1. For hearing the applicants appeals on merits, M/s. Tigrania Metal & Steel Industries are required to deposit a sum of Rs. 69,73,171.87 towards duty and Rs. 5.00 lacs towards penalty and the applicants covered by Stay applications 514/89 and 515/89 are required to deposit a sum of Rs. 1.00 lac and Rs. 2.00 lacs respectively, towards penalty.
2. Shri A. Satalvad, the learned Senior Counsel appearing on behalf of the applicants, contended that the applicants are re-rollers of iron and steel products. They were availing exemption under Notification No.208/83. They were getting ship breaking scrap in the form of various steel materials like bars, flats, angles, etc. The Collector issued a show cause notice on 26-7-1988 on the ground that the exemption contemplated in the aforesaid notification is not admissible to them and there had been a deliberate suppression of material facts relating to input used and sought to confirm the demand for the period 1-8-1983 to 31-3-1986, though the show cause notice is clearly time barred. He contended that prior to 1-3-1986, there was no separate sub-heading in regard to Ship Breaking Scrap. Scrap of iron and steel which is used for recovery of metal by melting was only covered by a separate sub-item. In the case of the applicants, they do not have a furnace and they are only re-rollers, where the defective scrap materials like bars, flats, angles, etc., which are known as re-rollable scrap are brought in as inputs. The department does not deny that the final products are specified in the Notification and the inputs namely, bars, flats, angles etc., are also specifically figuring in the Tariff Items mentioned in the column relating to inputs. After 1-3-1986, Excise Tariff was replaced by a comprehensive Tariff and in the new Tariff, ship breaking scrap came to be separately introduced as a sub-item.
Prior to 1-3-1986 there was no separate sub-item or item for re-rollable scrap and they are to be classified under the respective sub-items of Tariff Item 25 depending on the category of such re-rollable scrap. He, therefore, contended that the classification list has been filed giving the inputs as re-rollable scrap as also the various sub-items of the inputs as per the Notification. Merely because ship breaking scrap has not been mentioned in the classification list, it does not amount to suppression of facts because, even the material obtained from the ship breaking scrap is only re-rollable scrap and hot a melt scrap. He also pointed out that the invoices in respect of all the scrap received have been gone through by the audit parties and also by various inspecting authorities. None has raised an objection to this input. As regards the period after 1-3-1986, the period involved is only one month and even here within a month they have specifically mentioned the description of input as per the new Tariff in the declaration filed for availment of MODVAT Credit. He, therefore, contended that there was absolutely no intention to suppress any material facts justifying either extended period or imposition of penalty on the firm as well as on the manager and the partner.
3. He also contended that there had been a violation of the principles of natural justice. The applicants firm had requested for only one adjournment, which was not granted. One date was postponed for the Collector's own convenience. Hence without a personal hearing, the case came to be adjudicated.
4. He also pointed out that the Special Bench 'B' of this Tribunal at Delhi have granted adjournment, on the ground that the matter is under consideration of the Government for issue of a notification under Section 11C of the Central Excise Act.
5. Heard Shri Mondal, the learned SDR. He contended that there is no violation of principles of natural justice, because of the fact that enough opportunity was granted for personal hearing, which was not availed of and hence they cannot complain of denial of opportunity at this stage, when they had not availed of the opportunity. He also contended that the law requires the applicants to give full details of the goods manufactured as also the inputs in the classification list, when they claim exemption under the notification based on the criterion of inputs used. In this case, it is an admitted fact that the applicants have not given the description as ship breaking scrap in the classification list, which is a vital information needed for determining the eligibility for exemption. He also contended that ship breaking scrap is not specified in the Tariff item prior to 1-3-1986 and the applicants should have given the full description or atleast indicated that they are getting the ship breaking scrap. Failure on this account amounts to suppression of facts and hence the extended period is justifiable, so also the penalty imposed on the applicants.
He also contended that the ship breaking scrap is not duty paid and hence the exemption is not available. He also submitted that the input namely ship breaking scrap has neither been specified in the Tariff nor in the Exemption Notification. It came to be specified only in the new Tariff effective from 1-3-1986 and ship breaking scrap was incorporated as the eligible input only by amending Notification No. 101/87 effective from 27-3-1987. In the absence of specific provision in the exemption notification, the input namely ship breaking scrap is not eligible for exemption.
6. After hearing both sides, the prima facie issue to be considered is the question whether non mention of the description of re-rollable scrap as ship breaking scrap in the classification list amounts to wilful suppression of facts with a view to evading payment of duty. We observe that prior to 1-3-1986, there was no separate item or sub-item in the Excise Tariff for ship breaking scrap. It is an admitted fact that ship breaking scrap received by the applicants is only re-rollable material like defective plates, bars, strips etc., and not melting scrap. Only melting scrap was covered by a separate sub-item of Item 25 of Central Excise Tariff prior to 1-3-1986. If the scrap brought in were melting scrap (which is not a specified input for the final product manufactured by the applicants) non mention thereof could be viewed as done with some ulterior motive. In this case, ship breaking scrap is admittedly re-rollable scrap in the form of old or defective plates, strips, angles etc. Hence, in the absence of a separate sub-heading for ship breaking scrap prior to 1-3-1986, there is apparently no legal compulsion to mention this specifically in the classification list, so long as they have described the scrap as re-rollable scrap. No mala fides could possibly be attributed for non-declaration of the scrap as ship breaking scrap in the period prior to 1-3-1986. We are, therefore, prima facie of the view that the description 're-rollable scrap' as input in their classification list covers ship breaking scrap as well in the absence of separate classification for such ship breaking scrap prior to 1-3-1986.
Moreover, invoices and other documents relating to receipt of inputs ought to have been gone through by audit parties, especially when the exemption is based on nature of inputs used. We are prima facie satisfied that allegation of suppression of material facts cannot be sustained in regard to the period prior to 1-3-1986, when no separate classification for such ship breaking scrap existed. The Supreme Court have held that for suppression of facts, there should be something positive done other than mere inaction or failure on the part of the assessee. There should be a conscious and deliberate withholding of information Collector Chemphar Drugs & Liniments [1989 (40) E.L.T. 276 (S.C.)]. In this case, we find that there are no such ingradients of overt action on the part of the applicants. There could be a bona fide belief that they had given the correct description of the input as 're-rollable scrap' in respect of ship breaking scrap.
7. Having regard to the foregoing, we direct the applicants M/s.
Tigranic Metal & Steel Industries to furnish a bank guarantee for Rs. 3.23 lacs reportedly being the appropriate duty involved for the period after 1-3-1986. The direction for furnishing the bank guarantee for this amount instead of cash deposit is in view of their submission that the Government, is considering waiver of recovery of duty under Section 11C. On furnishing the bank guarantee as above, there shall be stay and recovery of the duty and penalty amounts from all the three applicants.
The applicants are granted eight weeks time from the date of communication of this order for compliance and they shall report compliance within nine weeks, failing which their appeals are liable to be rejected.