1. The facts in this proceeding transferred to and heard by the Tribunal, pursuant to Section 35P of the Central Excises. and Salt Act, 1944 (the Act, for short) are briefly: (a) the Appellant holds a L-4 Licence to manufacture paints coming within item 14 of the first schedule to the Act and the manufacture was, at all times material, exempt from payment of excise duty in terms of Notification No. 116/74 dated 27.7.1974 upto an aggregate value of Rs. 2,00,000/-.
(b) alleging contravention of the Rules 173-B, 173-E, 173-(G)(i) and 173-G(ii) of Central Excise Rules, 1944 (hereinafter referred to as the Rules), a notice dated 16.12.1976 was issued requiring the Appellant to show cause why central excise duty amounting to Rs. 14517.20 (9465.40 basic plus 5501.80 auxiliary) on 8647 Litres RM paints, 7789 KG stiff paint 3300 Litres varnish should not be demanded from the Appellant under Rule 10 of the Rules and why a penalty under Rule 173(Q) of the Rules should not be imposed.
Reliance for the show cause notice was placed upon the quantum of production shown in the RT 12 returns as well as sales invoices for the period between April 1975 and March 1976; (c) the Appellant in reply submitted that the method of evaluation adopted was wrong and contrary to the procedure prescribed in Section 4 of the Act, inasmuch as selling cost and selling profit, had not been excluded in the computation of the value and that in any view, no contravention of the Rules, as alleged, had taken place; (d) in Adjudication, the demand made in the show cause notice was confirmed. It was held, inter alia, that- (i) the Appellant had manufactured 8647 Litres RM paints, 7789 Kg.
paste and 3300 Litres varnish between 1.4.1975 and 31.3.1976; (ii) on verification from sales invoices, the Appellant would appear to have sold the said products for an aggregate sum of Rs. 231230.00 and thus exceeded the limit of Rs. two lakhs, in terms of Notification No. 116/74, and had accordingly violated the provisions in the Rules cited in the notice to show cause by availing of the benefit of the said Notification, although disentitled; (e) in Appeal against the said order, apart from re-iterating the earlier contentions, it was for the first time urged that the Appellant was not merely manufacturing colour paste during the relevant period on its own account but was manufacturing for other parties as well and the quantity that was manufactured for other parties should be excluded in the computation of the aggregate quantity manufactured on its own account for the purpose of aforesaid notification. The bar of Limitation in terms of Rule 10 of the Rules in terms of which a notice to show cause was issued was also pleaded; (f) it was held by the Appellate Collector that the plea of job work for others cannot be sustained, since the relevant products did not fall under Item 68 of the First Schedule to the Act. That apart, it was found that the total value of the Appellant's products came to Rs. 1,98,031.00, even on the basis of the Appellant's own figures, without including the quantity of colour paste alleged to have been manufactured for other parties. If the said quantity is added, obviously, the aggregate production would exceed the limit of Rs. 2 lakhs, thus disentitling the Appellant to the benefit of the aforesaid Notification. On the question of limitation it appears to have been held that if Rule 10 was applied a part of the demand would become barred. Neverthless the demand could be sustained under Rules 9(i) and (ii); (a) trade discount and deduction had not been taken into account in the computation of the value of the goods in question; (b) a quantity of about 1101 KG colour paste should have been excluded, since it was manufactured on job Work basis not on Appellant's own account but for other parties and accordingly, the value of the said quantity should have been excluded in the computation of the aggregate value; 3. It would appear to us, on a perusal of the record and the submissions made in the course of the hearing, that- (a) trade discount was neither pleaded nor proved in these proceedings. The plea was raised for the first time in the application filed before the Government of India. Whether or not trade discount had been allowed in accordance with "the normal practice of the wholesale trade" is a question of fact and not having been raised at any stage previously cannot now be entertained; (b) so also the issue relating to exclusion of such quantity of goods alleged to have been manufactured for other parties. The plea is not one in relation to the notification concerning job work. On the contrary, it is to be understood to be one relating to the question as to whether the Appellant was the "manufacturer" on his own account in relation to the goods manufactured for other parties, in terms of the definition of ''manufacturer" in the Act and the ratio of the decision of the Supreme Court in the case of Shree Agency v. S.K. Bhattacharya AIR 1972 S.C. 780 : ECR C 381 (S.C.).
Even so, it is a question of fact and not having been raised at the appropriate stage cannot also now be allowed to be urged; (c) the notice to show cause dated 6.12.1976, apparently, specified rule 10 as the relevant provision in terms of which the amount in question had been demanded (copy of the said notice to show cause has not been produced before us; (d) Rules 9, 10, 10A at the relevant time provided, inter alia, 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(i)]; (ii) the manufacturer is bound to pay on a written demand within the period specified in Rule 10 of the leviable duty in respect of the goods removed from the place of manufacture in contravention of Rule 9(i)[9(ii)]; (iii) in case of such contravention the manufacturer becomes liable to a penalty extending up to Rs. 2000 and the goods shall be liable to confiscation [Rule 9(ii)]; (iv) when there is a short levy through inadvertence, error, collusion or mis-construction on the part of an officer or through mis-statement as to the quantity, description or value on the part of the owner, the proper officer may within three months from the date of which the duty or charge was paid or adjusted, serve a notice on the person from whom such deficiency of duty is recoverable requiring him to show cause to the Assistant Collector why he should not pay the amount specified in the notice [Rule 10(i)-in so for as material]; (v) the appropriate officer after considering the reply to the show cause determine the quantum of duty payable by the manufacturer and thereupon he should pay the amount determined within 10 days from the date on which he is required to pay [Rule 10(ii)]; (vi) where the Rules do not specifically provide for the collection of duty or any deficiency in duty in the case of short levy or of any other sums, on any account payable to the Central Government under the Act or Rules, the proper officer may serve a notice upon the person who is liable to pay, to show cause to the Assistant Collector why he should not pay the amount [Rule 10A(i)]; (vii) after consideration of the reply, if any, the Assistant Collector shall determine the amount due, deficiency in duty or any sum due from such person and the amount so determined shall be paid within ten days from the date or which he is required to pay [Rule 10A(ii)]; (e) it will be observed from a perusal of the aforesaid provisions that- (i) even in terms of Rule 9(ii) it is the period specified in Rule 10 within which a written demand in terms thereof is to be made. It is not, therefore, as if no period of limitation is prescribed for the written demand envisaged in Rule 9(ii); (ii) it is, obviously, not a case where there has been a clandestine! removal so as to attract the provisions of Rule 9; (iii) nor is it as if there has been a mis-statement on the part of the Appellant so that Rule 10 may be attracted. It would, however, appear to be a case where the short levy has occurred through inadvertence or error on the part of an officer since the ineligibility to the benefit of the notification in question could have been discovered from the RT12 Returns as well as the Sale Invoices, Accordingly, the demand should have been made within the period of limitation prescribed in terms ofhe said Rule.
(iv) Rule 10(A) is a residuary provision that is attracted only in a case where either Rule 9 or 10 is inapplicable. Thus in . Assistant Collector of Central Excise Vs.
National Tobacco Co. of India Ltd.], it was held "Rule 10(A) indicates that there are residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the Rules". But then, it is not a case where the Rules did not specifically provide for the collection of duty or any deficiency in duty in the case of a short levy resulting from an inadvertence or error. Accordingly, Rule 10(A) does not appear to be applicable.
(f) In the premises, it is only that amount of duty that was leviable jupon the manufacture within 3 months preceding the issue of the [show cause notice that can be recovered in terms of Rule 10, as it read at the material time.
4. In the result, the appeal partly succeeds. The Department may re-compute the amount of duty that could be recovered within 3 months prior to the issue of the show cause notice and recover the same, if not already recovered. If the entire amount of duty demanded has already been recovered, the amount in excess of the duty payable within 3 months from the date of the issue of the show cause notice be refunded.