Full Judgment
2. Shri R. Santhanam, learned Advocate, referred to memorandum dated 16-3-1974 from the jurisdictional superintendent addressed to the appellants. This memorandum disposed of an earlier show cause notice dated 21-1-1974 making similar allegations. In the memorandum, it was held that since the assessees were manufacturing goods from duty paid goods falling under the same sub-item of the relevant Tariff Item, there was no requirement for them to hold licence. Learned Advocate submits that for several years before the issue of the present show cause notice, the department was aware of the activity of the appellants and, therefore, the charge of suppression to evade licensing control was not maintainable. It is his submission that since show cause notice is issued after nearly 3 years of the period mentioned in the show cause notice, demand is hit by limitation. Shri G.D. Sharma, learned JDR, on the other hand, claims that fact of suppression of Notification No. 75/67-C.E. was known to the assessees and that it was incumbent upon them to apply for licence and to pay duty on the resultant goods after claiming proforma credit. Their lack of action to secure licence after introduction of Notification No. 113/80 would amount to suppression. Shri Santhanam countered by saying that vide F.No. 139/19/83-CX.4, dated 10-5-1983 the Ministry had themselves directed the Collectors to show leniency in administration of provisions of Rule 57A to the assessees who were earlier availing of benefit of Notification No. 75/67. He further states that there was no revenue loss to the department since proforma credit was availed. Shri Santhanam further relied upon the judgment of the Supreme Court in the case of Telangana Steels Industries and Ors. v. State of Andhra Pradesh and Ors. 1994 (73) E.L.T. 513 (S.C.) : 1994-93-STC-187 in which it was held that wire rods and wires were not different commodities.
4. The contested show cause notice is issued under Rule 9(2). Rule 9(2) is attracted where dutiable goods are removed in a surreptitious and clandestine manner. Time limits specified in Section 11A are also required to be read into this rule. Therefore, where extended period has been invoked, the suppression to evade payment of duty is required to be established. In the present case, the activity undertaken by the assessees was, at all times, in the knowledge of the department. In fact, even in the earlier disputes, it has been held by the department that separate licence was not required by them. When the department had the knowledge of this activity for over a decade the allegation of suppression could not be made against the assessees. It is correct that assessees were under obligation to understand the change in the Notification but failure on their part does not automatically amount to suppression on their part. One this count, we find that demand made by the show cause notice and confirmed by the Collector is hit by limitation. In view of our holding this, we do not need to go into the issue whether drawal of M.S. wires from wire rods would amount to manufacture or not. We allow this appeal and set aside the order of the Collector and order consequential relief, if warranted.