1. This appeal under Section 35B of the Central Excises and Salt Act, 1944 by M/s. Guest Keen Williams Ltd., Howrah is directed against the order of the Collector of Central Excise, Calcutta bearing No.28(26)82-Celler-29/83 dated 10-2-1983.
1. The appellants hold a Central Excise licence L-4 No. 1/ Steel Ingot/ Cal.V/63/1. The question before us relates to the scope of notification No. 237/ 75-CE dated 9-12-75 as amended by notification No. 112/77-CE dated 18-6-77 and 235/77 dated 15-7-77 as well as notification No.156/79-CE dated 9-4-79, 53/80-CE dated 13-5-80 as amended by No.16/81-CE dated 13-2-81. The appellants were charged for contravention of Rules 9(1), 173B, 173F and 173G(1)of the Central Excise Rules, 1944 for having manufactured steel ingots falling under item No. 26 of the First Schedule to the Act, from certain raw materials such as Ferro-Silicon, Ferro-Manganese, Silico Manganese Alloy, Ferro-Sulphur (H.C.), Ferro Chromium (L.C.), Ferro Molybdium, Ferro Titanium, Ferro Boron, Aluminium, Nickel, Sulphur, Dolomite, Flourspar, Iron Ore, Lime Stone, Met Coke, Graph and Lime, without furnishing full details of such materials used in the manufacture of the said goods, while availing of the partial and complete exemptions provided by the notifications referred to earlier and clearing 2,19,098 MT of steel ingots during period 11-1-1977 to 19-11-1981 without payment of appropriate duty leviable and thereby evading payment of central excise duty to the extent of Rs. 5,79,99,205.410.
2. The notifications referred to above provided for a partial or a total exemption on steel ingots falling under item 26 when manufactured with the aid of electric furnace provided they are manufactured from any of the following materials namely- (b) a combination of the materials referred to at (a) above with fresh unused steel melting scrap on which the appropriate duty of excise has been paid; and (c) iron in any crude form falling under Item No. 25 of the said Schedule on which the appropriate duty of excise has been paid in combination with the materials referred to at (a), (b) above.
(d) Skull scrap and runners and risers arising in the course of the manufacture of the said goods with the aid of electric furnace in combination with the materials referred to at (a), (b) or (c) above.
(e) imported melting scrap of iron and steel (other than heavy melting scrap of iron and steel) in combination with materials referred to at (a), (b), (c) or (d) above.
(f) imported sponge iron in combination with the materials referred to at (a), (b), (c), (d) or (e) above.
(g) indigenous sponge iron in combination with the materials referred to at (a), (b), (c), (d), (e) and (f) above.
3. Since the appellants had used various other ingredients/raw materials and did not disclose use of such ferro-alloys fluxing materials and other metals in the classification list, they were alleged to have suppressed material information and got the classification list approved by the proper officer. The notifications do not permit the use of additional agents in the manufacture of steel ingots and hence the appellants were liable to pay duty for the period from 11-1-1977 to 17-6-1977 at Rs. 100/ per M.T. plus Auxiliary duty and from 18-6-77 to 19-11-81 at Rs. 330/- per M.T. plus special excise duty at the appropriate rates under notification No. 147/77 dated 18-6-1977. After considering the reply to the show cause notice and hearing the appellants, the Collector held that it is a well-known Rule of law that a proviso should receive strict construction. The notification uses the word namely and the use of unspecified materials would disentitle the assessee from availing the exemption (1981-(47) S.T.C. 337-State of Tamilnadu v. Kasivanjanadar). Similarly, miscellaneous petition No. 69 of 1972 dated 21-7-1979 of the Bombay High Court and AIR 1961 S.C. 1956-Shah Bhojraj Kuverjee Oil Mills and Ginning Factory v. Subhash Chander Yograj Sinha. He held that the judgment of the Supreme Court in the case of Union of India v. Tata Iron and Steel Co., Jamshedpur-1977 E.L.T. (J 61) cited by the appellants was not applicable since neither the words "provided" nor "namely" had been used in notification No. 30/60 which was under consideration there. Apart from the fact that the various raw materials mentioned earlier are not specified, quite a few of them like nickel, aluminium, chromium etc. are not necessary even for technological reasons but are raw materials used due to the specific requirements of the customers. He relied on AIR 1957 pages 639 to 640 and I.L.R. 41 Cal. 446-457 to support his finding that when there is a conflict between law and practice, the law must prevail. Had the Government intended to allow admixture like ferro-alloys, nickel and chromium with steel scrap, the notification would have been worded on the lines of notification 144/75 dated 7th June, 1975, as amended, wherein it is provided that alongwith the specified types of scrap the words "in admixture with other materials", are mentioned. If the letter dated 28th May, 1971 of the Central Board of Excise and Customs that the exemption contained in notification No. 26/69 dated 1-3-1969, as amended, is to be allowed, irrespective of what is used in the furnace for obtaining the desired quality of steel, are to be accepted, then there was no necessity for the notification to list the specified raw materials from which only the steel ingots were required to be produced to avail of the full or partial exemptions given in the notifications under reference. Instead, the notification would have given exemption to goods manufactured in electric furnaces. He also did not agree with the instructions dated 28-5-75 issued by the Board that additional agents such as Ferro Tungsten, Ferro Chromium, Ferro Vanadium and Nickel are technically essential to produce ingots falling under notification No. 26, so as to avail of the exemption in the said notifications. The manufacturers are at liberty, according to him, to add any additional raw materials to produce the particular quality required by the customers and forego the exemption and pay the appropriate rate of duty, as has been done in the present case while issuing the show-cause notice. Even assuming that addition of ferro-alloys and fluxing materials is a necessity, of which he remains unconvinced, this must be provided in the notification itself and any deficiency cannot be made good by the one interpreting the fiscal statute. The learned Collector relied on the decision of the Supreme Court in the case of Orient Paper Mills v. Union of India, Civil Appeal No. 659 to 664 of 1965 decided on 13-5-68 [1978 E.L.T. (J 345)], wherein the hon'ble Supreme Court observed that no authority, howsoever, high placed can control the decision of a judicial or quasi-judicial authority, in coming to a finding that he was not bound by the instructions issued by the Central Board of Excise and Customs or even the Government. He, however, admitted that the lower quasi-judicial authorities are no doubt bound by the decisions of the higher quasi-judicial authorities including the Central Board of Excise and Customs or the Government of India, when the latter act in their quasi-judicial capacities, in contradistinction to when they act in their executive capacity. On the question of limitation, since the use of iron ore, ferro-manganese etc. had not been disclosed, it was a clear case of suppression and Section 11A rightly applies though in the notice Rule 9(2) has been cited. The limitation period for the recovery of the short levy is, therefore, five years and the notice having been issued on 7-2-1982 covering the period from 11-1-1977 onwards, the demand is well within time. Regarding a letter dated 15th July, 1979 claimed to have been written in regard to the raw materials used, the period 11-1-1977 to 14-9-1979 was one when the use of various raw materials had not been brought to the notice of the department. From 15-7-1979 to 16-11-1980 Rule 10 was fully operative because even the letter of 15-7-1979 did not mention all the raw materials and was only a mention of the raw materials falling under item 68 on which duty was paid, so as to claim set-off or proforma credit. Regarding the Circular of the Central Board of Excise and Customs in April 1973 that it was an established practice to admix ferro-alloys and other fluxing materials in the manufacture of steel ingots on which exemption was claimed, the Collector held that if the duty is not paid or short paid in view of the clarification given by the department or due to incorrect interpretation of the notification, the officers are still empowered to recover the duty under Rule 10 or Section 11 and cannot be prevented from exercising their powers by applying the principle of equitable estoppel which is a Rule in equity and cannot prevail against law. He cited four Judgements in this context-Etikoppaka Co-operative Agricultural Society Ltd. v. U.O.I. -1979 E.L.T. (J 533) (A.P.)-1979 Tax. L.R. 2454 (A.P.).
2. Krishnarajendra Mills Ltd. v. U.O.I.-W.P. No. 2297 of 1973 decided on 7-2-1975 by Karnataka H.C.4. The grounds of appeal are that the Collector has misread or misinterpreted the notifications which do not use the word "only", "wholly" or "exclusively" while specifying the materials from which the steel ingots are manufactured and they prescribe only the basic raw materials. The use of small quantities of ferro alloys fluxing materials etc. cannot be dispensed with and that the officers were fully aware of the fact of such addition cannot be denied.
Classification lists were filed from time to time and there is no reason to believe that the Assistant Collector who approved them after due enquiry was unaware of such additions. The Collector's contention that there was suppression of facts cannot be sustained since the matter had received Government's attention all along and necessary directive was issued from time to time and no amendment of the notifications to include addition of ferro alloys etc. was considered necessary. It was and is an established practice even today to avail of the concessional rate for ingots made with the specified materials in admixture with ferro alloys etc. and all identical pending cases have been dropped. Admittedly, the Assistant Collector was informed on 15-7-1979 in the context of availing proforma credit but even after that no action to stop availment of the concessional duty on ingots using such ferro alloys, etc., was initiated. The demand for the period 11-1-77 to 19-11-81 is also barred by limitation and, therefore, not enforceable in law so the demand for duty deserves to be quashed.
Finally, the penalty of Rs. 10 lakhs cannot be justified in the absence of guilty conduct on the part of the appellants. In this case it was an established practice all over the country to avail of the exemption and it has been availed of under the express order of the proper officer made on the classification list.
5. When the case was heard on 20th January, 1984 Shri N. Mukherjee reiterated the grounds of the appeal. He explained that notification No. 26/69 dated 1-3-1969 could not be operated without using 5 % iron ore and this was amended by notification No. 68/70, dated 4-4-1970 to provide for such admixture. However, demands were raised for the period 1-3-1969 to 4-4-1970 and consequent on Board's order 3/6/69-CX. 4 dated 28-5-1971 clarifying that notification 26/69 as amended by 120/69 does not preclude the use of fluxing materials like lime, lime stone, dolomite, flourspar as well as ferro alloys, ferro manganese, ferro silico etc. and iron ore up to 5 %, the demands were withdrawn. In 1973 the matter was again examined and it was clarified in MSDR 137/1/72 CX.4, dated 19-4-1973, It was clarified that notification No. 65/73 as well as the previous notification 207/72 does not preclude the use of small quantities of iron ore, ferro alloys and other fluxing materials in the manufacture of steel ingots with the aid of electric furnaces from 1973 to 1981, the classification lists were being approved. In each melt the log sheets show all the ingredients used in the manufacture of ingots. In the case of copper and copper alloys it was clarified by the Board's order of 24th February, 1982 that the use of tin nickel zincs etc. not mentioned in the exempting notification as raw materials would not disentitle the copper alloys manufactured provided the copper content is predominant. These instructions were made applicable to tariff entries 25, 26, 26A, 26AA, 26B, 27 and 27A even if in the manufacture of these goods, other metals are also added as a technological necessity in combination with the based metals specified. Shri Mukherjee referred to an order dated 20-7-1982 passed by the Member, Central Board of Excise and Customs on a parallel case of M/s. National Iron and Steel Co. Ltd. and Orient Steel and Industries Ltd., setting aside order-in-original dated 6-3-1982 passed by the Collector of Central Excise, Calcutta. Therein the Board was of the view that use of iron ore, ferro alloys etc. would not be precluded for purposes of obtaining the exemption and this view was time and again conveyed to the field by the Board and the Government and not only has the department got all along on such advice but the assessees had taken the benefit in good faith. He, therefore, found force in the contention that it would be against equity to make them liable when other assessees were not required to pay the duty on similar goods. He also pointed out that the Board's order was dated 20-7-1982 and the Collector ignored this when he passed the impugned order dated 10-2-1983. Shri Lakshmi Kumaran, the learned SDR referred to page 12 of the Collector's order-in-appeal and wanted the decision on the short point whether the use of special alloys to make particular grades of high quality and expensive steel not specified as raw materials in the notification would entitle the appellants to get the steel ingots assessed at the lower rate. Shri N. Mukherjee, Consultant was directed to file an affidavit to support the contentions that the competitors who were producing similar types of steel were being treated differently as made out in the appeal. At the resumed hearing, the learned Consultant filed an affidavit sworn by the General Manager, Shri A.K. Mukherjee that in steel making, admixture of ferro alloys and fluxing materials is a must. They are used to meet chemistry stipulations of National and International specifications with reference to end use applications and for removal of impurities.
Normally, the ferro alloys remain within 2 % but may go upto 5% in some cases and other manufacturers like Mahindra Ugine Steel Co., Bihar, Alloy Steel Ltd., Bihar, Mukund Iron and Steel Works Ltd. Bombay, Visvesvaraya Iron and Steel Ltd. and Alloy Steels Plant should be using much higher percentage of ferro alloys and to the best of his knowledge are enjoying the concessional rate of excise duty. The National, Iron and Steel Co. and Orient Steel and Industries Ltd. who are within the same jurisdiction produced similar type of steel and the adjudication orders by the Collector of Central Excise, Calcutta confirmed this. The Government of India had authorised Mini Steel Arc Furnaces to produce alloy steel according to its policy laid down in "Guidelines for Industries" 1975-76. It is confirmed that since the impugned order of 10th February, 1983, no demand has been raised and the appellants are availing of the concessional rate on their steel ingots and in spite of the show cause notice dated 7th January, 1982 for the period upto 19th November, 1981, the department has allowed payment of excise duty at concessional rate on the end products after 7th January, 1982 which continued even after the said adjudication order was passed.
6. Shri Lakshmi Kumaran, defended the order under appeal. He referred to the word "namely" used in notification, and argued that it is specific in relation to raw materials. Only those materials like fluxes, which are technologically necessary, could be excluded. Use of other expensive and special materials like ferro-alloys, to make the high grades of special steels to suit customers' needs, stood on a different footing. The Collector's order was technically sound according to him. He relied on the doctrine of protective assessment enunciated by the Supreme Court and maintained that the Collector had rightly acted to protect the revenue due according to his interpretation of the statute. Dealing with the question of time bar, the learned SDR said if the goods in question were disentitled to the concession, then there was suppression of material facts and there would be no question of time bar. Regarding to the Affidavit now filed by the appellants, he did not doubt its correctness.
7. In reply, Shri Mukherjee contended that to make any distinction between some types of inputs like fluxes and others like ferro-alloys, would be entirely arbitrary. He also drew the attention of the Bench to an order of the Assistant Collector dated 24th November, 1982 dropping similar demands for the later period 20-11-1981 to 30-3-1982 which had not been reviewed by the very Collector who had come to a contrary finding in the impugned order dated 10-2-1983 which was communicated on 2-5-1983.
8. We have carefully considered the arguments advanced by the parties.
While the Collector of Central Excise, Calcutta would be correct in saying that a quasi-judicial authority must act independently and impartially and is not controlled by the directions given by others, we note that at page-15 of his order (available at page-48 of the Paper-Book), the learned Collector also admits that the lower quasi-judicial authorities are no doubt bound by the decision of higher authorities including the Central Board of Excise & Customs or the Government of India, when they act in their quasi-judicial capacity.
Now, in the present appeal, we find that the C.B.E. & C. acting in their quasi-judicial capacity, had passed the order dated 20-7-1982 on an identical issue. Even on his own reasoning, the learned Collector was bound by this order and could not have ignored the same and it is not clear how the Order-in-Appeal dated 20-7-1982 was overlooked by him while passing the order dated 9-2-1983. Having regard to the time lag, one could presume that the order must have reached the Collector. Added to this, in the same Collectorate there is an order dated 24-11-1982, passed by the Assistant Collector of Central Excise, which is diametrically opposite to the subject order of the Collector and no action was taken for reviewing this order or getting it set aside. It also appears that for later periods, without any change in the notification, in the same Collectorate the appellants have been getting concession under the notification. Besides, the appellants have urged that in similar circumstances other steel manufacturers like Durgapur Steel, Mahindra Steel Ltd. and Ors. had been availing of the concession under the notification, even though they were using higher percentage of ferro-alloys. In particular, two of them-National Iron and Steel and Oriental Steel Industries Ltd. both within the jurisdiction of Calcutta Collectorate-had been availing of this concession, though they had also been using similar ingredients in their manufacture. It is therefore clear that denial of the concession to the Appellants was discriminatory.
9. While an authority acting quasi-judicially is certainly not bound by directions or circulars of other authorities, it would not mean that it should ignore or not give due weight to interpretations given to the trade by the Government or other concerned authorities. To us, the decision contained in the Board's order and the Government of India's Circulars referred to above are reasonable and unexceptionable.
Accordingly, for the reasons stated, we set aside the impugned order and allow the appeal.