1. The Revision Application dated 2-7-1982 against order-in-appeal No.293/BR/81, dated 16-10-1981 passed by the Appellate Collector of Central Excise, Calcutta has been transferred by the Government of India to the Tribunal for disposal in terms of the provisions of Section 35P(2) of the Central Excises and Salt Act, 1944.
2. The appellants are a small scale manufacturer of Motor Vehicle Parts which were not initially specified under Central Excise Tariff Item No.34A but which subsequently came within the purview of Item No. 68. The Central Excise authorities observed that they had cleared unspecified motor vehicle parts upto a value of Rs. 27,82,911.84 during the period 1-4-78 to 28-2-79 and were not, therefore, entitled to exemption either from payment of duty or from licensing w.e.f. 1-3-79. After issue of a show cause notice and giving the party a hearing, the Assistant Collector observed that the appellants had applied for a licence on 15-3-79 which they got on 15-3-79, so the manufacture of parts which were dutiable under Tariff Item 34A till 5-9-79 at the rate of 8% A.V.under Notification No. 76/79, dated 1-3-79 without licence was illegal.
It was correct that from 27-3-79 they were clearing these parts under Chapter X and were not paying duty and hence their clearances from 27-3-79 to 9-5-79 was found to be legal. However, there was nothing on record to show that their clearances from 1-3-79 to 26-3-79 were legal and they have failed to prove that they cleared the parts on payment of duty. They have, therefore, contravened Rules 9(1), 52A and 173Q(1) and he, therefore, demanded duty on the said parts cleared during 1-3-79 to 26-3-79 but did not impose any penalty as the irregularity had occurred due to lack of understanding of the Budget of 1979 and he took a lenient view.
3. The appeal was rejected by the Appellate Collector observing that it was not clear why the demand was only limited to the period 1-3-79 to 26-3-79 when the appellant could not enjoy exemption under notification 75/79, dated 1-3-79 allowed by the Assistant Collector since this notification does not apply to goods falling under Tariff Item 68.
4. In the present appeal it is explained that prior to 1979 Budget, Item 34A covered "Parts and Accessories of Motor Vehicles not otherwise specified". It was, however, provided by Notification No. 99/71 as amended by Notification No. 14/75 that all motor vehicle parts and accessories falling under Item 34A other than those specified in the Schedule annexed were exempt from duty. The appellants were not manufacturing any of the scheduled items and were, therefore, not required to obtain a licence or be under Excise Control. From 1979 the description of Item 34A was revised and a number of items were included as dutiable but none of these items also was being manufactured. While introducing the Finance Bill Notification No. 76/79, dated 1-3-79 was issued which provided that it was not intended that pending enactment of the bill, duty should belevied and collected on such parts and accessories as have not been specified in the said Item No. 34A but classifiable under this item at the rate of duty specified therein. It was further provided that parts and accessories not specified are exempt from duty in excess of 8%. It is argued that from this notification, it is apparent that all parts not specified under Item 34 were covered under this item but the rate of duty was fixed at 8% instead of 20%. Another Notification 75/79, dated 1-3-79 was also issued which provided that parts and accessories are exempt provided Chapter X procedure is followed and the Assistant Collector is satisfied that they are intended to be used as original equipment parts in the manufacture of motor vehicles and tractors including trailers.
Thus it is apparent that parts so supplied to Motor Vehicle manufacturers were not liable to duty. The Appellants have been supplying all the parts manufactured by them to M/s. TELCO manufacturers of motor vehicles at Jamshedpur and Pune. They continued supplying these parts from 1-3-79 to 26-3-79 but unfortunately it took time to obtain a CT 2 certificate from the consignees and to get a Central Excise licence. All the parts were according to the specifications given by TELCO who also hold a licence in form L 6 and who gave a CT 2 certificate dated 2-3-79 to obtain the parts without payment of duty. As soon as they became aware of their responsibility, they obtained a licence on 16-3-79 opened a PLA' account on 23-3-79 and started observing the Chapter X procedure from 27-3-79. All these facts are borne out by the order-in-original. However, in issuing the demand for Rs. 37,538.96, the Assistant Collector failed to appreciate that it had never been claimed that duty had been paid before clearing the parts. The Appellate Collector neither understood the pleas put forward nor appreciated the orders of the Assistant Collector. His order is confused in regard to applicability of Notification 75/79. The correct legal position is that parts which were not specified were not liable to duty till 1-3-79. Even after 1-3-79 by virtue of Notification 75/79 they remained covered by Item 34A but were entitled to duty at 8% instead of 20% A.V. Furthermore, they were exempt from duty if sent under the proper procedure to motor vehicle manufacturers. These points were not appreciated by the Appellate Collector in rejecting the appeal. A copy of letter dated 2-12-81 certifying that the goods sent from 1-3-79 to 26-3-79 to them by the appellants were used as original equipment in motor vehicles. These par ts are, therefore, covered by Notification 75/79. There was no mala fide intention to evade duty as an application for a licence was immediately made and a PLA account was opened, so any lapse at best is technical since the goods as a matter of fact were not liable to duty if supplied to a manufacturer of motor vehicles under the proper procedure. The Supreme Court in Civil Appeal No. 1361 of 1966 has held that administrative authority will act in a manner consistent not with technicalities but with a broader concept of justice if a feeling is to be nurtured that the Government is by and for the people. The Supreme Court has also held that no penalty should be imposed for technical or venial breach of legal provisions and that Public Authorities should not rely on technical pleas to defeat legitimate claims but should do what is fair and just to the citizens (1978 E.L.T J 159 and 1979 E.L.T. J 396). The Government of India in its order No. 279 of 1979, dated 31-3-1979 has held that breaches of procedure of technical nature should not derive that citizen's right for substantive justice. In conclusion, the appellants have urged that since there has been no loss of revenue and the lapses are of technical nature for a short period of 15 days and delay in following the procedure was partly on the part of the Department. The Revision Application may be accepted and they may be exempt from payment of duty setting aside the order of the Appellate Collector which is not based on correct appreciation of the facts and law.
5. Shri Kampani explained the restrucluring of Hem 34A leading to amendment in the wording of the heading as also the two exemptions No.75/79 exempting such parts as are used as original equipment and No.76/79 exempting such specified parts from duty in excess of 8% (as application to T.I. 68) instead of payment at 20% (applicable to parts). All that had happened in this case was a lapse in following the prescribed procedure. No penalty had been imposed precisely because of this. There was no loss of revenue as factually there was no doubt that the appellants were entitled to claim the exemption and the parts were actually used for the exempted purpose. Shri Kampani also cited a decision of the Tribunal, confirmed by him later, namely Order B-719/83 dated 6-8-1983 and order-in-revision No. 118/80 reported in 1980 E.L.T.358 in support of the appeal.
6. Smt. Vijay Zutshi maintained that the statutory procedure laid down for claiming an exemption must be followed. She relied on 1978 E.L.T. J 350 where the Supreme Court held that there is no room for any intendment in a taxing statute and the supposed intention of the exempting authority cannot be called in. She also cited Order C-287/83 in regard to exemption Notification 276/77. In this case, the pre-vequisites in regard to licensing, production of CT 2, removal under Chapter X procedure etc., had not been complied with and the demand was fully justified.
7. We have carefully considered the records of the case and the arguments advanced by both sides. The appellants have drawn attention to the unclarity of the legal position at the time of restructurii g of C.E. Tariff Item 34A and it is apparent from the orders both of the lower authorities that there was some confusion regarding liability to duty of parts which had been exempted till 1-3-79. There is no doubt that, on purely technical considerations, the clearances did not merit the concession rate of duty. Never heless, the factual position, specially that the goods were otherwise entitled to relief from duty and the substance of the Chapter X procedure had been satisfied; as well as the fact that no demand was raised or action taken by the department against the actual user of the goods, for which a demand is now raised against the appellant, cannot be ignored. Keeping in view our own order cited by the appellant and weighing the precedents cited by both sides, we conclude that equity justice would override a merely technical view being taken of the matter. We accordingly allow the appeal and set aside the order of the Appellate Collector.