Full Judgment
2. We have heard Shri Jaswant Singh, Consultant for the appellants and Shri Balbir Singh for the Department.
3. Admittedly, the electricity generated by the appellants is supplied by them to their residential colony as also their hospital. It is with refererence to a quantity of 7,96,500 units supplied to the said residential colony and hospital that duty has now been demanded, the period being 1-3-1978 to 30-4-1980. There is no dispute that the appellants had not taken out a licence also till 18-1-1980. The question whether benefit of exemption under Notification No. 52/78 dated 1-3-1978 would be available in respect of supply to housing Colony, School, Hospital etc. has been considered by this Tribunal in the case of Oil India Ltd. [1983 (12) E.L.T. 570), the answer being in the negative. But Shri Jaswant Singh contends that the said decision should not be applied to the present case since the residential colony as well as the hospital are, in the case of the appellants, situate within the same compound as their factory whereas in the cited case it was not so. We are unable to accept any such distinction. The decision was rendered on the basis that benefit of exemption was available only with reference to electricity consumed in the factory for the actual manufacture of goods. We therefore reject the contention that the ratio of the cited decision would not apply to the facts of the present case.
4. Shri Jaswant Singh then submitted that in any event the demand was barred by time. As earlier mentioned, the demand covered the period 1-3-1978 to 30-4-1980. The order of the Deputy Collector refers to the show cause notice dated 29-4-1981 with reference to which the adjudication is said to have been held. In the said notice dated 27/29-4-1981 the appellants had been called upon to show cause why penalty should not be levied and why duty should not be demanded. Shri Jaswant Singh contends that the notice having been issued for a period more than 6 months preceding the date of the notice the demand was barred by time. From the order of the Deputy Collector or the order of the Collector it does not appear that this issue of limitation was specifically raised and dealt with. The reply dated 20-5-1981 to the notice dated 29-4-1981 does not raise this question of limitation. The petition to the Collector for review of the order of the Deputy Collector is not available to us. But a copy of the record of personal hearing held by the Collector on 20-7-1982 is available in the paper book. The same refers to the contention of the appellants that there had been no suppression of facts and no clandestine removal. No doubt here also the record does not disclose any question of limitation, in so many words, having been raised. But the record of personal hearing does indicate that there was at least some submission as to clandestine removal or suppression of fact which would suggest that possibly there was some discussion during the hearing on the question of limitation.
In any event, limitation is a plea that could be permitted to be raised at later stages also, provided the plea could be disposed of with reference to available facts.
5. In order to appreciate this plea it would be convenient to set out the sequence of the proceedings, as could be gathered from the papers available. On 22-12-1978 the Superintendent had sent a letter to the appellants, referring to their letter dated 25-7-1978 (from the photocopy it is not clear whether the date is 25-7-1978 or 25-10-1978) indicating that as the electricity generated by them was being used for supply to the residential quarters also they were liable to pay duty and the appellants was being therefore called upon to do so. He had also directed thereunder that they should take out a licence. Shri Jaswant Singh replied, in answer to a query, that an application for licence was made on 8-9-1979. Since the show cause notice dated 27/29-4-1981 mentions that they had produced electricity without obtaining licence during the period 1-3-1978 to 18-1-1981 it is likely that licence had been obtained on 18-1-1980. Thereafter, on 29-7-1980, the Central Excise Inspector had written to the appellants, with reference to their letter dated 19-7-1980, that a quantity of 7,96,500 units of electricity had been used for purposes other than captive consumption in the manufacture of goods and appellants were therefore liable to pay duty of Rs. 15,930/~ thereon. Under the said letter he had directed them to make the payment. That is to say, it was a peremptory demand. The appellants had replied under letter dated 15-9-1980 protesting against the demand. On that the Assistant Collector had sent a communication dated 25-3-1981 justifying the demand for payment of duty and calling for the payment. The appellants appear to have addressed the Collector under letter dated 8-4-1981 requesting him to consider the demand under the letter dated 25-3-1981 in view of their stand as to why the amount was not payable. It does not appear that this was in the form of an application for review addressed to the Collector. It is not known whether any action was taken by the Collector on this letter.
6. It is thereafter that the show cause notice dated 27/29-4-1981 was issued referring to the liability for payment of duty for the period 1-3-1978 to 30-4-1980 and also proposing imposition of penalty for manufacture without licence upto 18-1-1980. In their reply thereto, dated 20-5-1981, the appellants had merely taken the stand that the show cause notice was vague and defective and there had been no contravention on their part. It was thereafter that the Deputy Collector passed his order dated 23-6-1981 pointing out that the figures as well as the nature of use had been taken from the letter of the appellants themselves dated 3-6-1980. It was this order that was confirmed by the Collector under his order.
7. It is therefore clear that at any rate on 22-12-1978 the Deptt. was aware that the electricity generated by the appellants was being supplied to the residential colony and the hospital. This letter refers to a reply to the appellants dated 25-7-1978 (or 25-10-1978). It is not known whether it is in this reply that the appellants had indicated their supply of electricity to the hospital and colony also. Thus either from 25-7-1978 (or 25-10-1978), or at any rate from 22-12-1978, the Deptt. was aware that the appellants, in supplying electricity generated by them to their residential colony and hospital, were not entitled to benefit under Notification No. 52/78 in respect of that quantity of electricity. Therefore, at any rate in respect of duty payable after the said date of knowledge the demand therefor should have been issued within the normal period of limitation and not the extended period of limitation. The position will be different in respect of duty payable before the said date of knowledge since it is clear that before that date the appellants had not merely contravened the provisions regarding taking out a licence but had supplied electricity to the residential colony and hospital without payment of duty and had thus evaded duty by suppression of facts. That would mean that in respect of this earlier period the Deptt. 'was entitled to the longer period of limitation in raising the demand.
8. So far as the communication dated 29-7-1980 is concerned, that was in the nature of a peremptory demand and not a show cause notice. That is why, evidently, in spite of the subsequent letter of the Assistant Collector dated 25-3-1981, the Deptt. felt it necessary to issue a show cause notice on 29-4-1981 demanding payment of duty for the period 1-3-1978 to 30-4-1980. Hence it is only this show cause notice dated 29-4-1981 that will have to be taken into consideration in deciding whether the same was within the period of limitation so far as the demand now in issue is concerned.
9. Hence no proper decision could be arrived at on this question of the bar of limitation (with reference to the show cause notice dated 29-4-1981) unless the date when the Deptt. became aware of the fact of supply to the residential colony and hospital and the consequent dis-entitlement under Notification No. 52/78. As earlier stated, we have no exact information on this question as to whether it would be 25-7-1978 or 25-10-1978 or only 22-12-1978. In the absence of this information no finding could be recorded on the question as to which part of the demand is within time and which part hit by the bar of limitation.
10. In the circumstances the only proper method of disposal of the appeal would be to confirm the liability for payment of duty in respect of the quantum of electricity supplied to the colony and hospital, but remitting the matter to the Deputy Collector for deciding afresh as to which part of the claim is within time and which part is not, in the light of the discussions and findings earlier. So far as liability for penalty is concerned we uphold the orders of the lower authorities that this is a proper case for imposition of penalty since electricity had been manufactured without licence and removed, at least in part, without payment of proper duty. But we feel that the quantum thereof would merit reduction. We accordingly reduce the same to Rs. 2,000/-.
11. Thus the findings of the lower authorities as to liability of payment of duty in respect of quantum of electricity supplied to the residential colony and hospital is confirmed but the demand for duty is set aside remitting the matter to the Deputy Collector for adjudication afresh in the light of the findings and directions earlier. The quantum of penalty is reduced to Rs. 2,000/-. The appeal is allowed in the above terms, modifying the orders of the lower authorities to the extent indicated above.