Mahila Griha Udyog Lijjat Papad Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. this application was argued by shri r.v. desai, senior counsel appearing with shri a.d. kango. revenue was represented by shri a.ashokan, jdr.2. the applicants are registered co-operative womens society recognised by the khadi and village industries commission. they were manufacturing soaps. in their classification list filed in july, 1991, they claimed benefit of notification no. 88/88-c.e. as amended by notification no.89/91-c.e. this notification exempts laundry and carbolic soaps manufactured in rural areas by registered co-operative societies or by women societies or by institutions recognised by the kvic or state units of kvic. the notification defined the phrase "rural area" as under : "(a) 'rural area' means the area comprised in any village and (b) 'rural area' includes the area comprised in any town, the population of which does not exceed 10,000 or such other figure as the central government may specify from time to time." the classification list was approved by the jurisdictional assistant collectors. the assessees continued to avail of the benefit of this notification upto september, 1997.3. on 29-10-1997 show cause notice was issued by the commissioner, mumbai vi commissionerate. in the show cause notice it was stated that this unit which was situated in mira, district thane, did not fulfil the condition of the notification inasmuch as the area was covered under municipal council of mira bhayandar, that the population of mira bhayandar was 1,75,372 and that by a notification dated 12-6-1985 by the mira bhayandar municipal council, the area was declared a municipal area. it was claimed that the assessee should have known the existence of this notification and that on this ground the claim made by them in their classification list for the benefit of this notification was made on suppression of facts. on this ground proviso to section 11a(1) of the central excise act, 1944 was invoked and duty amounting to rs. 19,31,30,535.61 was demanded and the allegation was made that the assessees were liable to penalty, and their plant, builcaing etc. were liable to confiscation. after hearing the assessees the commissioner passed the order now impugned before us confirming the demand and imposing a penalty of equal amount in terms of provisions of section 11ac of the act as also rule 173q of the central excise rules, 1944.the assessees then filed an appeal and this application for waiver of pre-deposit of the duty and penalty and stay of recovery thereof during the present proceedings.5. the assessees have cited the cochin collectorate trade notice no.2/96, dated 3-1-1996 reproduced in 1996 (81) e.l.t. page t47. in this trade notice the scope of the term "rural area" occurring in notification no. 88/88 was spelt out. it was clarified that where a unit was located in an area in "village" in revenue records, the benefit was available irrespective of the population of that village.reliance is also placed on a certificate given by the tahsildar, thane on 26-11-1997 in which reference is made to mira which is certified to be a "revenue town". this certificate does not assist the assessees because in the cited trade notice, where the production unit is located in a "town". the limit of 10,000 stands imposed on the population. the major defence led before the commissioner was the bulk of the demand which was barred by limitation. it was claimed that the assessees were under the bona fide belief that their unit was located in a rural area in terms of the trade notice. the commissioner had dismissed their claim for lack of knowledge holding that the notification of the government of maharashtra dated 12-6-1985 very clearly defines the very area as a "municipal area". shri r.v. desai submitted that the assistant commissioner who approved the classification list filed by the assessees could also have been aware of this notification and if he was so aware, he could have prevented the benefit from being taken by the assessees at that time. shri ashokan on the other hand submits that an assessee who seeks the benefit of a notification is expected and required to ensure that the claim being made for a benefit of the notification was correct. we have considered both the submissions. we find that the proceedings do not show that the point of innocence was in doubt. therefore it is apparent that from 1991 to 1997 the department was also not aware of the existence of this notification.when both sides were equally ignorant it would appear that the assessees have made a prima facie case on the aspect of limitation.6. certain period covered in the show cause notice is within six months of the date of the show cause notice and therefore this defence cannot be available. shri desai fairly conceded that he was not in possession of documents indicating the financial viability of the applicants and fairly states that he be given time to procure the same.7. we find that in view of the very large amount of revenue involved and also in view of the fact that the assessee unit is a women society, it would be appropriate for us to take the main appeal for early hearing and disposal. we, therefore, grant waiver of the pre-deposit of the duty and the penalty and stay the recovery thereof during the pendency of the appeal procedure.

Judgment:
1. This application was argued by Shri R.V. Desai, senior Counsel appearing with Shri A.D. Kango. Revenue was represented by Shri A.Ashokan, JDR.2. The applicants are registered co-operative womens society recognised by the Khadi and Village Industries Commission. They were manufacturing soaps. In their classification list filed in July, 1991, they claimed benefit of Notification No. 88/88-C.E. as amended by Notification No.89/91-C.E. This notification exempts laundry and carbolic soaps manufactured in rural areas by registered co-operative societies or by women societies or by institutions recognised by the KVIC or state units of KVIC. The notification defined the phrase "rural area" as under : "(a) 'Rural area' means the area comprised in any village and (b) 'rural area' includes the area comprised in any town, the population of which does not exceed 10,000 or such other figure as the Central Government may specify from time to time." The classification list was approved by the jurisdictional Assistant Collectors. The assessees continued to avail of the benefit of this notification upto September, 1997.

3. On 29-10-1997 show cause notice was issued by the Commissioner, Mumbai VI Commissionerate. In the show cause notice it was stated that this unit which was situated in Mira, District Thane, did not fulfil the condition of the notification inasmuch as the area was covered under Municipal Council of Mira Bhayandar, that the population of Mira Bhayandar was 1,75,372 and that by a Notification dated 12-6-1985 by the Mira Bhayandar Municipal Council, the area was declared a municipal area. It was claimed that the assessee should have known the existence of this notification and that on this ground the claim made by them in their classification list for the benefit of this notification was made on suppression of facts. On this ground proviso to Section 11A(1) of the Central Excise Act, 1944 was invoked and duty amounting to Rs. 19,31,30,535.61 was demanded and the allegation was made that the assessees were liable to penalty, and their plant, builcaing etc. were liable to confiscation. After hearing the assessees the Commissioner passed the order now impugned before us confirming the demand and imposing a penalty of equal amount in terms of provisions of Section 11AC of the Act as also Rule 173Q of the Central Excise Rules, 1944.

The assessees then filed an appeal and this application for waiver of pre-deposit of the duty and penalty and stay of recovery thereof during the present proceedings.

5. The assessees have cited the Cochin Collectorate Trade Notice No.2/96, dated 3-1-1996 reproduced in 1996 (81) E.L.T. page T47. In this trade notice the scope of the term "rural area" occurring in Notification No. 88/88 was spelt out. It was clarified that where a unit was located in an area in "village" in revenue records, the benefit was available irrespective of the population of that village.

Reliance is also placed on a certificate given by the Tahsildar, Thane on 26-11-1997 in which reference is made to Mira which is certified to be a "revenue town". This certificate does not assist the assessees because in the cited trade notice, where the production unit is located in a "town". The limit of 10,000 stands imposed on the population. The major defence led before the Commissioner was the bulk of the demand which was barred by limitation. It was claimed that the assessees were under the bona fide belief that their unit was located in a rural area in terms of the trade notice. The Commissioner had dismissed their claim for lack of knowledge holding that the notification of the Government of Maharashtra dated 12-6-1985 very clearly defines the very area as a "municipal area". Shri R.V. Desai submitted that the Assistant Commissioner who approved the classification list filed by the assessees could also have been aware of this notification and if he was so aware, he could have prevented the benefit from being taken by the assessees at that time. Shri Ashokan on the other hand submits that an assessee who seeks the benefit of a notification is expected and required to ensure that the claim being made for a benefit of the notification was correct. We have considered both the submissions. We find that the proceedings do not show that the point of innocence was in doubt. Therefore it is apparent that from 1991 to 1997 the department was also not aware of the existence of this notification.

When both sides were equally ignorant it would appear that the assessees have made a prima facie case on the aspect of limitation.

6. Certain period covered in the show cause notice is within six months of the date of the show cause notice and therefore this defence cannot be available. Shri Desai fairly conceded that he was not in possession of documents indicating the financial viability of the applicants and fairly states that he be given time to procure the same.

7. We find that in view of the very large amount of revenue involved and also in view of the fact that the assessee unit is a women society, it would be appropriate for us to take the main appeal for early hearing and disposal. We, therefore, grant waiver of the pre-deposit of the duty and the penalty and stay the recovery thereof during the pendency of the appeal procedure.