Judgment:
1. The Appellants herein manufactured parts of machine. They also undertook various job work like machining, grinding, milling, drilling and induction as also hardening of crank-shafts of tractors. They took out Central Excise licence on 21-3-1986. They were advised to file the classification list and they declared the aforesaid activity of job work in Item 7 of the classification list claiming as "particulars of other goods produced or manufactured and intended to be removed by the assessee." In other words, they claimed that these activities of job work done by them were not excisable. Therefore, they did not include the job charges claimed by them in the computation of aggregate clearance during the financial year in the terms of Notification No.175/86-C.E. This was also noticed by the Department as is evident from the Superintendent's letter dated 17-4-1989 wherein it was stated that the appellants herein had not included the value of job work done by them in the assessable value of the goods manufactured by them. If so included, they were liable to pay duty in 1986-87 and 1987-88 because their first clearance would have crossed the exemption limit of Rs. 15 lakhs in a financial year. Therefore, the duty liability of Rs. 26,072/- was proposed by the Superintendent and he requested the appellants to deposit the same.
2. Thereafter, on 3-1-1990 a show cause notice was issued to the appellants alleging duty evasion of Rs. 14,84,792.68 for the period 1986-87 and 1987-88 alleging that they have not clubbed the value of clearance of own production and value of job work done by them together for assessment purposes. It was also alleged that they have not provided the above information thoroughly in RT-12 returns leading to short payment of excise duty due to suppression of facts. Annexures to the show cause notice indicated that the value of the raw material on which the job work has been done, has been taken 9 times the value of job charges collected by them from their customers.
3. On adjudication, on the basis of the suppression of facts, demand of duty has been confirmed and penalty of Rs. one lakh has also been imposed by the Adjudicating Authority under Rule 173Q.4. It is against the aforesaid order the appellants have now filed this appeal before us.
5. Learned Advocate Shri K.P. Bhatnagar for the appellants has urged that every information known to the appellant was given to the department as is apparent from the correspondence exchanged between them in 1986. They have also indicated that they were doing the job work on behalf of various parties. They have also claimed that the activity of job work was not an excisable activity. Therefore, no duty was leviable. Prior to the filing of the classification list, learned Advocate submits that a letter was written by the appellant dated 24-3-1986 in which these entire activities of job work were mentioned in that letter addressed to the Collector. Superintendent (Technical) responding to the appellants on behalf of the Collector told them to contact the Assistant Collector, MOD-HI. In pursuance of the said letter of the Superintendent (Technical), the appellant approached the Superintendent, Mayapuri, New Delhi vide their letter dated 25-3-1986 and submitted the classification list as mentioned above. Learned Advocate, therefore, submits that no facts have been suppressed by the appellants and the invoking of larger period in the face of these facts will be totally unsustainable. Only normal period of six months could be invoked. By reckoning the said allegation, the show cause notice is completely barred by time.
6. We have also heard the learned JDR Shri M.P. Singh for the Commissioner of Central Excise who has reiterated the findings of the said Collector on the question of limitation. The said Commissioner has held as follows :- "11. The last point raised is that limitation. They state that they had not mentioned the job work done by them in their RT-12 returns as there was no column for the same and that they had informed the Department by a letter that they were doing job work.
In this context I find that they have not mentioned the fact of their doing job work either in RT-12 or classification list and the only communication stated to have been made by them is their letter dated 24-3-1986 - in which they mention the compounds they are doing job work for - direct to the Collector Central. He in turn vide letter dated 15-4-1986 (given by the party in PH) asked them to meet the jurisdictional Asstt. Collector MOD-III in the matter. This lone letter by itself and that to the Collectorate Hqrs. rather than to concerned Ragne Supdt. or Asstt. Collector of their jurisdiction - cannot be taken as a disclosure of all facts to the Department." He has further held that the appellant has not disclosed all the facts.
No mention of the value etc. seems to have been made thereafter. No efforts have been made to bring on record the correct value of the raw material received for job work even after issue of show cause notice.
Therefore, the plea of limitation has been set aside.
7. We have carefully considered the pleas advanced on both the sides on the question of limitation. We observe that the appellant had clearly mentioned in their classification list in Item 7 of Form-1 that they are undertaking various job work activities for their customers and they consider the said activities to be non-dutiable activity by mentioning so under Item 7. The Adjudicating Officer's finding to the effect that the appellant did not mention the fact of doing job work in the classification list as mentioned in the extract given above, is baseless. Once this fact is known to the department, the department should have understood that job work activity was being done by the appellant and the value of the job work done would also be included for the purpose of reckoning the aggregate clearance under Notification No.175/86-C.E. That having not been done by the department, the appellant cannot be blamed for the same. In view of the aforesaid facts and circumstances, the larger period of five year is not at all justified.
Consequently, we uphold the plea of the appellant that the show cause notice dated 3-1-1990 is barred by time and on this point, we set aside the demand of duty made against the appellant. Since the demand of duty has been set aside, the penalty also would not be sustainable because no offence of wilful mis-statement or any guilty knowledge can be made against the appellants. In short, the appeal is allowed on the question of limitation alone and the impugned order to that extent is set aside.