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Hindustan Chemical Works. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(18)ELT28TriDel
AppellantHindustan Chemical Works.
RespondentCollector of Central Excise
Excerpt:
.....production. therefore, the manufacture was completely stopped w.e.f. 1-8-1977 and accordingly, the duty liability fixed under the simplified procedure was not discharged for that month onwards. an intimation was accordingly given to the jurisdictional superintendent of central excise, jullundar on 20-8-1977 informing the complete stoppage of manufacture by the appellants. however, show cause notice in all the four matters were served upon the appellants m/s. hindustan chemical works, jullundar under which they were charged for the contravention of the provisions of rule 173 rd and 173-re(b) of the central excise rules, 1944 and they were required to show cause as to why penalty should not be imposed on them under rule 173rl and also that the central excise duty for the period august 1977.....
Judgment:
1. These are four revision applications filed before the Government of India (now transferred to the Appellate Tribunal) under Section 35P of the Central Excises and Salt Act, 1944 against No. 454-457/CE/1980 dated 2-7-1980 passed by the Appellate Collector of Central Excise, New Delhi.

2. The appellants were engaged in the manufacture of Sodium Silicate falling under Item No. 14BB of the First Schedule to the Central Excises and Salt Act, 1944 and were working under (the now) defunct Chapter VI1-B of the Central Excise Rules, 1944.

3. As per the allegations made by the appellants, on account of serious differences among the partners, the functioning of the appellant firm became impossible and it was decided to close down the unit permanently and to stop the production. Therefore, the manufacture was completely stopped w.e.f. 1-8-1977 and accordingly, the duty liability fixed under the simplified procedure was not discharged for that month onwards. An intimation was accordingly given to the jurisdictional Superintendent of Central Excise, Jullundar on 20-8-1977 informing the complete stoppage of manufacture by the appellants. However, show cause notice in all the four matters were served upon the appellants M/s. Hindustan Chemical Works, Jullundar under which they were charged for the contravention of the provisions of Rule 173 RD and 173-RE(b) of the Central Excise Rules, 1944 and they were required to show cause as to why penalty should not be imposed on them under Rule 173RL and also that the Central Excise Duty for the period August 1977 onwards should not be demanded from them under the said Rules.

4. In response to the show cause notices M/s. Hindustan Chemical Works, the appellants, stated that their licences for the year 1978 had not been renewed and hence they were not the licencees for that period.

They further added that their factory was closed w.e.f. 1-8-1977 due to serious dispute among the partners and an intimation to this effect was given to the Superintendent of Central Excise, Range I, Jullundar and therefore, the question of depositing the duty for the said period did not arise.

5. The Assistant Collector of Central Excise did not accept the contention of the appellants and confirmed the demand against the appellants under Rule 173-RL of the Central Excise Rules, 1944 in all the four cases.

6. Aggrieved by the said order of the Assistant Collector of Central Excise, the appellants preferred four appeals before the Appellate Collector who decided all the four appeals by a single Order No.454-457/CE/80 dated 2nd July, 1980 holding that the appellants did not surrender their licences for cancellation and as such duty liability so fixed is to be paid by the appellants. However, the order imposing the penalty upon the appellants was set aside.

7. Not satisfied with the said order of the Appellate Collector, the appellants preferred four revision applications before the Government of India, which were transferred to this Tribunal and were treated as appeals. As the matter involved in all these four appeals is the same so all these four appeals are disposed of by this single order.

8. We have heard S/Shri A.K.S. Bedi along with S.C. Chopra, Advocates, for the appellants and Shri A.K. Jain, S.D.R., for the department and gone through the records.

9. Shri Bedi, the learned counsel for the appellants submitted that the manufacture was completely stopped w.e.f. 1-8-1977. According to him it was not a case of temporary breakdown or cessation of the work but was completestoppage of manufacture by the appellants as they never started production again. They were, therefore, not under any legal obligation to discharge the duty liability for that period when they had completely stopped the manufacture of the excisable goods.

10. Shri Bedi further pointed out that the appellants were asked to show cause for the demand of duty for the months of August, September, October, November, December 1977 and January 1978. The demands of duty for the months of August, October, November and December 1977, had been confirmed whereas the demand pertaining to the months of September, 1977 and January, 1978 were withdrawn by the Assistant Collector of Central Excise, Jullundar on the ground that since the appellants closed down their factory since 1-8-1977 and never started again, they were not required to discharge their duty liability for the subsequent months. The facts which were relevant for the months of September, 1977 and January, 1978 were equally relevant for the preceding months and the authorities below have grossly erred in confirming the demands for the preceding months. The impugned order, therefore, suffers from serious infirmity of law and is liable to be quashed.

11. Shri A.K. Jain, the learned S.D.R. countered the arguments of Shri Bedi, the counsel for the appellants and drew our attention towards Rule 173 RJ (4) of the Central Excise Rules, 1944 which lays down that "where during the 3 years block period, the assessee surrenders his licence to the proper officer or such licence is revoked or suspended, the duty liability determined under Rule 173 RB of Central Excise Rules, 1944 on the expiry of the month in which licence was cancelled or revoked or suspended shall cease". According to Shri Jain, the appellants did not surrender their licence for cancellation and as such duty liability so fixed is to be discharged by the appellants. The order of the authority below is just and proper and there is no justification to interfere with the findings of the authority below.

12. There is no dispute about this fact that the appellants completely stopped the manufacture of the excisable goods w.e.f. 1-8-1977 and an intimation was accordingly sent to the jurisdictional Superintendent of Central Excise, Jullundar on 20-8-1977. However, the appellants did not surrender their licence on that day. The point for determination is whether non-surrendering of excise licence, though there has been a complete stoppage of manufacture of excisable goods, continues to make the assessee liable to pay the duty 13. As per the provisions of Rule 173 RD, if the assessee pays the amount of duty determined under Sub-rule (2) of Rule 173 RC, such payment shall fully discharge his liability for duty leviable on the excisable goods manufactured by him during the month for which the amount has been paid. Since the appellants did not manufacture any excisable goods from 1-8-1977 onwards, no statutory duty was cast on them under Rule 173 RD to pay the duty of excise determined under Sub-rule (2) of Rule 173-RC. Non-surrender of the licence for cancellation is a procedural lapse and it does not effect the merit of the case, if otherwise, the production/manufacture of the excisable goods has ceased altogether on permanent basis. The law has to be followed in spirit and the breach of procedural requirements does not disentitle the appellants from claiming immunity from payment of duty when they had closed down their factory and stopped the manufacture of excisable goods, the intimation of which was duly sent to the excise authorities. The findings of the Appellate Collector cannot be approved in the presence of such circumstances.

14. The appellants were asked to show cause for the demand of duty for the months of August, September, October, November, December, 1977 and January, 1978. The demands of duty for the months of August, October, November and December, 1977 were confirmed whereas the demands pertaining to the months of September, 1977 and January, 1978 were withdrawn by the Assistant Collector of Central Excise, Jullundar, on the ground that since the petitioners closed down their factory w.e.f.

1-8-1977 and never started again, they were not required to discharge their liability for the subsequent months. The facts which were relevant for the months of September, 1977 and January, 1978 were equally relevant for the preceding months. This type of contradictory stand taken by the authorities below in the same circumstances of the case does not give weight to the findings of the authorities below.

15. Under these circumstances, as the appellants completely stopped the manufacture of the excisable goods w.e.f. 1-8-1977, the intimation of which was duly sent to the excise authorities, so the demand of duty for the period from August, 1977 onwards cannot be said to be justified and legal. We, therefore, set aside the orders of the authority below and accept all the four appeals. Consequential relief to follow.


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