Steel Fabricators Vs. Collector of Central Excise and - Court Judgment

Excerpt:
1. for hearing the applicant's aforesaid four appeals they are required to deposit a total amount of rs. 10,28,849.23 demanded by the collector of customs & central excise, baroda. all the aforesaid demands have arisen out of the common issue. hence shri koruthu argued on the merits of the stay applications in common. firstly, he pleaded extreme financial hardship and it is impossible for the applicants to make the deposit he took us through the assessment orders of the applicants' firm, balance sheets, individual partner's income to show that the firm has incurred a loss of rs. 17,688 during the year 1988-89 and the partner's income including agriculture income was only of the order of rs. 1.29 lakhs during the year 1987. they have sundry creditors to the extent of rs. 5.95 lakhs. they have sundry debtors to the extent of rs. 8.85 lakhs, and as of rs. three lakhs may have to be written off as bad debt. shri koruthu also contended that the aforesaid demands are prima facie time barred. they have been confirmed by invoking the extended period under section 11a of the central excises & salt act. the demands have arisen out of an audit objection of the accountant general audit party. they have been manufacturing industrial fans as well as dust extraction units since 1973. prior to 1975 when there was no duty on t.i. 68, they had been removing only of the industrial fans on payments after the introduction of t.i. 68 in 1975 budget, they have filed classification list separately for industrial fans and for dust extraction unit without industrial fans under t.i. 68. these classification lists have been approved from time to time without any objection till 1985. even the internal audit party and accountant general audit parties who have early visited their factory have not raised any objection. only in 1985, an objection was raised to the effect that the dust extraction unit should include the custom duty value of the industrial fans also and when this is so included, the applicants would not be eligible for small scale exemption. on that ground demands have been confirmed alleging suppression of facts. he took us through the classification filed for dust extraction units, which clearly indicates as below he contended that the classification list itself shows that there is no suppression of any material fact. they have described dust extraction units excluding industrial fans. if the department had thought of including the cum duty value of industrial fans, they should have pointed out at that time and raised the demands. instead of doing that they have approved the classification list and only after 10 years, they have made this plea and confirmed the demands alleging suppression. he also pointed out that neither the show cause notice alleges imposition of penalty nor even the order of the collector imposed penalty especially, when a serious allegation of suppression and defrauding to the extent of rs. 10 lakhs is alleged. this itself goes to show that the department itself is convinced of their bonafides.2. heard shri arya. on the financial position, he pointed out that the applicants have some resources to the extent of rs. one lakh and odd he however, stated that their financial position is not sound. on the question of time bar, he pleaded that there is a mis-classification of dust extraction unit without including the value of the industrial fans. hence, the extended time limit is justified.3. after hearing both the sides, we are satisfied that the classification list does not suppress any fact. it clearly indicates that the dust extraction unit excluding the industrial fans were sought to be classified under t.i. 68. if the department had felt otherwise, they should have raised the objection well in time. we are, prima facie, satisfied that the demands are time barred. moreover, their financial position also is in a bad shape. having regard to the aforesaid factors, we grant an unconditional stay with regard to the duty demanded in respect of all the lour stay applications.

Judgment:
1. For hearing the applicant's aforesaid four appeals they are required to deposit a total amount of Rs. 10,28,849.23 demanded by the Collector of Customs & Central Excise, Baroda. All the aforesaid demands have arisen out of the common issue. Hence Shri Koruthu argued on the merits of the stay applications in common. Firstly, he pleaded extreme financial hardship and it is impossible for the applicants to make the deposit He took us through the assessment orders of the applicants' firm, balance sheets, individual partner's income to show that the firm has incurred a loss of Rs. 17,688 during the year 1988-89 and the partner's income including agriculture income was only of the order of Rs. 1.29 lakhs during the year 1987. They have sundry creditors to the extent of Rs. 5.95 lakhs. They have sundry debtors to the extent of Rs. 8.85 lakhs, and as of Rs. three lakhs may have to be written off as bad debt. Shri Koruthu also contended that the aforesaid demands are prima facie time barred. They have been confirmed by invoking the extended period under Section 11A of the Central Excises & Salt Act. The demands have arisen out of an audit objection of the Accountant General audit party. They have been manufacturing industrial fans as well as dust extraction units since 1973. Prior to 1975 when there was no duty on T.I. 68, they had been removing only of the industrial fans on payments After the introduction of T.I. 68 in 1975 Budget, they have filed classification list separately for industrial fans and for dust extraction unit without industrial fans under T.I. 68. These classification lists have been approved from time to time without any objection till 1985. Even the Internal Audit party and Accountant General audit parties who have early visited their factory have not raised any objection. Only in 1985, an objection was raised to the effect that the dust extraction unit should include the custom duty value of the industrial fans also and when this is so included, the applicants would not be eligible for small scale exemption. On that ground demands have been confirmed alleging suppression of facts. He took us through the classification filed for dust extraction units, which clearly indicates as below He contended that the classification list itself shows that there is no suppression of any material fact. They have described dust extraction units excluding industrial fans. If the department had thought of including the cum duty value of industrial fans, they should have pointed out at that time and raised the demands. Instead of doing that they have approved the classification list and only after 10 years, they have made this plea and confirmed the demands alleging suppression. He also pointed out that neither the show cause notice alleges imposition of penalty nor even the order of the Collector imposed penalty especially, when a serious allegation of suppression and defrauding to the extent of Rs. 10 lakhs is alleged. This itself goes to show that the department itself is convinced of their bonafides.

2. Heard Shri Arya. On the financial position, he pointed out that the applicants have some resources to the extent of Rs. One lakh and odd He however, stated that their financial position is not sound. On the question of time bar, he pleaded that there is a mis-classification of dust extraction unit without including the value of the industrial fans. Hence, the extended time limit is justified.

3. After hearing both the sides, we are satisfied that the classification list does not suppress any fact. It clearly indicates that the dust extraction unit excluding the industrial fans were sought to be classified under T.I. 68. If the department had felt otherwise, they should have raised the objection well in time. We are, prima facie, satisfied that the demands are time barred. Moreover, their financial position also is in a bad shape. Having regard to the aforesaid factors, we grant an unconditional stay with regard to the duty demanded in respect of all the lour stay applications.