Lakshmi Engineering Works Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. the revision application filed before the government of india on transfer to the tribunal is being treated as an appeal. the main contention of the appellants is that during the period 6-11-1979 to 23-3-1980 they were manufacturing goods falling under item 68 purely as job workers within the meaning of notification no. 119/75, dated 30-4-1975. the surviving part of the controversy relates to 1620 pieces of galvanised steel taper tubes fitted with bend and socket. these are known in the trade as "hamilton tubes". the appellants did not turn up despite a date of hearing and so we have heard shri. a.k. jain, sdr for the revenue.2. in their revision application the appellants contend that the collector, central excise, calcutta held that in respect of the 1620 pieces of hamilton tubes the differential central excise amounting to rs. 14,175.64 should be paid and a penalty of rs. 5,000/- was imposed.on appeal to the board, the demand for duty was confirmed and the penalty was set aside.3. in their revision application the appellants contend that the appellants were entitled to the benefit of notification no. 119/75.according to them the central board erred in holding that the appellants had manufactured hamilton tubes. the appellants utilised the raw materials supplied by the customers and returned the same for some incidental fastening metal plant. it is also urged that the show cause notice was barred by limitation.4. on the facts it is manifest from the order of the collector that the appellants were supplied steel sheets by third parties and that they manufactured hamilton plates from these sheets. so it is proved that the sheets underwent substantial transformation and the goods that emerged out of the factory of the appellants were known in the trade as hamilton tubes. the contention of the appellants that they merely fastened certain metal pieces, and that the steel sheets supplied by the third parties were returned in the same condition except for incidental welding, has not been established. the board has rightly held that the same article was not returned by the appellants and that the benefit of notification no. 119/75 could not be extended to them.5. the next question to be considered is whether the claim is barred by time. the show cause notice was issued on 6-4-1981 and the duty related to the period 6-11-1979 to 23-3-1980. it is the contention of the appellants that there is no suppression of facts and hence longer period of limitation will not apply. when it was pointed out to shri a.k. jain that the board had set aside the penalty imposed on the ground that a case did not conclusively establish mala fides on the part of the appellants with a intend to evade the duty, shri a.k. jain submitted that suppression of facts was totally different from the concept of mens rea. he cited 1986 (10) ecc 35 (the nizam sugar factory ltd. v. the collector of central excise and ors.). he also relied on 1986 (24) e.l.t. 80 (indore bottling company, indore v. collector of central excise, indore). the north regional bench, new delhi held therein that guilty knowledge was a necessary ingredient for an offence under rule 173q(l)(a)(b)(c). in 1985 (22) e.l.t. 413 (collector of central excise, madras v. ultra marine and pigments ltd.), the south regional bench has taken a similar view. in [1987 (31) e.l.t. 292 (tribunal) (collector of central excise and customs, cochin v.fertilisers & chemicals travancore ltd.), the south regional bench held that there was no need to qualify the word "suppression" with the word "wilful" occurring in the earlier part of the proviso to section 11a.1986 (7) etr 34] (cheran engineering corporation ltd., pollachi v.collector of central excise, coimbatore) was also cited for the same purposes. in the case of abilities (india) ltd., ghaziabad v. collector of central excise, meerut [1984 (16) e.l.t. 619 (tribunal], the tribunal held that when a remark was made and was likely to and had in fact mislead the excise authorities, the appellants were guilty of suppression.6. the concept of suppression amounts to that which one is legally to state but one intentionally or deliberately or consciously does not state. in other words, the term 'suppression' includes a mental element to deliberately omit to state certain facts which would have a definite tearing in respect of leviability to duty. an intent to evade payment of duty would also come within the purview of suppression. a person who suppresses certain facts by not filing a classification list or maintaining central excise records etc. would be guilty of suppression because he wants to evade payment of duty. on the facts of the present case, we notice that on one breath the board has held that there was a suppression and on the same time opined that there was no conclusive proof of mala fides on the part of the appellants. it is also stated that the circumstances did not establish mala fides on the part of the appellants with intent to evade duty. a close scrutiny of this finding indicates that the board was not satisfied that there was a deliberate or conscious omission by the appellants. when such a conclusion has been reached the reasonable inference would be that there could be no suppression calling for the invocation of the longer period of limitation. in this case it is proved that the appellants have not filed any classification list or other documents but it is noticed from the order of the board that a letter had been written by the appellants even on 24-12-1979 which ruled out the possibility of any intent to evade duty. the penalty imposed against the appellant has been set aside on the ground of lack of evidence that it was with the intent to evade duty. with these findings, we are unable to support the earlier conclusion of the board that there was a deliberate suppression of the facts. since the two findings appear to be contradictory, we hold that the question of suppression does not arise on the present facts.7. the rulings reported by the sdr would not apply to the present facts for the andhra pradesh high court in the case of nizam sugar factory ltd., had to consider removal of goods under the self-removal procedure. the writ petition was in regard to the penalty imposed and the court held that mens rea was not a necessary ingredient for the purpose of imposing the penalty. similarly, the case of indore bottling company was one of challenging the penalty. the decision in fertilisers & chemicals travancore ltd., was only in respect of suppression of facts. that ruling will not apply to the present facts. similarly the case in cheran engg. corporation ltd., was one in respect of suppression of facts. in view of the findings of the board, that there was no intent to evade payment of duty, the longer period of limitation will not apply. since the show cause notice was issued beyond the period of limitation, the demand is barred by time. in the result, the appeal is allowed.

Judgment:
1. The revision application filed before the Government of India on transfer to the Tribunal is being treated as an appeal. The main contention of the appellants is that during the period 6-11-1979 to 23-3-1980 they were manufacturing goods falling under Item 68 purely as job workers within the meaning of Notification No. 119/75, dated 30-4-1975. The surviving part of the controversy relates to 1620 pieces of galvanised steel taper tubes fitted with bend and socket. These are known in the trade as "Hamilton tubes". The appellants did not turn up despite a date of hearing and so we have heard Shri. A.K. Jain, SDR for the Revenue.

2. In their revision application the appellants contend that the Collector, Central Excise, Calcutta held that in respect of the 1620 pieces of Hamilton tubes the differential Central Excise amounting to Rs. 14,175.64 should be paid and a penalty of Rs. 5,000/- was imposed.

On appeal to the Board, the demand for duty was confirmed and the penalty was set aside.

3. In their revision application the appellants contend that the appellants were entitled to the benefit of Notification No. 119/75.

According to them the Central Board erred in holding that the appellants had manufactured Hamilton tubes. The appellants utilised the raw materials supplied by the customers and returned the same for some incidental fastening metal plant. It is also urged that the show cause notice was barred by limitation.

4. On the facts it is manifest from the order of the Collector that the appellants were supplied steel sheets by third parties and that they manufactured Hamilton plates from these sheets. So it is proved that the sheets underwent substantial transformation and the goods that emerged out of the factory of the appellants were known in the trade as Hamilton tubes. The contention of the appellants that they merely fastened certain metal pieces, and that the steel sheets supplied by the third parties were returned in the same condition except for incidental welding, has not been established. The Board has rightly held that the same article was not returned by the appellants and that the benefit of Notification No. 119/75 could not be extended to them.

5. The next question to be considered is whether the claim is barred by time. The show cause notice was issued on 6-4-1981 and the duty related to the period 6-11-1979 to 23-3-1980. It is the contention of the appellants that there is no suppression of facts and hence longer period of limitation will not apply. When it was pointed out to Shri A.K. Jain that the Board had set aside the penalty imposed on the ground that a case did not conclusively establish mala fides on the part of the appellants with a intend to evade the duty, Shri A.K. Jain submitted that suppression of facts was totally different from the concept of mens rea. He cited 1986 (10) ECC 35 (The Nizam Sugar Factory Ltd. v. the Collector of Central Excise and Ors.). He also relied on 1986 (24) E.L.T. 80 (Indore Bottling Company, Indore v. Collector of Central Excise, Indore). The North Regional Bench, New Delhi held therein that guilty knowledge was a necessary ingredient for an offence under Rule 173Q(l)(a)(b)(c). In 1985 (22) E.L.T. 413 (Collector of Central Excise, Madras v. Ultra Marine and Pigments Ltd.), the South Regional Bench has taken a similar view. In [1987 (31) E.L.T. 292 (Tribunal) (Collector of Central Excise and Customs, Cochin v.Fertilisers & Chemicals Travancore Ltd.), the South Regional Bench held that there was no need to qualify the word "suppression" with the word "wilful" occurring in the earlier part of the proviso to Section 11A.1986 (7) ETR 34] (Cheran Engineering Corporation Ltd., Pollachi v.Collector of Central Excise, Coimbatore) was also cited for the same purposes. In the case of Abilities (India) Ltd., Ghaziabad v. Collector of Central Excise, Meerut [1984 (16) E.L.T. 619 (Tribunal], the Tribunal held that when a remark was made and was likely to and had in fact mislead the Excise authorities, the appellants were guilty of suppression.

6. The concept of suppression amounts to that which one is legally to state but one intentionally or deliberately or consciously does not state. In other words, the term 'suppression' includes a mental element to deliberately omit to state certain facts which would have a definite tearing in respect of leviability to duty. An intent to evade payment of duty would also come within the purview of suppression. A person who suppresses certain facts by not filing a classification list or maintaining Central Excise records etc. would be guilty of suppression because he wants to evade payment of duty. On the facts of the present case, we notice that on one breath the Board has held that there was a suppression and on the same time opined that there was no conclusive proof of mala fides on the part of the appellants. It is also stated that the circumstances did not establish mala fides on the part of the appellants with intent to evade duty. A close scrutiny of this finding indicates that the Board was not satisfied that there was a deliberate or conscious omission by the appellants. When such a conclusion has been reached the reasonable inference would be that there could be no suppression calling for the invocation of the longer period of limitation. In this case it is proved that the appellants have not filed any classification list or other documents but it is noticed from the order of the Board that a letter had been written by the appellants even on 24-12-1979 which ruled out the possibility of any intent to evade duty. The penalty imposed against the appellant has been set aside on the ground of lack of evidence that it was with the intent to evade duty. With these findings, we are unable to support the earlier conclusion of the Board that there was a deliberate suppression of the facts. Since the two findings appear to be contradictory, we hold that the question of suppression does not arise on the present facts.

7. The rulings reported by the SDR would not apply to the present facts for the Andhra Pradesh High Court in the case of Nizam Sugar Factory Ltd., had to consider removal of goods under the self-removal procedure. The writ petition was in regard to the penalty imposed and the Court held that mens rea was not a necessary ingredient for the purpose of imposing the penalty. Similarly, the case of Indore Bottling Company was one of challenging the penalty. The decision in Fertilisers & Chemicals Travancore Ltd., was only in respect of suppression of facts. That ruling will not apply to the present facts. Similarly the case in Cheran Engg. Corporation Ltd., was one in respect of suppression of facts. In view of the findings of the Board, that there was no intent to evade payment of duty, the longer period of limitation will not apply. Since the show cause notice was issued beyond the period of limitation, the demand is barred by time. In the result, the appeal is allowed.