SUPREME COURT OF INDIA

Before:- Ajay Prakash Misra and R.P. Sethi, JJ.

Civil Appeal No. 10625 of 1983. D/d. 23.3.1999.

M/s. Madras Petro-Chem Ltd. - Appellant

Versus

Collector of Central Excise, Madras - Respondent

Central Excises and Salt Act, 1944, Section 11A, Proviso - Demand of excise duty - Show cause notice - Limitation - Self-removal procedure - Finding recorded that there is obligation cast on the assessee to make proper and correct declaration and entries in the production register RQ 1 - Registers, gate passes and also of clearances in RT 12 returns by disclosing the particulars - Failure of assessee to disclose said information was not by inadvertence but deliberate - Proviso to Section 11A would be applicable - Issuance of demand notice within extended period of five months is permissible.

[Para 14]

Cases Referred :-

Lubri-Chem Industries Ltd. v. Collector of Central Excise, Bombay, 1994 Supp 3 SCC 258.

Collector of Central Excise, Hyderabad v. M/s. Champhar Drugs and Liniments, Hyderabad (1989) 2 SCC 127.

J.K. Cotton Spinning and Weaving Mills Ltd. v. Collector of Central Excise (1998) 3 SCC 540.

JUDGMENT

The present appeal is directed against an order dated 2-9-1983 passed by Customs Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as "the Tribunal") which confirmed the orders of the Assistant Collector and the appellate authority.

2. The counsel for the appellant has raised two main contentions- (1) that the notice issued by the respondent was beyond the period of six months hence barred by time and on the facts of the present case, the proviso to Section 11A of the Act would not be applicable and hence this period cannot be extended to five years and (2) that the stock in question was pre-budget stock, the assessment on the same was illegal and not sustainable.

3. The brief facts are that the notice was issued to the appellant-company on 25th June, 1979 by the Superintendent of Central Excise Madras-IV Division to show cause why the penalty should not be imposed upon them under Rules 9(2) and 173 of the Central Excise Rules, 1944 and why a duty of Rs. 1,01,915.84 paise should not be demanded under Rule 10 of the Central Excise Rules, 1944.

4. The notice indicated that the appellant-company having sold the transformer oil under invoice Nos. 626 to 629, 630 and 634 for the period from 1-3-1978 to 7-3-1978 for which the gate passes had not been prepared and duty has not been debited in PIA, though it has been raised in the invoices. It further mentioned that the company consumed 131-323 K.L. of white oil in the manufacture of petroleum jelly I.P. grade falling under tariff item 68 during the said period, i.e., 1-3-1978 to 31-12-1978 when there is no exemption of excise duty for such captive use.

5. A reply was filed by the company to the said notice on 14-7-1979, inter alia, stating that the transformer oil referred to in the notice was the pre-budget stock and the same could not attract excise duty and that the excise duty element has been inadvertently included in the invoices as they were raised after lapse of time. They also challenged the classification of the white oil used in the manufacture of petroleum jelly to be falling under tariff item No. 8. The other points raised by the appellant-company are not necessary for the purpose of disposal of the present appeal, except the question of limitation of the show cause notice as aforesaid. The Assistant Collector, Central Excise, Division IV, Madras, determined the excise duty on transformer oil amounting to Rs. 1,01,915.84 paise and the excise duty on white oil consumed in manufacture of petroleum jelly was assessed as Rs. 57,708.81 paise.

6. An appeal was preferred under Section 35 of the Act which was dismissed by the Appellate Collector of Central Excise. Thereafter the appellant-company filed a revision before the Central Government under Section 36, which was subsequently transferred to the Tribunal. The Tribunal also dismissed the appeal of the appellant against which the present appeal has been filed.

7. We have heard at length the learned counsel for the parties.

8. Learned counsel for the appellant laid emphasis that unless there was wilful suppression of material fact which is not in the present case, by an assessee period of six months as provided, under proviso to Section 11A would not be applicable. The contention is that it is true that the clearance of these products has not been disclosed in the re-levant monthly RT 12 register, but they were nevertheless covered by the appellant's challans and further, turn over (T.O.) of the Sales, invoices had been seen by the Excise Authorities, it could not be said that there was any wilful suppression of facts as to attract the extended period of limitation.

9. The contention for the revenue is that under the self-removal procedure, the primary obligation of an assessee is to make proper declarations and entries in the production Register RG I, the gate passes and RT 12 returns unlike in the Physical Control System where the Excise Inspector present in the factory has the duty of completing the assessment on the spot. We find that the Tribunal has considered the contention of both the parties and came to the conclusion as under :

"It was incumbent on the appellants to file necessary classification lists in respect of the T.O. and white oil, the enter the production figures in the RG I Register, to effect clearance under gate passes and to disclose the particulars of clearance in the RT 12 returns. These submissions were not controverted by the appellants before us. The suppression of material particulars in respect of the production and clearance of T.O. for consumption outside the factory and white oil for consumption within the factory could not, in the facts and circumstances of the case, be said to be through inadvertence."

10. So, we have no hesitation to hold on facts of this case in view of finding recorded by the statutory authorities concurrently, that proviso to Section 11A would be attracted, as it stood at the material time and the demand was, therefore, within time as recorded above. This finding has been recorded consistently by all the authorities below and we do not find any error to interfere with the same.

11. Then, learned counsel for the appellant referred to the following decisions of this Court regarding interpretation of Section 11 of the Act. In the case of Lubri-Chem Industries Ltd. v. Collector of Central Excise, Bombay, 1994 Supp 3 SCC 258; this Court while interpreting proviso to Section 11A held that extension of limitation period beyond six months up to five years for making a demand for excise duty, there has to be conscious or deliberate withholding of information by assessee and mere inaction is not enough. The relevant portion relied is read as under (para 6) :

". . . . . . . . .under the proviso to Section 11A of the Central Excises and Salt Act (earlier Rule 10 of the Rules made under the said Act), it has to be established that the excise duty had not been levied or paid or short levied or short paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or the Rules with intent to evade payment. Something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise was required before the assessee could be saddled with any liability beyond the period of six months."

12. Learned counsel further referred to the decision of this Court in the case of Collector of Central Excise, Hyderabad v. M/s. Champhar Drugs and Liniments, Hyderabad (1989) 2 SCC 127, which has also been referred in the aforesaid decision.

13. Another submission is with reference to the decision in the case of J.K. Cotton Spinning and Weaving Mills Ltd. v. Collector of Central Excise (1998) 3 SCC 540 that this proviso should be strictly construed. It was held that the proviso to Section 11A of Central Excises and Salt Act permitting the extension time should not be stretched more than the elasticity supplied in the section itself. So, the eventuality envisaged in Section 11A for further lengthening of the limitation period must be strictly construed.

14. The proposition of law as laid down is not in dispute. We find in the present case as aforesaid, a clear finding was recorded that the petitioner was aware and was obliged to file R.G.I., Register, gate passes and also of clearances in the RT 12 returns by disclosing the particulars which was not done in the present case. The finding recorded in this case, especially in the background that this was a case of self-removal procedure in which there is obligation cast on the assessee to make proper and correct declaration and entries in the production register RQ 1. Further finding was that it was not by inadvertence. There could be no other inference if it was not by inadvertence, then deliberate, then it is not in the realm of inaction of the assessee but with the objective of a gain, which in other words would be conscious withholding of the information. Thus unhesitantly we conclude, on the facts of this case, proviso to Section 11 would be applicable, hence, show cause notice is held to be within time.

15. Next question is about the stock in question which was for the period from 1-3-1978 to 7-3-1978 and the same was urged to be pre-budget stock hence not liable for excise duty. Similar submission was also made before the Tribunal where the contention was that the said stock of transformer oil of the aforesaid period was of pre-budget stock. The submission made before the Tribunal was that the Asstt. Collector could have verified this by examining the time taken to complete a cycle in the conversion of transformer oil stock. However, the Tribunal recorded the finding that one allegation was that the stock was not pre-budget stock, the burden was on the assessee to prove this fact. This was not done. The Tribunal further recorded that the Assistant Collector personally examined the matter and after discussing with the company official and after the scrutiny of the record gave allowances for a quantity which he held to be from pre-budget stock and that quantity was excluded from excise duty. Assistant Collector gives details about this and Tribunal recorded these figures were not controverted by the assessee before the Tribunal. No evidence was led to prove this. We find even this submission of learned counsel for the appellant has been concurrently found against him by all the Courts below.

16. Hence, we do not find any of the submissions made by the appellant sustainable. Accordingly, the present appeal be dismissed. There shall be no order as to costs.

Appeal dismissed.