1. M/s. Interarch Building Products (P) Ltd., NOIDA have filed an appeal being aggrieved from the order passed by the Collector of Central Excise, Meerut. Briefly the facts of the case are that M/s.
Interarch Building Products (P) Ltd. are alleged to be manufacturers of aluminium building products. Preventive Officers under the supervision of Superintendent, Central Excise, Ghaziabad visited the factory on 17th October, 1985 and seized the goods worth Rs. 11,59,524.05 and booked an offence case for the clearances already effected from the factory in a manner other than as provided in the Central Excise Rules and the total duty involved was Rs. 8,18,794.23. A show cause notice dated 18th March, 1987 was issued to the appellants answerable to the Collector of Central Excise. The appellant was charged for contravention of the provisions of Rule 174 read with Section 6 of the Central Excises and Salt Act, 1944, Rule 173B, 173C, 173F and 173G read with Rules 52A, 9(1) and 173Q of the Central Excise Rules, 1944. It was further alleged that the appellants are manufacturers of panels, flush profiles, splice panels, roll formed carriers, round discs, edge profiles, formed stringers etc. of aluminium in their factory at NOIDA.The revenue authorities were of the view that the above articles were used as building materials and were classifiable under Tariff Item 68 of the Central Excise Tariff, and the main raw material used by the appellants for the manufacture of the said products was imported aluminium strips of special grade aluminium alloy, AA 5050 having a special coating of polyester based enamel manufactured by their principals, M/s. Hunter Douglas at Rotterdam, Holland. On their visit to the said factory on 28th September, 1985, the excise officers observed that the factory was working without having applied for a central excise licence and on being asked to explain, Shri Vijay Taneja, Administrative Officer of the factory and Shri Arvind Nanda, Director of the said company informed the officers through their statements dated 28th September, 1985 that they were manufacturing the said goods since June, 1984 and the appellants did not obtain a central excise licence and they also did not file any declaration as they were seeking exemption from licensing control because the products fall within the meaning of shapes and sections of aluminium falling under Tariff Item 27(3) of the Central Excise Tariff and they were manufacturing the same out of aluminium strips on which duty of excise or countervailing duty, whatever the case may be, had been duly paid and they were exempt from the payment of central excise duty in terms of Notification No. 183/84-CE dated 1-8-1984. In the show cause notice the appellants were asked to pay duty amounting to Rs. 2,24,113.16 on the value of the goods cleared by them from June 1984 to 16th March, 1985 amounting to Rs. 22,41,131.57 at the rate of 10% ad valorem and for the period from 17th March, 1985 fb 31st March, 1985 excise duty amounting to Rs. 2,32,788.19 on the value of clearances of Rs. 19,39,901.55 and during the year 1985-86 central excise duty at the rate of 12% ad valorem, on the value of clearances of Rs. 80,20,115.96 for the period from 1st April, 1985 to 17th December, 1985 which comes to Rs. 9,62,413.92, should not be demanded. The Collector invoked the extended period of limitation in terms of provisions of Section 11-A of the Central Excises and Salt Act, 1944. In reply to the said show cause notice the appellants stated that question of classification has all India ramification and the same type of goods in several units situated in other Collectorates who were still classifying the goods of this type under Tariff Item 27(3) and availing exemption under Notification No. 183/84 dated 1-8-1984 as amended. The appellants had contended that the shapes and sections of aluminium as defined under Tariff Item 27(3) is the only correct classification of the goods produced by them and under no stretch of imagination these goods could be called as articles and classified under goods N.E.S. (T.I.68). The products were of general decorative use in fabrication of walls, linear ceilings/carriages, furniture, claddings, curtains, walls etc. in hospitals, swimming pools, offices, laboratories, restaurants, shops, show rooms, exhibition halls, airports, tunnels, cinema halls, computer centres and other structures by suitable modifications and these could find their use at the discretion of the buyers. It was also stated that the department admitted that the products were produced out of imported aluminium strips of special grade and cleared from customs on payment of appropriate customs duty. It was also contended that the roll forming on strips was identical to rolling in that it changed its shape by application of compressive forces exerted by rotating rolls. As defined in terminology of Chapter 25 of Central Excise Tariff, rolling is defined as "shaping of metal by passing through rolls". Their products do not undergo this process They had also pleaded that their exposure to the market by way of literature cited was a device for sale promotion. Literature itself says many different uses depending upon buyers as explained previously. It was concended that the products were shapes and sections for use in systems and were, in fact, unusable as structurals as a whole and were not in individual identity.
The adjudicating authority had granted a personal hearing and at the time of personal hearing the facts were reiterated. At the time of hearing drawings of the shapes and sections of aluminium produced by them were produced by the appellants. The articles under seizure were also examined by the adjudicating authority at the time of personal hearing. The appellants had further argued that they had acted in bona fide belief that the goods were liable to duty under T.I.27(3) and were exempted under Notification No. 183/84. In support of their argument, the appellants had referred to 1987 (13) ECR 122, Board's letter F.No.215/28/80-CX.6 dated 16th April, 1981 and Central Excise Law Guide page 24. It was also contended that the goods were not articles and demand could not be sustained and explanation in T.I.27(3) supported their case and under the tariff the goods should be classified under Chapter 7603.20 and not 7613.90. The learned Collector did not accept the contention of the appellants. He had observed that some of the goods like universal brackets manufacturing process consisted of roll formed out of aluminium strip and then punched, fixing clip with raw material as aluminium strips was made by roll formed out of aluminium strip and then punched. In most of these cases raw material acquired distinct shape of an article. It was clear that using the term 'shapes and sections' the intention was clear to extend this term to first manufacture akin to sheets, plates and bars etc., in the company of which the expression 'shape and section' occurred. The Collector was of the view that shapes and sections would take colour from the words preceding i.e. plates, sheets etc. He had cited CEGAT's decision reported in 1987 (28) ELT 513 in regard to iron castings that if by application of labour and skill an object is transformed to the extent that it is commercially known differently, it will suffice to say that manufacture had taken place and the degree of transformation and labour and skill spent were irrelevant and it was further held that such steel castings after machining and polishing ceased to be steel castings and became a new commodity falling under different item i.e. Item 68. He had further observed that aluminium raw material had been subjected to process of drilling, punching holes as a result of which articles formed were recognizable as building material or parts of structure and, therefore, they were clearly classifiable under Tariff Item 68 and do not remain as mere shapes and sections. He had further held that the goods manufactured by the appellants had definite name, design and character and were much more than mere shapes and sections and were distinct articles classifiable under Tariff Item 68. He had held that the goods were not shapes and sections. The appellants had also disputed the applicability of the extended period of limitation. He did not accept their plea and was of the view that extended period of limitation was applicable.
In regard to the seizure of the goods, he was of the view that classification dispute was there for which department itself took some time in arriving at the correct position, which indicated that there could possibly be grounds for genuine belief on both sides. He was of the view that seizure was not justified and had ordered the release of the goods subject to payment of duty. He had also imposed a penalty of Rs. 10,000.00.
2. Being aggrieved from the aforesaid order, the appellants have come in appeal before the Tribunal.
3. Shri V. Lakshmi Kumaran, the learned advocate who has appeared on behalf of the appellant has reiterated the facts. Shri Lakshmi Kumaran has pleaded that the appellant manufactures aluminium panels used in building for decorative purposes and false ceilings. He has referred to page 47 of the paper book where there are details of the goods. Shri Lakshmi Kumaran has argued that items (a) to (p) are manufactured by the appellant and items (o) and (p) which are suspension clips and rod hangers are bought out items. Items (m) and (n) are the raw materials, namely, perforated aluminium strips and aluminium strips which are purchased for the manufacture of the goods. Items (a) to (1) are perforated aluminium panels, formed aluminium panels, flush profile, splice panels, roll formed carrier, round discs, edge profiles, formed stringers, carrier splice, width adjustment splices, universal brackets and fixing clips. Shri Lakshmi Kumaran has argued that the raw materials purchased by the appellant are in coil form and either these are formed or perforated. The goods are imported and the appellant does the rolling for giving out shapes. Shri Lakshmi Kumaran has referred to page 87 of the paper book which is the list of items manufactured with raw materials and processes of manufacture. He has pleaded that aluminium perforated panels as per the appellant fall under T.I. 27(3), aluminium panel also falls under T.I. 27(3). Besides these, he has pleaded that the following items also fall under T.I.27(3) :- Shri Lakshmi Kumaran fairly stated that aluminium carrier splice, aluminium round disc, aluminium carrier, aluminium stringer, aluminium width adjustment splice, aluminium universal bracket and aluminium fixing clip fall under T.I.68. He pleaded that the dispute is only left about five items. Revenue says that these five items fall under T.I.68, whereas the appellant says that these fall under T.I.27(3). He also stated that in the new tariff as per the appellant, the same should be classified under Heading 7604.29, whereas the revenue says that in the new tariff the same fall under Heading 7610.90 on the basis of the old adjudication order. Shri Lakshmi Kumaran has again referred to the pamphlet which appears on page 87 of the paper book. Shri Lakshmi Kumaran has referred to Mechanical Metallurgy by George E. Dieter Chapter 17 which appears on page 95 of the paper book which explains classification of rolling process and rolling mills. He has pleaded that rolling of metals is dealt in Chapter 17 of this book and it is mentioned that "In conventional hot or cold-rolling the main objective is to decrease the thickness of the metal. Ordinarily little increase in width occurs, so that the decrease in thickness results in an increase in length. Roll forming is a special type of cold-rolling in which strip is progressively bent into complex shapes by passing it through a series of driven rolls. The thickness of the metal is not appreciably changed during this process. Roll forming is particularly suited to producing long, moulded sections such as irregular-shaped channels and trim." Shri Lakshmi Kumaran has referred to explanation III. He has pleaded that in view of explanation (b) the words "subsequently worked after production" are not in explanation (iii) (a). He has argued that the appellant is entitled to the benefit of Notification No. 183/84-CE dated 1st August, 1984 and Serial No. 5 of the said notification covers the appellant's case. He argues that the appellant makes the goods from strips.
4. On the limitation aspect, Shri Lakshmi Kumaran, the learned advocate has argued that the demand is hit by limitation. Shri Lakshmi Kumaran has referred to internal page 6 of the order-in-original which appears on page 93 of the paper book. Shri Lakshmi Kumaran argued that the appellant admits manufacture but states that at the worst if it is assumed that the excise duty is leviable the demand is hit by limitation. Extended period of limitation cannot be invoked.
5. Shri K.D. Tayal, the learned SDR who has appeared on behalf of the respondent, states that Shri Lakshmi Kumaran in his arguments has admitted the manufacture. Shri Tayal reads tariff Item 27 and the explanation to tariff Item 27. Shri Tayal argued that the perforated items cannot have solid sections and as such it is not covered by explanation (iii) to T.I. explanation (a). Shri Tayal has referred to HSN page 1069 Volume 3. Shri Tayal learned SDR reads the written arguments, and pleads that the dispute is only in respect of the following items :-.
and the goods fall under T.I.68. Shri Tayal further argued that the goods fall under heading 76.08. However, he fairly stated that there is no corresponding entry in T.I. 27. He has also referred to heading 73.21. Shri Tayal has argued that in view of the explanation (iii)(b) which uses the expression "subsequently worked after production", in the absence of similar wording in proviso (a) to (iii) strips which are subsequently worked upon go outside the purview of the entry. He has argued that shapes and sections appearing in Item 27(3) are preceded by the words "wrought bars, rods, including wire rods, angles..." In view of the same, the meaning of the expression "shapes and sections" takes colour from the words used preceding to it and in view of the same, finished articles of aluminium used in structural would be outside the ambit and scope of the said entry. He further argued that the entire tariff Item 27 refers to "aluminium and products thereof and a study of the items covered therein sub-item (1) to sub-item (11) would indicate that under the heading only aluminium and its product in its primary forms and as raw materials were covered like pigs, bigots, plate, sheets, foils and powder in flakes, pipes and tubes, shells and blanks for pipes and tubes. This would indicate that the item did not cover the finished articles of aluminium which could be used directly. Shri Tayal has referred to Heading 73.11 of CCCN. He has also referred to page 93 of the paper book and pleaded that when the appellant is the manufacturer, the appellant has to file the classification list and at no stage the appellant has come forward and as such, the extended period of limitation is applicable.
5. In reply Shri V. Lakshmi Kumaran, the learned advocate pleaded that the ; dispute is only in respect of roll formed products and the dispute is not in respect of structural. He has referred to the judgment of Steel Authority of India Ltd. v. Collector of Central Excise where it was held that: The making of steel structures from channels, angles, sheets do not amount to manufacture. Accordingly, the question of payment of duty under Tariff Item 68 does not arise. The proper officer of the Central Excise has based the demands on the basis of information furnished in G.P.I./despatch challan. The appellant neither manufactures nor removes new excisable goods. As such, contravention of Rule 9 does not arise, nor they have also contravened the provision of Rule 173F or Rule 173Q, as they did not manufacture any new excisable commodity. Therefore, demand notice as well as imposition of penalty are not sustainable." He has again referred to T.I. 27(3) add has referred to explanation (iii) and (x). He has also referred to a judgment of the Supreme Court in the case of Bharat Forge & Press. Industries (P) Ltd. v. Collector of Central Excise reported in 1990 (45) ELT 525 where it was held as under :- "5. A certain amount of reliance has been placed on entries in the Harmonised Code as well as in the Customs Cooperative Council Nomenclature (CCCN). We do not think that these entries and specifications are very helpful. The CCCN contains a number of entries in Section XV, namely, Heading Nos. 73.17 to 73.20. While Heading Nos. 73.17 to 73.19 talk of pipes, tubes and conduits, Heading No. 73.20 speaks of "tube and pipe fittings, (for example, joints, elbows, unions and flanges), of iron and steel". Section XVI also deals with some-types of pipes and tubes. The position is similar under the Harmonised Code. In Section XV, there is an equally meticulous sub-division. Heading Nos. 73.02 to 06 deal with various types of pipes and tubes. Then comes Heading No. 73.07 which specifically talks of "tube or pipe fittings (for example, couplings, elbows, sleeves) of iron and steel (including stainless steel)" and proceeds to set out various sub-divisions of these items one of which is (7307.23 and 7307.93) "butt welding fittings" which is the item of manufacture in the present case. It is true that "tubes and pipes" and "pipe fittings" fall under different sub-items under the above Codes where the two expressions are used in contrast and the sub-classification is more detailed, That dichotomy cannot be imported into the present context where there is only one comprehensive and generic entry. We cannot, therefore, derive any assistance from those entries." Shri Lakshmi Kumaran also refers to Heading 76.02 of CCCN and 76.02(d) pertains to rods, shapes, angles and sections, not further worth. Shri Lakshmi Kumaran has argued that the goods manufactured by the appellant are not structural. These are for false ceilings and for beautification, and by no stretch of imagination the same can be treated as falling under T.I.68. Shri Lakshmi Kumaran pleaded that Heading 76.08 of CCCN on page 1096 is not applicable. The scope of heading 76.02 and 76.08 is different. Shri Lakshmi Kumaran argued that Heading 73.21 of CCCN relates to structures and parts of structures.
Shri Lakshmi Kumaran argued that CCCN has been converted into HSN. Now the products falling under Heading 76.04 and 76.10 correspond to 76.08.
He further argued that the appellant's products are not finished products. Shri Lakshmi Kumaran argued that the goods manufactured by the appellant fall at serial No. 5 of Notification No. 183/84-CE dated 1st August, 1984. Shri Lakshmi Kumaran also argued that the goods were imported. The appellant had duly paid the countervailing duty on the strips.
6. On the limitation aspect, Shri Lakshmi Kumaran argued that no extended period of limitation can be invoked. The appellant, was under the honest belief that he was entitled to the benefit of Notification No. 183/84-CE and the Collector himself was uvdoubt as to the tariff entry. In support of his argument, he has referred to a judgment of the Supreme Court in the case of Padmini Products v. C.C.E. reported in 1989 (43) ELT 195 (SC). Shri Lakshmi Kumaran further argued that in this matter the quantum of duty has been left out to be worked by the Assistant Collector and the penalty has been levied without looking into the quantum and no penalty is leviable. Shri Lakshmi Kumaran has pleaded for the acceptance of the appeal.
7. We have heard both the sides and have gone through the facts and circumstances of the case. Both the sides have filed written arguments and we have taken into consideration the same. For the proper appreciation of the Tariff, T.I. 27(3) with the relevant explanation is reproduced below :- "27. Aluminium and products thereof - "Aluminium" shall include any alloy in which aluminium predominates by weight over each of the other metals.
(3) Wrought bars, rods (including wire rods), angles, shapes and sections of aluminium.
Fifty per cent ad valorem plus four thousand rupees per metric tonne, (a) any extruded, rolled, drawn or forged products of solid section (other than round, rectangular, square and hexagonal), of which the width or the maximum cross-sectional dimension exceeded millimetres and which, if they are flat,. have a thickness exceeding one-tenth of the width; or (b) any cast or sintered products, of the same forms and dimensions, which have been subsequently worked after production (otherwise than by simple trimming or descaling), provided that they have not thereby assumed the character of any article or product falling under any other item; (x) "hollow section" means a section which is normally extruded, drawn or cast and the cross-section of which completely encloses a void or voids;" A simple perusal of the T.I.27(3) of the Central Excise Tariff shows that wrought bars, rods (including wire rods), angles, shapes and sections of aluminium fall under T.I.27(3) of the Central Excise Tariff and explanation (iii) explains the meaning of "wrought angles, shapes and sections." Clause (a) of explanation (iii) relates to any extruded, rolled, drawn for forged products of solid section (other than round, rectangular, square and (hexagonal), of which the width or the maximum cross-sectional dimension exceeds 6 millimetres and which, if they are flat, have a thickness exceeding one-tenth of the width; and Clause (b) pertains to any cast or sintered products, of the same forms and dimensions, which have been subsequently worked after production (otherwise than by simple trimming or descaling), provided that they have not thereby assumed the character of any article or product falling under any other item. The appellant's contention is that the shapes and sections will include wrought products of solid section.
Solid section mentioned in explanation (iii) has to be contrasted with hollow section and semi-hollow section described in explanation (x) and (xa). The appellant has further argued that it was never the case of the revenue that shapes and sections in question were not of solid section. Regarding Clause (b) of explanation (iii) it has been contended by the appellant that generally casting or sintered products are unwrought materials and since T.I.27(3) covers wrought materials only, the said Clause (b) contemplates further working on the casting or sintered products to make it fall under T.I.27(3), subject to the condition that the said processes should not result in classification of the product elsewhere in the Tariff Item. This was the only harmonious way of reading the Explanation. The department, on the other hand, has taken the view that the goods were not covered within the scope of the entry read with its explanation as the goods do not satisfy the condition of solid section. The revenue is of the view that explanation (iii)(b) which uses the expression "subsequently worked after production", there is no similar working in proviso (a) to explanation (iii) and as such the strips which are subsequently worked upon go outside the purview of the entry. The revenue is also of the view that shapes and sections appearing in it are preceded by the words "wrought bars, rods, including wire rods, angles...". The revenue was of the view that meaning of the expression "shapes and sections" takes colour from the words used preceding to it and accordingly the finished articles of aluminium used in structurals would be outside the ambit and scope of the said entry and the entire tariff item refers to aluminium and products thereof and a study of items covered therein in sub-item (1) to sub-item (11) would indicate that under the heading only aluminium and its product in its primary forms and as raw materials were covered like pigs, ingots, slabs, blocks, shots, bars, rods, angles, castings wire, plate sheets, foils and powder in flakes, pipes and tubes, shells and blanks for pipes and tubes and this would indicate that the item did not cover finished, articles of aluminium which could be used strictly and the explanation does not refer to finished articles of aluminium. The revenue has also referred to CCCN page 1069 in the entry of structures Item 76.08 shapes and sections are covered and it would imply that the disputed goods were not shapes and sections referred to in entry 76.02 of CCCN page 1066 but refer to shapes and sections referred to in entry 76.08 of the CCCN. As a corollary it will follow that shapes and sections in T.I.27(3) have a limited scope and would exclude the impugned goods which would fall under T.I. 68 at the relevant time. The revenue authorities were of the view that the goods in dispute prepared were used for structures and as such, they would fall under T.I.68.
8. The appellant, on the other hand, on page 89 of the paper book has given the diagram of the goods in dispute which are aluminium perforated panel, aluminium panel, aluminium flush profile, aluminium splice panel and aluminium edge profile. The diagram of the goods in dispute is reproduced below :- We have gone through the order passed by the Collector. On internal page 5 of the order-in-original the Collector has discussed that some of the goods like universal brackets manufacturing process consists of roll formed out of aluminium strip and then punched, fixing clip with raw material as aluminium strips are made by roll formed out of aluminium strip and then punched and in most of these cases raw material acquired distinct shape of an article and he had taken the view that using the term 'shape and sections' the intention was clear to extend this term first to manufacture akin to sheets, plates and bars etc. in the company of which the expression 'shape and section' occurred. He has taken the view that the shapes and sections would take colour from the words preceding i.e. plates, sheets, etc. Shri V.Lakshmi Kumaran, the learned advocate for the appellant during the course of arguments has pleaded that he does not press the item, namely aluminium carrier, aluminium round, aluminium stringer, aluminium carrier splice, aluminium width adjustment splice, aluminium universal bracket and aluminium fixing clip and these items fall under Tariff Item 68. We have perused the pictures of the items in dispute, namely, aluminium perforated panel, aluminium panel, aluminium flush profile, aluminium splice panel and aluminium edge profile. There is no punching. These five items are roll formed into the said shapes and sections out of duty-paid aluminium strips by using series of rollers.
No other operation other than the roll forming has been conducted on the strips. After the process of rolling, no other operation like punching, drilling, etc. has been carried out. Extract from the book on Mechanical Metallurgy by George E. Dieter, Chapter 17 on Rolling of Metals (Annexure 10 pages 95 and % of the paper book) is reproduced below :- "In conventional hot or cold-rolling the main objective is to decrease the thickness of the metal. Ordinarily little increase in width occurs, so that the decrease in thickness results in an increase in length. Roll forming is a special type of cold-rolling in which strip is progressively bent into complex shapes by passing it through a series of driven rolls. The thickness of the metal is not appreciably changed during this process. Roll forming is particularly suited to producing long moulded sections such as irregular-shaped channels and trim.'' We are of the view that roll forming is a type of cold-rolling of strips. We have also gone through the HSN Explanatory Notes under Heading 73.11 which deals with angles, shapes of iron or steel. We have also gone through the Notification No. 183/84 dated 1st August, 1984 which specifically grants exemption to shapes and sections of aluminium being made out of duty-paid plates, sheets, blanks or strips of aluminium. Thus the notification itself contemplates the emergence of shapes and sections out of strips and the only known method of making shapes and sections out of strips or sheets is by cold-rolled forming process. The revenue's plea was that the goods are similar falling under Heading 76.08 which does not cover shapes and sections but only those shapes and sections which were prepared for use in structures.
Shri Lakshmi Kumaran, the learned advocate, had vehemently argued that the shapes and sections manufactured by the appellant were only of decorative nature and were not capable of load bearing, like beams, girders, purlins, etc. The goods manufactured by the appellant are not load bearing but having only decorative value. Aluminium strips are classifiable under sub-item (6) of T.I. 27. We are of the view that when these strips are roll formed into shapes and sections, the said shapes and sections would merit classification under sub-item (3) of T.I. 27. The goods cannot be treated as structurals and they cannot bear any weight or load. We find force in the arguments of the learned advocate. Hon'ble Supreme Court in the case of Bharat Forge and Press Industries (P) Ltd. v. C.C.E. reported in 1990 (45) ELT 525 (SC) had considered the question of classification of pipe fittings under T.I.26AA in preference to T.I. 68. There is no sub-heading corresponding to Heading 76.08 in T.I. 27. It is also not disputed that on the Five items in dispute there is no punching or drilling. Accordingly, we are of the view that the goods fall under T.I.27(3) and the appellant is entitled to the benefit of Notification No. 183/84-CE dated 1st August, 1984 (Sl.No.5 of the table).
9. On the limitation aspect, the appellant has argued that he was under the honest belief that the goods fall under T.I. 27(3) and the appellant was entitled to the benefit of Notification No. 183/84-CE dated 1st August, 1984 (Sl. No, 5 of the table). Shri Lakshmi Kumaran, the learned advocate, has relied on the judgment of the Supreme Court in the case of Padmini Products v. Collector of Central Excise reported in 1989 (43) ELT 195 (SC) where the Supreme Court has held as under :- "We are unable to accept this position canvassed on behalf of the revenue. As mentioned hereinbefore, mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of the Act: 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 or 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 11-A of the Act." The period involved in the present appeal is from June, 1984 to 17th December, 198S. There are two show cause notices. First show cause notice dated 28th February, 1986 was issued by the Deputy Collector, Central Excise, Ghaziabad on 28th February, 1986 which appears on pages 32 to 40 of the paper book. On internal page 5 para (ix) the issuing authority has invoked the extended period of limitation and the other show cause notice is dated 18th March, 1987 which was issued by the Collector of Central Excise which appears on pages 41 to 49 of the paper book and the extended period of limitation has been, invoked. By Section 3 of the Central Excises and Salt Act (Salt Amendment Act, 1985) for the words "Central Excise Officers" the word "Collector of Central Excise" was substituted. This amendment came into force from 27th December, 1985. This means the show cause notice by the Deputy Collector was issued after the amendment came into force and he had invoked the extended period of limitation. In view of the judgment of the Gujarat High Court, the show cause notice dated 28th February, 1986 issued by the Deputy Collector is illegal. The subsequent show cause notice dated 18th March, 1987 was issued by the Collector. The appellant was under the honest belief that his goods fall under T.I.27(3) and he is entitled to the benefit of Notification No.183/84-CE dated 1st August, 1984 and as such, he did not apply for any central excise licence and did not pay duty. Even the revenue authorities were also not sure as to under which tariff item the goods manufactured by the appellant fall. In view of the decision of the Gujarat High Court in the case of Gujarat State Fertilizer Co. Ltd. and Anr. v. Union of India and Ors. reported in 1988 (34) ELT 442 (SC), we hold that the earlier show cause notice issued by the Deputy Collector was illegal and quashable. For the latter show cause notice issued by the Collector, we would like to observe that the Hon'ble Supreme Court in the case of Padmini Products v. Collector of Central Excise reported in 1989 (43) ELT 195 (SC) had observed that extended period of 5 years inapplicable for mere failure or negligence of the manufacturer to take out licence or pay duty when there was scope for doubt that goods were not dutiable. Unless there was evidence that the manufacturer knew that goods were liable to duty or he was required to take out a licence. For invoking extended period of five years limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either any fraud, collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder. Relevant extract from para No. 8 of the Supreme Court judgment appearing on page 201 has already been reproduced above.
10. In view of the above discussion and the judgment of the Supreme Court, we hold that in the present matter there was no material from which it could be inferred or established that there was any fraud, collusion or any mis-statement or suppression of facts on the part of the appellant. Accordingly, we are of the view that the extended period of limitation cannot be invoked in this case and we hold that the demand is hit by limitation.
11. In the result, we set aside the impugned order and quash the imposition of penalty of Rs. 10,000.00 (Rupees ten thousand only) and hold that the goods are classifiable under T.I.27(3) of the Central Excise Tariff and the benefit of Notification No. 183/84-CE dated 1st August, 1984 should be extended to the appellant. Revenue authorities are directed to give consequential effect to this order.