Judgment:
1. The appellants manufacture veneers and sawn timber. Sometime in 1983 the central excise department alleged that the appellants evaded central excise duty and that they cleared goods in excees of 30 lakhs rupees value from the factory without payment of duty. As a consequence it was alleged that there was evasion of excise duty during the year 1981-82 and that the appellants did not obtain the central excise licence for manufacture of goods. A further charge was that the appellants did not maintain the RG-1 register and did not file RT-12 returns for the goods cleared by them. It was also alleged that they did not file the declaration necessary under notification No. 105/80-CE even though their production crossed 80% of the exemption limit of Rs. 30 lakhs in value. After due procees including the issue of show cause notice, the Collector of Central Excise held that the appellants failed to pay central excise duty amounting to Rs. 1,39,222.24 and that there were other irregularities as alleged. As a result, besides demanding the duty the Collector imposed a penalty of Rs. 50,000 on the appellants. Hence this appeal.
2. Shri D.N. Mehta, the learned advocate for the appellants submitted that the appellants are situated in a very remote part of Nagaland. As a consequence they could not obtain the PLA number in time and they could not therefore deposit the duty for some time. He submitted that the appellants are not disputing their liability to duty on the goods (veneers) removed by them and invited our attention to the Collector's order wherein it was recorded that the appellants paid duty from 16-3-1982. Shri Mehta submitted that there was no intention on the part of the appellants to evade central excise duty but only because of remote location and other difficulties, some irregularities took place.
He further submitted that the appellants admit duty liability only insofar as veneers are concerned and not in respect of sawn timber on which too duty has been demanded by the Collector. He submitted that sawn timber is not liable to central excise duty; therefore, about 45,000 rupees included in the demand by the Collector is disputed.
3. Shri Mehta, however, submitted that though there were some omissions on the part of the appellants, these were venial and the imposition of penalty was not warranted. In any event, the learned advocate submitted, the penalty is out of all proportion to the seriousness of the offence.
4. Shri Krishnamurthy, learned SDR opposing the arguments submitted that the appellants did not make a declaration as required by the notification No. 111/80-CE dated 9-5-1980 (sic). He, however, agreed that though no such declaration was made, the appellants did not apply for a L-4 licence before crossing 80% of the exemption limit of 30 lakhs per annum. He emphasised that the appellants not only removed goods without payment duty but also they did not maintain RG-1 register and did not file RT-12 returns; therefore, the learned SDR submitted, the imposition of penalty and demand for duty was correct in law.
5. We have considered the arguments of both sides. It is not disputed even by the appellants that they removed goods (veneers) without payment of duty. Therefore, we confirm the demand for duty on veneers, subjcet to any modification by the Collector, as a result of verification of calculation errors already pointed out by the appellants.
6. In so far as sawn timber is concerned the appellants submit that sawn timber is not liable to central excise duty and in this context they cited the following decisions:-Sanghvi Enterprises, Jammu Tawi v. Collector of Central Excise, ChandigarhSurma Valley Saw Mills Pvt. Ltd. v. Collector of Central Excise, Shillong 7. We have considered the submissions of the learned advocate. The Collector's order does not give the nature of the sawn timber on which he demanded central excise duty. Without full information about the process and description of the sawn timber as it is removed, it is not possible for us to go into the question whether the goods produced by the appellants are liable to central excise duty or not. We, therefore, set aside the demand contained in the impugned order so far as it relates to sawn timber and direct that the Collector should pass a fresh order in this regard after hearing the appellants, going through the facts and considering the case law cited by the appellants.
8. The next question before us is the justifiability of the penalty of Rs. 50,000 imposed on the appellants. The appellants have pleaded bona fides and absence of mens rea. We note that the appellants did apply for allotment of PLA and they approached the central excise authority and started paying duty before communication of such a number. We also note that they did apply for a central excise licence even though they did not make the declaration in terms of notification No. 111/80. As submitted by the learned Advocate the application for licence is a step ahead of the declaration prescribed by the notification. However, we note that the non-filing of RT-12 returns and non-return (sic) of RG-1 register cannot be overlooked completely, whatever be the difficulties.
At the same time we do not feel that the heavy penalty imposed is justified. We, therefore, reduce the penalty to Rs. 15,000 only.
9. In sum, we confirm the demand for duty on veneers, subject to any modification by the Collector if a representation has been made by the appellants regarding errors in calculation. The demand for duty on sawn wood is set aside subject to a fresh decision as ordered above. The penalty is reduced to Rs. 15,000. The appeal is thus partly allowed and partly rejected, another part of the impugned order having been remanded to the Collector.