1. In this appeal before the Tribunal, the question which arises for consideration is as to what could be treated as the 'base period' and 'base clearances' for the purpose of construing Notification No.198/76-C.E., dated 16-6-1976 vis-a-vis the products of appellants' company (Division : J.K. Engineers' Files).
2. The facts, as can be gathered from the orders of the authorities below, emanating from the issuance of a Notice to show cause dated 6-1-1979 are; that the appellants in their aforesaid Division were manufacturing 'files' and 'rasps', falling within the description of 'cutting tools'. The production of these goods commenced in appellants' factory some time in 1950 but these products were brought under excise control with effect from 1-3-1974 when for the first time when Tariff Entry 51-A was introduced in the Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). The company subjected itself to excise control from the date of introduction of said Tariff Item; such as applying for L-4 licence, filing necessary Declaration and Price List, etc. and paid excise duty at the normal rates as determined by the Central Excise Tariff (hereinafter referred to as the C.E.T.). However, on 16-6-1976, the Central Government issued notification; being Notification No. 198/76-C.E., whereby some concessional rates of excise duty were provided, depending upon the 'base clearance value' during a given period, by or on behalf of the manufacturer, which fact had to be determined, inter alia, in accordance with the formulae laid down by clause 2 of the aforesaid Notification. The relevant portions, for the purpose of present controversy, of clause 2; namely (b) and (c) as well as the opening part of the said Notification, are reproduced below for facility of reference : - "In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the excisable goods of the description specified in column (3) of the Table hereto annexed (hereinafter referred to as the specified goods) and falling under such Item Number of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) as are specified in the corresponding entry in column (2) of the said Table and cleared from one or more factories in excess of the base clearances by or on behalf of a manufacturer, from so much of the duty of excise leviable thereon under the said Item (read with any relevant notification issued under the said such Sub-rule (1) of Rule 8 and in force for the time being), as is in excess of seventy-five per cent of such duty, subject to the following conditions, namely : - 2. (b) where the specified goods were cleared from a factory for the first time on or after the 1st day of April, 1973, but not later than the 31st day of March, the base period shall be the three financial years, namely, 1973-74, 1974-75 and 1975-76 and the base clearances shall be one-third of the aggregate of the clearances of such goods during such base period; (c) where the specified goods were cleared from the factory for the first time earlier than the 1st day of April, 1973, the base period shall be the year in which the aggregate of the clearances of such goods during any of the financial years 1973-74, 1974-75 and 1975-76 was the highest and the clearances during such base period shall be the base clearances.
3. The party furnished necessary Declaration for the purpose of availing of the benefit of this concessional/exemption notification, proceeding on the assumption that the 'specified goods' as contemplated by this notification meant 'excisable goods', and thinking that since their goods became excisable for the first time with effect from 1-3-1974, their case fell within the ambit of Sub-Clause (b) which covered goods, where clearance of 'specified goods' had commenced for the first time on or after the 1st day of April, 1973 and on this information, the 'base clearances value' was determined by the Assistant Collector concerned, to be the l/3rd of the aggregate of the clearances of three financial years 1973-74, 1974-75 and 1975-76.
Consequential refund was also allowed to the party, on an application having been made in this regard and by means of a separate order, passed by the Assistant Collector.
4. Subsequently, the Department felt that in view of the position that the factory had commenced production of these goods in 1950, and there had been clearances of the goods ever since; the provision applicable to their case was Sub-Clause (c) of clause 2 of the Notification, which provided that the 'base period' would be the year in which the aggregate of the clearances of the 'specified goods', during any of the financial years 1973-74, 1974-75 and 1975-76 was the highest, and the 'base clearance' would mean the clearance during such 'base period'.
Working on the data, that had been supplied by the appellants, the 'base period' was determined afresh, and since the clearances in 1975-76 was the highest out of the three years under consideration, it was felt that, that was to be the 'base period' for the purpose of applicability of the benefit of this notification.
5 This change in view was followed by a notice to show cause issued on 6-1-1979 stating that M/s. J.K. Engineers' Files had availed of excess concession to the extent of Rs. 2,97,437.60, due to wrong fixation of 'base clearances value', in terms of para 2(2)(b) of the Notification No. 198/76-C.E., inasmuch as in place of 'base clearances value' being fixed at Rs. 5,54,15,389.99, it had been fixed at Rs. 3,69,18,341.62 and they were called upon to show cause as to why the excess concession so availed of be not recovered from them under Rule 10(1) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules).
6. This notice was contested on the plea that the 'base clearance' had been fixed rightly in their case with reference to Sub-Clause (b), and that that was the only provision attracted to their case. Besides taking up the plea, that they had availed of the benefit of the relief provided by Government of India by means of the aforesaid notification after fixation of 'base clearances period' by the appropriate authority; namely, the Assistant Collector, on the guidelines given in paragraph 2 of the Notification, and after the classification list claiming the said benefit had been approved by proper authority and so the 'base clearance' already fixed cannot be re-opened without sufficient cause; it was further urged that the term 'specified goods' had reference only to 'excisable goods' and since these particular goods became excisable for the first time with effect from 1-3-1974, they had rightly shown the clearance to have commenced on or after 1st April, 1973 and that the Assistant Collector had fixed the 'base clearance' accordingly, after fully satisfying himself from the records and after obtaining whatever information was called for. They thus reiterated that the reckoning date for purpose of clearance of goods, should be the date they had started paying excise duty, after introduction of Tariff Item 51 A.7. This contention of the party, however, did not find favour with the Assistant Collector and by his order dated 18-6-1979, the notice to show cause was confirmed on the view that the 'base clearances value' had not been correctly worked out earlier, for the purpose of availing of the exemption by the party, and that this had to be determined on the formula contained in para 2(2)(c) of the said Notification and not para 2(2)(b) thereof. He further held that this mistake had occurred mainly because of incorrect declaration having been filed by the party at the time of fixation of 'base clearances value' and 'base clearances period' inasmuch as they had shown that the first clearance of their product had commenced after 1974 budget. As a result, the demand for Rs. 2,97,437.56 was confirmed, under Rule 10(2) of the Rules.
8. The party assailed this finding in the appeal filed before the Appellate Collector, Central Excise, Bombay, reiterating their plea that inasmuch as their goods became excisable for the first time with effect from 1-3-1974, the 'base clearance' within the contemplation of the Notification under reference, had to be with reference to that point of time, when the goods became 'excisable', because exemption was only with reference to excise duty. They also contested the finding that the mistake in fixing the 'base clearance period' had occurred as a result of mis-statement or misdeclaration on their part, pleading that all the figures and records had been examined and verified by the Assistant Collector, before working out the 'base clearance value' and after making full enquiries as regards the 'clearance period' of the goods, and that the view now expressed by the Assistant Collector that incorrect declaration on their part was responsible for wrong fixation of the 'base clearance period' and 'base clearance value', was not sustainable on facts, and that even if it was felt that any excess amount had been allowed to them by way of concession or . exemption from duty, the only period which could be invoked was the normal period of six months as contemplated by Rule 10(1) of the Rules and that the demand having been raised after expiry of six months could not be validly sustained.
9. This appeal was dismissed by Collector (Appeals) confirming the view that 'base clearance value' in this case had to be determined only having regard to the provisions of Sub-Clause (c) of clause 2 of the Notification, and not (b) as claimed by the party, in view of the admitted position that the production had commenced with effect from 1950. He also over-ruled the objection as to the notice being barred by time on the view that it was a clear case where there had been a mis-statement as to the date of their first clearance and that in the circumstances, longer period of 5 years as stipulated in the proviso to Rule 10 was attracted. The appeal of the party was accordingly dismissed by his order dated 23-11-1982.
10. In the appeal before the Tribunal, both these issues have been taken up; namely, that the stand of the party in showing the clearance with effect from 1-3-1974 was correct inasmuch as 'specified goods' had reference only to 'excisable goods' and since in this case, their products became excisable for the first time with effect from 1-3-1974, that was the only date that had to be taken into reckoning and that on this basis, the 'base clearance value' had been rightly fixed. They have also contended that in any case even if any concession had been allowed erroneously or by mistake or there was a case for recovery of differential duty or of the refund allowed, that could be done only within a period of 6 months from the date of such payment, and there was no circumstance existing in the present case which could justify the invocation of extended period of 5 years and that the Collector (Appeals) erred in not accepting their plea and that the notice issued was barred by time under the normal period, allowed by Rule 10(1). They pleaded that there has been no mis-statement or mis-declaration on their part and that the moment Tariff Item 51A was introduced, the appellants filed all the necessary information before the Excise authorities. They placed reliance in this regard on their application for L-4 Licence made on 1-3-1974 itself, and also declaration of their record position as on 1-3-1974, again filed on that very day, and which showed the position of products manufactured prior to that date, and also the particulars which they had specifically furnished as to the quantum and value of the said products, manufactured in their factory and removed therefrom in 1973; while filing proforma in 1976 for availing benefit of this Notification No. 198/76, alongwith the declaration, they had submitted under cover of their letter dated 15-5-1976, in which they had clearly and specifically stated that appellants' factory had started producing these goods from 1-5-1950 but considered them excisable with effect from 1-3-1974, when they came for the first time under Excise Control. They, therefore, contend that in the face of this categorical statement and clear information furnished by them to the Excise authorities for the purpose of determining the 'base clearance value', the allegation of any suppression of facts or mis-statement on their part was wholly unfounded, and that the demand was liable to be struck down as barred by time.
11. At the hearing, that was first fixed for 1-8-1983, Shri V.J.Taraporevala, Senior Advocate appeared accompanied by Shri S. Ganesh, Advocate. He indicated the issues involved, laying emphasis on the contention that specified goods as contemplated by Notification No.198/76-C.E., meant "excisable goods", and also highlighted the fact that this notification did not relate only to this particular item, but was a general notification covering number of tariff items of the Schedule, and as such different criteria for determining the 'base clearance value' had been provided, depending upon the fact when the "excisable goods" were first produced, and cleared from the factory and that in their case what was relevant was not mere production and clearance at a point of time when the goods were not under excise control, but only when they became subject to such control, and acquired the character of "excisable goods".
12. He further argued that the opening part of the notification clearly and unmistakably referred to clearances as of "excisable goods", and urged that this term 'clearance' has to have a uniform meaning throughout wherever this expression occurred and placed reliance in support of this proposition on an authority of Supreme Court (AIR 1977 SC 789) holding that terms appearing in a statute should be given the same meaning, when the same expression was used in the same statute at different places. He also pointed out that Preamble to the Notification indicated that this was meant to be a production incentive scheme, and qua goods which did not bear any excise duty at a particular time, there was no question of incentive being provided and that this had to be correlated to the point of time when the goods were excisable. He drew pointed attention to Sub-Clause (i) of Explanation to the opening para of the Notification indicating that the goods which were exempt from excise duty were not to be taken into account for calculating the excess clearance and urged that goods which were not excisable at all could also be not covered for the purpose of base period and that the expressions have to be construed in their context and the object of the notification being to provide incentive, it was essential that such an interpretation is given to the notification which reduced the base so that the benefit became larger.
13. He further took up the point as to notice being barred by time, but it was felt that some more data would be necessary for the purpose of arriving at a correct decision in this regard. The learned counsel undertook to file copy of the Refund Application, as well as other relevant documents and for this purpose the hearing was adjourned.
14. It was taken up again on 1st of November, 1983 when Shri Taraporevala again appeared with Shri S. Ganesh, Advocate and resumed arguments on the point of limitation. He invited attention of the Bench to the fact that excise duty had been paid in the first instance in normal course and thereafter application for refund was filed which refund claim was duly determined by the Assistant Collector and conveyed by means of his letter dated 23-8-1977 whereby refund claim for Rs. 2,08,628.35 was allowed by way of Central Excise duty relief scheme in terms of Notification No. 198/76-C.E., dated 16-6-1976. He pointed out that the Notice to show cause was for recovery of this amount, or what was termed to be differential duty, depending upon the determination of 'base clearances value', which had been finalised earlier; firstly, on the necessary declaration being filed in 1976 itself, and subsequently confirmed by means of order, on the refund claim filed on 1-8-1977.
15. He put pertinent emphasis on the fact, that this notice was under the plain provisions of Rule 10(1) of the Rules which gives only a period of six months to Department for recovery of differential duty, and formulated two issues on the basis of the timing and wording of this notice which are; firstly, that no ground was indicated containing any allegation of suppression of facts or mis-statement or mis-declaration; and consequently there was no occasion for the appellants to rebut any such charge and secondly, assuming that such extended period of five years could be invoked or was invoked, none of the factors existed to justify such a charge.
16. He laid stress on the fact that the moment Tariff Item 51A was introduced, the appellants had placed entire information before the Excise authorities and besides declaring the stock position of the products manufactured from 1-3-1974, they also made an application for L-4 licence setting out all the necessary particulars, and otherwise also had been indicating clearly from time to time, that they had been in production prior to 1-3-1974. One such communication was a letter dated 21-10-1974, copy whereof is part of Annexure A appended to the appeal whereby they had solicited advice of the departmental authorities as to the rates applicable to some of their old rate contracts and reply received thereto by means of letter dated 22-10-1974. The learned Counsel invited attention of the Bench to another letter dated May 16, 1974 in which permission had been sought for bringing back pre-excise goods to the factory for re-processing again indicating that there had been clearances from the factory during the years 1968, 1971 and 1973, and this was also duly considered by the Department when permission was granted in terms of the conditions contained in letter dated 16-6-1974; copy being part of Annexure A.17. Shri Taraporevala further laid emphasis on the fact that on 20-10-1976, on a classification list being filed with reference to this notification No. 198/76-C.E., approval of the declarations made therein was conveyed by Department's order dated 4-12-1976, and that even the order dated 4-11-1976 (Ex. Y) was passed by the Assistant Collector after full consideration of facts, and pleaded that it had been clearly indicated in the declaration filed in this regard that the information was being supplied in relation to "excisable goods" (emphasis supplied) and that the Assistant Collector concerned had the entire record before him and all relevant information as supplied from time to time when this order fixing the 'base clearance value' under Sub-Clause (b) of clause 2 was passed. He thus pleaded that at no stage, the appellants had held back any material, from the concerned authorities, and had all along indicated that they were furnishing information, in relation to "excisable goods" (the view which they still held), that the goods described as "specified", in the notification related only to "excisable goods". He therefore strongly urged that there was no question of any mis-statement on their part, and no ground existed for invoking extended period of 5 years.
18. Shri Taraporevala placed reliance, in support of this plea, on a decision of the Tribunal recorded in case : Ganga Spinning & Weaving Mills, Ludhiana v. Collector of Central Excise, Chandigarh (1983 ELT 1674) (CEGAT) laying down that when duty was paid in accordance with the approved price list, and there was no material at all in the show cause notice alleging any suppression of fact and mis-statement justifying extension of time-limit to 5 years, as provided in proviso to Rule 10(1) of the Rules, it would be the normal time that will apply and not the extended time of 5 years. The learned Counsel further added that whenever there were circumstances existing which could justify allegation of mis-statement or mis-declaration, there was invariably a reference to proviso to Rule 10(1) (a), and facts are also indicated, and that the very fact that not only there were no such allegation of suppression or mis-statement in the show cause notice, even the provisions of the proviso were not invoked to attract the extended period and the notice was plainly under Rule 10(1), was sufficient to hold that no such material existed. Even otherwise, he argued, this omission entails violation of the principles of natural justice in so far as the appellants did. not have any opportunity to meet any such charge in the original proceedings, and pointed out that the moment they came to know that the Assistant Collector had held it to be case of wrong declaration, they took the very first opportunity to repudiate the allegations in their appeal, filed before the Appellate Collector.
Reliance was placed in this regard, on the Memorandum of Appeal, copy whereof is in the Paper Book supplied by the appellants.
19. Mrs. V. Zutshi, SDR appearing for the Revenue addressed arguments in reply. She controverted the contention that 'specified goods' as contemplated by this notification meant 'excisable goods' only, urging that if that was the intention then the expression used ought to have been 'such excisable goods' and not as happens to be in the present case, merely 'specified goods'. She contended that although the exemption had to be in relation to excisable goods but the goods to be specified goods necessarily bore relation to the Tariff Entry and whatever goods appeared in the Schedule annexed to the Act, those will have to be treated as specified goods for the purpose "of this notification and since admittedly these goods were being manufactured and cleared from the factory prior to 1-4-1973, only Sub-Clause (c) of the notification could apply and not sub-clause (b), as claimed by the party. She vehemently argued that the notification could not be restricted to apply only to 'excisable goods', and that reasoning adopted by the Collector (Appeals) in the impugned Order-in-Appeal holding that 'base clearances value' had to be fixed in terms of clause 2 (c) of the Notification was perfectly justified.
20. Reverting to the plea, as to notice being barred by time, although, she conceded very fairly that charge of wilful suppression could not be laid, much less substantiated on the basis of documents and material placed on record, she still contended that it was a case of mis-statement, made in the declaration, on the basis of which 'base clearances value' was determined, which showed the date of first clearance to be 1-3-1974 and this misled the concerned Excise authorities, in determining the 'base clearances value' on wrong footing. She read out extensively from Rule 10 to say that even if it was a case of mis-statement, the extended period of 5 years would be available to the Department.
21. We have given our very careful thought to the respective contentions of the parties. We find that the plea on the question of Notice of demand being barred by time is so palpably and patently forceful on the given facts of this case, that we think it expedient to first advert to this aspect of the matter. We find in this regard that, as pointed out by the learned Counsel for the appellants, there is no charge of any suppression or fraud or mis-statement in the notice itself. Although, we feel that in the absence of any such specific allegation in the notice itself, mere reference to proviso to Rule 10 (1) would not have been adequate; in this case even a bare citation is also missing, and the demand has been made with reference to Rule 10 (1) of the Rules, which gives only a period of 6 months to the Department, for raising a demand for short duty or differential duty, or recovery of the refund erroneously made. It is our considered view that in the absence of any such explicit or implied charge in the notice, it was not open to the Assistant Collector to apply the period of 5 years on the basis of alleged mis-statement or wrong declaration, and the Collector (Appeals) certainly erred in upholding this view of the Assistant Collector without caring to ascertain as to whether facts did exist to justify such an inference. We, on this record, find that the finding of the lower authorities in this regard, is wholly misconceived, and betrays lack of proper appreciation of facts, It i to be observed that the party from the very first instance when the Tariff Entry 51-A was introduced, had come out With all the necessary facts and details indicating repeatedly the factum of production of the goods since the year 1951. Their conduct has been very square and open, as indicated from letters dated 22-10-1974 and 16-5-1974 and also the classification list filed by them. Their correspondence also indicates that there was no intention of contravention of any of the provisions of the Excise laws, inasmuch as even when any goods had to be brought back for reprocessing, due intimation with complete particulars was furnished to the Department, and advice and guidance was sought in relation to the existing rate contracts. The declaration which was filed for availing of the benefit of this notification clearly indicated, that they had in focus only the term 'excisable goods'.
22. It is also not a case where excise duty had not been paid initially and wrong advantage was taken of any exemption or concession without.
Department's knowledge but it is a case where after excise duty was paid in the normal course, benefit of this notification was claimed, and after the same was determinad by order of the Assistant Collector passed on 4-11-1976, claim for refund was made, after considerable lapse of time, as indicated by application dated 20-8-1977 (Ex. Z), and the Refund Application preceding that, bearing the date of 1-8-1977.
This refund claim was allowed by Assistant Collector's order conveyed by means of letter dated 23-8-1977.
23. It is pertinent to note that when the order dated 4-11-1976, determining the 'base clearances value' was passed, and the time the order dated 23-8-1977 allowing the refund application, on the basis of the 'base clearances value' determined by the Assistant Collector, had been made, the Excise authorities, at the level of Assistant Collector, had complete information in their records, as having been furnished by the appellants from time to time. The most material information in this regard is the communication addressed by the appellants to the Assistant Collector of Central Excise under cover of their letter dated 15th May, 1976 (Ex. C), accompanied by detailed information. filled up in proforma, and the very first column of this declaration gives the date of production as 1st May, 1950, and a clear distinction is made by showing in the next column that the date of coming under Excise control was 1st March, 1974. It has to be borne in mind that this information furnished in May 1976 was at the level of Assistant Collector, and the order determining the 'base clearances value' was also passed by an Assistant Collector, with in months of this information being supplied to the Department by means of order dated 4-11-1976, followed by another order on the Classification List, passed on 4-12-1976.
Thereafter, when the refund was claimed, on the basis of this exemption Notification, of the excise duty already paid, that was also allowed by the Assistant Collector, after due material had been furnished to him.
In this setting of facts, we do not think that any inference of any mis-statement or mis-declaration, much less 'wilful', can be even remotely drawn against the party.
24. We are, therefore, of our considered view that none of the circumstances as contemplated by proviso to Rule 10(1) (a) prevailed in this case and consequently the only time available for raising demand for differential duty or for claiming recovery of the amount erroneously refunded was the normal period of 6 months provided by Rule 10 (1) of the Rules. In this view of the matter, the demand raised by means of the notice dated 6-1-1979, is, on face of the record, barred by time, because the refund had been allowed by means, of letter and the accompanying cheque dated 23-8-1977, and the duty exemption availed around the same time, pursuant to order dated 4-11.-1976. Both these events having occurred long before 6 months of the time of giving of the show cause notice; the demand made by means thereof, is certainly barred by time, and liable to be struck down on that account. The orders of the lower authorities are thus liable to be set aside on this account alone and the appeal merits acceptance on this score. It is allowed accordingly.
25. In face of the view, we have taken on the preliminary point of limitation, it has not been felt necessary to examine the other issues on merits.