1. This appeal filed by M/s. Rishi Enterprises is directed against Order-in-Appeal dated 3rd July, 1982 passed by Collector of Central Excise (Appeals), Bombay whereby he disposed of the appeal filed by the appellants, against Adjudication order of the Assistant Collector, Central Excise, Bombay passed on 11-7-1979.
2. Proceedings emanated from a notice to show cause having been issued on 2-1-1978 by Superintendent of Central Excise, Range IV, Bombay indicating that the party had been manufacturing 'nib slitting wheels' which attracted excise duty under T.I. 51(2) of the Central Excise Tariff (hereinafter referred to as the (CET), and that they cleared the same/consumed captively during the period October 1972 to April 1977, without obtaining Central Excise Licence as required under section 6 of the Central Excises and Salt Act, 1944, read with rule 174 of the Rules framed thereunder, (hereinafter referred to as the Act and the Rules respectively). Infringement of other provisions of the Rules was also alleged; such as clearance without filing and obtaining approval of the classification list as required under rule 173-B of the Rules, as well as, of the price lists, and without having the duty liability determined and paid, and without maintaining and submitting records and accounts as required by the Rules. Appellants were thus called upon to 'show cause as to why penalty should not be imposed on them under rule 173-Q of the Rules, and also as to why duty amounting to Rs. 43,702.03 be not recovered from them on the nib slitting wheels manufactured and cleared during the aforesaid period; the numbers whereof was determined to be 3,81,087. The demand of duty for the entire period of manufacture and clearance was made with referrence to the provisions of the rule 9(2) of the Rules.
3. The appellants contested the show cause notice by initially filing reply on 9-1-1978, followed by another one dated 23-1-1979 ; pleading that there had been no contravention on their part of any of the provisions of the Act, and the Rules as alleged in the notice, inasmuch as they had never concealed the fact of manufacture of nib slitting wheels. They asserted that certain Inspectors of the Department had visited their factory in the years 1975 and 1976 but none of them indicated to them during the survey of the factory that these nib slitting wheels would attract central excise duty and that it was on their own that they sought a clarification from the Department by their letter dated 12-1-1977 but even then although a communication from a Superintendent was received by them on 23-3-1977 in reply thereto; there was no direction that these particular goods, namely nib slitting wheels were considered to be falling under T.I. 51(2). According to them, it was only in April 1977 when the Superintendent of the Range while visting their factory gave an indication to them and in pursuance of the directions they obtained a licence on 11-4-1977 and started paying duty under protest and took up the matter of classification with the Government of India through the Federation of Indian Manufacturers but no clear-cut decision was taken or conveyed to them.
4. They further pleaded that even if nib slitting wheels were considered to be falling under T.I. 51(2), necessary requirement for attracting levy of Central Excise duty was that the manufacture was with the "aid of power" whereas in their case they had been manufacturing these nib slitting wheels up to July 1976 without the aid of power and consequently they could not be subjected to any levy of central excise duty for the period during which 'no power was used for the manufacture of these nib slitting wheels, and in case there was any duty liability that would commence only with effect from 1st July, 1976. The appellants also contended that after amendment of the relevant rule by a Notification No. 267 of 6th August, 1977 bringing about certain changes in the provisions of rules 9, 10 and 11 of the Rules, the Department was not within their power to recover duty for an unlimited period by reference to rule 9(2) and that in ease any demand could be enforced, that had to be confined to the period specified in rule 10, as it stood then that is after the amendment, providing a period of 6 months only, to the Department ; reiterating that in any case provisions of rule 9(2) would not apply, as the manufacture had been taking place within the knowledge of the Central Excise officers, and they had full opportunity to decide that dutiable goods were being manufactured and to levy duty accordingly and that there had been no clandestine removal on their part nor any intention to evade duty.
5. The Assistant Collector after affording opportunity of hearing to the party and after taking into consideration the contentions set up, and documents produced by them, recorded the finding that they had been manufacturing nib slitting wheels since some time in August 1972 and that they had obtained electrical power connection since 13-2-1973, and admitted that after installation of the power connection, they had been manufacturing all their other items, such as fountain pens, nibs, fountain pen caps with the aid of power ; but contended they had not employed the same for the purpose of manufacture of these nib slitting wheels. This contention he did not consider to be carrying conviction, on the view, that when they had power connection in the premises, and used the same for manufacturing all other goods, no valid reason had been advanced and established, as to why power was not used in the manufacture of nib slitting wheels as well, and that in the ordinary course of conduct, if power was available position could not be accepted that it was not taken advantage of. So, he held that from the time of installation of the power connection in the appellants' factory, there had to be presumption, in the absence of any evidence to the contrary, that manufacture of nib slitting wheels also took place with the aid of power and held accordingly that duty liability could be enforced with effect from February 1973. The contention, that up to July 1976, manufacture had taken place without the aid of power, was thus rejected. He further found it to be a case, on party's own admission, that prior to 11-4-1977, manufacture had taken place, but it went on and goods cleared without obtaining licence as prescribed by section 6 of the Act, and without complying with the provisions of the Rules, and without payment of excise duty. He also held that amendment to rules 9 and 10 vide Notification issued on 6-8-1977 could not divest the Government of the right already vested in them, to demand and recover central excise duty on goods which had been cleared without payment of any duty at all. He thus held that the charges levelled in the Show Cause Notice against the party stood proved and central excise duty was rightly recoverable from them, for the period commencing from February 1973. He accordingly confirmed the demand under rule 10-A of the Rules as it stood at the relevant time ; the only modification being that duty-demand would be restricted to the period from 13-2-1973 to 10-4-1977. A personal penalty of Rs. 1,000/- was also imposed under the provisions of rule 173-Q of the Rules.
6. On an appeal being filed against this order, the Appellate Collector, after taking note of their contentions, which were on the same lines as in their replies to the Show Causes Notice held it to be a case where manufacture had taken place in the factory at least during the year 1976 with the knowledge of the Department inasmuch as appellants' statement made in their reply dated 9-1-1978 that certain Inspectors of the Department had surveyed their factory in November 1976 had not been controverted, and as such he held it to be a case where activities of manufacture and clearance of the goods under reference had to be taken to be with the knowledge of the officers from November 1976. He accordingly, while confirming the order of the Assistant Collector on merits, reduced the period of demand for enforcement of duty liability from 13-2-1973 to October 1976. He also felt that penalty amount of Rs. 250 would meet ends of justice.
7. The party still felt aggrieved and has come up in second appeal, reiterating their pleas that there had been frequent visits of officers of the Excise Department right from the year 1975. They made a specific reference to the visit of Inspectors, O.P. Kumar on 7-3-1975, pleading that the Appellate Collector had erred that this visit was not proved.
They further asserted that at least up to April 1977, they were never informed, that T.I. 51 could be attracted to these goods, in spite of the fact that manufacture on their part was known to the Department and they themselves had sought clarification in January, 1977. They further contend that petitioners have definite information that there was doubt in the Department itself about the excisability of this product, and the matter had been referred to the Collectors' Conference, and that only by letter dated 24-8-1977 the concerned Assistant Collector had finally informed that correct classification of their product was under T.I. 51(2) and that they had taken a licence and started paying duty under protest but nothing further was heard from the Department till issuance of this notice dated 2-1-1978. They plead that although they had taken up the issue of excisability of this product, even while paying duty under protest, the notice to show case did not indicate that issue of classification would also be subject matter of consideration and it proceeded on the assumption that the goods were admittedly covered under T.I. 51(2). This assumption according to them was not sustainable inasmuch as classification was still a subject matter of dispute, and thus the demand made by show cause notice was not enforceable and that the appellants were prevented from putting up their case on the disputed question of classification, because of erroneous assumption on the part of the Department.
8. Coming to facts, the contention is, that plea about the manufacture being without the aid of power up to 1976, was also decided against them without any cogent reasons and that it was for the Department to discharge the onus of proving that the goods manufactured were "excisable goods". They further contend that the demand was barred by limitation and that they had not carried out the manufacture nor cleared the goods, with any intention of evading duty, and that mere non-observance of the prescribed procedure laid down in the Rules did not per se raise presumption of intention to evade duty, nor was there any specific allegation to that effect, and consequently the period of limitation of 5 years could not apply. They plead that it was otherwise also illogical to hold demand for immediate past period as time barred, whereas for the period prior thereto, as enforceable, and that even if it was a case of clandestine clearances ; demand could be raised only within a period of six months from the knowledge of manufacture, and that, in any case, confirmation of the demand by order passed in July, 1979 under rule 10A was bad in law as this rule stood deleted by that time without any saving clause. Findings of the lower authorities are thus assailed, adding, that it was not a case for imposing any penalty.
9. The Department, through Additional Collector of Central Excise, Bombay, has also come up in appeal feeling aggrieved by a portion of the Appellate order whereby demand for the period ; November 1976 to 10-4-1977, was held to be not enforceable, on the finding that at least since November 1976 when certain named officers of the Depart me at surveyed the factory, knowledge had to be assumed.
10. Since both the appeals involve identical questions of facts and law, they have been taken up together for hearing, and disposal, However, for the purpose of discussion party's appeal is kept in focus, particularly, for reference as appellants, and respondent.
11. On the hearing, the appellants were respresented by Shri J.M.Petel, Advocate whereas Shri K.D. Tayal, SDR appeared for the respondent. Shri Patel addressed arguments, in the hearing held on 8-11-1983. At the outset, he formulated questions which arise for consideration in these appeals, which he put as under :- (2) Validity of the Show cause notice given under rule 9(2) when the demand had been confirmed under rule 10-A. (3) Can a demand be confirmed under rule 10A which was not there, having been repealed, when show cause notice was given (4) Effect on the proceedings for not deciding classification issue raised prior to notice and even in reply to the notice.
(5) Basic classification vis-a-vis these goods known as nib slitting wheels.
12. Stating that the issue as to whether there had been clandestine removal or not was vital, he concentrated mostly on this question, reiterating the pleas as set out in the grounds of appeal; namely, that there had been definite visits of the officers which the party had indicated in their replies, giving both names as well as the dates of such visits, and the Collector (Appeals) has held the visit of March 1975 as not proved, without any sufficient and cogent reasons ; when particularly, there had been no rebuttal to their assertion that one Inspector Kumar had visited their factory on 7-3-1975.
13. He further asserted that apart from the specified dates, in view of the fact that the appellants' factory had been holding L-4 Licence, it was to be presumed that the officers of the Department had been visting the factory from time to time or at least annually for the purpose of carrying out their normal function of survey and that in face of this, any finding of lack of knowledge on the part of the excise authorities was not warranted. Relying on the authority of Madras High Court reported as 1977 ELT (J 193) in Murugan and Company v. Deputy Collector of Central Excise, Tiruchirapalli and Ors. and also that of Supreme Court in case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Others v. The Elphinstone Spinning and Weaving Mills. Co.
Ltd. [1978 ELT (J 399)], he contended that unless it was proved to be a case, (which onus, according to him, rested on the Department), that process of manufacture had been carried out or removals effected, without the knowledge of the Excise authorities, provisions of rule 9(2) could not be invoked. He further argued that where demand was confirmed under rule 10A, though issued under rule 9(2), it was impliedly conceded that circumstances justifying applicability of rule 9(2) were not made out. Replaced reliance in support of this contention on a Tribunal decision reported as Pyrites Phosphates and Chemicals Ltd. v. Collector of Central Excise, Delhi. [1983 ELT 674 (CEGAT) , He further highlighted the fact that it was not a case of discovery of process of manufacture on any raid being carried out but as a result of appellant's own querry, which fact by itself negatived existence of circumstances, attracting provisions of rule 9(2), adding that in face of the visits of the officers which the appellants have definitely asserted and which act Assistant Collector had not refuted in his order, any inference of clandstine removal was not warrented and that the case fell squarely within the scope of the authorities cited by him ; namely, Murgan and Company, and N.B. Sanjana v. Elphinstone Spinning and Weaving Mills 14. Shri Patel went on to argue to the effect that a notice which had been issued under rule 9(2), on being confirmed under rule 10A, ceased to be a valid notice. In support of this contention, he relied on another Tribunal decision reported as 1983 ELT 533 (CEGAT) in M[s.
Hydraulics Limited, Madras v. Collector of Central Excise, Madras. On being pointed out that this was the minority view, expressed by means of a dissenting order by one of the learned Members of that Bench, the learned counsel had no further comments to offer in this respect, stating that he did not notice this fact, while going through the authority, and did not press his arguments further, on this aspect.
15. He, however, vehemently argued that rule 10A having been repealed without any savings clause by the time notice to show cause was issued, its confirmation with reference to that rule would vitiate the entire proceedings, and again relied upon the judgment of the Tribunal, in the case of Pyrites, Phosphates and Chemicals Ltd. (supra). Reiterating his contentions that Show Cause notice having been issued on 6-8-1977, the period of limitation as provided by the amended rules could be available, and that the only rule with reference to which demand for levy of duty could be raised was rule 10 giving the Department only a period of six months, and that in no case it could be carried beyond that, added that the position as emerging from the Appellate Collector's order, otherwise looked anomolous inasmuch as demand for the period immediate to the Show cause notice has been held to be time barred whereas for the earlier period it has been held to be within time.
16. He argued lastly that classification issue had not been decided at any point of time, nor any opportunity afforded to the appellants in this regard, and that the orders of the lower authorities were vitiated having proceeded on the erroneous assumption that the question of classification was a settled issue. His attention having been drawn to a letter of the Assistant Collector dated 24-8-1977, he contended that it was not an appealable order, and till the matter was duly adjudicated, this question could not be deemed to have been decided.
17. Shri K.D. Tayal, while replying to the arguments, placed on record a copy of the reply received from the Assistant Collector in pursuance to the directions given by the Bench, and on this reply being taken on record with due notice to the learned counsel for the appellants, the latter also placed on file, copy of their reply addressed in respect to Inspectar Kumar's visit on 7-3-1975.
18. Shri Tayal urged that so far as issue of classification was concerned, it had not been taken up by the appellants in their Memo of appeal, filed before the Collector (Appeals), and consequently it shall be deemed to have been dropped at the appellate stage, and could not now be revived at the stage of second appeal ; adding that otherwise also, it was not an open issue, having been decided as conveyed by a letter of the Assistant Collector who was the competent authority, addressed to the party on 24-8-1977, and that since this communication was not challenged in appeal, though it was an appealable order, by virtue of the provisions of rule 213, as it then existed, which made all decisions appealable, this question could not now be reopened, and that the lower authorities were justified in proceeding as if the classification issue stood settled, further asserting that it was a clear case where the nib slitting wheels would fall within the description of products covered by T.I. 51(2) read with the Explanation thereto.
19. Regarding the question of applicability of the provisions of rule 9(2), he contended, that these provisions applied not only to cases of clandestine removal, but to all cases where there had been removal of goods, without complying with the requisite provisions of the rules, and that in this case, admittedly, licence was obtained for the first time on 11-4-1977 under directions of the Department, and prior to that date there was obviously no compliance with any of the provisions of the Act and the Rules, making it to be a case of clearances, as contemplated by rule 9(1) so as to attract rule 9(2). He further contended that the ratio of the decision of the Supreme Court in N.B.Sanjana's case and that of Madras High Court in case of Murugan and Company, was not applicable to the present case because in both those cases, the party had duly filed classification lists and had declared the factum of manufacture as well as clearances and at the relevant time, the Department had accepted their declaration that the goods were not dutiable and it was in this context that it was held that those could not be considered to be a case of clearances, without payment of duty, so as to attract rule 9(2). He asserted that as against that position, in this case, the factum of manufacture of goods was never disclosed nor of clearance, and it was not established as to whether the survey of the Inspectors even in the years 1975 and 1976 had been in respect to these goods, and whether manufacture was taking place at the time of the Inspector's visits, and that conduct of the party was not very straightforward inasmuch as it is not explained as to why need was felt for seeking clarification in January 1977, when manufacture had been going on since 1972.
20. Shri Tayal controverted the contention that mere reference to rule 10A while confirming the demand would vitiate the proceedings or the original order, stating that it was a well considered order, and the circumstances made it to be a case of applicability of rule 9(2). He cited an authority of Supreme Court in support of his assertion, reported as 1978 ELT (J 355) in J.K. Steel Ltd. v. Union of India and Ors., holding that if the exercise of a power can be traced to a legitimate source the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. He even went to the extent of saying that rule 10A could also be validly invoked, placing reliance on another Tribunal decision reported as 1983 ECR 1137, (Anna Aluminium Alwaye v. Collector of Central Excise, Cochin), adding that rule 10 could not apply because that pre-supposes assessment and levy, whereas in the present case goods had not been offered for assessment inasmuch as even classification lists were not filed. He placed reliance in support of this contention on a judgment of Bombay High Court reported as 1983 ELT 338 (Bom.) in Devidayal Rolling & Refineries Pvt. Ltd. v. Ay. Borkar, Superintendent, Central Excise, holding that rule 10 would apply only if a demand notice is issued after assessment, laying further stress that provisions of rule 9(2) were not confined to cases of clandestine removal, and that in cases where there were no assessment, rule 9(2) would apply. Shri Tayal urged that the Tribunal has also subscribed to the same view in a number of cases ; some of which he cited as Goodwin Rubber's case : 1983 ELT 718 (CEGAT) ; re. Rekha Industries, Bombay v.Central Board of Excise & Customs,Ceakay Rubber Industries v. Collector of Central Excise, Madras, 21. He also addressed arguments with reference to departmental appeal urging that visits of certain Inspectors to the factory in the years 1975 and 1976 was not conclusive on the question of knowledge of the concerned Central Excise authorities because apart from the fact that there was no evidence that the goods were being manufactured or were lying in stock or otherwise sealed by the concerned Inspector during the respective visit, presumably the visits of Inspectors, particularly that of Mr. Kumar, was with reference to the applicability of newly introduced T.I. 68 and that accordingly the Collector (Appeals) had erred in giving benefit of the period starting from alleged visits in November 1976.
22. Shri Patel made a short reply reiterating his contention that no circumstances justifying applicability of rule 9(2) existed in the present case. He however made it clear that he did not press the question of use of power, and that it could be presumed that ever since the installation, the manufacture might nave gone on with the aid of power but contended that nevertheless, this fact was no conclusive of the matter, inasmuch as first the question as to whether the goods fell within T.I. 51(2) required to be decided, and in any case circumstances did not exist for invoking provisions of rule 9(2), and that it was a case at the most of non-levy, due to error, giving the Department only six months, under rule 10.
23. We have given our careful consideration to the issues involved, in the light of the contentions canvassed before Us.
24. Adverting to the question of classification first, we find that the assertion that it requires still to be adjudicated, seems to be misconceived for the reason that it is apparent from the letter dated 24-8-1977 (page 10 of the Paper Book) addressed by the Assistant Collector, Central Excise, Bombay X Division to the appellants that the classification of these products, known as "nib slitting wheels", was determined under T.I. 51(2), and duly conveyed to the appellants. It is pertinent to note that this communication was with reference to the detailed representation made by the appellants to the Assistant Collector vide their letter dated 17-4-1977 (page 7 of the Paper Book) in which all the pleas as now set forth had been advanced putting with great emphasis forward their view that these products, described as nib slitting wheels could not be treated as 'grinding wheels' within he meaning of T.I. 51(2) and thus be declared to be falling outside the scope of said tariff entry. It is presumed that decision to classify these goods under T.I. 51(2) must have taken place after consideration of all the averments and arguments set in this representation dated 17-4-1977 because the reply has specific reference to this communication.
25. We also find force in the contention of learned SDR that all such decisions were appealable under rule 213 of the Rules, as it then operated, and that failure of the appellants to further agitate the matter would have the effect of the issue having become concluded in this regard, and it was not now open to them to reagitate the matter.
This is so, particularly in view of the fact that the appellants had been told earlier also in April 1977 itself, that L-4 licence was required for the purpose of manufacture of these goods and the appellants had obtained the same and had started paying duty under protest and thereafter addressed a detailed representation by means of letter dated 17-4-1977. It was thus in the context of the controversy raised by the appellants, so much so that they clearly communicated to the authorities that they were submitting to the directions for obtaining L-4 licence under protest, which action was followed up by their representation dated 17-4-1977. It is to be assumed, therefore, that the decision, which was conveyed by means of letter dated 24-8-1977, was in the light of the stand taken by the appellants, and has to be deemed to be a final decision unless challenged before appropriate authority by way of appeal or any other statutory mode that might have been available. But the appellants having not resorted to any such prescribed remedy or procedure, this decision has to be deemed to have become final qua them.
26. As a result, we find that the contention, that demand had been made without the classification issue having first been settled, to be devoid of force. Otherwise also, we find that the goods described as 'nib slitting wheels', from their very nomenclature denote a function which involves "cutting" of nibs and we find that the view of the excise authorities that they are classifiable under T.I. 51(2) is correct, because nibs are obviously made of metals and as such these products howsoever fine or delicate may be, do perform the function of cutting of metals, within the contemplation of Explanation appended to T.I. 51. It thus becomes settled that these goods were classifiable throughout under T.I. 51(2), particularly when the plea that for a specified period the manufacture had taken place without the aid of power, has not been pressed or pursued, and it is also not otherwise established from record.
27. The view of the lower Excise authorities to the effect that these goods are excisable with effect from February 1973, the time power was admittedly installed in the factory premises is thus not open to any challenge. It is an admitted fact on record that the goods were cleared whether by way of captive consumption or removal from the factory for marketability, without complying with any of the formalities laid down by Excise law, on the subject, including the Rules, and without payment of the excise duty, which was leviable thereon.
28. The Assistant Collector has thus proceeded rightly to confirm notice to show cause, to cover the entire period of manufacture, because there was clear indication in the show cause notice issued on 2-1-1978 that in Department's view, there had been contravention of the provisions of section 6 of the Act, as well as various provisions of the Rules, including rule 9(1). The Assistant Collector, while passing the Order-in-Original has taken into account all these factors which were indicated in the notice to show cause and recorded a definite finding by means of detailed order that manufacture and clearance of these goods prior to 11-4-1977, which was the date when the appellants obtained licence for the first time, was obviously in contravention of the provisions of section 6 of the Act read with rule 174, and that he was of the considered view that all these charges levelled in the show cause notice against the party stood proved and central excise duty was rightly recoverable from them. He had applied full mind to the controversy, as revealed by the detailed discussion, as to the use of power for the manufacture of these products, and although the notice to show cause related to the year of commencement of manufacture ; namely, 1972, the Assistant Collector held that these would be excisable only from the date they were manufactured with the aid of power, and that being from February 1973, no duty was recoverable for the period prior to February 1973. This aspect has been highlighted to pinpoint the fact that the order passed by the Assistant Collector is a well-considered order based on discussion of facts, establishing clearance of excisable goods without central excise licence having been obtained, and without payment of excise duty, and without complying with other requisite procedure, such as maintenance of accounts, approval of price lists, submission of classification lists and filing of returns, etc. When the circumstances, set out in the notice to show cause, were found to be established in the adjudication order confirming the same, the fact that while concluding, the Assistant Collector mentioned rule 10A would not vitiate the show cause notice or the order confirming the same.
29. We find this to be a case, clearly covered by the authority of the Supreme Court: In re : J.K. Steel Ltd. v. Union of India and Ors.
(supra), laying down that when exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under different powers does not vitiate the exercise of power in question. It was held in this authority that in case the officer who made the demand was competent to act under rule 9(2), if the circumstances made out a case of applicability of rule 9(2), the fact that reference was made to rule 10 would not be of any consequence. In the present case also, in view of the established position as endorsed by chain of decisions by the Tribunal that in cases where there is contravention of the provisions of rule 9(1), such as failure to obtain central excise licence ; maintenance of statutory records, entailing removal without payment of excise duty, and without any information whatsoever to the Excise authorities about the factum of manufacture and clearance/removal of the goods; then provisions of rule 9(2) can be invoked, and that existence of any such circumstances, would amount to clandestine or surreptitious removal. Reference to these cases has already been made in the foregoing discussions, and for purpose of reiteration of the principles, mention is being made again to cases reported as 1983 ELT 1163 (CEGAT) in Rekhi Industries, Bombay v.Central Board of Excise & Customs, 1983 ELT 578 in Goodwin Rubber Works v. Collector of Central Excise, CochinCeakay Rubber Industries v. Collector of Central Excise, Madras, wherein the principle was laid down that demand under rule 9(2) was enforceable in all cases where there had been manufacture and removal of goods without intimation to the Excise authorities, and without obtaining requisite central excise licence and without payment of duty, besides maintaining statutory records.
30. We further find that the cases referred to by the learned counsel for the appellants, are clearly distinguishable. It has already been pointed out in the order, pertaining to M/s. Ceakay Rubber Industries (supra) that in the case before Supreme Court in what is referred to as N.B. Sanjana, Assistant Collector v. Elphinstone Spinning and Weaving Mills Co. Ltd. (supra), it was not a case of manufacture or removal of goods without any information to the Excise authorities but it was clearly a case where the party had filed classification lists, showing the factum of both manufacture and clearance indicating their view that no excise duty was payable, to which the Excise authorities had acquiesced. It was in this context that the Hon'ble Supreme Court had held that it was not a case where the provisions of rule 9(2) could be invoked. Similarly, in the case decided by the Madras High Court referred to as Murugan & Co. (supra), the Excise authorities themselves had entertained a doubt in the first instance, as to whether the goods were excisable or not, and had not objected to the clearance without payment of duty, and it was in that setting of facts that it was held that subsequently the authorities were prevented from raising demand with reference to rule 9(2).
31. In the case decided by the Tribunal, on which also the learned counsel for the appellants placed reliance ; namely, Pyrites, Phosphates and Chemicals Ltd. v. Collector of Central Excise (supra) the Excise authorities themselves had not been of any clear mind on the subject because of the stage of show cause notice itself, after first issuing notice under rule 9(2), a supplementary notice was issued with reference to mentioning to rule 10, and it was in that situation that it was felt that the authorities having taken contradictory stand, and the Appellate Collector having finally resorted to rule 10A, could imply in the circumstances and facts of that case, that provisions of rule 9(2) may not apply.
32. As against that, in this case, there is a clear finding by the Assistant Collector himself, which is the first adjudicating authority, that all the allegations levelled in the show cause notice, stand established and that it has been a case of clearance of goods without payment of excise duty and in contravention of the provisions of section 6 of the Act, besides the various rules quoted in the notice.
33. The other case cited by the learned counsel reported as 1983 ELT 533 (CEGAT), namely, M/s. Hydraulics Ltd., Madras v. Collector of Central Excise, Madras, has been found to be a case of minority order, which, with all respects to the learned Member recording it, cannot be treated to be a decision of the Tribunal.
34. It is thus a case where both on facts before us, as well as those considered by the Assistant Collector, while confirming the show cause notice, provisions of rule 9(2) are clearly attracted. The orders of the lower authorities, cannot, therefore, be considered to be suffering from any infirmity in this regard and we feel satisfied that period beyond six months as provided by rule 10 has been rightly invoked because rule 10 applies only in cases where there has been assessment ; it may though be a case of 'nil' assessment. In all cases where there was no assessment at all, and no intimation to the Excise authorities about the manufacturing activity or process of removal, provisions of rule 9(2) can be invoked. We, therefore, do not find it possible to concede to the contention of the appellants that the demand was liable to be struck down as being barred by time. However, we do find substance in their contention that at least from March 1975, they had informed the Excise authorities that they were manufacturing nib slitting wheels with the aid of power as is clear from their letter addressed on 7-3-1975 with reference to the visit of Inspector Kumar to their factory on the said date. After this communication was addressed to the authorities, though at the level of Inspector, it is not possible to hold that there was no information at all to the Excise authorities. We, therefore, feel that during the period commencing from March 1975, it is not possible to draw the conclusion that manufacture and clearance had gone on without information to the Excise authorities, so as to bring home to the appellants charge of contravention of the provisions of rule 9(1) of the Rules, because it was incumbent upon the Excise authorities also to take appropriate steps. We accordingly are of the view that demand for the period March 1975 onwards cannot be enforced by resorting to rule 9(2) of the Rules.
It would be thus barred under rule 10 having been made by means of notice issued on 2-1-1978.
35. In the result, the appeal filed by the appellants is partially allowed inasmuch as demand for the period starting from March 1975 is held unenforceable under rule 9(2). As a consequence, the appeal filed by the Department is also liable to dismissal because they have come up against that part of the order of Collector (Appeals) whereby allowance was made for the period commencing from November 1976 on the basis of knowledge of the Excise authorities. In the view we had taken, that this knowledge extended back even to March 1975, making rule 9(2) inapplicable for this period, the appeal of the Department does not retain any force.Collector of Central Excise, Bombay v. M/s. Rishi Enterprises, Bombay, whereas Appeal No. ED (SB) 116/83-D : M/s. Rishi Enterprises, Bombay v.Collector of Central Excise, Bombay is allowed partially, setting aside the demand for the period from March 1975 up to 10-4-1977, with the result that it will be open to the Excise authorities to enforce the demand for the earlier period, namely, 13-2-73 to 6-3-75. Penalty amount already being almost nominal, that is, Rs. 250 is confirmed.