Industries Ltd. Vs. Commissioner of Central Excise, Chandigarh  Insc 493 (22 November 2002)
S.N.Variava & D.M.Dharmadhikari. S. N. Variava, J.
Appeals are against an Order dated 8th October, 1999 passed by the Customs , Excise and
Gold (Control) Appellate Tribunal (hereinafter called the
stated the facts are as follows:
Appellants are engaged in construction activities. As part of their business
they crush boulders into "bajari" which is then used in the
construction work. The Appellants did not consider the activities of crushing
boulders into bajari to be a manufacturing activity. They, therefore, did not
apply for any licence nor paid excise duty.
On 26th February, 1992 a Show Cause Notice was issued to
them demanding duty of Rs. 17,565/- on the crushed bajari for the period
October, 1991 to January, 1992. Another Show Cause Notice was issued to them on
3rd May, 1993 demanding duty of Rs. 12,05,187/-
for the period 1st
April, 1988 to 30th September, 1991.
Appellants filed a reply to both the notices.
On 14th June, 1993, the Assistant Collector, Central
Excise confirmed the demand and also imposed a penalty of Rs. 1,00,000/-.
On 19th November, 1993, the Collector (Appeals) confirmed
the order of the Assistant Collector. The Appellants, therefore, filed an
Appeal before the Tribunal. By the impugned Judgment the Appeal has been
questions were raised before the Tribunal, viz.
the activity of crushing boulders into bajari amounts to manufacture and
whether the "bajari" is a new product having a distinct name,
character or use and
the Respondent could have invoked the extended period of limitation under
Section 11-A for the demand under the Show Cause Notice dated 3rd May, 1993.
will first take up the second question. The law on this point is Excise
reported in 1989 (43) E.L.T. 195 (S.C.), this Court has held that wherever
there is the scope for believing that the goods are not excisable to duty and,
therefore, no licence is required to be taken out, then the extended period of
limitation for demand under Section 11A is inapplicable. This Court has held
that mere failure or negligence on the part of the manufacturer in not taking
out a licence and in not paying duty does not attract the extended period of
limitation. This Court has held that there must be evidence to show that the
manufacturer knew that the goods were liable to duty and that he was required
to take out a licence. This Court has held that for invoking the extended
period of limitation duty should not have been paid, short levied or short paid
or erroneously refunded because of either fraud, collusion, wilful mis-statement,
suppression of fact or contravention of any provision or rules. This Court has
held that these ingredients postulate a positive act and, therefore, mere
failure to pay duty and/or take out a licence which is not due to any fraud,
collusion or willful mis-statement or suppression of fact or contravention of
any provision is not sufficient to attract the extended period of limitation.
Advocate, for the Appellant, has apart from this authority also relied upon
number of other authorities wherein the Tribunal has taken an identical view.
In our view, the law having been settled by this Court, it is not necessary to
refer to the decisions of the Tribunal. As the decisions have been cited, we
merely set out the citations viz.: Chandigarh. Raipur.
this case, there was a divergent view of the various High Courts whether
crushing of bigger stones or boulders into smaller pieces amounts to
manufacture. In view of the divergent views, of the various High Courts, there
was a bona fide doubt as to whether or not such an activity amounted to
manufacture. This being the position, it cannot be said that merely because the
Appellants did not take out a licence and did not pay the duty the provisions
of Section 11A got attracted. There is no evidence or proof that the licence
was not taken out and/or duty not paid on account of any fraud, collusion,
willful mis- statement or suppression of fact. We, therefore, set aside the
demand under the show cause notice dated 3rd May, 1993.
regards the demand under the show cause notice dated 26th February, 1992, Mr. Sridharan states that the
Appellant has already paid the amount. He states that he is not pressing this
Appeal in respect of the demand under that show cause notice. Thus we see no
reason to decide the other question, viz. whether crushing of stones amounts to
manufacture and whether a new product has come into existence. We leave this
Appeals stand disposed of accordingly. There will be no order as to costs.