(a) the Appellant manufactures two types of dyes, Rapidogens and Naphthol A.S.G. (b) while Rapidogens were wholly exempted from duty pursuant to Notification No. 180/61/C.E., dated 23-11-1961, the Appellant was paying duty at the appropriate rates in respect of Naphthdl A.S.G. till the end of February 1978, after availing of proforma credit under Rule 56A of the Central Excise Rules 1944, (hereinafter referred to as the Rules); (c) in a classification list filed on or about 9-3-1978, exemption from payment of Central Excise duty under Notification No. 71/78, dated 1-3-1978 in respect of the first clearances of Naphthol A.S.GL upto a value of Rs. 5 lakhs was claimed by the Appellant.
Information relating to value of clearance of Naphthol only during the preceding financial year was also furnished along with the necessary declaration ; (d) the said classification list was approved on 26-5-1978 by the Assistant Collector, Central Excise ; (e) between 1-4-1978 and 19-11-1981, on several occasions the Central Excise authorities had checked and re-checked and verified the records relating to the production and clearance of Rapidogens as well as Naphthol A.S.G. ; (f) neverthless, a notice requiring the Appellant to show cause as to why- (i) Central Excise duty at the appropriate rate amounting to Rs. 1,57,370.85 (Rs. 1,49,877 Basic plus Rs. 7493.85 Special) should not be demanded and recovered under Rule 9(2) of the Rules, read with Section 11A of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act), and (ii) a penalty should not be imposed under Rules 173Q and/or 9(2) and 52A, was issued on 19-11-1981 ; (i) the Appellant had availed of the benefit of the exemption in terms of Notification No. 71/78, dated 1-3-1978, although not entitled, in as much as the aggregate value of "specified goods" including Rapidogens cleared during the preceding financial year had exceeded Rs. 13.74 lakhs, (ii) the Appellant had filed a wrong declaration on 9-3-1978 and appears to have suppressed the facts about the value of, "specified excisable goods" cleared during the preceding financial year, intentionally, in order to avail of the exemption under the aforesaid Notification and evade payment of Central Excise duty leviable thereon, (iii) the Appellant had removed excisable goods without payment of Central Excise duty between 1-4-1978 and 23-10-1978, and (iv) the Appellant had contravened the provisions of Rules 173F, 173G(1) read with Rules 9(1) and 173G(2) read with Rule 52A (h) in reply, the Appellant submitted that there had been no contravention of any of the provisions cited in the notice to show cause and no liability to pay any duty' whatsoever as demanded since- (i) the Appellant had not suppressed any material information from the Department, (ii) they had acted all along under bonafide belief that Rapidogens, having been fully exempted under a separate Notification, need not be included in the reckoning for valuation of "specified goods" in terms of Notification No, 11/78, (iii) even so, the. information, relating' to Rapidogens was all along available to the Department, and was furnished once and again at least right from 19-7-l978 on enquiry and even earlier in the various gate passes, (v) in any view, the amount required to be paid amid not be quantified without affording the profound credit under Rule 56A, which they had been enjoying, all along, and (i) in his Adjudication order dated 21-8-1982, the Assistant Collector confirmed the demand, holding that the Appellant had made a wrong declaration and suppressed the facts relating to quantity of Rapidogens manufactured during the financial year preceding the classification list. Nevertheless, he refrained from imposing any penalty under Rule 173Q on the ground that "Culpable mental state is not clearly discernible" (j) an Appeal filed against the aforesaid Adjudication order failed.
The Collector (Appeals) held, inter-alia, that the Appellant was not absolved of the charge of wilful mis-statement simply because the Department had access to the relevant information and the plea relating to proforma credit was merely hypothetical ; 2. Before us, while reiterating the contentions advanced earlier in support of the Appellant's case, the learned counsel for the Appellant invited our attention to Explanation (4) in Notification No. 147/79, dated 30-3-1979 and contended that inasmuch as it was declaratory or clarificatory of the intent of the legislature, it should be given a retrospective effect. The learned Departmental representative generally supported the orders below.
3. The questions that, therefore, arise for our consideration in the nstant Appeal are - (a) Whether, in terms of Notification No. 71/78, dated 1-3-1978, goods exempted under any other Notification are to be taken into account or excluded from the reckoning in the computation of the aggregate value of "specified goods" cleared during the relevant period .. - (b) Whether Explanation (4) in Notification No. 141/79, dated 30-3-1979 is of a declaratory or clarificatory nature and consequently retrospective in its applicability (c) (i) Whether, in the facts and circumstances of the case, there was any wilful mis-statement or suppression of facts by the Appellant in the statement in the classification list dated 9-3-1978 or in the declaration appended thereto (d) In any view, whether the Appellant is entitled to the benefit of Rule 56A and the demand reduced accordingly on account of the proforma credit in terms of said Rule 4. (a) Notification No. 71/78-C.E, dated 1-3-1978 exempted specific "excisable goods", (also referred to as the "specified goods") falling under various items of the First Schedule to the Act, to the extent of the aggregate value not exceeding Rs. 5 lakhs and cleared on or after 1st April in any financial year from the whole of the duty of excise leviable thereon provided that- . .
(i) for the financial year 1978-79 the aggregate value of the "specified goods" cleared between the 1st April, 1977. and 28th February, 1978 had not exceeded Rs. I3.75 1akhs.
(ii) for the subsequent financial years such clearances of "specified goods" during the preceding financial year did not exceed-Rs. 15 lakhs; (b) amongst the goods specified in the aforesaid notification were "Synthetic Organic Dyestuffs (including Pigment Dyestuffs) and Synthetic Organic Derivatives used in any dyeing process" falling within Item 14D of the First Schedule to the Act; (c) in regard to various other "specified goods" enumerated in the aforesaid Notification, Explanation III therein provides for the exclusion of goods on which duty was exempted under any other Notification in the reckoning of the aggregate value thereof, cleared during the relevant periods, like e.g., goods falling within Item 14 of the First Schedule to the Act (Pigment, Colours, Paints etc.) ; (d) no such exclusion appears in regard to goods falling within Item 14D ; (e) accordingly, the conclusion is irresitible that, in so far as Synthetic Organic Dyestuffs manufactured in the financial year 1978-79 are concerned, the aggregate value of all such dyestuffs manufactured within the period commencing from 1st April, 1977 and ending with 28th February, 1978 should not exceed Rs. 13.75 lakhs, regardless of whether any of them had been separately exempted under any other Notification or not Likewise, to avail of the benefit of the aforesaid Notification for the succeeding years, the aggregate value of clearances during the financial year preceding should not exceed Rs. 15 lakhs; (f) once this is so, there could be hardly much of a controversy on the question as to whether the expression "excisable goods" or "specified goods" in the aforesaid Notification included goods exempted from levy by virtue of any other Notification, in so far as Dyestuffs are concerned. The value of goods falling within item 14D in the aggregate should not exceed the specified limits, regardless of exemption in respect of any of them under any other Notification.. The legislative intent is clear by contrast with other items specified in the selfsame Notification.
We are, therefore, unable to accede to the contention to the effect that- (i) the value of goods falling within Item 14D, but exempted under any other Notification, need not be taken into account in the reckoning, of the aggregate value, in terms of Notification No. 71/78-C.E., dated 1-3-1978, and (ii) accordingly, the value of Rapidogens cleared during the relevant periods need not have been furnished in the statement appended to the classification list or the declaration annexed thereto.
5. (a) The amending Notification No. 141/79-C.E., dated 30-3-1979 had, by Explanation IV, extended the benefit of exclusion of goods, separately exempted from levy, even in regard to those falling within Item 14D, in computing the aggregate value ; (b) it has been expressly stated in the amending Notification itself that it shall come into force on 1-4-1979 ; (c) in the construction of taxing Statutes, it is impermissible to gather the intent of one provision even if ambiguous, by reference to a subsequently enacted provision, unless the later of the two amounted to a retrospective declaration as to the meaning and intent of the earlier. No such retrospective declaration of the intent or clarification appears in Notification No. 141/79-C.E. Neither expressly nor by necessary intendment can Explanation IV in the said Notification be given a retrospective effect. It was, on the contrary, wholly prospective in its applicability and rather reflected a change in the policy altogether from the earlier Notification, in so far as goods falling within Item 14D are concerned; (d) in the premises, we are disinclined to read Explanation IV in Notification No. 141/79 dated 30-3-1979 into the earlier Notification No. 71/78, dated 1-3-1978 or otherwise give it a retrospective effect.
(i) filing of wrong declaration in which the value of the "specified goods" cleared during the period between 1-4-1977 and 28-2-1978 was suppressed intentionally on account of the applicant's failure to include the value of Rapidogens also manufactured during the relevant period ; and (ii) the contravention of Rules 173F, 173G (1) read with Rule 173G (2) read with Rule 52A that had been alleged against the Appellant, who was required to show cause as to why Rs. 1,57,370.85 should not be recovered under Rule 9(2) read with Section 11A of the Act and a penalty should not be imposed under Rule 173Q and/or 9(2) and 52A ibid.
(b) A perusal of Rule 9 of the Rules and Section 11A of the Act, as they stood when the show cause notice was issued on 19-11-1981, would disclose that- (i) the removal of excisable goods from the place of manufacture, without payment of duty leviable in the manner prescribed and permission of the proper officer on an application made to him in an appropriate form, is prohibited, subject, however, to some exceptions, not germane for the present purpose [Rule 9(1)]; (ii) the manufacturer is bound to pay on written demand within the period specified in Section 11A of the Act, the leviable duty, in respect of goods removed from the place of manufacture, in contravention of Rule 9(1); [Rule 9(2)]; (iii) in any case of such contravention, the manufacturer becomes liable to a penalty extending upto Rs. 2,000 and the goods shall be liable to confiscation [Rule 9(2)]; (iv) when the duty had not been levied or has been short levied, or when there has been an erroneous refund, the proper officer may, within 6 months of the "relevant date" (i.e. when the duty required to be paid in terms of the Rules) serve a notice requiring the manufacturer to show cause as to why he should not pay the amount specified in the notice-Section 11A of the Act]; (v) if, however, a short levy was occasioned by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or of the Rules with intent to evade payment of duty, the period within which a notice could be issued is 5 years instead of 6 months [proviso to Section 11A of the Act].
(c) Rule 173Q of the Rules provides for confiscation and penalty, inter alia, for removal of goods in contravention of any of the Rules, failure to account, manufacture without licence and contravention of Rules with intent to evade duty, when the goods are liable to confiscation and penalty not exceeding 3 times the value of the goods in respect of which the Rules had been contravened or Rs. 5,000/-, whichever is greater, has to be imposed.
(d) On a construction of the aforesaid provisions, we had occasion to hold in the case of Shriram Pistons and Rings Limited v. The Collector, Central Excise (ii) contravention of the provisions of the Act or the Rules with intent to evade payment of duty, have not only to be alleged but proved in the proceedings before the larger period of Limitation of 5 years from the "relevant date" can be availed of.
(e) While mis-statement or suppression of facts, per se, attract the larger period of Limitation, contravention of rules without the requisite intent does not. Once this is so, it is obvious that, regardless of intent, a mere suppression of facts or mis-statement in the information statutorily required to be supplied to the Excise authorities attract the larger period of Limitation. The intent is immaterial in so far as fraud, mis-statement or suppression of facts are concerned.
(f) In the facts and circumstances of the case, we cannot but hold that there has been a mis-statement, in so far as there has been a failure to include the quantity of Rapidogens manufactured during the relevant period in the statement furnished along with the classification list as well as the declaration appended thereto. The requirements of the Notification in question are unambiguous and there is no warrant or scope for bonafide mis-construction.
(g) While it may be that the relevant information in regard to the manufacture of Rapidogens had been, on other occasions, supplied and was in the possession of Excise authorities in answer to various queries and in the shape of gate passes, when it came to making a statement for the purpose of availing of the Notification in question, the fact remains that the Appellant had failed and neglected to furnish the requisite information and thereby was guilty of a mis-statement.
(h) We, therefore, hold, in the facts and circumstances of the case, that the larger period of Limitations in the proviso to Section 11A is attracted and the notice of demand-cum-show cause issued within five years of the relevant date is not barred.
7. Indisputably, the Appellant had been availing of the benefits of proforma credit under Rule 56A of the Rules prior to the Notification No. 71/78, dated 1-3-1978. In the computation and assessment of the leviable duty, in case the said notification was inapplicable, it was the plain duty of the appropriate officer to have extended the benefit of the proforma credit to the Appellant. The extension of the benefit of the proforma credit in terms of Rul.e.56A enjoyed by the Appellant hitherto cannot be brushed aside as merely hypothetical.
8. While rejecting the Appeal, therefore, we, hereby,. direct the lower authorities to compute the leviable duty after affording the Appellant the benefit of proforma credit under Rule 56A of the Rules, if otherwise eligible.
9. The appellants may argue that Explanation V introduced into Notfn.
71/78 by amending Notification 141/79, should be retrospective in its application because it merely clarifies the intent of the law maker(s).
If this position is true and correct then the non-inclusion of the clearances of rapidogens dyes in the declaration would not form an infraction of law.
10. It is not possible to accept this proposition. The explanation lays down the method of computing the aggregate value of clearances under the notification for purposes of arriving certain figures vital to the calculations under the notification. It specifically requires the exclusion of specified goods exempted under Rule 8 of the Central Excise Rules by any other notification while totalling the clearances to arrive at the aggregate value of clearances. An amendment of this kind cannot be a clarification but a substantive alteration of a basic component of the law. It makes available what was not available. Even if it is named an explanation, it is an amendment. And amendments cannot become active retrospectively, except when so decreed by Parliament. And the amending notification itself specifies its own date of effect viz. 1-4-1979.
11. The Assistant Collector held that the assessee had evidently made a wrong declaration and had suppressed facts. But he ends by saying the manufacturer had no clearly discernible culpable mental state. The latter statement cannot be reconciled with the former and the Assistant Collector was clearly wrong to say so when the assessee had suppressed facts. A suppression is always dishonest because by suppressing the facts, this assessee presented a case to the Central Excise that was false in very material details. It is not an argument to say that the manufacture of rapidogens dyes was well known to the authorities. The claimant to exemption under Notification 71/78-C.E. must present a claim backed by facts and true date to show he was qualified for the exemption. It is not the Central Excise who must establish his qualifications. That the Central Excise could have verified and found out the truth may be true but the claimant's burden to present the complete facts becomes not one title the less for that.
12. To obtain this concession, Cosmic Dyes was required to state all its productions and clearances, including those of rapidogens. It did not show the production and clearances of these dyes, and it has no satisfactory explanation for not doing so except to say that it was under the belief that rapidogens need not be included as they were exempted under another notification. There was nothing to induce that belief and hence the conclusion that there was suppression was correct.
I cannot agree with the Assistant Collector that there was no culpable state. The 5 year limit for the demand was, therefore, correct. It may be true that the demand was issued only after Explanation IV was introduced into Notification 71/78-C.E., but I cannot see why this would make a difference to the charge. The failure of an officer cannot mitigate to charge because by so doing it is to assume implicitly that the officer knew that the figure of clearances should be higher and he still took no notice. We cannot make that assumption on the evidence we have. If the manufacturer had stated the full figures of production and clearances but the authorities nevertheless gave the concession, we might be able to allow that the Central Excise's lapse made an essential difference which invalidates the charge in an essential matter. It was not this kind of case either.
13. The appellant argues that in Madhar Mills v. Collector of Central Excise-1982 E.L.T. 310 (Pat). The Patna High Court ruled clearance meant clearance or payment of duty. But in Vishal Andhra industries v.Union of India-1983 E.L.T. 2265, the Delhi High Court very categorically ruled that goods do not cease to be excisable even if they are ex empted from duty. The assessee had made a declaration that the clearance would be less than the amount specified by the notification; but this was not a correct statement. Even if they had been guided by the Patna High Court judgment, they ought to have listed all goods but asked for exclusion of the exempted rapidogens from the total. If the Central Excise agreed then only could the assessee say it had made a full and correct statement and the burden would shift, rightly and unavoidably to the excise authorities.
14. I am therefore of the opinion that the charge of mis-statement/ suppression was founded on strong grounds.
16. I now come to 56A. The factory claims it had been availing proforma credit on duty paid on O.T. base used in the manufacture of Naphthol A.S.G., prior to 1-4-1978. Apparently, the factory stopped taking advantage of the procedure when it began taking duty concession under Notification 71/78-C.E. It now wants to be given the credit under 56A for the period of dispute so that instead of paying the full duty demanded, it would have to pay only about Rs. 45,000/-, and it would receive a credit of nearly Rs. 75,000/-. I am unable to see this quite that way. If proforma credit as asked for can be given, in accordance with the law but only in accordance with the law, the Central Excise authorities should give it to the assessee. I can say no more than this.