1. M/s. Bharat Beedi Works (P) Ltd., Mangalore, with Registered Office at Kadri Road, Post Box No. 730, Mangalore, (hereinafter referred to as the company), had filed eight revision petitions before the Central Government, feeling aggrieved against one common order passed by the Appellate Collector of Customs & Central Excise, Madras on 24-7-1979 whereby he disposed of eight appeals filed by the Company against eight different orders of the Assistant Collector, passed in respect to different units of the Company. The particulars of the Order-in-Original, and the appeal references are all detailed in the Order-in-Appeal.
2. All these revision petitions stand transferred to the Tribunal by virtue of the provisions of Section 35-P of the Central Excises and Salt Act, 1944, to be treated as appeals before the Tribunal. These are being disposed of as such.
3. The proceedings against the Company emanated from the notices given to different units operating in and around Mangalore where beedies which the appellants describe as "Hand-made", are being manufactured.
The controversy is confined to the stock which was in existence as on 1-3-1975, when this item was, for the first time, subjected to excise control. According to the appellant, they manufacture beedies by manual process in their different units, and that the manufacture is complete as soon as a 'Beedi' is ready, but thereafter packing and labelling is done which is carried out partly within the premises and partly from outside labour. In view of this understanding, beedies which were rendered excisable with effect from 1-3-1975, the different units declared their stock position as on 1-3-1975, the same day, and inspection was conducted by concerned excise officers, and verified to be correct. The Company effected clearances thereafter, from its different units, which is pleaded to have been carried out after filing of the AR1 declaration in prescribed proforma, and after those were duly approved, and certified by the concerned officer.
4. However, long after these clearances which were all effected between the period from 1-3-1975 to 7-3-1975, the Department took the view that only those beedies could be treated as manufactured which had been completely packed and labelled, and in this view of the matter the position of pre-budget stock as indicated by the various units was not correct because they have shown even loose beedies yet to be put in packs, and to be lebelled, also as manufactured, and to that extent the declaration was mis-leading, and tantamount to withholding of relevant records, and that this had resulted in failure to pay excise duty, leviable on beedies, which in Department's view had to be treated to have been manufactured after 1-3-1975.
5. The Company took up the position that packing or labelling was post-manufacturing operation, and that the 'manufacture' was complete as soon as beedies came into existence, and as such whatever number of beedies was lying in stock as on the expiry of 28-2-1975, whether in packages or loose or due for packing, ought to be deemed to have been manufactured before the crucial date i.e. 1-3-1975. They further pleaded that in any case there had been no concealment or mis-statement on their part, as they placed before the authorities all of their stocks, as well as records, showing the stock position as on 1-3-1975, and the stocks stand duly inspected by the concerned officers, and certified to be correct and further that clearances were effected within one "week of the change in tariff i.e. 7-3-1975, and each time form AR1 was submitted to the proper officer, and clearance effected after verification and certification by him, and thus there was neither any mis-declaration nor any surreptitious removal so as to attract Rule 9(2) of the Central Excise Rules, and that the only rule to apply was Rule 10, which prescribed a period of three months in case of removals under physical control, and as such the demands raised long after the period of three months were patently barred by time.
6. Both the Assistant Collector as well as the Appellate Collector rejected these contentions, and holding that manufacture was complete, only after beedies were ready to be marketed in packaged form ; further holding that there had been incomplete disclosure as to the state of their records as on 1-3-1975, and to that extent there had been wrongful declaration, and as such clearances had been effected in violation of the provision of Rule 9(1) of the rules and, consequently Rule 9(2) would apply, giving the department a period of five years to raise the demands, on account of non-levy, as a result of wilful suppression of facts. As a result, demands were confirmed in relation to six units with reference to Rule 9(2), and the other two units under Rule 10A.7. The appellant assailed these findings in these appeals, which are being taken up together for disposal in view of common question of facts and law being raised. Shri K. Chennabasappa, Advocate appearing for the appellants canvassed the same proposition, as were taken up before the lower authorities, and reiterated in the ground of appeal ; namely that manufacture stood completed as soon as beedies came into existence, and that packing and labelling was incidental, in order to facilitate marketing and not in any case essential to the process of manufacture, and further that there was no mis-declaration on the part of the appellants as they had given inspection of all their existing stocks as well as of all the records to the authorities and they had satisfied themselves after physical inspection, as well as from the records, as to what was the actual position of the pre-budget stocks, and that clearances were effected thereafter, again under physical control of the authorities, after submission of AR 1 forms, which were duly verified by the proper officer.
He also placed on records copy of an order passed by the Appellate Collector of Customs and Central Excises, Madras dated 31-1-1980, whereby he allowed eight appeals of this Company, against eight orders passed by the Assistant Collector on different dates, imposing penalty of Rs. 25/- on each unit of the appellants, with reference to Rule 198, and the Appellate Collector has set aside all the eight aforesaid orders, holding that the issue was only as to whether the beedies which had yet to be labelled could be considered as fully manufactured or not, and simply because the Company had shown un-labelled beedies along with labelled beedies as fully manufactured as on 1-3-1975 would not mean that they had failed or refused to give correct information or could be deemed to be guilty of having wilfully furnished false or mis-leading information. The orders of imposition of penalty were thus quashed.
9. The learned counsel argued on the basis of this order of the Appellate Collector that now finding has been given by the concerned authority himself in relation to this very matter that there had been no mis-declaration or withholding of information. He thus contended that in face of this position, the charge of wilful mis-statement or suppression of facts, so as to attract Rule 9(2) was no longer sustainable, and that the only rule to apply was Rule 10, and consequently residuary provisions of Rule 10A could also not be invoked, as has been done in two of the eight cases, and that judging by any criterion the demand raised after about 22 months, in all cases was clearly barred by time.
10. Since this contention appeared to be prima facie tenable, we did not think necessary to further go into the question, as to at what stage, the manufacturing process could be considered to have been completed, and called upon the learned SDR to state, as to what could be urged, in relation to the objection as to time-bar.
11. Shri K.D. Tayal, SDR vehemently argued that the only record relevant for this purpose, was the one which was originally shown on 1-3-1975, and that the fact of the subsequent clearances having been effected after submission of AR 1 form was not relevant. He further contended that Rule 10 applied only to cases where there was error or mis-construction, though he conceded that short levy could cover cases of 'non-levy' also, but this being, according to him, not a case of any error or mis-construction, Rule 10 could not apply and, he reiterated that it was a case of wrongful declaration on the crucial date i.e.
1-3-1975, which has resulted in this non-levy and as such both Rule 9(2) as well as Rule 10A had been rightly invoked by the lower authorities, and that objection as to the demand being barred by time was not sustainable.
12. In view of the fact, that this question goes to the root of the matter, we have deemed it fit to first advert to this controversy alone. On careful consideration of the matter, we find it abundantly established on record that there had been no suppression of information or withholding of record, so as to attract Rule 9(2).
13. Apart from the fact, that the Appellate Collector in subsequent proceedings, relating to and arising out of the same controversy, namely as to state of the pre-budget stock as on 1-3-1975, though, emanating from separate notices, issued under Rule 198, has himself absolved the appellants of all the charges of mis-declaration or wilful mis-statement of facts or suppression of records; otherwise also, we find it to be a case where no inference of any mis-declaration or concealment can legitimately be drawn. The learned counsel for the appellant placed before us a copy of the AR 1 form, dated .4-3-1975, clearly indicating that the stock of "hand-made" beedies cleared thereby was from pre-budget stock as on 28-2-1975. This form was received in the office on 5-3-1975 and duly certified for clearance on 7-3-1975. It is stated by the learned counsel that this was the position in relation to all the clearances, which were effected, according to the chart given at internal page 3 of the appeal, on 5-3-1975 in six cases and on 7-3-1975 in two other cases. The dates of demand of duty, allegedly non-levied in all cases were after the expiry of period, varying from 16 to 22 months. We find from the documents placed before us, that the verification of the records which was conducted on 1-3-1975, was also in respect of those stocks which were not in the premises, but indicated in the accounts. This obviously relates to those beedies which are stated to have been given to out-workers for packing and labelling but received in the premises on or after 1-3-1975, and cleared upto 7-3-1975.
14. We, therefore, find it to be a clear case both on the basis of the records placed before us, and submission made with reference to the same, as well as on the basis of the finding of the Appellate Collector himself relating to these very stocks that there had been no wilful suppression of facts or wrongful declaration of any type nor any deliberate mis-declaration. On face of it, a case of suppression of facts or surreptitious removal cannot be held to be made out. It is at worst a case, if the Department's view were to be assumed to be correct that manufacturing was complete only after packaging had been done, that of mis-statement of description or that of 'error' or 'mis-construction' within the contemplation of Rule 10.
15. There is also no dispute on facts that the goods were being removed under physical control, and as such period of three months of limitation was available at the relavant time, for raising demand with reference to Rule 10 on account of short levy or non levy. The provisions of Rule 9(2) were thus not at all available to the Department nor could Rule 10A be invoked because that was a residuary provision and when specific provision in the form of Rule 10 was available, then no recourse could be had to Rule 10A.16. We have thus no hesitation in holding that the demands of duty raised long after the expiry of the period of three months in all the eight cases, were clearly barred by time, and consequently the orders confirming the said demands and those of the Appellate Collector upholding the said confirmation of demands, are clearly not sustainable. These demands are, therefore, liable to be quashed on account of being barred by time. On the view we have taken, on the question of limitation, we do not deem it necessary to advert to the controversy as to what would be tentamount to "manufacture". All the eight appeals are thus allowed on the point of limitation. It is directed that in case the duties have been paid, consequential relief by way of refund shall follow, which be allowed within a period of two months of the receipt of the communication of these orders by the concerned authority/authorities.