TMI Blog1988 (2) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or not ? 2. Present proceedings arise against the appellants under the following circumstances. The appellants are engaged in laminating cotton fabrics, man made fabrics and paper on job work basis. As already said laminated cotton fabrics and laminated man made fabrics were exempt from Central Excise duty under notification 100/77, dated 3-6-1977 as amended by notification 192/77 dated 18-6-1977. Laminated paper also became exempt from 28-2-1982 under notification 63/82. Before 28-2-1982 laminated paper falling under T.I. 17(2) was chargeable to Central Excise duty in terms of notification 71/77 dated 18-4-1977 as amended by notification 25/79, dated 1-3-1979. Earlier the appellants had licences in respect of the three items of manufacture but after laminated cotton fabrics and laminated man made fabrics became exempt from duty they held licence only for laminated paper. With respect to laminated paper the appellants claim to avail benefit of exemption under notification 71/78 till 18-6-1980 and notification 80/80 thereafter. Notification 71/78 dated 1-3-1978 granted exemption in respect of first clearances of excisable goods specified in the notification cleared for home co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation also had certain conditions. The condition No. (ii) and an Explanation V which are reproduced below : Nothing contained in this notification shall apply a manufacturer- Condition (ii) who manufactures excisable goods falling under more than one Item Number of the said First Schedule and the aggregate value of clearances of all excisable goods by him or on his behalf for home consumption, from one or more factories, during the preceding financial year, had exceeded rupees twenty lakhs. Explanation V-For the purpose of computing the aggregate value of clearance under this notification, the clearances of any specified goods, which are exempted from whole of the duty of excise leviable thereon by any other notification issued under sub-rule (1) of Rule (8) of the Central Excise Rules, 1944 and for the time being in force, shall not be taken into account." In the Table appended to the notification at serial No. 24 Paper and paper board, all sorts falling under Item 17 are specified. It is not in dispute that laminated paper would be covered under this description. 3. The present proceedings against the appellants, are the outcome of visit, dated 10-6-1982 to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting the appellants advanced the following contentions: (1) That Hon ble Allahabad High Court within whose jurisdiction the appellants and the Collector of Central Excise, Kanpur are located had in M/s. Nagarath Paints Pvt. Ltd. v. The Union of India Others 1978 TLR NOC 45 [now in 1988(33) E.L.T. 58] followed and referred to in E. Septon Co. Private Limited v. Superintendent of Central Excise Another 1985 (19) E.L.T. 57 (All.) held that once a commodity is exempted from excise duty the same shall be deemed to have been taken out of the First Schedule to the Act and becomes non-excisable. The Collector of Central Excise was in error in disregard of the law laid down by the Hon ble Allahabad High Court in issuing show cause notice and launching proceedings contrary to the law declared by the Hon ble High Court and the show cause notice and adjudicating order confirming the same was invalid and without jurisdiction. For the later proposition Shri Shridharan relied on the Supreme Court decision in East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta 1983 E.L.T. 1342 (S.C). This ground is not urged in the Memo of Appeal but was permitted to be urged during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n particular, attention was drawn to stock taking report, dated 27-2-1979 in respect of three items of manufacture (Annexures, J, K L) for the argument that jurisdictional officers were aware of the fact. Further on 1-4-1980 and again on 1-4-1981 the appellants had submitted declaration prescribed under notification 111/78, dated 9-5-1978 claiming exemption from licensing control with respect to laminated man made fabrics and laminated cotton fabrics. The Central Excise Officers could have then enquired into the appellants value of clearances for the relevant preceding years. That they did not do. Further even with respect to laminated paper after the appellants had reached the exemption limit of rupees five lakhs and Rs. 7.5 lakhs as stipulated under the two exemption notifications 71/78 and 80/80 the excess clearances were effected under regular gate passes and the R.T. 12 Returns submitted in relation thereto were duly assessed. It was the duty of the assessing officer to examine all the facts before finalising the monthly Returns. On these facts he submitted that no case invoking longer time limit of 5 years under Section 11A(1) was justified and demand can only be for the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants could not derive any help from the observations of Patna High Court in the decision. As to Rule 9(2) of Central Excise Rules being applicable she submitted that the appellants while claiming exemption under the two notifications 71/78 and 80/80 were required to declare the value of clearances of excisable goods for the preceding year. Even if they felt that goods were not excisable they should have in the appropriate columns of the declaration mentioned the fact of being engaged in the manufacture of two exempted items laminated man made fibres and laminated cotton fabrics. Having failed to do the same, the appellants cannot merely on the basis of the fact that Central Excise officers visited their factory or at some earlier point of time they held licence with respect to the two items of manufacture, not them exempted, would not justify invoking shorter time limit for raising demand of duty against them. The appellants have to show that their particular activity and in particular value of their clearances for the preceding years were within the knowledge of the Central Excise officers. In absence of proof on these lines the Department was fully justified in invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the appellants did make a submission that laminated cotton fabrics and laminated man made fabrics exempt under notification 100/77 dated 3-6-1977 were not includible within the expression aggregate value of clearances of all excisable goods used in the notifications 71/78, and 80/80. It is also seen from the order of the Collector that reference was made, inter alia, to Hon ble Allahabad High Court decision in Nagarath Paints v. Union of India (internal page 5 of his order). The discussion of this plea is to be had at internal page 9 of the order. The Collector, however, does not say how he gets over the decision. The Allahabad High Court decision in E. Septon Co. Private Ltd. case does not appear to have been cited before the Collector of Central Excise because neither the order of the Collector nor the appellants reply to the show cause notice refers to the same. It was not disputed before us that if the ratio of the decision in the two Allahabad High Court case be applied to the present case and laminated man made fabrics and laminated cotton fabrics exempt under notification 100/77, dated 3-6-1977 be held not excisable then the value of the goods cleared would not be inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this view of the matter it must be held that the petitioner is not required to obtain a licence for manufacturing the ice in the Ice Factory." East India Commercial Co. Ltd., Calcutta 1983 E.L.T. 1342 (S.C) In para 29 of the majority judgment of Their Lordships Subba Rao, J and Mudholkar, J it was held as under : .........This raises the question whether an administrative tribunal can ignore the law declared by the highest court in the State and initiate proceedings in direct violation of the law so declared. Under Art. 215, every High Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself. Under Art. 226, it has a plenary power to issue orders or writs for the enforcement of the fundamental rights and for any other purpose to any person or authority, including in appropriate cases any Government, within its territorial jurisdiction. Under Art. 227 it has jurisdiction over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that tribunal over which the High Court has superintendence can ignore the law declared by that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner it has now been done. Our earlier decision in Chibramau Cold Storage would not lead us into ignoring the Allahabad High Court decision in E. Septon Co. and Nagarath Paints case as also the Supreme Court decision in East India Commercial Co. Ltd. case. Following the Allahabad High Court decision in Nagarath Paints and Supreme Court decision in East India Commercial Co. Ltd. case (paras already extracted above) we find that the show cause notice issued against the appellants being in direct violation of the law laid down by the Hon ble Allahabad High Court deserves to be set aside. We hold the show cause notice to be invalid and as a consequence the adjudicating order confirming the same is also found to be invalid. We therefore set aside the same. 12. In view of the above finding, findings on other points urged by the parties appear unnecessary. However, as the matter might go to the appellate court, we consider it prudent to briefly record our findings against other arguments urged by the parties. 13. As to the next ground that the Collector of Central Excise had no jurisdiction to adjudicate in the proceedings and jurisdiction under Section 11A(2) of the Act wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - goods wholly and unconditionally exempted under a notification issued under Rule 8(1) of the Rules become non-excisable there is divergence of judicial opinion on the point. While the Madras, Patna, Delhi and Karnataka High Courts in TamiLNadu (Madras State) Handloom Weavers Cooperative Society Ltd. 1978 E.L.T. 357, Shri Madhav Mills Pvt. Ltd. 1984 (17) E.L.T. 310, Vishal Andhra Industries 1983 E.L.T. 2265 and Karnataka Cement Pipe Factory, Industrial Estate 1986 (23) E.L.T. 313 respectively held that goods even after such exemption continue to remain excisable, the High Courts of Allahabad and Madhya Pradesh in Nagarath Paints Private Ltd. v. Union of India Others 1988 (33) E.L.T. 58 (All.) decided on 5-12-1977 followed in E. Septon Co. 1985 (19) E.L.T. 57 (All.) and Tata Export Ltd. v. Union of India Others 1985 (22) E.L.T. 732(M.P.) have held that excisable goods cease to be excisable goods after total exemption from tax. The Tribunal, however, in a series of decisions has preferred the views of Delhi, Karnataka, Patna and Madras High Courts and has held that after such exemption goods continue to remain excisable. Considering the foregoing we have no hesitation in hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give them knowledge as to value of clearances of exempted goods i.e. laminated man made fabrics and laminated cotton fabrics. Mere visit would not, in absence of proof of specific knowledge by Central Excise officers, absolve the appellants of their liability to duty. We would prefer to place reliance on the observation of the Collector rather than on the photostat copy with the shortcomings and discrepancies pointed out above. In the above state of things we would hold that the Revenue would be justified in invoking 5-year time limit against the appellants in raising demand of duty. 16. As for penalty, imposition of penalty against the appellants would not have been justified if the appellants had disclosed full facts and claimed that in view of the Hon ble Allahabad High Court decision, value of clearances of laminated cotton fabrics and laminated man made fabrics were not includible in the value of clearances. The appellants, however, did not disclose full facts at the proper stage. Considering all this imposition of penalty against the appellants would be justified but the amount of rupees one lakh appears excessive. It should, in our view, be reduced to Rs. 50,000/- (fifty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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