Mahendra Jayantilal Nanavati and Vs. Cce - Court Judgment

Excerpt:
1. these appeals are directed against the impugned order captioned above passed by the collector of central excise, mumbai-ii. by this order the collector has demanded duty of rs. 66,033.85 from the appellant mahan synthetic textiles ltd. besides imposing penalty of rs. 25,000/-; and penalty of rs. 10,000/- has been imposed on appellant mahendra jayantilal nanavati, managing director of mohan synthetic textiles ltd., and on s.r. fabrics who is the other appellant under rule 209a of the central excise rules. the brief facts are on 4.10.1987 the preventive officers of the central excise commissionerate mumbai-ii made a surprise visit to the premises of appellant mahan synthetic textiles and conducted verification of the stock with reference to the statutory records. they found unaccounted quantity of 3725.80 l. meters of processed man-made fabrics. in the course of detailed verification the officers also observed that at the time of actual weighment of representative lot, the weight of fully processed and packed man-made fabrics belonging to appellant s.r. fabrics were considerably higher than the weight declared by the appellant in their classification list and declarations which in turn increases the wholesale price of the said processed man-made fabrics. this mis-declaration of the value in the classification list had resulted in evasion of central excise duty which came to be confirmed in the impugned order. statements were given by appellant mahendra nanavati and other employees in which they admitted the discrepancy. proceedings were initiated against the appellant by show-cause notice dated 3.4.1992 for demanding duty and after considering the appellant defense the impugned order was passed.2. shri s.n. kantawala, the learned counsel for the appellant submitted that the penalty on the appellants in all these cases is bad in law in the light of the delhi high court judgment in the case of pioneer silk mills wherein the high court has held that there is no authority for confiscation and levy of penalty under additional duties act and that the provision relating to confiscation and penalty in the central excise act, 1944 are not applicable to evasion of additional duties. the learned counsel further argued that as regards the demand of additional duty of excise in this case from the appellant mahan synthetic textiles ltd. the show cause notice is hit by limitation, because the appellants have not held back any information from the department and the classification list and price list submitted by them has been duly approved by the departmental authorities and in such a context the ratio of the supreme court judgment in the case of collector v. chemphar drugs & liniments 1984 (40) elt 276 : 1989 (21) ecr 182 (sc) : ecr c 1364 sc will be attracted wherein the supreme court held that the longer period under section 11a can be invoked only for conscious and deliberate withholding of information by a manufacturer. in this case all the necessary materials had been disclosed and the show-cause notice had been issued only in 1992 whereas the officers visit was in october 1987. the learned counsel pleaded that in these circumstances the appellants cannot be charged with suppression of facts so as to invoke the longer period under sub-section (i) of section 11a of central excise act.3. shri v.k. suman, the learned dr pointed out that in respect of the penalty on the appellants the high court judgment (supra) may support their case. as regards the duty demand the department was justified in invoking the longer period for limitation because the officers found on a surprise visit to their factory premises that there was mis-declaration of the weight of the fabrics which had direct impact on the duty payable thereon.4. we have carefully considered these submissions. we find that the penalty on the appellants in all these cases is unsustainable because of the judgment of delhi high court in the case of pioneer silk mills (supra). therefore we set aside the penalty on the appellants following the ratio of that judgment.5. as regards the arguments on limitation we find in their reply to the show-cause notice which is on record, the appellants have taken various grounds for resisting the demand on grounds of limitation. they have stated that the relevant classification list and price list had been filed with samples of the fabric in question with necessary declaration from s.r. fabrics who are the merchant manufacturer. the classification list namely 2/87 and 5/87 had been duly approved thereafter. it is also contended in the reply that the rate of duty of additional duty of excise in terms of notification 60/87 is based on the value of the fabrics and not on the weight of the fabrics. therefore the mis-declarations to the weight is not material. it has been further contended that appellant s.r. fabrics had declared weight of grey fabrics as per their purchase bills which were available for verification, but the department has failed to make out any investigation in that respect and having value of grey fabrics declared therein is correct. we find that his argument has not been squarely met in the impugned order and therefore we are satisfied that on limitation there is a case acceding to the plea made before us by the learned counsel for remand of the matter to the adjudicating authority.therefore so far as the duty demand in this case is concerned we allow the appeal by way of remand to the commissioner for re-adjudication according to law and after hearing the appellants in this matter. the penalty on all the appellants is set aside. the appeals are disposed of in the above terms.

Judgment:
1. These appeals are directed against the impugned order captioned above passed by the Collector of Central Excise, Mumbai-II. By this order the Collector has demanded duty of Rs. 66,033.85 from the Appellant Mahan Synthetic Textiles Ltd. besides imposing penalty of Rs. 25,000/-; and penalty of Rs. 10,000/- has been imposed on Appellant Mahendra Jayantilal Nanavati, Managing Director of Mohan Synthetic Textiles Ltd., and on S.R. Fabrics who is the other Appellant under Rule 209A of the Central Excise Rules. The brief facts are on 4.10.1987 the Preventive Officers of the Central Excise Commissionerate Mumbai-II made a surprise visit to the premises of Appellant Mahan Synthetic Textiles and conducted verification of the stock with reference to the statutory records. They found unaccounted quantity of 3725.80 L. Meters of processed man-made fabrics. In the course of detailed verification the officers also observed that at the time of actual weighment of representative lot, the weight of fully processed and packed man-made fabrics belonging to Appellant S.R. Fabrics were considerably higher than the weight declared by the Appellant in their classification list and declarations which in turn increases the wholesale price of the said processed man-made fabrics. This mis-declaration of the value in the classification list had resulted in evasion of Central Excise duty which came to be confirmed in the impugned order. Statements were given by Appellant Mahendra Nanavati and other employees in which they admitted the discrepancy. Proceedings were initiated against the Appellant by show-cause notice dated 3.4.1992 for demanding duty and after considering the Appellant defense the impugned order was passed.

2. Shri S.N. Kantawala, the Learned Counsel for the Appellant submitted that the penalty on the Appellants in all these cases is bad in law in the light of the Delhi High Court Judgment in the case of Pioneer Silk Mills wherein the High Court has held that there is no authority for confiscation and levy of penalty under Additional Duties Act and that the provision relating to confiscation and penalty in the Central Excise Act, 1944 are not applicable to evasion of Additional Duties. The Learned Counsel further argued that as regards the demand of Additional duty of excise in this case from the Appellant Mahan Synthetic Textiles Ltd. the show cause notice is hit by limitation, because the Appellants have not held back any information from the department and the classification list and price list submitted by them has been duly approved by the departmental authorities and in such a context the ratio of the Supreme Court Judgment in the case of Collector v. Chemphar Drugs & Liniments 1984 (40) ELT 276 : 1989 (21) ECR 182 (SC) : ECR C 1364 SC will be attracted wherein the Supreme Court held that the longer period under Section 11A can be invoked only for conscious and deliberate withholding of information by a manufacturer. In this case all the necessary materials had been disclosed and the show-cause notice had been issued only in 1992 whereas the officers visit was in October 1987. The Learned Counsel pleaded that in these circumstances the Appellants cannot be charged with suppression of facts so as to invoke the longer period under Sub-section (i) of Section 11A of Central Excise Act.

3. Shri V.K. Suman, the Learned DR pointed out that in respect of the penalty on the Appellants the High Court Judgment (supra) may support their case. As regards the duty demand the department was justified in invoking the longer period for limitation because the officers found on a surprise visit to their factory premises that there was mis-declaration of the weight of the fabrics which had direct impact on the duty payable thereon.

4. We have carefully considered these submissions. We find that the penalty on the Appellants in all these cases is unsustainable because of the Judgment of Delhi High Court in the case of Pioneer Silk Mills (supra). Therefore we set aside the penalty on the Appellants following the ratio of that Judgment.

5. As regards the arguments on limitation we find in their reply to the show-cause notice which is on record, the Appellants have taken various grounds for resisting the demand on grounds of limitation. They have stated that the relevant classification list and price list had been filed with samples of the fabric in question with necessary declaration from S.R. Fabrics who are the merchant manufacturer. The classification list namely 2/87 and 5/87 had been duly approved thereafter. It is also contended in the reply that the rate of duty of Additional Duty of Excise in terms of Notification 60/87 is based on the value of the fabrics and not on the weight of the fabrics. Therefore the mis-declarations to the weight is not material. It has been further contended that Appellant S.R. Fabrics had declared weight of grey fabrics as per their purchase bills which were available for verification, but the department has failed to make out any investigation in that respect and having value of grey fabrics declared therein is correct. We find that his argument has not been squarely met in the impugned order and therefore we are satisfied that on limitation there is a case acceding to the plea made before us by the Learned Counsel for remand of the matter to the adjudicating authority.

Therefore so far as the duty demand in this case is concerned we allow the appeal by way of remand to the Commissioner for re-adjudication according to law and after hearing the Appellants in this matter. The penalty on all the Appellants is set aside. The appeals are disposed of in the above terms.