1. The question for decision in this appeal to the Tribunal is correctness or otherwise of demand of duty of Rs. 5,557.50 Basic and Rs. 277.87 Special, besides a penalty of Rs. 500/-for contravention of Rule 173Q of the Central Excise Rules, imposed by the Assistant Collector of Central Excise, XVII Division, Calcutta by his order dated 25-1-1982/19-3-1982 and upheld by the Collector of Central Excise (Appeals), Calcutta by his order dated 18-12-1982.
2. The appellants hold a L-4 Licence for manufacture of Motor Vehic les falling under T.I. No. 34 of Central Excise Tariff. The appellants filed their Classification List bearing No. I/Motor Vehicle/80 dated 7-10-1980 claiming classification under T.I. 34-I (1) and exemption from payment of whole of Central Excise Duty leviable thereon in terms of Notification No. 52/77-C.E., dt. 6-4-1977. This Classification List was approved by the Assistant Collector of Central Excise, Calcutta XI Division on 23-10-1980. Later the Superintendent of Central Excise, XVII Division, Calcutta issued a Show Cause Notice dated 17-9-1981, alleging that the appellants were actually manufacturing Moped Model Jet & Rocket, which were chargeable to duty at the appropriate rate and not entitled to exemption under the aforesaid notification. The appellants were called upon to show cause why appropriate duty be not realised from them and penalty not imposed. The appellants made a request for supply of documents to which, we shall refer later. The appellants filed reply to the show cause notice denying the allegations and submitted that the classification list was approved by the proper authority after proper physical inspection. They maintained that the appellants products fulfil the requirements of the notification aforesaid and its explanation. The Assistant Collector of Central Excise, however, negated the plea of the appellants and demanded duty and levied penalty as already set out in the first para of the order.
The order was upheld in appeal by the Collector of Central Excise (Appeals), Calcutta. Aggrieved, the appellants have filed an appeal before the Tribunal.
3. At the hearing of the appeal, Sh. V. Sridharan, C.A. representing the appellants argued that Notification No. 52/77-C.E., dt. 6-4-1977 exempts powered cycles from the whole of duty of Excise leviable thereon. Under the Explanation to the said Notification so far as material for the present appeal 'powered cycles'means a mechanically propelled cycle, which may also be pedalled, if necessity arises for so doing. He further argued that mopeds are powered cycles and are not defined in the Excise Act. The word 'Moped' does not appear in the Tariff. The appellants product in case of necessity arising; is pedalled. It, therefore falls within the meaning of term 'power cycles' as set-out in the explanation to the notification. He contended that the appellants were entitled to benefit of exemption under the notification read alongwith the explanation. He also urged that the show cause notice referred to literature of the product circulated by the appellants as its basis. But in spite of the appellants' request no such literature was shown to the appellants. There was thus non-compliance with the principles of natural justice. The order passed by the Assistant Collector of Central Excise took into consideration the fact that the appellants were using tyres falling under T.I. 16(1) i.e. 'Tyres for motor vehicle moped' and that the pedals used in the cycles are nothing but starter of the moped and that the shape of the vehicle was not that of ordinary bicycle. The order was based on classification made in respect of other manufacturers. All these factors were not mentioned in the show cause notice and therefore no use could be made of these in the order. Shri Sridharan in support of his arguments relied on meaning of cycle in Shorter Oxford Dictionary and the following decisions :Mohinder Singh Gill and Anr. v. Chief Election Commr., New Delhi and Ors.-AIR (ii) Subash Chander Nishat v. Union of India and Ors.-1979 E.LT J 212; (iv) Hydraulic Ltd., Madras v. Collector of C, Excise, Madras-1983 E.L.T. 533 ; and On behalf of the Respondent, Sh. S.N. Khanna, J.D.R. stoutly defended the orders passed by the lower authorities. He argued that the notification exempted only ordinary bicycles and Rickshaws in which power components were added and not Mopeds. He further argued that the appellants products were Mopeds which did not get exemption under the aforesaid notification. The appellants have been guilty of suppression of facts and therefore the orders of demand of duty and levying penalty were justified and legal. It was not barred by limitation.
4. We have carefully considered the arguments advanced by the parties.
For the purpose of the appeal, it does not appear necessary to give a finding about the proper classification of the appellants product as the appeal could be decided on other grounds. The Show Cause Notice referred to literature circulated by the appellants. We find that the appellants had requested the Superintendent of Central Excise for inspection of documents relied on and the Superintendent of Central Excise by letter dated 16-11-1981 granted permission to the appellants for inspection of record. The records numbered 4 i.e. G.P. I, R.T. 12 returns, Offence Report and approved Form I? There is no mention of any document such as literature of the appellant: therein in the record.
shown to the appellants. The appellants thereafter by their communi-' cation dated 14-1-1981 addressed to Inspector of Central Excise confirmed having inspected the four records, consisting of G.P. I, R.T.12 returns, Offence Report and approved Form I. The appellants representative specifically urged that these records have been checked in detail and no other record was shown to him. The letter went on to say that if there was any other record connected with the points raised in the show cause notice, it should be made known to the appellants and the records may be produced for inspection either on the date or on any other suitable date. There is no material on record to show whether any other record in particular the literature of the products mentioned in the show cause notice was shown to the appellants or made available to them for inspection. We find considerable force in the appellants' contention that the literature which is the foundation of the show cause notice and the order was not made available to them for inspection and on this ground alone, the order passed would be liable to be struck down for offending the principle of natural justice.
5. Apart from the foregoing, we find that the Assistant Collector of Central Excise relied on use of tyres used in Mopeds, pedal used for the product only being starter of the and the shape of the vehicle not being that of an ordinary bicycle, Moped in the case of other manufacturers being so classified as the factors for concluding classification of the appellants product to be wrong. The perusal of the Show Cause Notice shows that none of the ingredients which formed the basis' of the order was mentioned in the show cause notice. All that the show cause; notice said was that from the literature of the products circulated by the licensee if appeared that they are actually manufacturing Mopeds. We feel that the factors taken into consideration in coming to a finding in the order not having been set out in. the show cause notice, the order cannot be sustained as it took into consideration the extraneous matters for coming to a finding. In M/s.
Hydraulic Ltd., Madras v.. Collector of Central Excise, Madras-1983 E.L.T. 533, the Tribunal held that the demand of duty is not valid if the proper show cause notice was not given. We have explained above how the show cause notice did not set out the proper particulars and the basis of the demand of duty and contravention of Rules for attracting penal action. The Order, therefore of demand of duty and penalty cannot be sustained and on this ground is set aside and the appeal allowed.