TMI Blog1985 (9) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... ds had found that the appellant had supplied coke oven gas to M/s. Indian Tube Company Ltd., Jamshedpur from 1st March, 1975 to 31st July, 1979 without payment of duty. A Show Cause Notice was issued to the appellant vide C. No. 1730/79/1076, dated 19th September, 1979. In the said show cause notice, it was alleged by the Revenue that the assessee had contravened the provisions of Rules 9(1), 173-B, 173-C and 226 of the Central Excise Rules, 1944 inasmuch as he had removed 156.87 million cubic metre of coke oven gas assessable under Tariff Item 68 to M/s. Indian Tube Company Ltd., Jamshedpur between 1st March, 1975 to 31st July, 1979 without payment of duty. It was further alleged that they had not submitted any classification list or price list for the above commodity. It was also alleged that the assessee had failed to maintain accounts and removed the goods without observance of Central Excise procedures. The assessee was asked to show cause to the Assistant Collector of Central Excise, Jamshedpur why duty should not be recovered from them and why penalty should not be imposed on them under Rules 9(2), 173Q and 226 of the Central Excise Rules, 1944. In all, four demands amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er going through the reply to show cause notice and personal hearing, transferred the case to the Collector of Central Excise and the learned Collector of Central Excise, Patna had desired the appellant to confirm whether the defence reply filed before the Assistant Collector, Jamshedpur might be treated as defence before the Collector or whether the appellant wished to add any fresh point and the party was also asked whether the appellant wanted personal hearing or not. In reply to the said letter, the appellant stated that the defence reply filed by the Assistant Collector may be considered as reply to the Collector but had requested for personal hearing and accordingly a personal hearing was granted. It was argued before the learned Collector that what they were producing in the coke oven was coke; incidentally other by-products like sulphate of ammonia, benzene, naphthalene, etc. were also manufactured. It was further argued that the coke oven gas which comes out was not the product of their manufacturing activity. It was the by-product and was mostly used in appellants own factory. However, some coke oven gas was sold outside also. It was also added that this gas is not known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77, dated 18th of June, 1977 and had further stated, as the coke oven gas was manufactured without aid of power, it was exempted from the excise duty. For the maintenance of accounts, the appellant had stated that he was maintaining some accounts in his own way but were not maintaining in the prescribed Excise forms and their own account proformae were not approved by the Central Excise authorities. For the period 1st March, 1975 to 29th April, 1979 for the demands of Rs 1,72,503.17, it was argued that it was used for the manufacture of excisable goods in their own factory and as such the same should have been considered as use of intermediary products. The appellant had also disputed the levy of the penalty. The Revenue authorities had verified the classification lists filed by the appellant as under :- (a) In classification list No. 2/75 effective from 1-3-1975, coke oven gas had been declared under particulars of other goods (Item No. 5) and was classified by the then Assistant Collector as non-excisable. (b) In a subsequent classification list (No. 2/77) effective from 18-6-1977, coke oven gas was declared in Item 5 but was cancelled along with other 3 items, i.e., zinc d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly the electric power was being used. The learned Collector had held that the coke oven gas supplied to M/s. Indian Tube Company was manufactured with the aid of power and had added that the same was excisable to duty under Tariff Item 68 of the First Schedule to the Central Excises and Salt Act, 1944. Regarding declaration of the coke oven gas in the classification lists, the appellant had claimed that they had always declared coke oven gas in the classification lists and it was accepted by the department as non-excisable. The appellant had further stated that the demand was time-barred as it was issued after more than six months of the cause of action, especially when in the classification list No. 2/75, the then Assistant Collector had approved coke oven gas as non-excisable. The learned Collector of Central Excise had held that the coke oven gas was cleared by M/s. TISCO during the period 18th June, 1977 to 31st July, 1979 and thereafter was chargeable under Tariff Item 68 of the First Schedule to the Central Excises and Salt Act, 1944 and had further held that the demands from 1-3-1975 to 17-6-1977 were time-barred and had also imposed a penalty of Rs. 6 lakhs under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and coke oven gas was not manufactured with the aid of power. He has also referred to Notification No. 179/77, dated 18th June, 1977. He referred to the order passed by the learned Collector of Central Excise and has also referred to para Nos. 21 and 29 of the Revision application and has again mentioned that there was no mention of Rule 10 and as such the duty cannot be reserved from the appellant. He has pleaded for the acceptance of the appeal. In the alternative, he has pleaded for the reduction of penalty or remand of the case for a limited purpose for detailed observation. 4. In reply Shri V. Lakshmi Kumaran, the learned Senior Departmental Representative pleaded that the coke oven gas is obtained and fully falls within the definition of manufacture . He has pleaded that the coke oven gas manufactured by the appellant comes within the definition of goods and Central Excise duty is leviable. He has pleaded that the appellant cannot get the benefit of Notification No. 179/77, dated 18th June, 1977. He has referred a judgment of the Hon ble Kerala High Court in the case of Metro Ready-wear Company v. Collector of Customs reported in 1978 E.L.T. (J 520), where the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EGAT in the case of Abilities (India) Ltd., Gaziabad v. Collector of Central Excise, Meerut reported in 1984 (16) E.L.T 619 where this Tribunal had held that a note in the remarks column this also includes Pistons meant for original equipment cannot lead to an inference that the appellants were availing of the Notification - Nos. 101/71 and 151/71 in respect of original equipment. To say the least, remark was vague and was likely to mislead and had in fact misled the Excise authorities. Had the notification numbers been mentioned, the appellant would not have got the benefit of Notification No. 71/78. The appellants were guilty of suppression. He has pleaded that in the instant case, five years limitation period is applicable and not six months. He has referred to the order passed by the Hon ble Board. He has referred to another judgment of CEGAT in the case of Shree Hanuman Metal Industries, Jagadhari v. Collector of Central Excise, Delhi reported in 1984 (18) E.L.T. 652 where the Tribunal had held that the demand was not time-barred, because the Excise Department was in full knowledge of their activities, does not have any merit. There is no clear evidence that excise authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that Rule 10 of the Central Excise Rules, provides ordinarily six months for duty short levied/non-levied and period of five years for duty not levied on account of fraud, mis-statement or suppression of facts. Since in the instant case, the Central Excise authorities have been frequently visiting the factory seeing the process of manufacture and were determining the excisability of the goods manufactured and the show cause notice did not allege any fraud, suppression or mis-statement of facts, therefore, the period of five years as envisaged by Rule 10 would not apply. The learned Advocate has also referred to another judgment of the Bombay High Court in the case of Mis. The Calcutta Silk Mfg. Co. Ltd. v. Assistant Collector of Customs, reported in 1984 (17) E.L.T. 244 (Bom.)=1984 E.C.R. 645 where the Hon ble High Court had held that it is not possible to appreciate how and on what basis the officer came to the conclusion that there was any collusion or any wilful mis-statement or suppression of facts on the part of the importer where the initiation of proceedings are challenged, then the respondents must come out with the material to establish that the officer had sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... help the respondent. In that case the fact of manufacture was not intimated to the Revenue authorities and the appellant had not filed any classification list. He has also pleaded that the judgment in the case of Abilities (India) Ltd., Gaziabad v. Collector of Central Excise, Meerut reported in 1984 (16) E.L.T. 619 also does not help the respondent. He has also referred to the judgment in the case of Shree Hanuman Metal Industries, Jagadhari v. Collector of Central Excise, Delhi reported in 1984 (18) E.L.T. 652. He has pleaded that in the case of the appellant, there is no clandestine removal by the appellant and as such the said judgment is not applicable. The learned Advocate has pleaded that no penalty can be imposed in the case of the appellant and that there is complete absence of the element of mens rea. He has pleaded that the penalty proceedings are quasi-criminal proceedings and there is a bonafide mistake on the part of the appellant and the order to the levy of penalty of Rs. 6 lakhs should be quashed. He has referred to another judgment of the Hon ble Supreme Court in the case of Hindustan Steel Limited v. State of Orissa reported in 1978 E.L.T. J 159, where the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. After hearing both the sides and going through the facts and circumstances of the case we would like to observe that the process of manufacture of coke oven gas starts from the first stage i.e. when coke is charged into oven and is complete only when the coke oven gas is taken out after undergoing various processes including the separation of the so called by-products like Benzene, Napthalene etc. During this course electricity is being used at more than one place for e.g. at the stage of primary Coolers, deep coolers and in the refrigeration plant etc. and the gas which is ultimately taken out and is partly used by the Appellant s firm and the remaining was sold to M/s. Indian Tube Company is not the same gas which is released at the time of carbonisation of coal in the coke oven. In between a number of products like Sulphate of Ammonia, Benzene, Napthalene etc. are taken out from the gas which is released from the oven at the first stage. The gas which is ultimately cleared from the factory is entirely different from that which is released in the oven for carbonisation of coal. The Appellant s argument that they were using electricity in the intermediary processes for the sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he/they intends/ intend to rely in support of his/their defence. 3. M/s. TISCO Ltd., Jamshedpur, should also indicate in the written explanation whether he/they wishes/wish to be heard in person before the case is adjudicated. 4. If no cause is shown against the action proposed to be taken within ten days of the receipt of this notice or he/they does/do not appear before the adjudicating officer when the case is posted for hearing, the case will be decided ex-parte." 9. A simple perusal of the said show cause notice shows that there is no mention of the demand of excise duty. During the course of argument Shri Lakshmi Kumaran, Sr. D.R. had stated that the Revenue Authorities had duly issued demand notices on the same date separately i.e. 19th September, 1979. We are of the view that the demand cannot be created without issue of show cause notice under Rule 10 of the Central Excise Rules, 1944 which was in force from 6-8-1977 till 16-11-1980. Relevant extract from the then rule in force is reproduced as under :- Reproduced below is the old Rule 10 which was in force from 6th August, 1977 till 16th November, 1980. Old Rule 10 read as follows :- (1) Where any duty ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created against the appellant as there was no mention of the demand of the duty in the show cause notice. 11. We would also like to observe that in the instant case the Appellant had duly filed the classification lists and had claimed exemption from the levy of Central Excise duty which was accepted on coke oven gas. The same was not accepted by the Revenue Authorities in the subsequent classification lists. The revenue authorities had deleted the claim of exemption by a cutting on the classification list but did not make any appropriate entry in the memorandum of approval. We hold that there had been no suppression of facts or clandestine removal on the part of appellant and as such six months period of limitation is applicable under Rule 10 of the Central Excise Rules, 1944. The period of five years in the instant case is not applicable. The learned Advocate has cited a number of authorities on the subject which have been discussed above. The authorities cited by the learned SDR do not help him. 12. Accordingly, we also hold that demand from 1-3-1975 to 19-3-1979 is also hit by limitation. In view of our above findings the whole of the demand created is quashed. 13. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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