ORDER
Jyoti Balasundaram, Member (J)
1. The above appeal arises out of the order of the Additional Collector of Central Excise, Kanpur confirming duty of Rs. 95,685.74 on 47298 pairs of PVC Soles manufactured and clandestinely removed by the appellants without payment of duty during the period from 24-7-1985 to 6-1-1986 when exemption notification 70/85 dated 17-3-1985 was rescinded by Notification No. 174/85 dated 24-7-1985, confiscating the goods with an option to redeem the same on payment of a fine of Rs. 2,000/- and imposing a penalty of Rs. 25,000/-.
2. The brief facts of the case are that on 7-1-1986 the Preventive Officers of Central Excise Division Agra visited the factory of the appellants who are holders of L 4 Licence for the manufacture of PVC soles classifiable under T.I. 36(2) of the Schedule to the erstwhile Central Excise Tariff. On physical verification of the stock lying in the factory it was noticed that 400 pairs of PVC soles valued at Rs. 5,600/- were not accounted for in the statutory RG 1 records. The proprietor of the firm tendered a statement on the same date that 400 pairs of PVC soles could not be entered in the RG 1 register as the factory had received the Licence only on 6-1-1986. Further interrogation revealed that the appellant manufactured and cleared 47,298 pairs of PVC soles valued at Rs. 6,28,904.90 during the period 24-7-1985 to 6-1-1986 and these goods were seized under the reasonable belief that they were liable to confiscation for contravention of the Central Excise Rules. A demand of duty was raised by show cause notice dated 10-4-1986 and the case was adjudicated by the Deputy Collector, Central Excise who confirmed the duty demand and imposed a penalty of Rs. 40,000/- and the seized goods were also confiscated with an option to redeem. Aggrieved by this order the appellants herein preferred an appeal to the Collector (Appeals), Central Excise, New Delhi who set aside the order of the Deputy Collector and remanded the case for fresh consideration by the proper authority after grant of opportunity of hearing to the appellants. Accordingly a show cause notice was issued on 24-1-1989 alleging suppression of manufacture and clearance of soles without payment of duty with intent to evade payment of duty and invoking the extended period of limitation under Section 11A of CESA, 1944. The appellants replied thereto contending inter alia that the setting aside of the order of the Deputy Collector does not empower the Department to enlarge the scope of the show cause notice by invoking the larger period of 5 years limitation which was not the subject matter of the original proceedings. The appellants also submitted that the goods manufactured and cleared during the period in dispute were not removed clandestinely but were cleared in good faith for want of knowledge of Notification 174/85 which rescinded the earlier notification granting exemption from payment of duty on such goods. The adjudicating authority confirmed the duty demand under Section 11A read with Rule 9(2), confiscated the seized goods under Rule 173Q with an option to redeem the same on payment of Rs. 2,000/- and also imposed a penalty of Rs. 25,000/-. Hence this appeal.
3. We have heard Ms. Savita Sharma, learned Counsel and Shri V.C. Bhartiya, learned DR and carefully considered their submissions.
4. The only issue that arises for determination is as to whether the demand is barred by limitation. The learned Counsel’s contention is that the appellants bona fide believed that the goods were covered by exemption Notification 70/85 and it is only in November or December 1985 when they came to know about rescission of the above-mentioned notification by Notification 174/85 dated 24-7-1985. Immediately thereafter they applied for a licence and subsequently cleared the goods on payment of appropriate duty. None of the manufacturers of PVC soles at Agra where the appellant’s factory is located were aware of the issue of rescinding notification and even the Departmental officers did not take any steps to recover duty short paid during the period from 24-7-1985 onwards. We are unable to accept this submission in the absence of anything on record to establish that the trade came to know about the rescinding of Notification 70/85 only in November or December 1985 as pleaded by the appellants. Learned Counsel referred to a trade notice having been issued in November or December 1985; however, in the absence of any details as to the conditions or date of issue of such trade notice, the contention has not been substantiated. The plea of bona fide belief and conduct in good faith is not supported by any material and in the admitted fact of non-application for licence and non-filing of classification lists and non-accountal of manufacture of PVC soles in the statutory records immediately after exemption was withdrawn on 24-7-1985, we hold that the demand is not barred by limitation. The argument of the learned Counsel that the second show cause notice has gone beyond the scope of the earlier show cause notice also does not hold good in view of the fact that both show cause notices allege suppression on the part of the appellants. Therefore, the case law relied upon by the appellants is not applicable to the facts of this case. It is not correct to state that the Collector (Appeals), Central Excise, New Delhi set aside the earlier order of the Deputy Collector on the ground of time bar – we have gone through the remand order of the Collector (Appeals) and find that the order of the Deputy Collector was set aside for want of authority and the matter was remanded for fresh adjudication by the proper authority. We, therefore, confirm the order of the adjudicating authority relating to duty demand and confiscation of the seized goods with option to redeem on payment of a fine of Rs. 2,000/-. However, in the facts and circumstances of the case, we reduce the penalty to Rs. 5,000/-.
5. Subject to the above modification, the appeal stands rejected.