ORDER
S.L. Peeran, Member (J)
1. In all these cases, common question of facts and law arises, hence they are taken up together for disposal as per law.
2. Appeal No. E/2538/90-C is directed against the Order-in-Appeal No. GSM/177/90 Baroda dated 20-3-1990 passed by Collector of Customs and Central Excise (Appeals) Bombay which had arisen from Order-in-Original No. Legal/BLS/5/86 dated 10-5-1988 passed by the Asstt. Collector of Central Excise, Valsad. By this Order-in-Appeal, the Collector (Appeals) has confirmed the differential duty calculated by the department and confirmed by Order-in-Original by the Asstt. Collector amounting to Rs. 28,72,391.18 as correct. The dispute which arose in this appeal is regarding computation of differential duty payable in terms of Order-in-Original No. 3/MP/84 dated 17-5-1984 passed by the Collector of Central Excise, Baroda where the Collector of Central Excise, Baroda has held that the paper in question being more than 225 gsm should be taken as ‘Board’ and excise duty is to be calculated on that basis. In this connection, the appellant had contended that in terms of the order passed by the Gujarat High Court, the Supdt. of Central Excise and the representative of appellant had jointly worked out the difference in terms of the order of the Collector. The appellants had disputed the calculation of duty in terms of the earlier order-in-original dated 17-5-1984 passed by the Collector of Central Excise, Baroda and, therefore, in terms of the order passed by the Gujarat High Court, the Asstt. Collector recalculated the duty and passed the order-in-original confirming the duty which was appealed before the Collector (Appeals) who has passed the impugned order issued on 20-3-1990 which is appealed in this case. However, it has to be noted that the entire original proceedings has arisen from the Order-in-Original No. 3/MP/84 dated 17-5-1984 passed by the Collector of Customs and Central Excise, Baroda against all the appellants which is a subject-matter of all the connected appeals.
3. For the purpose of disposal of this case, the facts which has arisen originally and which is a subject-matter of the order-in-original No. 3/MP/84 dated 17-5-1984 which is appealed in E/4095/91-C and other connected appeals are noted in this order.
4. The facts of the case are that the department acting on the information that the appellant M/s. Vapi Paper Mills holder of Central Excise Licence L-4 for manufacture of Paper and Paper Board chargeable to excise duty under Tariff Item 17(2) of the first schedule of the Central Excises and Salt Act, 1944 (hereinafter referred to the said Act) by reason of wilful mis-statement or suppression of facts intentionally evaded the payment of duty of excise payable on paper board manufactured and cleared by them, the officers of the Central Excise (Preventive) of the Collectorate Headquarters, Baroda and the officers of the Directorate of Revenue Intelligence, Anti-Evasion Wing, Bombay carried out search of their premises and also that of the premises of M/s. Tubular Packaging Pvt. Ltd. (Appellant in E/3365/84-C) who have said to have received the offending goods from the appellants M/s. Vapi Paper Mills on 26/27-9-1980. The premises of other respondents of offending goods namely, Supertex Paper and Colour Cartons Ltd. (appellant in appeal No. E/3365/84-C) were also searched /visited by the officers of the Preventive Branch Headquarters, Baroda and the officers of the DDRI and Anti-Evasion Wing on 8-10-1980, 13-10-1980 and 15-11-1980 respectively. As a result of this search the incriminating documents were seized under Mahazar and also statement of various persons were recorded. Representatives samples were drawn under Panchnama from the bulk of goods seized. The seized goods were handed over to the parties from whose custody possession and control. They had been seized for preservation and safe keeping on behalf of the department under regular spurdnama. The investigation so conducted revealed that M/s. Vapi Paper Mills (first appellant herein) had entered into manufacturing business in March, 1977 and started manufacture of mill board/grey board packing and wrapping paper etc. chargeable to duty of excise under Tariff Item 17(2). They also gave declaration in their classification list that in the manufacture of above variety of paper, paper made out of 100% under conventional raw materials, such as, waste paper, paddy straw bagasse, jute stock etc. were used. In the different classification list filed by them from the commencement of their business till 12-7-1979 under provision of Rule 173-B of the Central Excise Rules, 1944. They gave the classification of mill board, grey board and packing and wrapping paper etc. in various classification lists. The details furnished in the said classification lists are noted herein below :
” (i) Classification list No. PL/38/77
Under this classification list, the assessee declared only one product vis. mill-board (i.e. unbleached homogenous board of thickness exceeding 0.5 mm made out of mixed waste paper without adding any colouring matter).
The assessee claimed exemption on this variety of product under Notification No. 70/76 C.Ex. dated 16-3-1976.
(ii) Again the assessee filed a fresh classification list No. 207/77 for mill-board and in this classification list gave the description of the product as “paper and paper board,” all sorts (including paste board, millboard, straw board, card board and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.
Paper board and all other kinds of paper (including paper and paper board which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing) not elsewhere specified and claimed exemption under Notification No. 70/76 C.Ex. dated 16-3-1976 and Notification No. 127/77 dated 18-6-1977.
(iii) Vide their classification list No. 268/77 dated 23-6-1977 the asses-see filed the classification for their product, “MG Duplex board”, and the rate of duty applicable was as per Notification No. 127/77 dated 18-6-1977.
(iv) The assessee vide their revised classification list No. II/7/78 dated 7-2-1978 again filed a classification list for mill-board and were paying duty as per Notification No. 70/76 dated 16-3-1976.
(v) Similarly under revised classification list No. II/7/78 dated 7-2-1978 they filed classification for M.G. Duplex Board and duty exemption was claimed under Notification No. 15/78 dated 24-1-1978.
(vi) They again revised their above classification list on 4-3-1978, and duty exemption was claimed under Notification Nos. 15/78-C.Ex. and 70/76 C.Ex. respectively.
(vii) The classification for ‘grey board’ filed by the assessee came on record vide revised classification list No. 11/16/78 dated 17-4-1978 and the duty exemption was claimed under Notification No. 15/78 dated 24-1-1978.
(viii) Again on 21-3-1979, the assessee filed revised classification list No. Vapi/II/109/78-79 for this product (grey board) and duty exemption was claimed under Notification No. 15/78 C.Ex. dated 24-1-1978 as amended by Notification No. 25/79 dated 1-3-1979.
The assessee in addition to the above filed classification lists for packing and wrapping paper and other varieties of papers such as “Kraft paper” as described in Notification No. 15/78 dated 24-1-1978 and the detailed description of these classification lists are given below :
(ix) Classification No. 59/77 dated 18-4-1977
Packing and wrapping paper in substance 150 Gsm., 140 Gsm., and claimed exemption of duty on this product under Notification No. 45/78.
(x) In replacement of this classification list, the assessee filed their classification list No. 331/77 dated 25-6-1977 giving the classification of the product as under:
‘Used pulp made out of 100% unconventional raw materials such as waste papers, paddy straw, bagasse, Jute stalks etc. packing and wrapping paper substance 100 Gsm to 270 Gsm and claimed exemption of duty under Notification Nos. 127/77 and 128/77 both dated 18-6-1977.’
(xi) Again on 7-2-1978, the assessee got approved a fresh classification list No. II/6/78 revising the description of the product is used pulp made out of 100% unconventional raw materials such as waste paper, paddy straw, bagasse, Jute stalk etc. packing and wrapping paper substance 100 Gsm and above. They claimed exemption of duty this time under Notification Nos. 15/78 dated 24-1-1978 and 128/77 dated 18-6-1977.
(xii) Assessee preferred one more classification list bearing No. II/18/78 dated 4-3-1978 and gave the description of the product as ‘M.S. Kraft paper (i.e. packing and wrapping paper substance 100 Gsm and above)’. In this classification list the duty exemption is claimed under Notification No. 15/78 dated 24-1-1978 and 128/77 dated 18-6-1977.
(xiii) Under No. Cl/Vapi/78-79 dated 3-3-1979 the party replaced the above classification list describing the product as MG Kraft paper, i.e. commonly known as packing and wrapping paper, kraft liner, corrugating media deluxe and Super kraft etc. substance 65 Gsm. and above upto 270 Gsm.’
(xiv) The final and the last classification list No. RGL Vapi-II/29/79-80 dated 12-7-1979 came on record and the description of the product therein reads as ‘MG Kraft paper, i.e. delux kraft paper substance 100 Gsm and above upto 225 Gsm. The duty exemption was claimed under Notification Nos. 128/77 dated 18-6-1977 and 15/78 dated 24-1-1978 as amended by Notification No. 25/79 dated 1-3-1979, in this classification list.
5. The Investigating Officer examined the provisions of Notification Nos. 45/73 dated 1-3-1973, 127/77, 128/77, 25/79 dated 1-3-1979,91/79 dated 1-3-1979, 181/79 dated 10-5-1979 and also Notification No. 201/79 dated 4-6-1979 under which the first appellant had claimed the benefit in the six classification lists submitted by them. On such examination by the Investigating Officer, the classification list indicated that the first appellant was purported to have been manufacturing different type of paper, namely, packing and wrapping paper, craft liner corrugating media, deluxe and super craft paper hereinafter referred to as Taper for brevity purposes’. Investigating Officers carried out further investigation to test the veracity and validity of these declarations. The investigations with reference to grammage of the substance contained of the so-called paper manufactured by the first appellant indicated that the substance contained is much more than 180 Gsm. It was found that the major buyers of all the goods, namely, the paper were well known for their activity of manufacturing ‘cartons’ ‘cans’ ‘tubes’ and ‘Beam Boards’ etc. The investigation revealed that in the major documents recovered from these buyers, the first appellant paper had been declared as paper board. The investigations were also extended by the officers to study the raw materials consumed, the expert’s opinion and gathered various definitions so as to test variety of the so-called “paper” manufactured by the assessee.
The officers recorded the statement of Shri Bhagubhai Gordhanbhai Patel in-charge of pulp plant in the first appellant factory. He had given the details of raw material and their percentage used and also the manufacturing process of the final goods. The statement of Shri Narendra Harishanker Joshi working as paper machine-incharge was also recorded who also disclosed the manufacturing process grammage raw materials used and merely stated that paper is smooth on one side and rough one on the other and also stated that it is a stiff paper. He also disclosed that the other products manufactured by the appellant MG Kraft paper 225 Gsm to 330 Gsm made with rice straw, jute stalks and kraft cuttings and the said paper is also smooth on one side and rough on the other. The statement of Shri Ravjibhai Patel, Administrative Officer of the first appellant was also recorded who have also given the details of the goods manufactured, raw materials and their percentage used in the final product.
6. The Order-in-Original recorded in great detail about the raids carried out in the other appellants factories and the recovery of the said paper supplied by the first appellant to them. The statement given by the other appellant’s employees is also elaborated in great detail running into several pages in the Order-in-Original. From this it can be gathered that M/s. Tabulor Packings Pvt. Ltd. were purchasing the said paper from the first appellant with grammage from 225 Gsm to 300 Gsm and that they were used in the manufacture of ‘Cones’ and ‘Tubes’ which was used by textile mills for winding of cotton and silk yarn. The investigation with the appellant herein M/s. Industrial Paper Convertor revealed that they were also purchasing the said paper from the first appellant with grammage 220 Gsm to 314 Gsm and 182 Gsm and this were being used for manufacture of corrugated boxes. The statement of Shri Surenderbhai Patel partner of M/s. Industrial Paper Convertors revealed that they were purchasing papers from 100 Gsm to 335 Gsm received from the first appellant and selling it to M/s. Polycone Paper (P) Ltd. who were manufacturing paper cones, paper tubes and corrugated boxes by using different varieties of papers of substance of 100 Gsm and 300 Gsm as per their requirement. Investigations were also done with Eastern Paper Tube factory who were also using substance of paper containing 250 Gsm to 300 Gsm. Investigation with M/s. Colour Carbon Ltd. revealed that they were using paper ranging from 250 Gsm to 335 Gsm purchased from the first appellant herein. The scrutiny of purchase register reveal that all material purchased from M/s. Vapi Paper Mills had been shown as ‘paper board’. The premises of Supertax Papers was also raided by officers and the statement of its partner Shri Faiyaz K. Doctor was taken. From his statement it revealed that they were manufacturing ‘Beaming Board’ which are used in textile industry in looms. They were purchasing the raw material from the first appellant herein. He has stated that in all the documents vis G.P. Is, delivery challans and invoices the product was described as packaging and wrapping paper, corrugating media and MG Super Kraft paper and Board. He has also stated that they require heavy and thick board and they purchase the same from the first appellant herein which contain a substance above 180 gsm. He has also stated that the material supplied is thick and is known as ‘paper board’ and that they had described this material as ‘board’ in their invoices and delivery challans. He has also revealed that he has supplied his final product to M/s. Bharat Mills Stores and Sunil Textiles, Surat and that from the documents recovered and enquries revealed that every bill showed the description of the goods sold as ‘Board’ and it also mentions the size of the Board as 36%, 40″, 52″, 58″, 60″ and 66″. The officers also scrutinised the records of M/s. Eastern Paper Tube factory which also revealed that they were purchasing raw material from the first appellant herein. Likewise the statement of Managing Director of M/s. Polycone Papers Pvt. Ltd. was also recorded, who disclosed that they were purchasing mill board, grey board, cone board, beam board, P & W board were used by them from the first appellant herein and it was of a substance ranging from 260 Gsm to 370 Gsm received in bundle size of 18″ X 61″. The factory of M/s. Colour Carbon Ltd. was also raided and the goods were seized. The seized goods revealed that they had already been purchasing from the first appellant herein and it had different grammages viz. 240 Gsm, 260 Gsm, 235 Gsm and 225 Gsm. The investigation revealed the same pattern of manipulation of record and sale of goods by different names adopted by the first appellant herein. Investigation also revealed that mis-declaration regarding grammage in the invoices of the first appellant herein. Regarding Kraft liner of 235 Gsm and 225 Gsm compared with corresponding gate-passes and delivery challans. It was cross checked and compared with purchase order. All this revealed clear mis-declaration of the grammage and description of the final product. The investigation further revealed that the grey board supplied by the first appellant herein in the name of kraft liner are similar and identical to the grey boards received from every mills and they were used in the manufacture of detergent powder cartons by M/s. Colour Carbons Ltd. The statement given by the officers of the Colour Carbons Ltd. revealed that the price charged by the first appellant and some other manufacturers were inclusive of excise duty except Papco Mills who showed excise duty paid at ad valorem 30% (BD) 5% of BD as SED. They have also confirmed that the goods supplied by the first appellant herein were board and the same have been approved by their laboratory vis-a-vis their purchase order and also the end-product namely, detergent cartons. The officers also examined the said cartons manufactured by them which were supplied to M/s. Hindustan Lever Ltd. and Govt. Soap Factory, Bangalore which all confirmed the statement made by the officers of the Colour Carbon Ltd. The statement of Shri Sohan Bagla, Production Manager in Paper Convertor Metal Box Ltd. was also recorded on 7-7-1987 who confirmed that grey board supplied by the first appellant herein had been used for the manufacture of detergent cartons for Hindustan Lever Ltd. He also confirmed having received grey board of 250 Gsm and 325 Gsm which has been used for the manufacture of detergent cartons for M/s. Hindustan Lever Ltd. The statement of representative of M/s. Metal Box Ltd. was also taken and documents and purchase orders and test reports were also examined by the Investigating Officer which revealed that the first appellant herein had deliberately misdeclared the grammage of 225 Gsm instead of 335 Gsm. This was also confirmed by the statement of M/s. J.R. Patel, Director of the first appellant and also Shri B.P. Patel, Admn. Officer, Shri N.B. Joshi, Production Officer and Shri M.C. Mistry, Excise-in-charge who all confirmed that they were maintaining falls record deliberately right from the beginning that is, production stage in respect of project kraft liner cleared to M/s. Metal Box. Investigations were also conducted from the firm Jordin Hendersons Ltd., Bombay who had also received 22 consignments of alleged ‘Kraft Liner’ from the first appellant herein. The statement of one Shri O.D-Costa, Branch Manager, was also recorded to confirm about such supplies by the first appellant herein. Details of purchase, grammage, quantity and all other documents were also seized and recorded.
7. On 6-9-1980, the officers of DRI, Anti-Evasion detained the alleged P&W Paper cleared by the first appellant herein from Poly cone Paper Pvt. Ltd. and six representatives samples from the said goods were sent to Dy. Chief Chemist, Bombay for test and obtained his opinion. The report indicated that the samples had the grammage from 289 Gsm to 355 Gsm and thickness from 0.45 mm to 0.60 mm. The results in respect of samples seized from Colour Carton, Bombay also revealed the grammage between 237 to 304 Gsm and thickness from 0.36 mm to 0.46 mm. The test report of 13 samples drawn from the seized goods from the first appellant’s factory also revealed the Grammage ranging from 186 Gsm to 331 Gsm and thickness from 0.27 to 0.47 mm. The test results gave an opinion that definition of Board as given by ISI may be valid. The ISI glossary of term relating to paper and pulp based packaging materials published in 1975 on page 4, board is defined as paper of substance not below 180/gm.2 (generally above 250 gm/2), characterised by its rigidity and on page 10 paper is defined as “A sheet material essentially made of felted and interlacing cellulose fibres of natural origin. Result also revealed that the raw material used by the first appellant herein in manufacture of kraft paper are rice straw. Hessian or jute, Bamboo pulp and waste paper etc. The chemical mainly used in the manufacture of pulp were caustic lye, sodium sulphate and soda ash. The test report dated 6-6-1980 also revealed that the pulp obtained by the process adopted by the manufacture is not sulphate pulp that is kraft pulp. The report also stated that blend of different types of pulps were used which include in some cases kraft waste also for manufacture of kraft liner. The report also stated that it was not clear that kraft waste used by the party is actually waste obtained from genuine kraft paper or it is pulp from materials which have appearance similar to kraft paper. He further stated that even taking for granted that waste paper used is from kraft paper the percentage of kraft waste is much less than 80% a minimum limit of kraft pulp laid down in ISI specifications for kraft liners. The report also stated that the product is known as Board.
8. From the entire investigation and recording of statement and examination of records from various parties it generally transpires that the first appellant herein had been supplying Board of higher grammage while disclosing in GP-ls, invoices and delivery slips with lower grammage. They have also maintained their basic records wrongly only to protect their clearances by showing wrong grammages in the clearing documents. Investigations further revealed that they had full knowledge of the wrong maintenance of records in respect of paper supply of grammages 335 Gsm to M/s. Jordin Hendersons Co., Bombay. Thus it appeared that the said deliberate and intentional act was done with attempt to defraud Government revenue while suppressing vital facts pertaining to paper and board. It also appeared from the constitution of the first appellant that M/s. Tabulor Packaging and Industrial Paper Conver-tors and Polycone Paper that they were interested in the affairs of each other as some of Directors were having direct/indirect connections with every unit partners/Directors etc. In the light of the investigations conducted the first appellant were charged for contravention of provisions of Rule 173F, Rule 173G(1) read with Rule 9(1), Rule 173B Rule 173G(2) read with Rule 52A and Rule 173G(4) read with Rules 53 and 226 of the Central Excise Rules, 1944, in as much as they had made the following contraventions as stated herein below :
(i) They, as discussed above, by reasons of fraud and wilful misstate-ment of facts filed false classification lists from time to time.
(ii) They failed to determine their liability to duty and removed the goods manufactured by them from their manufacturing premises without paying duty at the appropriate rate leviable thereon, i.e. (a) 40,90,555 kgs. of ‘boards’ cleared in the guise of so-called packing and wrapping paper, kraft liner A&B, M.G. kraft paper, corrugated media, deluxe and super kraft paper etc., as detailed in the chart enclosed with the show cause notice (Form C-2).
(b) they entered incorrect particulars in the gate-passes issued by them, which they had reason to believe to be false, in respect of goods mentioned at (ii)(a) above.
(c) they wrongfully availed of the concessional rate of duty provided for in Notification No. 45/73 dated 1-3-1973 as amended by Notification No. 11/73-C.E., dated 30-4-1973, Notification No. 19/74-C.E. dated 1-3-1974 and Notification No. 128/77-C.E., dated 18-6-1977.
(d) they failed to maintain true and complete account in respect of goods manufactured removed by them in the statutory records i.e. in form RG. 1, in respect of goods mentioned at (ii)(a) above and also in respect of 9465 kgs. of so-called kraft liner ‘A’, packing and wrapping paper ‘A’ and ‘B’ and M.G. Super kraft paper, valued at Rs. 34,114.63 seized at their factory premises, which acts of contravention on their part appear to have been committed from time to time by reason of fraud and wilful mis-statement and suppression of facts, with intent to evade payment of duty to which they have not title in law, amounting to offences falling under the provisions of Rules 9(2), 52A, 226 and Clauses (a), (b) and (d) of Rule 173Q of the Central Excise Rules, 1944.
9. Therefore, the first appellant herein called upon to show cause the following charges.
(i) Why the Central Excise duty at the appropriate leviable rate on the goods mentioned against the charge (ii)(a) in the preceding para-24 amounting to Rs. 37,76,800.64 BD + 34,583.36 special excise duty, (total Rs. 38,11,384.00) on 40,90,555 kgs. of Boards valued at Rs. 1,59,56,640.95 as per charts enclosed with the show cause notice and marked C(2) should not be recovered from them, under the provision (a) and (b) of sub-rule (1) of Rule 10 of the Central Excise Rules, 1944 as it stood before being omitted vide Notification No. 177/80-C.E., dated 12-11-1980 and corresponding proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944;
(ii) Why the excisable goods weighing 9,465 kgs. valued at Rs. 34,114.63 seized from their possession as mentioned hereinabove, should not be confiscated under the provisions of Rules 226 and 173Q(1) of the Central Excise Rules, 1944;
(iii) Why penalty should not be imposed on them as provided under Rules 9(2), 52A, 226 and 173A(1) of the Central Excise Rules, 1944, on the ground of having committed contravention of Central Excise Rules mentioned in the preceding paras;
(iv) Why the land, building, plant, machinery etc. belonging to them and used in the manufacturing, storage and removal of the offending goods and any other excisable goods as such land or in such building or produced or manufactured with such plant or machinery shall not be confiscated under Clause (a) of Sub-rule (2) of Rule 173Q of the Central Excise Rules, 1944.
10. The other parties namely M/s. Tubular Packaging Pvt. Ltd., Vapi (2) M/s. Industrial Paper Convertors, Vapi (3) M/s. Supertex Paper, Surat, (4) M/s. Polycone Paper Pvt. Ltd., Bombay, and (5) M/s. Colour Cartons Ltd., Bombay were also called upon to show cause against confiscation of goods seized from their possession, custody or control as detailed below respectively.
(i) 7 reels weighing 1,683 kgs. and valued at Rs. 5,863
(ii) 3 reels weighing 6,25 kgs. and valued at Rs. 1,835
(iii) (iii) 10 reels weighing 15 kgs. and valued at Rs. 6134.32
(iv) 20 reels and 376 packets weighing 12,901.6 kgs. valued at Rs. 54,106.60
(v) 111 reels weighing 26,739.00 kgs. valued at Rs. 1,45,804.12.
11. The parties herein filed a detailed written replies and contested the proceedings. They were also given opportunity to cross examine the witnesses in a very detailed and protracted proceedings. In the meanwhile the parties having approached the Gujarat High Court and also succeeded in getting directions. Ultimately, the proceedings were concluded and the learned Collector after a very detailed examination of the charges, replies made and after giving entire extracts of the evidence in his order passed the impugned order confirming the following :
(i) The goods weighing 9465 kgs. valued at Rs. 34,114.63 ps. seized from M/s. Vapi Paper Mills Ltd. GIDC, Vapi, District Bulsar, are liable to confiscation. Accordingly, under Rules 173Q(1) and 226 of the Central Excise Rules, 1944, I confiscate the same, and order that the assessee shall pay a fine of Rs. 8,500 in lieu of confiscation within one month of receipt of this order by them.
(ii) I order that M/s. Vapi Paper Mills Ltd. GIDC, Vapi, District Bulsar, shall also pay differential duty on the substance of 225 Gsm and above treated as “Board”, on the basis of details mentioned in the worksheets to pages 13 and 25 of annexure C(2) enclosed with the show cause notice, under provisos (a) and (b) of Sub-rule (1) of Rule 10 of the Central Excise Rules, 1944, as it stood before being omitted vide Notification No. 177/80 dated 12-11-1980 and corresponding proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944.
(iii) I also impose a penalty of Rs. 1,50,000 under Rule 173Q(1), Rs. 2,000/- under Rule 9(2), Rs. 1,000 under Rule 52A and Rs. 2,000 under Rule 226 of the Central Excise Rules, 1944, respectively, on M/s. Vapi Paper Mills Ltd. GIDC, Vapi District-Bulsar.
(iv) Considering the facts of the case, I do not propose to pass any order with regard to confiscation of the land, building, plant, machinery etc. belonging to M/s. Vapi Paper Mills Ltd. GIDC, Vapi, District-Bulsar, used in the manufacture, storage, and removal etc. of the offending goods.
(v) I also order confiscation of the goods :-
(i) weighing 1683 kgs. valued at Rs. 5860 seized from the possession of M/s. Tubular Packaging Pvt. Ltd. GIDC, Vapi, District Bulsar.
(ii) weighing 625 kgs. valued at Rs. 1035 seized from the possession of M/s. Industrial Paper Convertors, GIDC, Vapi, District-Bulsar,
(iii) weighing 1,115 kgs. valued at Rs. 6134.32 seized from the possession of M/s. Supertex Paper, Salabatpura, Surat,
(iv) weighing 12,901.6 kgs. valued at Rs. 54,106.60 seized from the possession of M/s. Polycone Paper Pvt. Ltd., Andheri, Bombay.
(v) weighing 26,739 kgs. valued at Rs. 1,45,804.12 seized from the possession of M/s. Colour Cartons Ltd. Bhandup, Bombay under Rule 173Q(1) and Rule 9(2) of the Central Excise Rules, 1944.
However, I give each of them an option to pay a fine of Rs. 1500 (ii) Rs. 450, (iii) Rs. 2,000, (iv) Rs. 10,000, (v) Rs. 60,000 in lieu of confiscation respectively, within one month from the date of the receipt of the order by each of them.
12. The appellants had been contesting the commencement of these proceedings by filing Special Civil Application No. 857/81 before the Hon’ble Gujarat High Court which was pending and in the meantime when the impugned Order-in-Qriginal was passed, they amended the application and challenged the same.
The Hon’ble High Court set aside the penalty and confiscation order passed by the Collector with regard to the quantum of duty to be demanded. Based on this order, the appellants and the department were directed to have a joint sitting to. issue the same. The department accordingly demanded an amount of Rs. 28,72,391.18 vide order dated 10-5-1988. The first appellant again challenged the method of computation adopted by the department and contended that only an amount of Rs. 12,96,221.56 can be demanded in terms of the order of the Collector. The first appellant paid an amount of Rs. 15 lacs in terms of the High Court Interim Order dated 25-9-1984. The first appellant aggrieved by the method adopted by the department determined the quantum of duty filed an appeal to Collector (Appeals). The Collector (Appeals) passed an Order-in-Appeal issued on 20-3-1990 which is a subject-matter of appeal in E/2538/90-C by order dated 16-8-1991, the Hon’ble Gujarat High Court disposed of Special Civil Application No. 857/81 filed by the first appellant directing the applicants to file art appeal under Section 35B of the Act within six weeks against the Order-in-Original passed by the Collector (Appeals) Baroda. This appeal is subject-matter before us in E/4095/91-C.
13. The ground made out by the first appellant in Appeal No. E/4095/91-C against the Order-in-Original passed by the Collector (Appeals), inter alia, are besides making a ground of violation of principles of natural justice inasmuch as two witnesses were not called for cross examination. They contended that they had filed classification list in respect of kraft paper specifying grammages upto and more than 300 Gsm. The classification had been approved by a Proper Officer. The order of the Collector in denying the exemption under Notification No. 1213/77-C.E. is without jurisdiction as the classification list filed by the first appellant claiming exemption under the said notification had been duly approved by the proper officer and were not reviewed under the relevant provisions of the Act. Hence, the Collector of Central Excise took the view that the appellants trial of 225 Gsm to be treated as board rejected the exemption under Notification No. 128/77 to such material. It is pleaded that even in terms of ISI that board is a paper of a substance not below 180 Gsm (generally above 250 Gsm) which is characterised by its rigidity, hence mere grammage of the material is not a criterion to classify it as a paper or board but its flexibility or rigidity is the criteria. The Collector had failed to give a cogent and convincing reason to consider the material of grammage to 225 Gsm and above its rigidity and it is a Board, merely because kraft liner manufactured and cleared by them which is used for making carton it would automatically make such goods rigid. The reliance placed by Collector on dictionary meaning of the term ‘rigidity’ is incorrect as the dictionary meaning would be misleading and cannot be adopted in classifying the products under Central Excise Tariff. The first appellant has challenged the Collector having omitted the vital evidence used by DGS&D wherein kraft paper was specified to be grammage upto 250 Gsm. The main ground of attack on the part of the first appellant is that the appellants were barred by time, inasmuch as they had been filing classification list from time to time claiming that the kraft paper manufactured by them would be eligible for exemption under Notification No. 128/77. These classification lists were duly approved by the proper officer even though the first appellant has furnished that the grammage of their kraft paper would be in the range within more than 300 Gsm. The monthly RT-12 returns had been duly approved. Under these circumstances, the department alleged suppression of facts not to invoke extended period of limitation.
14. The first appellant have also taken the ground that quantification of duty demanded in the impugned order is contrary to the provision of Section 4(4)(d)(ii) of the Act. It is pleaded that this section provides for deduction in pursuance of effective duty payable to arrive at the assessable value. In computing the differential duty, the authorities have not given deduction for the excise duty now being demanded. It is pleaded that there is a fundamental error in the calculations made by the department. The price charged by them from the customers are cum duty prices. The invoices do not indicate excise duty as a separate element. Only the consolidated amount is indicated in the invoice and that this is the normal practice followed in the paper industry. In addition the prices charged by the first appellant from the customers is decided by the market conditions wherein the customer is not concerned about the rate at which the excise duty is being paid by the first appellant but is concerned only with the total price payable by them. Therefore, they stated that only the total price has been indicated in the invoice. It is pleaded that the correct manner of working out the duty payable is that the effective rate of duty for kraft paper and board is taken 30%. Then during the material period, under Notification No. 128/77, the exemption to the extent of 60% was available. In other words duty payable was only 12% (40% of 30%). The first appellant had paid 12% as duty while effecting clearance of the goods. The department had taken the stand as the goods were not available, the duty payable should be 30% as against earlier rate of duty 12%. However, the department had levied 30% duty at the rate of old approved assessable value. The first appellant have contested that it is not a correct method of valuation. It is pleaded by them that the department had arrived at the old approved assessable value by taking 12% as excise duty on the invoice price on the assumption that 12% is the rate of duty leviable. If the department now says that 30% is the rate of duty, the assessable value has to be redetermined/reworked afresh by deducting from the invoice prices, duty payable at the rate of 30%. If duty at the rate of 30% is not being deducted it would mean that the department is not giving deduction for the excise duty being demanded by the first appellant. They further pleaded that it is contrary to the specific provisions contained under Section 4(4)(d)(ii) of the Act. They stated that the manner adopted by the department goes contrary to the very formula itself which has been applied throughout the country. The department always has been asserting that assessable value plus duty payable should be equal to cum duty price. This view has been now accepted by different Courts/Tribunal in various decisions specially in Bata Shoe Co. (P) Ltd. v. CCE, reported in 1985 (21) E.L.T. 9 (S.C.) and in the case of Asstt. Collector of Central Excise v. MRF Ltd., reported in 1987 (27) E.L.T. 553 (S.C).
15. The first appellant has also relied upon several rulings of High Court and that of the Tribunal. They further contended that in view of the foregoing grounds no differential duty need be paid by them and hence imposition of penalty and confiscation of goods ordered is not correct.
16. The other appellants have also challenged the order and confiscation of goods made from their respective factories. M/s. Colour Carbon Ltd. contended that the charges levelled against them are not established and they have not colluded in any of the offence, hence they cannot be penalised. They have relied on the rulings rendered in the case of Merck Spears v. CCE -reported in 1983 (13) E.L.T. 1261. M/s. Polycon Paper Pvt. Ltd. in their appeal have also challenged the confiscation of goods seized from their factory and imposition of fine of Rs. 10,000. They have also, inter alia, taken similar grounds as that of the first appellant and M/s. Colour Carbons. The grounds made out by M/s. Tubular Packings and M/s. Industrial Paper Convertors likewise similar and identical grounds taken by the first appellant and M/s. Colour Carbons referred to above.
17. We have heard Shri V. Sridharan, learned advocate for the appellants and Shri L.N. Murthy, JDR for the respondents. The main crux of the arguments of the learned Advocate has been that the demands are barred by limitation and that computation of duty has not been properly done as per Section 4(4)(d)(ii) of the Act. He brought to our notice the rulings rendered by the Tribunal in the case of Kamal Traders v. Collector of Customs, reported in 1991 (52) E.L.T. 43, Sunrise Agencies v. CC, reported in 1986 (26) E.L.T. 286 – Order No. 279-280/91-C dated 20-3-1991 rendered in the case of Convey Printers Pvt. Ltd. v. Collector of Customs, Madras, Jayant Paper Mills v. CCE in Order No. 1/84-C dated 3-1-1984, Simpled Trading Co. and Ors. v. CC in Order No. 64-66/91-C dated 16-1-1991 and Order of the Hon’ble Madras High Court dated 17-6-1989 rendered in Writ Petition No. 98/67 and Ors. of 1987 in the case of Harak Chand and Ors. v. Union of India and Ors.. He has pointed out that in all these rulings, a view has been taken that upto grammage of 225 Gsm would be printing and writing paper.
18. Arguing on the aspect pertaining to the benefit of the Notification No. 15/78, learned Advocate Shri Sridharan pointed out that the various items supplied by the first appellant is commonly known in the market as Grey board or Grey unbleached board. He pointed out that the duty admittedly has been demanded by the department only on the ground that what the first appellant supplied is not paper but only Board. Therefore, admittedly they cannot be called as kraft paper. Hence, the first item mentioned in Serial No. 1 of the table to the Notification No. 5/78 would not be relevant. He submitted that the Chemical Examiner has stated based on the position of the pulp that the item cannot be called as kraft liner. Hence, the second item mentioned in serial No. 1 of the table to the Notification No. 15/78 is also not relevant. It is nobody’s case that the item supplied is a corrugated media and hence Item No. 3 mentioned in. serial No. 1 of the table to the said notification is also not relevant. The learned advocate pointed out that even based on the department’s own case as contained in the learned Collector’s Order the product of the first appellant cannot be covered by serial No. 1 of the table of the said Notification. Thus the duty payable for the product in question is only 30% ad valorem. Based on the correct rate of duty to 30% and redetermination of assessable value in accordance with Section 4(4)(d)(ii) the first appellant had worked out the duty liability jointly with the Supdt. and it worked out to Rs. 12,96,221.56 lacs and as against this, the first appellant has already deposited Rs. 15 lacs. Therefore, he submitted that the quantum of duty has to be reworked out by giving the benefit of the rulings cited by him in which it has been held that grammage upto and inclusive of 225 Gsm is paper. The department has proceeded to even confirm duty for 224 Gsm, the duty liability has to be again worked out. He further contended that the assessable value has also to be worked out in terms of Section 4(4)(d)(ii) of the Act and if re-working of the quantification and redetermination of duty is done then the liability would not be more than Rs. 12,96,221.56 lacs. This he contended is on the event of the Bench holding that there has been mis-declaration and suppression on the part of the first appellant in respect of the item manufactured and cleared by them. The learned advocate pointed out that although there has been mis-declaration and the item has been described as kraft paper but yet the real cause of demand is based on the grammage and as the grammage had been clearly mentioned and described in the classification list and the same had been approved by the department, therefore, it cannot be said that there has been mis-declaration and the extended period could not be applied in this case. The learned advocate did not seriously argue as regards the nature of the item being not paper beyond 225 Gsm in the light of the ruling of the Tribunal in the case of Kama! Traders case and also on the enormous evidence on which the case has been built up. He only pleaded that declaration having been made with regard to the grammage in the classification list, the first appellant, therefore, cannot be held to have suppressed the correct facts in the case. He however, admitted that the classification did not disclose that the item is a grey board but it had been declared as kraft paper but his contention is that as there has been no collusions between the purchasers and the manufacturers, the extended period cannot be invoked nor penalty be imposed. He further pointed out that Rule 209A of the rules was introduced only on 1986 and it does not have retrospective effect and hence no penalty can be imposed under this rule against the purchasers from whom the goods have been seized.
19. Shri L.N. Murthy, learned JDR appearing for the department submitted that the Tribunal as well as the Madras High Court laid down that the grammage upto 225 Gsm would be paper but however, it would not include 225 Gsm but would be only less than 225 Gsm and hence, the Collector having considered the grammage upto 224 Gsm as paper is maintainable. Therefore, he submitted that there in no need for recalculation of duty in respect of clearances effected beyond 225 Gsm and above. He pointed out that the matter pertaining to re-determination of duty was referred again by the Hon’ble High Court of Gujarat and the same had been reworked out. The first appellant had filed the appeal against this and the learned Collector (Appeals) has considered their plea and rejected the same and he would reiterate the said findings. Shri Murthy pointed out that the first appellant has not challenged the aspect pertaining to mis-declaration in the classification list and, therefore, the mere fact of mentioning the grammage in the classification list by itself would not be sufficient to come to conclusion that they are not liable to be proceeded for extended period. He pointed out that the appellant were clearing Boards of a higher grammage in the guise of kraft paper. There has been manipulation of records and in the face of the entire evidence and the charges having been proved and admitted, the extended period is available and the Collector’s order in this aspect of the matter is sustainable in law. He pointed out that the party was under SRP Procedure and claiming the benefit of the notification and, therefore, they were required to furnish correct details and establish their claim. In this case, the party had clearly mis-declared the board as kraft paper and the department has proceeded only on the basis of this portion of the declaration. It is only after a detailed and cumbersome investigation, it came to light about the modus operandi adopted by the first appellant in misusing the benefit of the notification. In any event of the matter the extended period is available. In this regard he further contended that the notification did not speak about grammage and, therefore, it was not material for the department to have checked on this aspect. The benefit was only for grey paper and as the party has declared the same as grey paper, the department had proceeded on those lines and hence the plea of the first appellant in this regard has to be rejected. He has relied on the rulings of the Hon’ble Supreme Court in the case of Jai Shree Enginerring v. CCE as reported in 1989 (40) E.L.T. 214 and also that of TISCO v. Union of India – reported in 1988 (33) E.L.T. 297 and that of the Tribunal in the case of Venus Papers Mills v. CCE – reported in 1990 (50) E.L.T. 410.
20. Countering the arguments of the learned JDR Shri V. Sridharan, learned advocate has pointed out to the order of the Asstt. Collector pertaining to the reassessment and submitted that the department in fact had not worked out the assessable value at all and there was no discussion by the Asstt. Collector on this aspect of the matter. Therefore, it required re-working as per Section 4(4)(d)(ii) of the Act.
21. We have carefully considered the submissions made by both the sides and perused the records and have examined the entire case from all aspects of the matter. We have taken into account the submissions made by the learned advocate particularly his submission that he is not contesting on the merit of the findings but is confining himself on three aspects of the matter, that is, (i) pertaining to the grammage of the paper upto 225 Gsm and all clearances made upto and inclusive of 225 Gsm is to be considered as paper in the light of ruling cited by him.
(ii) Although there is mis-statement and mis-declaration and the investigation and the statement of witnesses and all the records disclosed that it is not kraft paper which is cleared by the first appellant but it is ‘board’ and the same is not eligible for the benefit of the notification in question but yet the department had accepted and approved the classification list. It has to be presumed that they are aware of the facts and hence extended period cannot be invoked in the present case.
(iii) The assessable value has not been properly worked out in terms of Section 4(4)(d)(ii) of the Act and the matter may be required to be worked out in the light of the rulings of the Supreme Court/High Court and the Tribunal. We are confining ourself on these three aspects of the matter, as in view of the admitted position it is not necessary for us to go into the various aspects of the matter concerning merits and the evidence which has been enormously collected, analysed and discussed by the learned Collector to come to his conclusion in the impugned order-in-original. Taking the first submission first the aspect pertaining to the grammage which determines between paper and paper board has now been settled in the light of the rulings of the High Court of Madras in the case of Hark Chand v. Union of India (supra) as in the case of CC v. Kamal Traders (supra) and in the later unreported rulings noted above. The Hon’ble Madras High Court ruling has taken into account the order of the Tribunal rendered in the case of Sunrise Agencies v. CC and has laid down that grammage beyond 225 Gsm would be paper board and less than that would be paper.
22. In Kamal Traders v. CC, the Tribunal went into very aspect of the matter and has taken into consideration Indian Standard (IS. 4661/1968) glossary of terms used in paper trade and industry and other literature defining the various terms and has come to conclusions in para 2.2 at p. 44 of the report as follows:
“It has also to be noted at this stage that the goods imported in this bunch of appeals by various importers include paperboard both upto 225 GSM and above that GSM. The Collector of Customs, Bombay, in his appeal has clearly admitted that the Custom House has accepted the paperboards upto 225 GSM as printing and writing paper in accordance with the judgment of CEGAT in the matter of Sunrise Agencies [1986 (26) E.L.T. 286]. In other words, the dispute in this bunch of appeals relates only to paper and paper-board exceeding 225 GSM and the benefit of the aforesaid notification in respect of paper and paperboard upto 225 GSM involved in these appeals should be extended to the importers.”
23. In Convey Printers Ltd. the Bench has clearly indicated that grammage beyond 225 Gsm will be eligible for exemption under Notification No. 341/76 and that upto 225 Gsm, the goods will be eligible for exemption under Notification No. 55/56.
24. In view of these rulings the learned Collector’s finding that grammage upto 224 Gsm alone would be considered as paper is not correct and his finding requires to be modified to this exteent that grammage upto and in inclusive of 225 Gsm has to be considered as paper and beyond 225 Gsm will be ‘board’. In this regard all these clearances which has been made upto and inclusive of 225 Gsm would be entitled to the benefit of exemption and the plea of the first appellant in this regard has to be accepted.
25. As regards the second contention pertaining to the extended period of limitation, the learned advocate had raised a very interesting plea inasmuch as that although the mis-declaration and mis-statement is admitted but that by itself should not be a reason to hold that the first appellant had suppressed the material facts pertaining to the grant of exemption, and in view of the department themselves having approved the classification list. We do not see any force in this argument. The assessee is claiming the benefit of the notification and it is for the assessee to truthfully and correctly furnish all the particulars and not leave any aspect of the matter in doubt. The declarations made by the first appellant in the classification list as extracted (supra), and from this it is quite clear that the first appellant had deliberately declared the goods as kraft paper and other forms of paper despite having full knowledge that it is a board. The learned Collector has summarised in Order-in-Original on this aspect of the matter in great detail in paragraphs 31 to 37 of this order. Paragraphs 32 to 36 concerns about the evidence and also the test results in respect of the goods seized. Para 37 deals about time bar and other contentions raised by the first appellant. Para 31 and para 36 is extracted herein below :
” 31. The issue involved in the case is about assessment of substance described variously as paper by M/s. Vapi Paper Mills Ltd., Vapi, in their classification lists as mentioned in the show cause notice for which exemption has been claimed under Notification No. 45/73 dated 1-3-1973 as subsequently superseded by Notification No. 128/77 dated 18-6-1977.
The duty under Central Excise Tariff 17(2) was 40% ad valorem during the relevant period which was the tariff rate.
Initially exemption to paper all sorts other than “paper board” and certain types of paper as specified therein was available under Notification No. 45/73 dated 1-3-1973 as amended to the extent of 75% of the duty leviable on the first 1000 M. tonnes, 25% of the duty leviable on the next 1000 M. tonnes and 15% of the duty leviable on the next 2000 M. Tonnes. Later on this Notification was superseded by Notification No. 128/77 dated 18-6-1977 under which exemption was available only to paper. Board and certain other types of paper were out of the purview of this exemption notification. The exemption was based on the installed capacity, it being to the extent of 75% of the duty leviable upto 2000 tonnes installed capacity, 60% of the duty leviable in excess of installed capacity of 2000 tonnes and upto 5000 tonnes and 50% of the duty leviable in excess of installed capacity of 5000 tonnes and upto 10,000 tonnes respectively.
In their classification list No. 59/77 dated 18-4-1977, they claimed exemption under Notification No. 45/73 for packing and wrapping paper. Thereafter, they filed various classification lists as mentioned in the show cause notice and claimed exemption under Notification Nos. 15/78 and 128/77.
Notification No. 15/78 dated 24-1-1978 as amended refers to the kraft paper including paper and paper board exceeding 65 Gsm for which the rate indicated is 40% which is also the tariff rate. Notification No. 45/73 dated 1-3-1973 as amended referred to paper all sorts other than paper, boards etc. exceeding 25 GSM and to exemption on first 1000 metric tonnes to the extent of 75% of the duty leviable, next 1000 metric tonnes to the extent of 25% of the duty leviable and the next 2000 metric tonnes to the extent of 15% of the duty leviable thereon. Notification No. 128/77 dated 18-6-1977 referred to exemption on the basis of installed capacity as indicated above.
M/s. Vapi Paper Mills Ltd., Vapi in short manufactured kraft paper known as kraft liner, as stated in Notification No. 15/78 and claimed exemption on the basis of the installed capacity as available under Notification No. 128/77 dated 18-6-1977.
36. From the discussions in the foregoing paras, it is noticed as under :-
The material supplied by M/s. Vapi Paper Mills Ltd., Vapi, under nomenclature of paper with various descriptions like “packing and wrapping paper” M.S. kraft paper, corrugated media, M.G. delux and super kraft paper, kraft liner ‘A’ and ‘B’ etc. generally of 225 gsm. and above has been to the manufacturers of cartons, cones, boxes etc. Those manufacturers have considered the materials supplied by M/s. Vapi Paper Mills Ltd., Vapi as “board” as is clear from various records, extracts of which are given above.
The definition of “board” as given in Indian Standards is that “it is a paper of substance not below 180 gsm. (generally above 250 gsm) characterized by its rigidity. So far as rigidity is concerned, we have seen that since the material of 225 gsm, and above is used for cartons and boxes etc., it is rigid in nature. It has also been stated as thick in some of the test paper reports. This material has also been stated to be “grey unbleached board” or “brownish grey coloured board” by the Deputy Chief Chemist, Bombay.
It was noticed from the samples drawn from the seized goods, that the grammage shown of the material was lower than actually found. In the case of M/s. Colour Cartons Ltd. Bombay, it was described in the documents as of 225 gsm. and above and whereas on test it was found of 335 gsm. and above. The same type of variation has been reported by M/s. Metal Box India (P) Ltd., Bombay.
Kraft liner includes “paper” as also “board”. Kraft liner therefore does not restricted only to paper.
In view of the above discussions, and so far as the material supplied by M/s. Vapi Paper Mills Ltd., Vapi, to their customers with grammage 225 and above, which in effect has found to be 325 and above, was nothing else but “board” as understood under Indian Standard Specifications, Board’s Tariff Advice as referred to by them, as also rigidity and trade usage, their contention that “paper” as variously described as above of even 300 gsm. or above is to be treated as ‘paper’ is not acceptable on the basis of technical specification, trade practice, tariff advice, and laboratory test reports. Since the material manufactured and cleared of grammage 225 and above, has been found to be ‘board’, it has to be treated as “board”.
Thus it is established beyond any doubt that the removals of the material of grammage 225 and above, under the various description of “paper” by the assessee during the relevant period as mentioned in the show cause notice were clearly in suppression of facts that their material was “board” which was not eligible for exemption under Notification No. 45/73 dated 1-3-1973 and Notification No. 128/77 dated 18-6-1977 as ‘board’.”
25(a). We do not find any infirmity in these findings and it requires to be confirmed except with regard to the benefit available to paper of grammage 225 Gsm as stated earlier.
26. As has been pointed out by learned JDR, the Notification does not require disclosure of the grammage but deals with exemption to paper board. Therefore, the mention of the grammage made by the first appellant in the classification list is not material. The calculated manner by which the first appellant has adopted a modus operandi to suppress the material facts by mis-declaring the true nature of the goods in G.P. 1s, invoices and in records and also in view of the admission made in voluntary statements by the officers of the first appellant; it cannot be now said that the first appellant had no intention to evade duty. The admission of the guilt to evade duty has become explicit and clear from the various statements of the officers of the first appellant. On a perusal of the entire statements made by various witnesses it is very clear that the first appellant went about clearing board by falsely declaring as kraft paper with an intention to evade duty. It is not as though the first appellant had entertained some doubt on the nature of the paper. They were clearing the board for the purpose of manufacture of cartons, cones and for all other such purposes and the items had been used as intermediate product. The customers had clearly placed order and given specifications for supply of board for the purpose of manufacture in cartons, cones, boxes. The first appellant was also fully aware of the manner in which it was being put to use. In the classification list the product is clearly mis-declared as kraft paper and with a view to suppress the material facts and this has been deliberately done with a intention to defraud and evade duty. Therefore, there is absolutely no force in the plea of the learned advocate and it deserves to be rejected. In a similar case coming up before the Tribunal in the case of Venus Paper Mills v. CC, the Bench rejected the similar plea and has held that there was a clear case of suppression as held in paras 18 to 23. The relevant paras 20 to 23 are reproduced.
“The appellants replied to this letter on 10-7-1980 stating that the quantity declared in the AL-4 application filed earlier was only an estimated quantity whereas the actual production never exceeded 1800 MT per annum. The endorsement dated 11-7-1980 on the AL-4 application dated 26-11-1979 reads as “AL-4 renewed for 1980-83 subject to confirmation of installed capacity.
We have already reached the conclusion that the installed capacity of the mills in fact exceeded 2000 M.T. per annum and hence the benefit of concessional rate of 75% duty under Notification 128/77 cannot be extended to the appellants. This being the factual position, we cannot hold that there was absence of suppression. The appellants have mis-declared the installed capacity of the mills in their letter of 10-7-1980, based on which the AL-4 licence was renewed for 1980-83 subject to confirmation of installed capacity. We also note that the classification list as earlier approved and also the application for licence prior to 1979, when the Notification underwent a change, had mentioned 36000 MT as installed capacity and even the classification lists for the period 1973 to 1977 contained 3 categories. From the above, it appears that subsequent to the issue of the Notification which altered the basis for concessional rate of duty from production to installed capacity the appellants mis-declared the installed capacity which amounts to a suppression of facts, entitling the Deptt. to invoke the extended period of limitation. The appellants’ plea on limitation is therefore rejected.
Regarding the issue of computation of the differential duty, we remand the matter to the Collector for the purpose of determining the amount, after deduction of the amount of duty actually paid from the sale price, in accordance with the provisions of Section 4(4)(d)(ii) of the CESA, 1944. In view of the fact that we have upheld the demand of differential duty for the entire period from 18-6-1977 to 31-3-1982, the levy of penalty upon the appellants is sustainable. However, having regard to the facts and circumstances of the case we are of the view that the penalty imposed is disproportionate to the amount of duty demanded. Hence, we reduce the penalty to Rs. 4 lacs which works out to approximately 25% of the duty demanded.”
27. The Hon’ble Supreme Court of India in the case of TISCO v. Union of India (supra) had also occasions to examine on this issue on suppression arid has laid down the law on this aspect of the matter.
The said findings given in paras 30 to 31 is incorporated herein below :
” 30. The next aspect of the matter is whether the steps for realisation of the excise duty were barred by time. Prior to 1980 excise duty was levied by the department on every item of goods produced before they left the factory premises. Since 1980 a self removal scheme was introduced. Commensurate with that scheme Section 11 A(l) in the Central Excises and Salt Act, 1944 was enacted. With the introduction of the self removal scheme producers were free to remove goods by assessing themselves. The manufacturer is required to file a classification list. When the classification list is approved, the manufacturer is required to assess the duty himself and deposit them in an account meant for that purpose. To meet the situation, Section 11 A(l) was enacted which laid down that when any duty of excise has not been levied or paid or has been short-levied or short-paid, an Officer of the Central Excise department may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid. It thus followed that steps for realisation of duty, not paid, had to be taken within six months from the relevant date. A proviso, however, was added to it which reads as follows :
‘Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words ‘six months’, the words ‘five years’ were substituted.’
The proviso extended the period within which duty, not paid, could be realised to five years from six months. That extension is available to the department only if the non-payment or short-payment has been occasioned by fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act. At the lowest, upon the findings recorded by me earlier, it is elementary that there was mis-statement or suppression of facts. The petitioner at no point of time declared that it was clearing cranes. It tried to take shelter under an application in Form L-6 in a manner which was, to say the least, not a complete disclosure. The crane was ment not for maintenance of a plant, but was meant to be used in production of processing of goods in a new plant. In that view of the matter, the department is entitled to the benefit of the extended period of limitation set down in the proviso to Section 11 A(l).
31. Learned counsel for the petitioner contended that there was no fraud or collusion or wilful mis-statement of facts by the company and, therefore, the six months rule should apply in the present case. It is not necessary to observe that there was fraud or collusion on the part of the company, but it is obvious that there was as least mis-statement and wilful suppression of facts. The petitioner was not entitled to the benefit of the exemption notification. It is not open to the petitioner to take up the position that it could not have conceded what it was contesting namely, that a crane had been manufactured. The facts are so obvious that the petitioner was required to declare it specially when the department and the assessee work on self assessment scheme. I have not the least doubt that the five year rule must rule this case. The steps, therefore, for realisation of the duty are obviously within time. The stand of the petitioner in regard to the bar of limitation must be squarely rejected.”
28. The Hon’ble Supreme Court again examined the issue of fraud, collusion, wilful mis-statement or suppression of facts are in the case of Jai Shree Engineering Co. (P) Ltd. v. CCE (supra) in para 10.
“10. Therefore, we have to find out whether there was any fraud, collusion, wilful mis-statement or suppression of facts for the Department to be justified to claim duty beyond a period of six months. This is a question of fact. It was found by the Tribunal that it was not possible for the appellant to contend that the appellant had made a correct statement. The Tribunal noted that the appellant could hardly contend that it discharged the onus of making correct declaration if it had withheld the description which was commonly used in respect of the goods not only by itself, but also by those from whom it bought or to whom it sold the products. The appellant itself was both buying and selling these nuts and as such there was no conceivable reason why these nuts were described as end-fittings in the declaration to the Department. It may be noted that in the declaration it was so described. The Tribunal was of the view, and it cannot be said not without justification that these goods should have been described as nuts because the appellant itself had treated these as nuts. Therefore, from this conduct suppression is established. The fact that the Department visited the factory of the appellant and they should have been aware of the production of the goods in question, were no reason for the appellant not to truly and properly to describe these goods. As a matter of fact, not only did the appellant, as found by the Tribunal, described these goods properly but also gave a misleading description.”
29. Therefore, taking into consideration the case law on this aspect of the matter which has been cited above, the learned Collector’s finding on suppression based on enormous evidence, which has not been controverted, has to be upheld and the duty demanded for the extended period has to be confirmed.
30. The third leg of the argument of the learned advocate is pertaining to the correct assessment of the value and rate of duty. The main grievance is that the learned authority despite remand of the matter has not applied its mind and has not calculated the duty in terms of Section 4(4)(d)(ii) of the Act. We have gone through the Orders-in-Original and Order-in-Appeal which are subject-matter of appeal in E/2538/90-C. There is a force in the submissions made by the learned advocate. We notice that there is not discussion at all on the plea taken by them but instead the learned Asstt. Collector has held that the duty was jointly worked out as per the terms of the Gujarat High Court and it worked out to Rs. 28,72,391.18 and the first appellant had in pursuance of Gujarat High Court order dated 26-9-1984 deposited Rs. 15 lacs and further the Court had directed by its order dated 7-12-1984 to give Bank guarantee if at all required to be furnished after the departmental officers confirmed the calculation of differential duty. The learned Asstt. Collector has held in the order that in pursuance of the direction of the High Court it was recalculated and it worked out to Rs. 28,72,391.18 is not clear as to whether the duty was calculated in terms of Section 4(4)(d)(ii) of the Act or not. As has been seen from the Venus Paper Mills Ltd. case, the Tribunal has accepted this plea of calculation in accordance with the provisions of Section 4(4)(d)(ii) of the Act and had remanded the matter for computation of the differential duty in accordance with the said provisions.
31. In view of this we have also to direct the lower authorities… the Assistant Collector for carrying out the said exercise in the light of the plea taken by the learned advocate and the citations noted. In any case, the appellants have clearly admitted that they are liable to pay Rs. 12,96,221.50. Therefore, the differential duty is required to be worked out by granting the benefit of clearances of paper upto and inclusive of 225 Gsm. in the light of the observations made by us.
32. As regards the personal penalty imposed on the first appellant, there has been no serious argument made by the learned advocate in this regard. Taking into consideration the seriousness of the case and the manner in which the first appellant has gone about to evade duty, we do not think that the imposition of personal penalty of Rs. 1,55,000 to be on the higher side and we confirm the same. As regards the confiscation, a fine of (i) Rs. 1500 (ii) Rs. 450 (iii) Rs. 2000 (iv) Rs. 10,000 and (v) Rs. 60,000 in lieu of seized goods on the various premises of the other appellants imposed under Rule 173Q(1) and Rule 9(2) of the Central Excise Rules, 1944. We do not see any infirmity in this order. They are all offending goods on which duty has not been paid and there is no denial that these goods were not purchased and cleared from the first appellant’s factory. Therefore, there is no reason to interfere with this portion of the Order and we confirm the same.
33. In the result the appeals are disposed of in the above terms.