Judgment:
1. Order-in-Original, dated 20-10-1989 passed by the Additional Collector of Central Excise, Bombay-III is under challenge in this appeal.
2. Appellant, engaged in the manufacture of electric hoists and brake motors, is also manufacturing rotor-stator assemblies for captive consumption in the manufacture of electric hoists and filing price lists in Part vi(b) in respect of rotor-stator assemblies and price lists in Part I in respect of brake motors, the price of the former being much less than the price of the later. Price lists were approved and RT 12 assessments were being finalised from time to time. The dispute in this appeal relates to the period from 1-4-1985 to 28-2-1986. Show cause notice dated 27-6-1986 was issued stating that rotor-stator assembly is the same as brake motor and since the appellant was clearing brake motors to buyers and the factory gate price of brake motors was available, in respect of rotor-stator also price lists should have been filed under Part I adopting the same price in view of Rule 6(b)(i) of the Rules which relates to cases where comparable goods are sold either by the assessee or by another manufacturer. It was also alleged that there was wilful mis-declaration of price in the price lists in Part vi(b) and this was with intent to evade excise duty. Thus larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944 was also availed. It was proposed to demand differential duty on the basis of the higher price shown for brake motors in price lists in Part I. It was also proposed to impose penalty.
3. Appellant resisted the show cause notice on merits as well as on the plea that the show cause notice was barred by limitation. The Additional Collector overruled both these contentions, confirmed the demand and imposed penalty of Rs. 20,000/-. This order is now challenged.
4. Learned Counsel for the appellant addressed arguments on merits as well as on the question of the show cause notice being beyond time. The parties before us have taken diametrically different stands regarding the comparability of rotor-stator assembly with brake motor. According to the appellant rotor-stator assembly is manufactured in very large numbers for the further manufacture of hoists and brake motors which are manufactured in very small numbers cannot be used as substitute in the manufacture of electric hoists, that brake motors contained something more than the components contained in rotor-stator assembly and sizes are also different. Thus, according to the appellant, the two goods are not comparable at all. The department rubutted these contentions. Shri K. Srivastava, SDR took us through the impugned order where the Additional Collector had supported the comparability of the two goods. We do not propose to go into the merits since we are satisfied that the appellant is entitled to succeed on the plea of limitation.
5. Appellant has been manufacturing electric hoists and also rotor-% stator assembly and brake motors since 1965, all along filing two sets of price lists, namely, under Part vi(b) for rotor-stator assembly and the other under Part I in respect of brake motors, the price shown in the former being always much less than the price shown for the latter.
There is no dispute that all along the price lists were being approved and the monthly RT 12 returns were finalised on that basis. The department has no case that any objection was raised against this till 1979. It appears in 1979 CERA audit was conducted and the observation made by the audit party was intimated to the appellant vide letter dated 26-11-1979 seen at page 1 of the Paper Book. The audit party raised the objection that the price shown in price lists in Part I must apply also to rotor-stator assemblies. By this letter the Superintendent quantified the differential duty. The appellant replied vide letter dated 21-4-1980 seen at page 2 of the Paper Book contesting the stand of the audit. The matter rested there till November, 1986 when CERA audit action led to a similar objection. The appellant was informed about the same by letter dated 6-11-1986 seen at page 5 of the Paper Book wherein the Superintendent had requested the appellant to pay the differential duty. Appellant sent reply dated 12-1-1987 rebutting the stand of the audit party and justifying the procedure adopted hereto. More than one year and five months later, namely on 27-6-1988, the Additional Collector issued show cause notice which has led to the impugned order.
6. From what we have indicated in the preceding paragraph, it is clear that the department was aware of the practice followed by the appellant as early as in 1979 when the audit party raised the objection. The department apprised the appellant about it and when the appellant denied the correctness of the stand of the audit party, the mater was allowed to rest there. In the circumstances, there can be no question of the appellant during the period from 1-4-1982 to 28-2-1986 suppressing any facts or misdeclaring prices or intending to evade duty. The later objection raised by the audit party in November, 1986 resulted in the show cause notice nearly one and half years later. The show cause notice did not contain any explanation about the long delay in issuing the show cause notice. Having regard to all the circumstances, we hold that the appellant was not guilty of deliberate suppression of facts or misdeclaration of prices or with intent to evade duty. On the other hand, appellant was all along acting bonafide taking a definite stand in regard to the matter controversy. In the circumstances, the proviso to Section 11A(1) of the Act could not be availed. The show cause notice was barred by time. In this view. It is quite unnecessary to go into the merits of the case.
7. For the reasons indicated above, the impugned order is set aside and the appeal is allowed.