1.The appellants, M/s. Mermaid Marine Products (P) Ltd. admittedly manufacture fish meal and fish oil in their factory. Under Notice dated 11-5-1083 they were called Upon to show cause why action should not be taken against them for carrying on the said activity of manufacture of fish oil without taking out a Central Excise licence therefor and without observing due formalities in connection therewith. They replied contending that fish meal as well as fish oil were exempted and that though they had applied for licence the same had been returned with audit and that they had not, therefore, committed any contravention.
They further claimed that the demand was time-barred.
2. Under order dated 8-6-1984 the Additional Collector of Central Excise, Cochin held the charges established and imposed penalties [Rs. 1,000/' under Rule 9(2), Rs. 500/- under Rule 52A, Rs. 1,000/- under Rule 222 and Rs. 5,000/-under Rule 173Q of the Central Excise Rules] and also demanded payment of duty on the clearances amounting to Rs. 8,43,376.05 during the period April, 1977 to November, 1982. It is against the said order that the present appeal has been filed.
3. We have heard Shri C. Chidambaram, Consultant, for the appellants and Shri K.D. Tayal, Senior Departmental Representative, for the respondent.
4. Shri Chidambaram contended that under Notification No. 115/75-CE, dated 30-4-1975 the fish oil manufactured by the appellants was exempted from payment of duty and, therefore, the order of the Additional Collector was not correct. He further contended that in any event the appellants had been informing the Excise authorities of their intended activities ever since they started the factory and there had been no suppression of facts at any time and, therefore, the demand was in any event invalid except for the normal period of six months preceding the Show Cause Notice. Shri Tayal, on the other hand, contended that the claim for benefit under Notification No. 115/75-CE was not open to the appellants and that the demand was valid for a period of 5 years under the proviso to Section 11A of the Central Excises and Salt Act, as held in the order under appeal.
5. We have carefully considered the submissions of both sides. Shri Chidambaram points out that fish oil is also oil and relies upon the definition of 'oils' in the Encyclopaedia Britannica (Vol. 13); Webster's Third New International Dictionary and Chambers Dictionary of Science and Technology. We find that the Additional Collector also had proceeded on the basis that fish oil is an oil, though in connection with the applicability of the exemption under Notification No.115/75-CE the Additional Collector had held against the appellants, based on the words in the notification.
6. Notification No. 115/75 wholly exempts from excise duty goods falling under Item 68 of the First Schedule to the Central Excises and Salt Act and manufactured in the factories covered by any of the industries specified in the Schedule to the Notification. Item No. 4 of the Schedule to the Notification reads : "Oil Mill and Solvent Extraction Industry". Shri Chidambaram contends that the extraction of fish oil would fall under the words "Oil Mill Industry". But the Additional Collector had rejected this contention. He had held as follows in this connection : "This entry covers only the usual oil mills which crush and extract oil from oil seeds and also the solvent extraction connected with it. Their contention that fish oil is also covered by this is not correct. Fish oil is extracted by a process of steam cooking of fish and such factories are not referred to as oil mills. The Produce Cess Act, 1966 which collects cess from oil mills covers only Cotton Mills and Oil Mills which extract oil from oil seeds. The fact that they are not eligible for exemption under any other Notification as stated in the show cause notice has been conceded and hence, further examination of the same is not considered necessary." Shri Chidambaram contends that the entire reasoning in this portion of the order is incorrect. The reference to the Produce Cess Act by the Additional Collector appears to us also to be inappropriate. Shri Chidambaram points out that fish oil being admittedly an oil, the extraction thereof by use of screw presses would make out the industry of the appellants to be an oil mill as mentioned in the Notification.
The fact that a screw press is used, had been referred to by the appellants in their letter dated 24-4-1981.
7. But it appears to us that the argument of Shri Chidambaram in this regard is not acceptable in the circumstances of, the present case. The plant run by the appellants is a 'fish meal plant' as is referred to by the appellants themselves in their letter dated 29-11-1978. It may be noted that the appellants themselves do not refer to the same as a 'fish oil plant' or a 'fish oil milP. The words used by them are as follows : "Our manufacturing process is carried out by an Imported Compact fish meal plant and operation is carried out in an automatic manner." "For this we had imported a complete Fishmeal Plant from Norway in 1976 and for which we have undertaken to the Government to export at least 75% of our production of Fishmeal annually. Fish oil our by-product has so far been for inland consumption only." 8. From the above statements of the appellants themselves it is fully clear that the factory of the appellants was a fish meal plant, the production of the fish-oil by them being only by way of a by-product in the manufacture of fish meal.
9. We may also see that in their letter dated 29-11-1978 they have given the following further details also : "The envisaged annual production of fish meal is to the tune of 1000 tonnes and fish oil around 150 tonnes. The value of the fish meal varies and however, we hope 1000 tonnes of fish meal will be able to fetch Rs. 28,00,000/-. Please also note that the entire quantum of ths fish meal will be exported. 150 tonnes of fish oil is likely to fetch around Rs. 7,50,000/-".
10. These details make it clear that the factory of the appellants was intended for production of fish meal and that the production of fish oil was as a by-product only, the value as well as the quantity being a small proportion of the value as well as the quantity of the fish meal manufactured by the appellants.
11. In the circumstances, we are satisfied that though fish oil may also have been produced by the appellants in their factory, the said factory could not be called on oil mill but would essentially be a fish meal factory only. The appellants cannot, merely on the basis of production of fish oil to a small extent as a by-product in the factory, style their factory as an oil mill, in order to claim benefit under Notification No. 115/75. We may also notice in this connection that ever since 1977, when correspondence commenced between the appellants and the department, the appellants had been making no reference to any benefit under Notification No. 115/75 but were claiming benefit under other notifications only even as far as fish oil is concerned, and that the first occasion they claimed benefit under Notification No. 115/75 was only when, on 27-6-1983, they sent a reply to the Show Cause Notice. These facts would support our conclusion that the appellants were never thinking of their factory as an oil mill, until they chose to put forward this ground six years after the factory was started.
12. Therefore, on a careful consideration of the submissions of both sides we are satisfied that the appellants are not entitled to benefit under Notification No. 115/75 in respect of the fish oil manufactured by them. .
13. On the question of time-bar; Shri Chidambaram points out that even on 14th February, 1977 the appellants had intimated the Superintendent about their commencement of the factory and had asked for information as to whether the fish oil and fish meal could come under any item of the Central Excise Tariff. He points out that subsequently also the appellants had been addressing Excise authorities with such information as was required to be furnished by them and, when information was required as to the manufacturing process also, such details were furnished and in the circumstances there had never been any suppression of facts. He, therefore, contends that the normal time period of six months alone should have been applied and not the extended period of five years as provided under the proviso to Section 11A of the Central Excises and Salt Act. The Additional Collector had in his order observed that the appellants had been consistently avoiding giving details of their production and had also avoided taking out a licence in spite of specific notice and the records were also not produced when called for, making it necessary for the department to collect figures from the State Sale Tax Department for arriving at the duty liability also. On this ground he observed that there had been wilful suppression and avoidance, to evade payment of Central Excise duty. On this conclusion he held that the extended period of limitation was available.
14. It is, no doubt, true that there had been extended correspondence between the appellants and the department from 1977 onwards. It is also true that the department had been put on notice that fish meal as well as fish oil was being manufactured by the appellants in their factory.
In this sense there cannot be said to have been any suppression of facts on these matters. But it is to be noted that as early as 13-10-1977 the appellants had been informed by the department that the goods manufactured by them were liable to duty under Tariff Item 68 and that they should, therefore, obtain licence also therefor. When the appellants appear to have applied for a licence under letter dated 9-5-78, the department had replied under letter dated 15-5-78 that the application was defective and was being returned and that they were to submit classification list also in Form I for approval. It is admitted that no licence was subsequently obtained, nor was any classification list filed, though correspondence appears to have been carried on, claiming exemption under some notification or other, such correspondence extending over a period of years.
15. It is, therefore, seen that the appellants had been clearly put on notice even by the end of 1977 that the fish oil and fish meal'manu factored by them were excisable commodities and duty was to be paid on them and that they had to take out the necessary Central Excise licence also therefor. Admittedly, no such licence had been taken out even on the day the Show Cause Notice was issued and no classification list also appears to have been filed at any time, claiming any proper exemption to justify non-payment of duty. In the circumstances, we are satisfied that this is a clear case where there had been contravention on the part of the appellants of the relevant provisions of the Central Excises and Salt Act and the rules made thereunder, with intent to evade payment of duty. The contention of Shri Chidambaram that there had been no intent to evade duty and, therefore, the provisions of the proviso to Section 11A are not satisfied, is not acceptable. Evasion need not involve concealment. Contravention of Law (like the failure of the appellants in this case to take out a licence and file a classification list) calculated to make duty unrealisable would also amount to evasion of duty. We, therefore, hold that the authorities were entitled to take action as provided under the proviso to Section 11A. We, therefore, further hold that there is no question of time-bar in the proceedings before the department.
16. The quantum of penalties levied do not also appeal to be excessive.
In the circumstances, the order under appeal is confirmed and this appeal is dismissed.