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Saraiya Engineering Co. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(16)ELT327TriDel
AppellantSaraiya Engineering Co.
RespondentCollector of Central Excise
Excerpt:
.....is obtained for the manufacture of excisable goods and removal is effected without payment of duty, rule 9(2) is attracted. it is only when a demand is made under rule 9(2) that the liability to pay arises and not otherwise. therefore, the fundamental right to hold property is affected as from the time the demand is made. but since section 33 gives the right to object to such a demand, and as the determination under rule 9(2) is a judicial or quasi-judicial function, the said rule is neither arbitrary nor unreasonable nor excessive.under rule 9(2) if any excisable item in contravention of sub-rule (1), is removed from any place specified therein, the producer or manufacturer, therefore, shall pay the duty leviable on such goods upon written demand made as per rule 1.0 by the proper.....
Judgment:
1. This is a revision application (hereinafter called 'appeal') filed before the Central Government (now transferred to the Appellate Tribunal) under Section 35P of the Central Excises and Salt Act, 1944, against order-in-original No. V-Adj (36) 15-1-76 dated 25-1-1978 passed by the Collector of Central Excise, Bombay.

2. Briefly stated, the facts of the case, as are apparent on record are that M/s Saraiya Engineering Co., 159-3, Caval Cross 6, Bombay-2 started manufacturing Mechanical Lighters since 1970 under the brand name 'Gasofire'. They did not obtain a Central Excise licence and cleared the goods without payment of duty. On receipt of information that M/s Saraiya Engineering Co. were manufacturing Mechanical Lighters without Central Excise licence and clearing the same without payment of duty, the officers of the Central Excise, Bombay Division No. II visited the premises of the appellant on 3-10-1975 and found 70 fully manufactured Mechanical lighters lying in the said premises. Statement of Shri Kakubhai K. Saraiya, Prop, of the appellant firm was recorded and he admitted that he had not paid any duty so far on the Mechnical lighters sold by him. He further stated that he started manufacturing these lighters since 1970. On scrutiny of the account books of the appellant firm it was found that the said firm had manufactured and sold 46724 Mechanical Lighters without payment of duty. In addition he had also manufactured 70 Mechanical Lighters which were found in the premises of the appellant firm and were seized.

3. The officers of the Central Excise, Bombay Division II also visited the premises of M/s Fairdeal Traders at 27/29, Kolbat Lane, Bombay-2, M/s Novelac at 31/33, Kolbat Lane, Bombay-2 and M/s Natural Gas Co. (P) Ltd., Bombay where the officers found 34 'Gas-o-Fire' mechanical lighters, 46 pieces of 'Gas-o-fire' brand of Mechanical lighters and 12 pieces of 'Gas-o-fire' brand of mechanical lighters respectively. The proprietors of these concerns intimated that these mechanical lighters were supplied by Shri Kakubhai K. Saraiya of the appellant firm. Those lighters were also taken into possession.

4. Shri Kakubhai K. Saraiya, Prop, of the appellant firm stated that he did not collect any Central Excise duty till October, 1975 as he was under the impression that this product was not excisable and that only Pocket Cigarette Lighters required Central Excise licence. He, therefore, did not obtain the Central Excise licence nor maintained any records required under the Central Excise Law.

5. A show cause notice was issued and a personal hearing was given to the appellate firm and the Collector of Central Excise, Bombay vide his order dated 25-1-78, ordered the confiscation of 162 mechanical lighters and in lieu of confiscation, the appellant was given an option to redeem the said mechanical lighters on payment of redemption fine of Rs. 486/-. He also imposed a personal penalty of Rs. 2 lakhs on Shri Kakubhai K. Saraiya under rules 173Q, 52A and 226 of the Central Excise Rules, 1944. Regarding payment of duty it was ordered that under rule 9(2) of the Central Excise Rules, 1944 the excise duty should be paid by Shri K.K. Saraiya with respect to 46726 lighters which he had cleared without payment of excise duty during the period 3-11-1970 to 3-10-1975.

6. Aggrieved by the said order of the Collector of Central Excise, Bombay an appeal was filed before the Central Board of Excise & Customs. Shri J. Datta, Member Central Board of Excise & Customs upheld the contention of the Collector of Central Excise, Bombay that the classification of the article under item 39 of the C.E.T. was correct and he confirmed the same. He further held that the goods had been cleared without payment of duty and so the Collector was right in demanding duty under rule 9(2) of the Central Excise Rules, 1944 and he dismissed the plea of time limit. However, he found that there was no evidence of clandestine clearance so as to permit penalty under rule 173Q and taking a lenient view regarding penalty, he retained a token penalty of Rs. 1,000/- each under rules 52 and 226. The order of confiscation was, however, confirmed.

7. Not satisfied with this order of the Central Board of Excise & Customs, the appellant filed a revision application to the Central Government which on transfer to this Tribunal, was treated as appeal.

8. We have heard Shri D.K. Subhedar, Advocate for the appellants and Mrs. Vijay Zutshi, SDR and have also gone through the record and the documents produced by the parties.

9. The entire case hinges upon the fact whether "GAS-O-FIRE" lighters manufactured by the appellant are Mechanical lighters falling under Tariff Item No. 39 of the First Schedule to the Central Excises and Salt Act, 1944. In this regard, our attention was drawn towards tariff item No. 39 which reads as under:- "Mechanical Lighter" means any mechanical or chemical contrivance for causing ignition, which is portable and which operates by producing a spark of flame whether by itself or when brought into contact with gas, and includes a mechanical lighter issued from a factory in an incomplete state or requiring for its completion the addition of a flint." Analysing the definition given of "lighter" as contained in this tariff item, the learned advocate of the appellant pointed out that "GASOFIRE"-Gas Stove Ignition manufactured by the appellant is not portable as understood in common pailance, as it cannot be used, anywhere and everywhere like a cigarette lighter which can be carried in pocket, wherever a person goes ; while GASOFIRE Gas Stove Ignition was meant for fixing on a wall near the gas stove for its quick use. It was also pointed out that Mechanical Lighter had inbuilt device to put petrol or gas, whereas there is no such device in Gas-O-Fire manufactured by the appellant. It has also been urged that in common parlance the Gas-O-Fire is not known as mechanical lighter, and it is also not known in the market as mechanical lighter. The Battery operated gas stove lighters and Electrical Gas Stove lighters though discharge the same function as Gasofire, they do not fall under the definition of mechanical lighter and are not charged to duty. He also submitted that in trade parlance and in market, gasofire is never considered as mechanical lighter and the authorities below should have adopted the common parlance test in deciding the product manufactured by the appellant. The affidavit filed by the appellant before the authority below was not commented upon and the same was rejected arbitrarily. He drew our attention towards the case of Bombay High Court, Subhashchandanishat v. Union of India and anr. (Reported in E.L.T. 1979 J 212) in support of his contention that where affidavits are filed before an officer, it would not be proper for him to arbitrarily reject them as incorrect. On the point of applicability of rule 9(2), it was pointed out that there was nothing clandestine about their operation, and, therefore, the demand for duty under rule 9(2) was not tenable. There was no surreptitious removal of these mechanical lighters as they had advertised in the Newspaper that they were manufacturing GASOFIRES and the appellants were never informed that their product was excisable and therefore the question of imposing of penalty under rules 9(2) and 173Q did not arise. He drew our attention towards two cases of Madras High Court, Murugan & Company Pudukottai v.Deputy Collector of Central Excise, Tirucharapalli and Ors. (1977 E.L.T. J 193) and Parkar & Co., Madras v. Union of India and Ors. (1977 E.L.T. J 92) in support of his contention that in cases where a particular manufacturer goes on producing certain articles under the bona fide impression that the goods are not excisable goods and the departmental authorities did not take any step for bringing the goods under the excise levy as per rule 9(1) the authorities cannot invoke rule 9(2) on the ground that the goods have been cleared without payment of excise duty merely because they have taken a view that the goods are excisable long after the goods had been cleared from the factory. According to the learned advocate of the appellant, where the goods are sought to be brought to excise duty levy for the first time by the issue of demand after the goods had been cleared from the factory, the manufacturers cannot be held to have contravened rule 9(1) so as to enable the excise authorities to invoke rule 9(2).

10. Shri Subhedar, Advocate for the appellant also drew our attention towards case of Supreme Court, Hindustan Steel Limited v. State of Orissa (1978 ELT J 159) in support of his contention that no penalty should be imposed for technical or venial legal breach of provisions or where the breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by the statute. He challenged the order of the Member of the Board also on the ground that he should have considered the nature of the different products under Tariff Item No. 39 for Mechanical Lighter, because under the Tariff Item the different products can be classified, such as, Cigarette Lighters and Gas Stove Igniters and as per the classification rule when two names are possible and when goods can be classifiable under two items or sub-items, then the benefit of doubt should be given to the subject product and against the legislature which has failed to explain itself in Tariff Item No. 39 of Mechanical lighter and therefore the construction most beneficial to the subject should have been adopted.

11. We find no force in the arguments of the learned representative of the appellant in the circumstances of the present case.

12. As per the own case of the appellant, he is manufacturing 'GAS-O-F1RE' Flint Lighters since the year 1970 and they had not obtained the excise licence and cleared the goods without paying the excise duty. He also advertised the goods manufactured by him as "GAS-O-FIRE FLINT LIGHTERS".

13. It is to be seen whether this flint lighters manufactured by the appellants fall within the purview of Tariff Item No. 39 of the Central Excise Tariff which has defined "Lighter" as any mechanical or chemical contrivance for causing ignition, which is portable and which operates by producing a spark or flame whether by itself or when brought into contact with gas. No doubt this GAS-O-FIRE Flint Lighter manufactured by the appellant is a mechanical contrivance for gas ignition and it is also portable. The word portable has been defined in Chamber's Twentieth Century dictionary as "easily or conveniently carried or moved about and durable." No doubt this flint lighter can be easily removed and carried out, and we find no reason to interfere with the findings of the lower authorities on this point. Admittedly, this lighter can be carried by any person from place to place without affecting its quality. The mere fact that the bracket has been fixed on this apparatus permitting the same to be hung near the stove does not take away its classification as portable. The legislature has nowhere distinguished this lighter with a cigarette lighter. The Cigarette lighter is as much portable as this lighter is and the fact that it is a mechanical contrivance for causing ignition and is portable, is sufficient to bring this item within the purview of tariff Hem No. 39.

14. The plea that this item manufactured by the appellant is not known in the market as mechanical lighter but as GAS-O-FIRE and that the authority below did not take into consideration the affidavit on this point, does not help the appellant much. As per his own advertisement made by the appellant be manufactures GAS-O-FIRE FLINT LIGHTER and they are sold as such. These flint lighters are mechanically operated and are portable and fall within the purview of Item 39 of the Tariff and therefore there was no need to take into account the affidavit that in trade parlance and market it was never considered as a "mechanical lighter". Persons may say anything about a particular thing but we have to find out by the examination of that particular goods under what tariff item it is to be classified. Item 39 of the Central Excise Tariff covers "mechanical lighter" which operates by producing a spark or flame whether by itself or when brought into contact with gas, and includes a lighter issued from a factory in an incomplete state or requiring for its completion the addition of flint. The fact that the apparatus does not have any inbuilt fuel to hold a flame cannot disqualify it from including it under the tariff item No. 39 if other requirements of the tariff item are satisfied. The case law cited by the representative of the appellant on this point, is not helpful to him in the present circumstances of the case where the product manufactured by the appellant clearly falls within the ambit of item 39 of the Central Excise Tariff.

The lower authority has correctly held that the goods manufactured by the appellant are assessable to excise duty under item No. 39 of the Central Excise Tariff and we find no reason in interfering with the judicious findings of the lower authority.

15. On the point of the applicability of rule 9(2) of the Central Excise Rules, 1944, admittedly, the case of the appellant is that he did not obtain any excise licence and cleared the goods without payment of any excise duty under the bona fide belief that the product manufactured by him was not subjected to levy of the excise duty. It has been laid down in N.S. Metal Industries v. Union of India (77 TLR (NOC)-31) that when no licence is obtained for the manufacture of excisable goods and removal is effected without payment of duty, rule 9(2) is attracted. It is only when a demand is made under rule 9(2) that the liability to pay arises and not otherwise. Therefore, the fundamental right to hold property is affected as from the time the demand is made. But since Section 33 gives the right to object to such a demand, and as the determination under rule 9(2) is a judicial or quasi-judicial function, the said rule is neither arbitrary nor unreasonable nor excessive.

Under rule 9(2) if any excisable item in contravention of Sub-rule (1), is removed from any place specified therein, the producer or manufacturer, therefore, shall pay the duty leviable on such goods upon written demand made as per rule 1.0 by the proper officer and shall also be liable to penalty which may extend to Rs. 2,000/- and such goods shall be liable to confiscation.

16. In this case, the department has followed the procedure as laid down under rule 9(2) and rule 10(old) and the learned representative of the appellant has not been able to satisfy us as to how this demand is barred by time. The authorities of the Madras High Court cited by the learned authorised representative of the appellant, Murugan & Co., Pudukottai v. Dy. Collector of Central Excise and Ors. and Parker & Go., Madras v. Union of India and Ors. (Supra) are not helpful to the appellant in the circumstances of the present case. It was held by the Madras High Court that the provisions of rule 9(2) would not be invoked where the excise authorities entertained a doubt as to whether the goods are excisable or not and did not object to the clearances of the goods without payment of duty. In this case the appellant never informed the excise authorities nor obtained any licence. The excise authorities were not informed when the goods were cleared and therefore the question of entertaining any doubt as to whether the goods were excisable or not could not have arisen. In a case of Bombay High Court Devidayal Rolling & Refineries Pvt. Ltd. v. Superintendent of Central Excise and Ors.-1983 ELT 338 (Bom) the applicability of rule 9(2) and rule 10 of the Central Excise Rules has been upheld. According to his Lordship, rule 10 of the Central Excise Rules will apply, if demand notice was issued after assessment and if there was no assessment rule 9(2) will apply.

17. As the goods have been removed without payment of Central Excise duty, the Collector was right in demanding duty under Rule 9(2) of the Central Excise Rules, 1944 and the plea of time limit cannot be accepted.

18. In view of our discussion above, we find no reason to interfere with the judicious findings of the Member, Central Board of Excise & Customs. He has already taken a lenient view so far as the penalty is concerned and the penalty amount was reduced to Rs. 1000/- under each of the two rules 52A and 226. The appellant is bound to pay duty on the excisable goods manufactured without compliance of the Central Excise Rules. Therefore, we uphold the findings of the authority below and dismiss this appeal.


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