ORDER
P.P. Naolekar, J.
1. This is a petition under Articles 226 and 227 of the Constitution of India; whereunder the petitioners have challenged the validity of show cause notice dated 29-5-1992, issued by the Collector of Central Excise, Raipur, raising demands invoking the extended period of limitation provided for under the proviso to Section 114(1) of the Central Excises and Salt Act, 1944 (1 of 1944) (hereinafter referred to as the 'Act'). The show cause notice issued on 29-5-1992 relates to the period 1-4-1987 to 31-3-1992 containing allegations in respect of two units viz. M/s. Satna Cement Works, Satna and M/s. Birla Vikas Cement, Satna, both of which belong to M/s. Birla Jute and Industries Ltd.
2. The petitioner No. 1 Birla Jute and Industries Ltd. is an existing company within the meaning of the Companies Act, 1956, having its registered office at Calcutta, West Bengal. The Company owns, inter alia, the cement division which comprises cement plants at Satna in M. P., Chittorgarh in Rajasthan and Durgapur in West Bengal. M/s. Satna Cement Works, Satna undertaking at Satna (M. P.) had a single licence L4 under the Act upto 31-12-1987. Petitioner No. 1 Birla Jute and Industries Ltd. had moved an application for grant of two separate licences L4 in respect of both the units i.e. M/s. Satna Cement Works. Satna and M/s. Birla Vikas Cement, Satna. Separate Excise Licences in Form L4 were obtained in respect of both the units on 1-1-1988 bearing No. 1/88/SCW/R1/Satna for Satna Cement Works and No. 2/88/BVC/RI/ Satna for No. 2, the unit called Birla Vikas Cement. Both the units had a common L4 licence upto 31-12-1987 but from 1-1-1988 they have two separate L4 licences. According to the petitioners upto 1-1-1988 both the units, petitioners' companies M/s. Satna Cement Works and M/s. Birla Vikas Cement, Satna had been shifting and storing with the full knowledge of the excise authorities, clinker produced in one unit in the other, due to paucity of space at any particular point of time. This shifting was with the full knowledge of the excise authorities and several letters were written by the petitioners had always been scrutinised by the excise authorities are the proofs for the same. The excise authorities have knowledge of the fact of the storing of the clinker outside the bonded store room. It is, further alleged that each day's production of clinker and cement during all material times was in the knowledge and matter of record of the excise authorities. The daily production report submitted by the excise authorities and the same were found as correct. That the shifting of the clinker from both the units outside the bonded store room was with due approval of the excise authorities and the same was removed back to the factory of its origin for the use of manufacture of the cement. The production of each day's cement at all material times had been actually checked, verified, to ensure that the same is correctly accounted for and compared with all the records including RCI. But, in spite of the aforesaid known and undisputed facts the respondent No. 2 the Collector of Central Excise and Customs has fabricated a false case against the petitioners and issued the impugned notice dated 29-5-1992.
3. On 29-5-1992 the respondent No. 2 the Collector of Central Excise and Customs had issued notices to M/s. Satna Cement Works, Satna, M/s. Birla Vikas Cement, Satna, M/s. Birla Jute and Industries Ltd. Cement Division, Calcutta (W.B.), Shri U. S. Sethia, President, Shri J.N. Prasad, Sr. Vice President and Shri J.S. Banthia, General Manager (Marketing), Satna Cement Works and Birla Vikas Cement, Satna (M. P.). The detailed notice issued along with memorandum of charges giving details and list of records and documents relied upon by the department contained allegations in brief, inter alia, that whereas it appears that M/s. Satna Cement Works, M/s. Birla Vikas Cement. Satna, and M/s. Birla Jute and Industries Ltd., Cement Division, Calcutta had contravened the provisions of Rules 9(1), 52-A. 53, 54, 173-F, 173(C)(4) and (5), 174 and Rule 226 of the Central Excise Rules, 1944 inasmuch as is during the period from 1-4-1987 to 31-3-1992 the cement clinker falling within Chapter 25 of the Central Excise Tariff Act, 1985 (5 of 1986) was removed without payment of basic duty and special excise duty and no gate-pass was issued to cover such transport to M/s. Birla Vikas Cement, Satna and vice versa to M/s. Satna Cement Works, Satna without accounting for in the daily stock register of clinker. There is no account for receipt of cement clinker in the daily stock register used for manufacture of cement and manufactured cement thereof was removed without payment of the basic duty and special excise duty and without accounting for in the daily stock register of cement. The petitioners have failed to determine themselves the liabilities for duty due on aforesaid quantities of cement clinker and cement and cement removed which was done without payment of duty, and it was not included in the general ledger of stores in the declaration furnished under Rule 173-G(5) of the Central Excise Rules, 1944, suppressed production of clinker and cement, made wilfully false entries of production and removal of cement clinker and cement at their daily stock account register of the quantities of clinker and cement mentioned in the notice. That, M/s. Birla Jute and Industries Ltd., Cement Division Proprietor M/s. Satna Cement Works, Satna, and M/s. Birla Vikas Cement, Satna had knowingly and deliberately by reason of collusion and wilful misstatement and suppression of facts in regards to manufacture of cement clinker removed the aforesaid quantities of unaccounted and non-duty paid cement clinker from one factory to another and enabled the consignee factory to produce and remove the quantity of cement without payment of duty. The notice further contains that Shri U.S. Sethia, President, Shri J.N. Prasad, Sr. Vice President and Shri J.S. Banthia, General Manager (Marketing) of M/s. Satna Cement Works, Satna and M/s. Birla Vikas Cement, Satna knew or had reason to believe that aforesaid quantities of cement clinkers and cement involves evasion of total duty of Rs. 8,36,43,044.28 were liable for confiscation under the Act and the rules framed thereunder. The notice is accompanied with a memorandum giving details of charges and also the list of records and documents.
4. Notice required the petitioners to submit their reply by 30th June, 1992. Petitioners have not submitted their reply to the Collector of Central Excise and Customs but have come, straightway to this Court challenging the validity of the notice. As per the petitioners, in the instant case the sum of Rs. 3.38 crores are demanded on the assumption that 2 lac M. Ts. cement clinker was removed during 1-4-1987 to 31-3-1992 by the petitioners from units viz. M/s. Satna Cement Works and M/s. Birla Vikas Cement, Satna in excess quantity mentioned in the record is baseless and imaginary because the petitioners were not having move capacity to produce cement clinkers than it had shown in the daily production reports'. The excise authority having accepted the daily report as correct, which has been substantiated by due checking and verification of annual stock taking reports of goods manufactured, have no jurisdiction to issue notice under Section 11A proviso, taking advantage of the extended period of limitation, as the petitioners have not exercised fraud, collusion or any wilful misstatement or suppression of the facts to the excise authorities neither have contravened any of the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder with intention to evade the payment of excise duty, to attract 5 years' limitation. On the other hand, it is contended by the counsel for the respondents that the documents on record and under the facts and circumstances it is a clear case of deliberate evasion of the excise duty by suppression of the material facts which were within the knowledge of the petitioners and there is also a case made out of contravention of provisions of the Central Excises and Salt Act, 1944 and rules made thereunder by the petitioners.
5. The counsel for the parties, at the time of hearing, cited various other decisions arising out of and considering the question of initiation of the proceedings under the different Acts, particularly under the Income-tax Act, but in view of the direct decisions of the Supreme Court considering Section 11A of the Central Excises and Salt Act, 1944, which are referred hereinafter, we do not feel it necesssary to consider those decisions. Section 11A is intended to relate back and covers a period of 5 years from the date, a jurisdiction under it is invoked and thereby covers a period upto 5 years preceding the date of issue of notice. Whether there had been non-disclosure of primary facts which caused escapement of duty is basically a question of fact. When any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded the Central Excise Officer within six months from the relevant date may serve a notice on the person chargeable with duty which has not been levied or paid or which has been short levied or short paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Under the proviso this period of six months has been extended to 5 years and the Collector of Central Excise has been authorised and conferred with the jurisdiction to issue show cause notice where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Central Excises and Salt Act, 1944 or the rules made thereunder with an intent to evade payment of duty, by such person or his agent. When there is an intention to evade payment of duty for the reason stated in the proviso, the Collector of Central Excise gets an authority and jurisdiction to issue notice to show cause for the period of 5 years preceding the issuance of notice.
6. The counsel for the respondents has submitted before us that a large number of cement-bags are sold or transported from the factories viz. Birla Vikas Cement and Satna Cement Works without payment of excise duty and are shown as sweepage in the factory records. The statement of Shri J.S. Banthia, petitioner No. 4 which is filed as Annexure R9, the questions Nos. 3, 5, 6, 8, 10 and 13 and the answers thereof and, the statement of J.N. Prasad, Petitioner No. 3, which is Annexure-R10, the questions Nos. 3 and 6 and answers thereof, served with show cause notice, does indicate recording of certain cement-bags as sweepage in the books of the company. Shri J. S. Banthia, petitioner No. 4, was asked question No. 5 'Wherever excess quantity of cement bags, is reported received at different dumps and is found correct on verification also. How do you adjust the same in the statutory records maintained as SOW and BVC'. Shri Banthia has answered that 'After adjustment of shortage and excess quantity the net excess quantity whenever received at our dumps is recorded in our dump records, but the same is not adjusted in the excise records at our factory''. Admittedly Satna Cement Works and Birla Vikas Cement, Satna have been given two separate excise licence in form L-4 on 1-1-1988, and from that date both the units are separate factories and separate entities for the purposes of Excise Act. Annexure-E filed along with the petition, is a statement showing yearwise production and clearance of clinkers and cement during the period April 1987 to March 1992. In this statement clinkers sent from Satna Cement Works to Birla Vikas Cement, in the year 1987-88 nil, in the year 1988-89 nil, in the year 1989-90 nil, in the year 1990-91 - 13545 MT and in the year 1991 -92- 22956 MT; whereas as per chart prepared on the basis of stores freight account (general ledger) clinker shifting and the bills of transporters given for transportation of the clinkers from Satna Cement Works to Birla Vikas Cement the clinker is shown to be transported in the year 1987-88, 1988-89 and 1989-90. As per counsel for the respondents these documents also show the excess quantity of clinkers transported in the year 1990-91 and 1991-92 than reflected in Annexure-E. Similarly, Annexure-E does not show transportation of clinkers from Birla Vikas Cement to Satna Cement Works in the year 1989, whereas the bill dated 21-12-1989 (Paper-Book Page 127), supplied to the petitioners with show cause notice of M/s. Daulat Construction Co. the clinker was transported from Birla Vikas Cement of Satna Cement Works on 11-12-1989 and 13-12-1989 for which the bill for transportation was given. Under notification No. 16/90, Central Excise, dated 20th March, 1990, issued in exercise of powers conferred by Sub-section (1) of Section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the clinker used else where than in the factory of production, if the procedure, set out in Chapter X of the Central Excise Rules 1944, is followed it is exempted from payment of excise-duty. There is nothing on record to show that procedure in Chapter-X was followed under the Central Excise Rules, 1944 before transportation of the clinker from one unit to another unit by the petitioners. In the rejoinder filed by the petitioners in reply to para 7, the petitioners have submitted that the authorities instead of relying on the official records and forms maintained under the production based control system by them, Annexures-D to D-13, are attempting to base their case on the stores general ledger, prepared for personal accounting, in which day-to-day deliveries were recorded. The said stores general ledger showing shifting of the clinker from one unit to another unit was for storing and was brought back to the same unit by the petitioners at their own convenience for ultimate use to manufacture cement and entries clearly show that there is no suppression of facts. Further, in paragraph 9 of the rejoinder of the petitioners, it is alleged that Satna Cement Works and Birla Vikas Cement of the petitioners had single L-4 licence upto 31-12-1987 with one common premises. Thus, shifting of clinker within the above premises is only a site to site shifting for captive consumption for manufacture of cement which does not require the petitioners to follow the procedure set out in Chapter-X of the Central Excise Rules, 1944. Hence the period 1-4-1987 to 31-12-1987 in the impugned notice has wrongly been included.
7. From the above statement of facts, it is clear that exemption from following the procedure prescribed under chapter-X is being claimed only for the period 1-4-1987 to 31-12-1987. That excise authority has issued notices to the petitioners on the basis of the records of the company, which have not been submitted or brought to the notice of the excise authority. The statements of officers of higher hierarchy, who are also petitioners do indicate that the excess quantity of cement-bags received at the dump in excess of despatched consignment as per railway receipt/excise gate-pass are accounted for as sweepage and not shown in excise records. If the private records not produced before the excise authority show evasion of the excise duty or the facts and figures recorded therein do not reflect in the records produced before the excise authorities, excise authorities are perfectly justified and well within their limits to make investigations, enquiries thereof to find out whether there is deliberate evasion of the excise duty. Whether shifting of the clinkers from one plant to another when they have become separate units, holding separate L-4 licence, was done with the knowledge and with the consent of the excise authority for the purposes of storing only due to paucity of place or otherwise is a matter of investigation and consideration of all material, records and reply to show cause notice. We do not find ourselves in a position to record any finding thereof at this stage. The question of contravention of provisions of the Act or the Rules framed thereunder or any other law can only be determined after assessment of entire evidence, material on record and, thereafter arriving at the factual conclusion on the basis of material placed.
8. In Collector of Central Excise, Hyderabad v. Chemphar Drugs and Liniments, Hyderabad, AIR 1989 SC 832, the facts in brief are that the respondent was issued show cause notice by the department and was asked to explain as to why excise duty in respect of Patent and Proprietary medicines manufactured and cleared by it should not be demanded and why penalty should not be imposed on it. The respondent submitted reply and thereafter the Collector, Central Excise made demand of excise duty on the ground that the respondent had not revealed the correct position. The respondent preferred appeal and the Tribunal upheld the contention of respondent after considering the matter on merits, that the demand for duty for the period beyond six months was time barred. The Revenue preferred appeal in the Supreme Court and. the Supreme Court has said in para 8 -
'In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and upto a period of 5 years in view of the proviso to Sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.'
It may be seen that the Apex Court has specifically held that whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.
9. In Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, Bombay, AIR 1989 SC 1218, the appellant was issued a show cause notice, and after, appellant showed cause the Collector of Central Excise passed order against the appellant. Appeal was preferred before the Tribunal. The Tribunal partly allowed the appeal but held that the appellant was guilty of suppression and rejected the submission of the appellant that the show cause notice was barred by time. Appeal was filed before the Supreme Court and the Supreme Court while considering the question whether the claim for duty is only confined to the period of six months because there was no suppression of facts has held in para 10 that-
'Therefore, we have, to find out whether there was any fraud, collusion, wilful misstatement or suppression of facts for the Department to be justified to claim duty beyond a period of six months. This is a question of fact.'
Therefore, in this decision also the Appex Court has held that the question whether there was any fraud, collusion, wilful misstatement or suppression of the facts is question of facts requires to be determined by the authorities.
10. Padmini Products v. Collector of Central Excise, Bangalore, AIR 1989 SC 2278, is again a case where after a show cause notice was issued to the appellant; the appellant filed reply and the findings have been recorded by the authority and the Tribunal. In an appeal preferred to the Supreme Court the Apex Court, after considering order of the Tribunal and the material on record held at page 2284 that-
'In the facts and circumstances of this case, there were materials, as indicated to suggest that there was scope for confusion and the appellants believing that the goods came within the purview of the concept .of handicrafts and as such were exempt. If there was scope for such a belief of opinion, then failure either to take out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licensed, would not attract the penal provisions of Section 11A of the Act. If the facts are otherwise, then the position would be different.'
'.......There were no materials from which it could be inferred or established that the duty of excise had not been levied or paid or short-levied or short paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made thereunder,'
Thus, this decision of the Apex Court also proceeded on the basis of facts found before the authorities and, therefore, it has been specifically said that if the facts are otherwise, then the position would have been different and that there was no material or record from which it could be inferred or established that the duty of excise was avoided in contravention of Section 11A of the Act.
11. In Union of India and Ors. v. Maheshwari Woollen Mills, AIR 1993 SC 1251, in para 6, the Supreme Court after considering the facts contained in the notice to show cause says that the notice issued was clearly one on the basis of which notice could be issued under the extended period of limitation under the proviso of Section 11A of Central Excises and Salt Act, 1944, and the notice cannot be quashed at a preliminary stage.
12. The notice was issued on 29-5-1992. The petitioners have come to this Court even without filing reply to the show cause notice. In the facts and circumstances of the case, it cannot be said that no prima facie case has been made out by the respondents for exercising the powers under proviso to Section 11A of the Central Excises and Salt Act, 1944, by the Collector of Central Excise. At this stage, it is neither advisable nor necessary, for us to determine questions of facts which can only be determined and adjudicated after the reply is filed by the petitioners to the show cause notice dated 29-5-1992. The Court need not go into the details at this point of time of the proceedings, it is a job of the Collector of Central Excise. The Court has only to look' into the facts to the extent, to satisfy itself, that there is material on record which requires investigation and initiation of proceeding is not merely to harass the petitioners.
13. For discussion aforesaid, this petition is dismissed with cost. Counsel's fee Rs. 2,500/-, if certified.
14. The petitioners are directed to submit their reply to the show cause notice to the respondent No. 2 on a fresh date which will be given by the respondent No. 2 to the petitioners.
S.K. Jha, C.J.
15. I entirely concur in the judgment of my learned brother. I, however, in deference to the argument of the Senior Counsel for the petitioner Shri Y.S. Dharmadhikari, want to highlight one thing. I must confess that at the time of admission, I was rather impressed by a facet of the judicial nature. The point which had been argued with great emphasis was with regard to the Collector of Central Excise and Customs having already made up his mind before applying his mind objectively to the facts. In other words, the argument was that the Collector having already pre-judged the issue, it would be merely a shadow of a trial without any judicial mind to apply to the facts at all and since he had already exposed his mind by expressing vocally through the media of newspapers.
In order to test this impression, I had in the midst of arguments in the case on 8-7-1993 suggested to the counsel for the parties namely Shri Y.S. Dharmadhikari, Sr. Advocate for the petitioner and Shri N.C. Jain, learned counsel for the Collector, Central Excise and Customs, Raipur that the matter may be transferred to any other place before any other Collector of Central Excise and Customs agreeable to both the parties to go into the matter de novo and that in the mean time, no coercive steps should be taken against the petitioner so long as such a Collector does not reach any conclusion with regard to the merits of the case. After consultation with each other in open Court, learned counsel were agreeable to the matter being referred to for de novo application of mind by the Collector of Central Excise and Customs, Indore. This Bench thereafter told learned counsel Shri Dharmadhikari to ask his clients for specific instructions in that regard and to convey it to us the next morning. The next day i.e. on 9-7-1993 when we assembled, Shri N.V. Jain said he had nothing to say in the matter since he had already agreed to the proposal by us but Shri Dharmadhikari, learned counsel told us that he was unable to persuade the petitioners to have the matter so transferred to any other Collector of Central Excise and Customs, albeit the Collector of Central Excise and Customs at Indore, and that the petitioners wanted the proceedings to be continued on merits and that, therefore, he was unable to come to any terms regarding the locus. So we proceeded to continue to hear the matter. My impression with regard to bias on the part of the Collector, Central Excise and Customs, Raipur was thereafter washed out and as I have already said, I entirely agree with my learned brother's judgment that the petition be dismissed with counsel's fee Rs. 2,500/- only.