Grauer
& Weil (India) Ltd. Vs. C.C.E [1994] INSC 550 (26 October 1994)
Mukherjee
M.K. (J) Mukherjee M.K. (J) Sahai, R.M. (J)
CITATION:
1995 AIR 543 1995 SCC (1) 77 JT 1994 (7) 284 1994 SCALE (4)701
ACT:
HEAD
NOTE:
The judgment
of the Court was delivered by M.K. MUKHERJEE, J. - This appeal under Section
35-L of the Central Excises and Salt Act, 1944 ('Act' for short) is directed
against the order dated 7-6-1985 passed by the Customs, Excise and Gold
(Control) Appellate Tribunal ('Tribunal' for short) in Appeal No. ED(SB)A
104/84.C.
Facts
leading to and relevant for disposal of the appeal are as under.
2.On 30-1-1983 a team of Central Excise (Preventive) Officers of Buisar
Division paid a surprise visit to the factory premises of M/s Growel Chromates,
a division of M/s Grauer and Weil (India) Ltd., Bombay, the appellants herein, situated in
Plot No. 407, G.I.D.C., Vapi. They found that the appellants, who are engaged
in the manufacture of Sodium Bichromate (falling under Item No. 14-AA of the
First Schedule to the Act) under a valid licence, had removed their product, on
payment of Central Excise duty and under gate passes, for captive consumption
to their Chromic Acid Section situated adjoining to their manufacturing premises,
for the manufacture of Chromic Acid flakes. The officers further found that
those flakes, (falling under T.I. 68) were manufactured with the aid of power
and were removed under delivery challans of the appellants without payment of
duty. The officers detained 98 drums containing 4900 kgs. of Chromic Acid
flakes 79 lying in the Chromic Acid Section for making further enquiry into the
matter. On a subsequent visit on 2-2-1983, the officers seized 126 drums of Chromic Acid flakes (which included
the 98 drums detained earlier) in fully manufactured condition weighing 63,000 kgs.
and valued at Rs 1,89,000 on the reasonable belief that the goods were liable
to confiscation as the appellants were not entitled to exemption from duty
under Notification No. 46/81 dated 1-3- 1981. The goods were provisionally
released to the appellants on their executing requisite bonds.
3.In
due course a notice was issued to the appellants on 14- 7-83 charging them with
contravention of Rule 173-F read with Rule 9(1), Rule 173-B, Rule 173-C, Rule
173-G(2) read with Rule 52-A, Rule 173-F(4) read with Rule 53 of the Central
Excise Rules, 1944 and they were asked to show cause why penalty should not be
imposed on them, why the goods seized and subsequently released provisionally should
not be confiscated and why they should not be called upon to pay duty on
1,52,950 kgs. of Chromic Acid flakes valued at Rs 44,95,475 illicitly
manufactured and cleared by them during the period from September 1981 to
January 1983.
4.On
consideration of the cause shown by the appellants and the oral submissions
made on their behalf the Collector made and recorded the following order on 30-11-1983:
"(i)
I impose a penalty of Rs 5,00,000 on M/s Growel Chromates of Vapi under Rule
473-Q(1) of Central Excise Rules, 1944.
(ii)
The goods namely "Chromic Acid flakes" weighing 6300 kgs. contained
in 126 drums valued at Rs 1,89,000 seized from their possession from Chromic
Acid Section and subsequently released provisionally on execution of B11 bond
are liable to confiscation. Accordingly under Rule 173-Q(1) of the Central
Excise Rules, 1944, 1 confiscate the same and order that the assessee shall pay
a fine of Rs 1,89,000 in lieu of confiscation within one month of receipt of
this order by them.
On
redemption, the confiscation goods shall be properly accounted for by them and
cleared in accordance with law, if not already done.
(iii)
I order that M/s Growel Chromates of Vapi shall pay the duty of excise at the
appropriate leviable rate on 1,52,950 kgs. of Chromic Acid flakes falling under
Tariff Item 68, valued at Rs 44,95,475 illicitly manufactured and removed by
them without paying the duty leviable thereon, during the period from September
1981 to January 1983 or thereabouts, as shown in Annexure A to the show-cause
notice, under the proviso to sub- section (1) of Section 11-A of the Central
Excises and Salt Act, 1944, read with Rule 9(2) of the Central Excise Rules,
1944."
5.
Aggrieved by the above order the appellants filed an appeal before the
Tribunal. The Tribunal while upholding the order of the Collector directing
payment of excise duty, set aside the order of confiscation and imposition of
fine in lieu thereof. The Tribunal also upheld the order of imposition of
penalty but reduced it to Rs 1,00,000. Hence this appeal.
80
6. To
appreciate the contentions of the appellants, it will be profitable at this
stage to refer to Notification No. 46/81 dated 1-3-1981, which reads thus:
"In
exercise of the powers conferred by sub- rule (1) of Rule 8 of the Central
Excise Rules, 1944, and in supersession of the notification of the Government
of India, in the Ministry of Finance (Department of Revenue), No. 85/79-Central
Excises, dated 1st March, 1979, the Central Government hereby exempts all
goods, falling under Item No. 68 of the First Schedule to the Central Excises
and Salt Act, 1944 (1 of 1944), other than goods manufactured in a factory,
from the whole of the duty of excise leviable thereon.
Explanation.-
In this notification, the expression 'factory' has the meaning assigned to it
in clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948).
This
notification shall come into forte with effect from 1st day of April,
1981." and Section 2(m) of the Factories Act, 1948 which, so far as it is
relevant for our present purposes, reads as under:
"(m)
'factory' means any premises including the precincts thereof- (i) whereon ten
or more workers are working, or were working on any day of the preceding twelve
months, and in any part of which a manufacturing process is being carried on
with the aid of power, or is ordinarily so carried on, or (ii) whereon twenty
or more workers are working, or were working on any day of the preceding twelve
months, and in any part of which a manufacturing process is being carried on
without the aid of power, or is ordinarily so carried on, * * *
7. The
first ground that was unsuccessfully canvassed by the appellants before the
Collector and the Tribunal, and which has been re-agitated beforeus, is that
Chromic Acid Section of their premises constitutes a unit different from the
unit where Sodium Bichromate is manufactured and as, admittedly, the workers
employed in that section are not more than 4 it cannot be said to be a
'factory' within the meaning of Section 2(m) of the Factories Act. That
necessarily means, the appellants have contended, that they were exempted from
payment of excise duty under the above quoted notification.
8. In
dealing with the above contention the Excise authorities conceded that if the
Chromic Acid Section was not a 'factory' within the meaning of Section 2(m) of
the Factories Act the Chromic Acid manufactured by the appellant therein would
not attract duty under the above notification but they asserted that the said
section did constitute a factory and, therefore, the appellants were liable to
pay duty under the notification.
81
9. On
perusal and appraisal of the materials placed before him, the Collector
rejected the above submission of the appellants with the following findings :
"In
this regard, reference to 24th Annual Report for the year 1981 of M/s Grauer
and Weil (India) Ltd. (the appellant) is also
relevant. In the said annual report, in the director's report on the item
'Additions to fixed assets' it has been stated that the company has also acquired
the complete assets and liabilities of Growel Chromates Pvt. Ltd., located at Vapi,
in the district of Valsad, Gujarat. The plan so acquired is designed for annual
capacity to manufacture the following products:
(2)
Sodium Bichromate 2190 Tons
(3)
Yellow Sodium Sulphate 1314 Tons.
From
the director's report it is quite clear that the entire plan of Growel
Chromates Pvt. Ltd., including Chromic Acid Section formed the division of Grauer
& Weil (India) Ltd., Bombay, in the name of M/s Growel Chromates,
on merger. On the other hand, while applying for L4 licences for manufacture of
'Sodium & Potassium Dichromate' falling under T.I. 14- AAon 2-12-1981 and
for `Yellow Sodium Sulphate' falling under T.I. 68 on 18-1-1982, in the ground
plans produced therewith, the assessee has safely avoided to show their
premises demarcated as 'Chromic Acid' Section, though the same premises is
situated in the same plot bearing No. 407.
The
facts discussed as above clearly bring out that the assessee has made a
wrongful attempt to get considered 'Chromic Acid' Section as a separate
premises/entity entitled for exemption under Notification No. 46 dated 1.3.1981
ashey honestly believed that their Chromic Acid Section is not a factory and on
such belief did not pay excise duty on the flakes manufactured therein till the
Excise authorities held otherwise. According to the appellants, the above
contents of the letter not only prove their bona fides but negate the
allegations of fraud, collusion, wilful misstatement or suppression of facts
also. To bring home their above contention the appellants have relied upon the
following passage from the judgment of this Court in C.C.E. v. Chemphar Drugs
& Liniments I : (SCC p. 1 3 1, para 9) "In order to make the demand
for duty sustainable beyond A period of six months and up to a period of 5
years in view of the proviso to subsection (1) of Section II -A of the Act, it
has to be established that the duty of excise has not been levied or paid or
short-levied or short-paid, or erroneously refunded by reasons of either fraud
or collusion or wilful misstatement or suppression of facts or contravention of
any provision of the Act or Rules made there under, with intent to evade
payment of duty. Something positive other than mere inaction or failure on the
part of the manufacturer or producer or conscious or deliberate withholding of
information when the manufacturer knew otherwise, is required before it is
saddled with any liability, before the period of six months. Whether in a
particular set of facts and circumstances there was any fraud or collusion or wilful
misstatement or suppression or contravention of any provision of any Act, is a
question of fact depending upon the facts and circumstances of a particular
case." (emphasis supplied) 14.As has been observed in the above quoted
passage the question as to whether in a given case the requirements for
invoking the proviso are fulfilled or not is one of fact. It has therefore to
be ascertained whether in the set of facts and circumstances of the instant
case, the Collector and Tribunal were justified in concluding that the
appellant was guilty of wilful misstatement and suppression of facts. On
perusal of the record we find that in arriving at the above conclusion the
Collector and the Tribunal relied upon the following facts and circumstances: (i)
The reference to the declaration dated 15-4-1981 by the appellants in their
letter dated 19-9-1981 was incorrect and misleading inasmuch as the said
declaration related to Growel Chromates Pvt. 1(1989) 2 SCC 127 : 1989 SCC (Tax)
245 : (1989) 40 ELT 276 84 Ltd. and was filed for availing exemption under
Notification No. 105/80 dated 19-6-1980, which pertained to factories wherein
the total investment on plant and machinery was not over 10 lakhs, and had no
reference or relevance to Notification No. 46/81 dated 1-3-1981; (ii) The copy
of the prescribed form of the above declaration dated 15-4-1981, which was
filed in the impugned proceedings indicates that, against the column
"reference to the notification under which exemption from duty is
claimed" is the remark "105/80 dated 19-6- 1980; Not as 92/81 (not
falling under HYPERLINK
"http://www.commonlii.org/in/legis/num_act/fa1948108/" Factories
Act having less than 10 workers)" but in the original of the declaration
form the words "Not No. 92/81 (not falling under HYPERLINK
"http://www.commonlii.org/in/legis/num_act/fa1948108/" Factories
Act having less than 10 workers)" are significantly missing; (iii)
The claim of the appellants that the HYPERLINK "http://www.commonlii.org/in/legis/num_act/fa1948108/"
Factories Act authorities had on 9-2-1982 approved their layout plan
wherein the Chromic Acid Section has been described as "premises which do
not come under Section 2(m) of the ' HYPERLINK "http://www.commonlii.org/in/legis/num_act/fa1948108/"
Factories Act' ", was unfounded for it had not been signed by a
duly empowered officer administering the HYPERLINK
"http://www.commonlii.org/in/legis/num_act/fa1948108/" Factories
Act; (iv) The statement of non-factory status of the Chromic Acid Section
in the letter dated 19-9-1981 was a conclusion drawn without any factual basis
for the same, for, on the own showing of the appellants, the endorsement
regarding the "non-factory" status of the said section was made for
the first time on or around 9-2-1982; and
(v)
Though the appellants showed the Chromic Acid Section in the ground plan
submitted to the HYPERLINK
"http://www.commonlii.org/in/legis/num_act/fa1948108/" Factories
Act authorities and claimed ,non-factory' status for it, in the ground
plan submitted to the Excise authorities for approval of licence for
manufacture of 'Sodium Bichromate' they did not even indicate its existence.
15. In our opinion from the above facts and circumstances when taken together,
a reasonable conclusion can certainly and legitimately be drawn that the
appellants wilfully and deliberately made misstatements and suppressed material
facts to avoid payment of excise duty. In other words it is not a case of
simple inaction or faliure on the part of the appellants to furnish material
information. 16. It has lastly been contended that in any view of the matter
the appellants could not be asked to pay penalty as the breach in question
flowed from the bona fide belief that they were not liable to pay excise duty.
In support of this contention the appellants have relied upon the following
passage from the judgment of this Court in Hindustan Steel Ltd. v. State of
Orissa2 : (SCC p. 630, para 8) "An order imposing penalty for failure to
carry out a statutory obligation is the result of a quasi-criminal proceeding,
and penalty will 2 (1969) 2 SCC 627: 1978 ELT 159 85 not ordinarily be imposed
unless the party obliged either acted deliberately in defiance of law or was
guilty of conduct contumacious or dishonest, or acted in conscious disregard of
its obligation." 17. Since we have already found that the appellants have
acted in conscious disregard of their statutory obligations and deliberately suppressed
material facts the above contention can neither be accepted nor the above
quoted passage pressed into service. 18. In the result the appeal fails and the
same is hereby dismissed. However, there will be no order as to costs
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