other hand, reiterates the findings of the adjudicating authority.
5. We have carefully considered the pleas advanced on both sides. It is admitted on record that the appellant’s production and clearance of the excisable goods is far below Rs. 10 lakhs. Therefore, it was exempted from licensing control as well as exempted from payment of duty under the respective notifications, namely, 11/88-C.E. (NT), dated 15-4-1988 and 175/86 dated 1-3-1986. Further, the production and clearance in any of the financial year being admittedly less than Rs. 7.5 lakhs, the appellant herein was not even required to get himself registered with the competent authority as a small scale industrial unit for the purposes of exemption from payment of duty under Notification 175/86 dated 1-3-1986. This is clear from proviso (a) to para 4 of the said notification which is reproduced below :-
“4. The exemption contained in the notification shall be applicable only to a factory which is an undertaking registered with the Director of Industries in any State or the Development Commissioner (Small Scale Industries) as a small industry under the provisions of the Industries (Development and Regulation) Act, 1951 (65 of 1951):
Provided that nothing contained in this paragraph shall be applicable :-
(a) in a case where the value of clearances from a factory during the preceding financial year or in the current financial year did not exceed or is not likely to exceed rupees seven and a half lakhs.”
5.1 Reason for denying the benefit of exemption Notification 175/86 is that the appellant was not entitled for exemption from licensing control in view of the declaration under Notification 1/88-C.E. (NT), having not been filed by him. This reason is also based on erroneous understanding of law by the adjudicating authority. Exemption from licensing control is different from exemption from payment of duty. In the case of
Healthways Dairy Products Co. v. UOI [1978 (2) E.L.T. (J 457)]
a question was raised before the Supreme Court that since the Healthways Dairy Product had obtained a licence for manufacture of condensed milk only and it did not obtain a licence for manufacture of condensed skimmed milk, therefore, for the purposes of the levy of the excise duty both condensed milk and condensed skimmed milk should be placed on the same footing. Healthways Dairy Products Co. submitted that if excise duty was not leviable on condensed milk then no licence was required for its manufacture. On the aforesaid point, the Supreme Court observed as follows :-
“The position of law seems to be that under Section 6 of the Excise Act no person can engage in the production or manufacture of any specified goods included in the 1st Schedule of the Act except under the authority and in accordance with the terms and conditions of a licence granted under the Act. It would have been seen, therefore, that since skimmed milk or condensed skimmed milk will be a milk preparation within the meaning of Item IB of the 1st Schedule, a licence to manufacture such milk would be required. If any goods specified in the 1st Schedule are exempted from the levy of excise duty by the Central Government in exercise of their power under Rule 8(1) of the Central Excise Rules, that cannot affect the manufacture of the said goods.”
(Emphasis supplied) 5.2 This question also came to be examined by the Tribunal in Structurals and Machineries (BOKARO) Pvt. Ltd. v. CCE, Patna [1984 (17) E.L.T. 127] . The Tribunal observed as follows in para 13 of the said Report :-
“We have carefully considered this part of the arguments of the parties. The concession in Notification No. 89/79-C.E., dated 1-3-1979 is not dependent on taking out a licence. The demand of duty from the appellants is to be examined on the basis of effective rates of duty provided under the notification and on other conditions of notification being fulfilled which are not disputed in the case. Considering the entire facts and circumstances of the case, the notification and the precedents relied on by the parties, the Bench is of the view that it would not be proper to deny the appellants the benefit of Notification No. 89/79-C.E., dated 1-3-1979 on the ground that the appellants had not taken out a licence. The Bench finds accordingly.”
Accordingly, we are of the view that even if the appellant was required to take out a Central Excise licence for not filing a declaration as enjoined under Notification No. 11/88-C.E. (NT), dated 15-4-1988, the benefit of Notification 175/86, dated 1-3-1986 on payment of duty cannot be denied. Therefore, the demand of duty made in the impugned order is not at all called for and is set aside. Since the seized goods namely 45 electric fans fell within aggregate exemption limit for the relevant financial year no demand of duty can be raised on the seized goods as well.
5.3 As regards the confiscation of the goods with an option to redeem them on payment of a fine of Rs. 1,50,000/- the appellant’s learned counsel has stated that in view of the technical nature of the offence, confiscation is not justified and in any case redemption fine of Rs. 1,50,000/- as against the value of Rs. 11,250/- of the seized goods is too harsh and the option to redeem the goods of such a low value against such a high fine is illusory. We agree with the learned counsel for the appellant. Since it is admitted that in all the financial years the value of production and clearance of the excisable goods, namely, electric fans was far below Rs. 10 lakhs, the appellant would have automatically been entitled to exemption from licensing control in terms of Notification 11/88-C.E. (NT), dated 15-4-1988; had he sent the declaration required thereunder. The appellant’s lapse, therefore, is nothing but a technical breach of the said notification. Confiscation of the goods, therefore, in these circumstances is not justified. We, therefore, set aside the confiscation and consequently redemption fine of Rs. 1.5 lakhs.
5.4 As regards the imposition of compounding fee of Rs. 25,000/-, the learned counsel for the appellant has submitted that the show cause notice given to the appellant did not propose any compounding fee. Therefore, imposition of compounding fee for not taking out a licence is going beyond the purview of the show cause notice. Even on merits, he has submitted that as submitted earlier in the context of redemption fine, no licence was required to be taken inasmuch as the production and clearance of the appellant was far less than Rs. 10 lakhs in a financial year. We agree with the learned counsel for the appellant. Accordingly, the compounding fee is also set aside.
6. In short, appeal is allowed with consequential relief to the appellant. Cross objections are accordingly dismissed.