TaxTMI 
TaxTMI 
1984 (2) TMI 318
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....Excises and Salt Act. All these 15 matters (henceforth referred to as "appeals") are being dealt with as appeals to the Tribunal under Section 35B, Central Excises and Salt Act, as amended. 2. Since there are common issues involved in all these appeals (with some differences in individual cases, which will be referred to in their appropriate place), they were heard together, and are being disposed of by this combined order. 3. The basic facts are quite simple. It appears that the appellants, the Andhra Pradesh State Electricity Board (henceforth referred to for convenience as "the Board") are a statutory body constituted under Section 5 of the Electricity Supply Act, 1948, and are charged with the responsibility for generation, transmission and distribution of electricity within the State of Andhra Pradesh. In pursuance of these statutory duties, the Board has undertaken the rural electrification programme in the State. For the purpose of distribution of electricity, transmission lines have to be laid, and these require a large number of poles. Previously, only steel and iron poles were being used. It was found more economical and convenient to use cement concrete p....
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.... an instance, we may take the case of the Erragadda unit, covered by Appeal No. 700/82. Some important dates and events with reference to this case are listed below :- 12-7-1977. Letter issued by an Inspector in the Office of the Superintendent of Central Excise, M.R. IX, Kamdan Estate, Nampally Railway Station Road, Hyderabad, to the Asstt. Engineer (Civil), R.C.C. Pole Centre, APSEB, Sub-Divn. III, Erragadda, Hyderabad. In this letter the Inspector states that it is noticed that the Board is producing certain items like P.C.C. Poles and R.C.C. Poles at Erragadda, Hyderabad, and that these attract C.E. duty under T.I. 68. The Asstt. Engineer is required to furnish particulars as in the proforma enclosed with the letter. 18-7-1977. Reply from Asstt. Engr. (Civil), P.S.C.C. Pole Centre, Erragadda to the Inspector. He gives some details of the equipment, staff and work done at the Centre, and gives the turnover for the year 1976-77 as less than Rs. 30 lakhs and from 18-6-1977 to 31-3-1978 as not over Rs. 20 lakhs. He ends by saying that in view of the above he presumes the Centre at Erragadda do not warrant licensing by the Central Excise Department. 2-5-1978. A le....
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....espective units licensed and observe other Central Excise formalities. The letter ends with a warning that any further delay would entail necessary penal action being taken against the Board. 18-6-1979. Reply from Chief Engineer to the Deputy Collector that "the poles in question are being prepared for the exclusive use of the APSEB. The Board is advised that the poles are not `goods' within the scope of entry 68 of the First Schedule to the Central Excises and Salt Act, 1944, and that the said activity does not attract Excise duty." 5-2-1980. Letter from Under Secretary to Government of India, Ministry of Finance to Secretary to the Board. In this letter the Under Secretary has informed the Secretary to the Board that RCC poles and PSC poles were manufactured goods attracting excise duty under Item 68 of the Central Excise Tariff. It was also added that duty was payable on these goods unless a declaration was made by the Parliament in terms of Notification No. 57/75, dated 1-3-1975. 1-4-1980. Letter from Deputy Collector (Technical), Central Excise Collectorate, Hyderabad to the Secretary to the Board. In this letter the Deputy Collector referred to the Gov....
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....serve to be taken note of separately, they have been commented upon later in this Order. 8. It is against the demands for duty and imposition of penalties in the above-mentioned orders that the present appeals have been filed. 9. In a series of hearings, extending over five different days, the case of the appellants was presented exhaustively by Shri Rangaswamy. His arguments were arranged into 17 headings, which have been listed in a letter dated 3-1-1984 signed by Shri Ramaseshayya Choudhury. A list of these 17 "issues" follows :- S. No. Issue I. Limitation II. Whether the items cleared are at all goods within the meaning of the Central Excises and Salt Act? III. Whether the appellants are entitled to exemption relatable to job work? IV. Whether it is proper for all the units of the Appellants to have been clubbed together for the exemption limit under Notification 176/77 applicable to Small Scale Industries under Item 68? V. State function and not liable to excise. VI. Whether steel and cement having already been subjected to excise....
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....aning of the Central Excises and Salt Act, and accordingly no duty was leviable on them. It was argued by Shri Rangaswamy that the poles were not "goods" for the reasons that (i) they were not marketed, (ii) they were used only by the State Electricity Board and had no use to anyone else, (iii) they were incomplete, in that certain other parts, such as the base plate, cross-arms, etc., had to be added on at the site; and (iv) since they were finally embedded in the ground, they could, on the analogy of a "plant", be considered as not "goods". In support of these arguments, Shri Rangaswamy stated that the poles were made to the specifications framed by the Board. They were not sold to anyone else. Nor was anyone else likely to buy them, as no one else would have any use for them, and it would be uneconomical to transport them over long distances. On the last point that they were not goods because they were embedded in the earth. Shri Rangaswamy relied on an order of the Government of India in the case of Otis Elevator Co. (India) Ltd., reported in 1981 E.L.T. 720, relating to elevators and escalators installed in buildings, an order of the Tribunal in the case of Gujarat Machinery M....
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....e purposes of that Item that only complete articles should be covered. 17. On the argument that the poles were not goods because they were fixed to the ground, Shri Tayal submitted that the poles in themselves were fully manufactured products. Curing of the poles was also done before they were removed, as part of the contract. The various orders cited by Shri Rangaswamy referred to elevators, chemical plants, etc., which became complete only after erection and when they were already fixed to the ground, whereas in the present case the poles were completely manufactured and were removed as such before being fixed to the ground. 18. We find considerable substance in the arguments of Shri Tayal. The poles are clearly recognisable articles which even according to Shri Rangaswamy himself are made according to specifications furnished by the Board. We had pointed out to Shri Rangaswamy that Item 68, being a non-specific Item, can cover any goods, and not only those which form complete articles. So far as marketability is concerned, the judgment in the Union Carbide case clearly sets out the position. Since the supply of electricity is a function statutorily entrusted to t....
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....into by the Divisional Electrical Engineer. Operation, Kavali on the one hand and Shri S.K. Basha, contractor, on the other. The work to be done, as given in the schedule to the agreement is as follows : "Casting and curing of 24' RCC poles at Buchi Pole Centre as per departmental standards including the cost of screened sand, G.I. wire, for earthing and labour charges for casting and staking but excluding the cost of 12 mm metal, M.S. rod, Cement and fabrication of grill and steel. GC RATIO : 1 : 2 : 4 SAND Pure (screened) sand from Pennar river." 21. There are also certain conditions for the hire of the concrete mixture and vibrator which apparently were provided at the site by the Board. It is stated in these conditions that the contractor shall meet the working expenses of concrete mixers like pay of crew, and cost of fuel and lubricants. 22. It was argued by Shri Rangaswamy that what was done by the contractor was only supply of labour and therefore what was done within the unit should be considered as "job work" and duty should have been charged, if at all, on the value of this "job work" in accordance with Notification No. 119/75. 23. Shri....
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.... metal, mild steel rod and cement, was supplied by the Board and sand was to be taken from the Pennar river. Even the concrete mixers and vibrators were made available by the Board, although the contractor was required to supply the fuel and lubricants and to pay the crew. Further, the payment was in the nature of "piece rate" payment. In the circumstances, the agreement with the contractors is basically one for supply of labour and they could by any stretch of imagination be considered as manufacturers. 27. Since all the work resulting in the excisable article, namely, the cement concrete pole, was done within the unit, there is no justification for separating out some of the operations and calling them "job work", as contended by the learned Advocate. It is the Board which arranged the entire process of manufacture, laid down the specifications, furnished the basic material and paid the contractors for their labour. On the analogy of the Shree Agency case, the Board must clearly be held as the manufacturers of the goods, nor is there any question of applying the exemption for "job work". 28. Issue No. IV - Whether it is proper for all the units of the Appellants t....
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....pendently or not) thought of the position :- "I therefore on behalf of A.P.S.E.B. state further that the A.P.S.E.B. is constituted under Section 5 of the said Act. No suit prosecution, or other legal proceedings shall lie against any person for anything which is in good faith done or intended to be done under this Act. The Officers of the Board are adhering to the duties enjoined upon them under the Act by the Board and hence no prosecution of penalty is leviable. the Board is also not liable for the proposed levy of excise duty from 18-6-1977 in view of the foregoing explanation and in view of the position already stated." 31. We also observe that, with reference to the question of penalty, Shri Rangaswamy himself has argued that the officers in charge of the individual units could not be held liable since they had to follow directions from above. It would, therefore, be plainly contrary to the facts to say that the units were functioning independently, particularly in the light of the common control, transferability of employees and pooled procurement of materials. We, therefore, do not find any substance in the argument that the units should be treated as independent ....
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....n the poles. - This argument was not expanded upon by Shri Rangaswamy. There is no authority for the proposition that because the constituents or raw materials of certain excisable goods have been subjected to duty, the complete article resulting from further manufacture cannot be subjected to duty under a different entry of the Tariff. This argument, therefore, has no force. 37. Issue No. VIII - Communications from other sources cannot be relied upon whilst dealing with a particular establishment. - It was contended by Shri Rangaswamy that in respect of the orders covered by Appeals Nos. 133/82-D, 745/82-D, 147/82-D, 227/83-D, 2057/83-D and 304/83-D, the lower authority had erred in relying upon communications received from other sources. For instance, in the order dated 26-6-1982 of the Collector of Central Excise, Hyderabad, which is the subject-matter of Appeal No. 133/82, the Collector has observed as follows :- "It is not correct that the liability of the poles and base plates, etc., was known to the Electricity Board only in April, 1980. - It is on record that the Electricity Board was told in July, 1978. The matter was dealt with in Order No. 7B, dated 14-1-1982.....
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....on Notification 179/77, dated 18-6-1977 exempting goods manufactured without the aid of power can be given? - This issue has been raised with reference to the three orders which are the subject-matter of Appeals Nos. 227/83-D, 745/82-D and 2060/83-D. The arguments is that in the making of the goods in these units no process was carried on with the aid of power, and therefore the goods were exempt from excise duty under Notification No. 179/77, dated 18-6-1977. 41. This point would no doubt have been relevant with reference to the levy of excise duty. However, we find that it was not taken before the adjudicating authority. In the case covered by Appeal No. 745/82-D, there was no reply to the show cause notice. In the other two cases, a reply was sent to the show cause notice but this point was not taken. 42. When this was pointed out to Shri Rangaswamy, he submitted that the position could be verified even at this stage from documentary evidence. He submitted that this should be done and necessary relief should be given if the contention was found to be correct. 43. We observe that power was admittedly used in the majority of cases for mixing of concrete, welding, etc. The....
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....factory cannot enjoy this exemption." In other words, even on the basis of their own statement, the appellants were not entitled to the exemption in respect of this unit. We do not consider it either necessary or feasible to re-open the issue at this stage so far as this appeal is concerned. 48. However, the position is slightly different in Appeal No. 2057/83-D. The Order-in-Original passed by the Collector shows that the appellants had taken the plea that they had never employed more than 40 workers. This ground, though mentioned in the Collector's order, has not been discussed or taken into account. The exemption under Notification No. 54/75 is admissible in respect of a factory and not a manufacturer and therefore if in fact the number of workers in the Karimnagar factory, covered by this appeal, was always less than 50, the production of that factory was entitled to the exemption. Since this is a material argument which although advanced by the appellants has not been dealt with by the Collector, we find that his order so far as this unit is concerned is vitiated and that this is a fit case for being remanded to the Collector for re-adjudication after taking this submission....
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.... of the electricity supply, these poles could be found not only in roads, but within housing colonies, schools, offices and even other factories. It would be totally far-fetched to advance an interpretation which leads to the conclusion that there would be "factories" of the Board within each of these sites. We do not, therefore, find substance in the argument of Shri Rangaswamy that the goods were eligible for the benefit of exemption under Notification No. 118/75. 54. Issue No. I - Limitation. - We now come to Shri Rangaswamy's arguments on the question of limitation. 55. It was Shri Rangaswamy's contention that the appellants throughout entertained the bona fide belief that the goods were not liable to duty. Therefore, there was no question of their having been removed clandestinely or of any information having been suppressed. In this connection, Shri Rangaswamy relied heavily on the decision of the Madras High Court in the case of Murugan and Company, reported in 1977 E.L.T. J 193. In this case, the petitioners were manufacturing French polish on which they were not paying excise duty. On coming to know about this, the Excise authorities directed the petitioners not to c....
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....rt to contend that since the appellants in this case were under a bona fide belief that the goods were not liable to duty, the mere fact of removal of the goods could not make Rule 9(2) applicable, and therefore the demands under this Rule were not sustainable. 56. Shri Rangaswamy also cited the judgment of the Supreme Court in the case of N.B. Sanjana v. Elphinstone Spinning and Weaving Mills Co. Ltd., reported in 1978 E.L.T. 399. That decision related to a case where the goods had been removed after a "Nil" assessment, with the prior permission of the Excise authorities. The facts of that case are, therefore, clearly distinguishable from those of the present case. However, Shri Rangaswamy relied on the following observations in para 26 of the judgment :- "That sub-rule (2) is a penal provision is shown from the fact that apart from the duty payable the party is also made liable to a penalty and he also incurs the risk of the goods being confiscated. That Rule 9(2) applies only to a case where there has been an evasion from payment of duty is clear from the decision of this court in (1969) 2 SCR 481 = (AIR 1970 S.C. 1173)." Shri Rangaswamy relied on the above judgment for....
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....reme Court set aside the penalty, on the ground that a return could not be said to be "false" unless there was an element of deliberateness in it. It was observed that when an assessee did not include a particular item under the bona fide belief that he was not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. It was also observed that the failure of the petitioners to include the amount of freight was based on a highly arguable contention which required serious consideration by the Court and the belief entertained by the assessee that it was not liable to include the amount of freight in the taxable turnover could not be said to be mala fide or unreasonable. 61. Shri Rangaswamy also cited a number of authorities for the proposition that where a notice had been issued under Rule 10 before its omission on 17-11-1980, proceedings in terms of that Rule could not be continued after that date. It is, however, not necessary to set out these cases in detail, as they are not relevant to the case before us. 62. A question was posed to Shri Rangaswamy as to whether it could be held that after 12-7-1977, when the app....
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...., the above argument is not relevant to the issue. 66. Shri Rangaswamy then argued that Rule 10 had been omitted with effect from 17-11-1980, and that the show cause notices issued after that date under Rule 9(2) were thereby invalidated. In this connection Shri Rangaswamy referred to various judgments on the effect of proceedings initiated or continued after a particular provision had been omitted. It is not necessary to go into details of this argument because they proceed on an assumption which, as will be seen from the discussion which follows, we are unable to accept, namely that a notice of demand under Rule 9(2) would depend for its validity or force on the continued existence of Rule 10. 67. Shri Rangaswamy also submitted that since allied questions relating to the position after the omission or amendment of Rules 10 and 10A had been referred to a Larger Bench, this case should also be so referred. We, however, pointed out that in our view no such question arose out of the appeals before us and we did not find any necessity for referring this matter to the Larger Bench. 68. Replying on behalf of the Department, Shri Tayal in his turn, referred us to several judicia....
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....case there was no assessment of the goods and it was held that Rule 10 was not applicable. 73. Shri Tayal also referred to a number of decisions of the Tribunal in this regard. One was the Order in the case of Goodwin Rubber Works, reported in 1983 E.L.T. 578. In that case it was held that a reference to Rule 10 was misconceived because that Rule pertained to cases of "short levy", and not those of "non-levy" as in the case before the Tribunal. 74. Again, in the Tribunal's decision in the case of Ceekay Rubber Industries, reported in 1983 E.C.R. 687, it had been held that where a manufacturer did not bring to the notice of the Excise authorities the fact of manufacture of certain goods, Rule 9(2) was applicable. Similar observations has been made in the Tribunal's decision in the case of Ruby Rubber Works, its Order No. 633/83-D, dated 15-10-1983 (not reported). 75. Shri Tayal also referred to the decision of the Tribunal in the case of Rekha Industries, reported in 1983 E.L.T. 1163. In that case the appellants were held to have manufactured certain goods and removed them without complying with Central Excise formalities and paying duty, and it was held that Rule 9(2) was ....
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....of intention. Similarly, Rule 173Q(d) referred to contraventions of any Rule "with intent to evade payment of duty". In contrast, Rule 9 did not anywhere refer to "intent" or "evasion", but only to "removal" of goods. 81. Shri Tayal referred to Shri Rangaswamy's argument that the period covered by the demands should be broken up into three parts. He submitted that these being cases entirely under Rule 9(2), breaking up of the periods into different parts was meaningless. 82. Coming to the detailed justification given by Shri Rangaswamy in respect of each part of the period, Shri Tayal commented on Shri Rangaswamy's submission that prior to 12-7-1977, the appellants should be held to be ignorant of the fact that their goods might be liable to duty. His reply was that for the purpose of levy of duty ignorance was no excuse. Further, as a Government undertaking the appellants had a special obligation to observe the provisions of law. 83. Shri Tayal drew our attention to the letter dated 12-7-1977 addressed to the appellants by the Inspector of Central Excise, Ameerpet Range. He pointed out that even after receipt of this letter, the appellants did not take any steps to comply....
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....effect of the omission of Rule 10 and its replacement by Section 11A on the operation of Rule 9(2) should be referred to the Larger Bench which is considering such matters; (iv) the period prior to issue of show cause notice has to be considered with reference to the following factors :- (a) six months prior to issue of show cause notice, when limitation may not apply; (b) from 16-7-1977 to six months prior to issue of show cause notice. The extended period under Rule 9(2) could not be applied for this period, since particulars of manufacture were furnished on 16-7-1977 and therefore there could not be said to be any suppression or concealment after that date; (c) from 1-3-1975 (when Item 68 was introduced) to 15-7-1977 (before particulars of manufacture were furnished). Even during this period Rule 9(2) was not applicable because of the bona fide belief of the appellants that the goods were not dutiable. 87. In support of his contention that Rule 9(2) was not applicable to a case of this nature, Shri Rangaswamy has strongly relied on the Madras High Court decision in the case of Murugan & Company and also on the Supreme Court decision in the case of N.B. Sanjana v. ....
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....the scope of the Supreme Court's observations in Sanjana's case, so as to bring in all the considerations governing imposition of penalty into a case where the question is one of demanding duty, is not justified. There has certainly to be a distinction between the payment of duty, which is not dependent on any offence being committed, and the imposition of a penalty which is with reference to a specific offence. While, therefore, Shri Rangaswamy is justified in relying upon the judgment of the Supreme Court in Sanjana's case which bears directly on the interpretation of Rule 9(2), he cannot call to his aid various judgments on the question of imposition of penalty as such, merely because in Sanjana's case Rule 9(2) is referred to as a penal provision. We shall however, refer to these judgments, as well as those referring to the presumption that "every one knows the law" when dealing with Issue No. VII relating to the penalties. 90. Coming back to the question whether the demands under Rule 9(2) would be justified in the light of the observations made in Sanjana's case, we have already observed that the present cases are distinguishable on facts, because there was no assessment t....
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....not set out in that Rule. What we find, however, is that there are a number of other judicial decisions, also of High Courts, where a different view has been taken. One of these is the judgment of the Allahabad High Court in the case of Oudh Sugar Mills Ltd. (1982 E.L.T. 937), which was cited by Shri Tayal. As pointed out by him, a distinction has been drawn in that judgment between the word "issue" as including the removal of goods under the direction of a competent authority, and "removal", which would be by the manufacturer or producer only. Since Rule 9(2) uses the word "removed" the above judgment would imply that such removal if not covered by the direction of the competent authority would attract the provisions of that Rule. 93. We also find that para 21 of the same judgment contains some very significant observations which are particularly relevant to the present case. We reproduce the relevant sentence below : "In our view Rule 9 of Central Excise Rules puts a bar on the removal of excisable goods from the place where the same are produced or manufactured unless duty is paid. The rule by itself does not create a liability, nor can it be read as destroying a liability....
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....nce in this argument because on a plain reading Rule 9(2) is a self-contained provision and does not have to depend for its force on any other Rule. In fact, as pointed out by Shri Dayal, it is clear from the Supreme Court judgment in Sanjana's case that Rules 9, 10 and 10A were alternative provisions each of which applied to case to which the others did not apply. There is thus no force in this contention of Shri Rangaswamy. 97. Shri Rangaswamy had also argued that the effect of the omission of Rule 10 and its replacement by Section 11A should be taken into account, and since allied questions were under the consideration of a Larger Bench, these cases should also be referred to the Larger Bench. We have difficulty in seeing the force of this submission. We find that all the show-cause notices in this case (subject to minor variations to be commented upon later) were issued under Rule 9(2). All the show cause notices were issued after 6-8-1977, that is, after Rule 9(2) had been amended to incorporate a time-limit. It is true that some of the show cause notices were issued prior to 17-11-1980, when Rule 10 was in force, and some after that date, when it was replaced practically v....
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....use notice, and therefore they would be fully within time in terms of Rules 9(2). 100. In the case of appeal No. 2057/83, the show cause notice covered the period from 1-3-1975 to 3-6-1982, that is over seven years, and the order-in-original contained a demand in respect of the same period, which was in excess of the five years' period in Rule 9(1)_. However, for the reasons given in para 48 above, we propose to remand this case. for de novo decision. In the re-adjudication proceedings, the appellants will be free to take up the question of limitation and we have no doubt that the adjudicating authority will give it due consideration. 101. In the case covered by appeal No. 149/82, the show-cause notice was issued on 12-10-1981, for the period 1-4-1975 to 21-6-1981. However, in the Collector's order-in-original dated 19-3-1982, he has specified that the appellants should pay duty on the goods manufactured in the five years preceding the date of the show cause notice. As so limited, the demand is within the period of limitation and therefore valid. 102. Similarly, in the case covered by appeal No. 700/82, the show-cause notice dated 16-6-1980 was for the period from 1-3-1975....
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....eal No. 2059/83, the Assistant Collector should have relied upon Rule 9(2) and not on Rule 10A or 10, or Section 11A. Further, under that Rule, we find that the practice was to apply the time limit of five years, as seen from two orders of the Collector of Central Excise, Hyderabad, referred to in paras 101 and 102 above. We accordingly, while holding that this case would also be governed by the provisions of Rule 9(2) (and that there would be no contravention of the principles of natural justice in so holding, since in all other cases Rule 9(2) was invoked, and the appellants were fully aware of it), hold that the demand should be limited to a period of five years from the date of the revised show-cause notice, that is, 25-3-1982. (We would make it clear that in giving this direction we are not expressing a view on the question whether a provision which has been rescinded could thereafter be invoked in respect of occurrences prior to its being rescinded, which question arose in the reference made to a Larger Bench. We are only applying uniformly the principle applied by the seniormost officer in the same Collectorate in two earlier orders on cases of the same appellants). 105. ....
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.... these circumstances operated in this case. 110. Shri Rangaswamy also referred to the judgment of the Supreme Court in the case of Cement Marketing Company of India Ltd. (1980 E.L.T. 295), to which he had already referred in connection with the question of limitation, and stressed that fighting for one's rights is not a matter for penalty. He also cited a judgment of the Andhra Pradesh High Court in the case of Gyanoba Yashwant Jadhav (AIR 1974 A.P. 76), in which it had been held that a power to impose a penalty must be exercised judiciously. Another reference given by him was to the judgment of the Punjab High Court in the case of Sitaram Gurdamal (AIR 1968 Pb. 35), wherein it was observed that the word "adjudge" implied a judicial approach and decision. He also referred to a decision of the C.B.E.C. in the case of Agarwal Metal Works (P) Ltd. (1981 E.L.T. 602). In that case the appellate authority had observed that Rule 173Q conferred enormous powers on the adjudicating authority and had to be used not with enormity but with circumspection and great caution. 111. In the light of these judgments, Shri Rangaswamy submitted that, even if it was held that the goods were dutiabl....
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....penalties and in some cases no penalties had been imposed. According to him, the orders were passed by different officers and each officer had taken a view on the basis of the case before him. 118. In the end Shri Tayal submitted that the penalties imposed could not be said to be unjustified and should be sustained. 119. It would now be appropriate for us to consider how much force there is in the submissions of the learned Counsel for the appellants, particularly in the light of the judgments on which he has relied, whether with reference to the question of penalty or with reference to the question of limitation, wherein he had sought to bring in the concepts relating to the imposition of penalties. 120. We shall first refer to the two judgments regarding the proposition that "every man is presumed to know the law." This proposition has been controverted both in the Supreme Court's judgment in the case of D. Cawasji & Co. (1978 E.L.T. 154) and that of the Calcutta High Court in the case of Union Carbide Co. Ltd. (1978 E.L.T. 180). However, this by itself would give very little assistance to Shri Rangaswamy. This is because, as the Supreme Court made clear in its judgment ....
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.... the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out." 123. As seen from the above extract and from the rest of the judgment of the Supreme Court, what happened in this case is that Messrs. Hindustan Steel were erecting factory buildings and residential buildings for their employees. Some of the constructions were done through contractors. The company supplied building materials to the contractors for consideration and adjusted the value of the goods supplied at the rates specified in the tender. Action was taken against them under the Orissa Sales Tax Act and it was held that the company was a dealer in building material and had sold the m....
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.... Central Excises and Salt Act, 1944, and that the said activity does not attract excise duty." 127. Subsequently, the appellants received the letter dated 5-2-1980 from the administrative Ministry, namely, the Ministry of Finance in the Department of Revenue, in which they were informed that the appellants were manufacturing goods attracting excise levy under Item 68 and that duty was payable on the goods unless a declaration was made by Parliament in terms of Notification No. 57/75, dated 1-3-1975. Even this reply did not seem to make much difference to the appellants because they continued to contend, as they are now contending before us, that the goods were not liable to excise duty. 128. We have, therefore, to see whether this could be considered to be a case of "bona fide belief". Further, even if it is, would it save them from the imposition of penalties? 129. It appears to us that by bona fide belief one does not mean a blind belief or a self-opinionated belief. It would imply a belief which has been reached after a sincere attempt to understand the issue and examine it reasonably. There is no evidence of any such attempt having been made by the appellants. When the....
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....r not they represent the "advice" which was given to the Board earlier), is that the Board had in mind two main considerations namely (i) that it was statutory authority carrying out statutory functions, and (ii) that the poles were put to its own use and not bought or sold. On both these aspects the advice, if any, given was obviously incorrect. The first point would not arise at all, in view of the conclusive and very direct authority of the supreme Court, and its opinion of 1963 in the Presidential reference (vide para 33 above), which not only made it clear that goods manufactured by Government, for whatever purpose, were liable to Excise Duty, but also confirmed the validity of the actual wording of Section 3(1A) of the Central Excises and Salt Act as in force at the material time. As regards the second aspect, the appellants had quoted the Supreme Court judgment in the case of South Bihar Sugar Mills as to what constitutes goods. It is relevant that in the very next sentence the judgment refers to the earlier judgment of the Supreme Court in the case of Delhi Cloth and General Mills Co. Ltd. It was clearly laid down in para 8 of the latter judgment that the fact that a substa....
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....ities, there was no basis for the Board's contention that the goods manufactured by it were not liable to excise duty. In these circumstances, the plea of "bona fide belief" is misconceived and untenable. 135. We now come to the question whether, assuming that a bona fide belief existed, it could have the effect of saving the appellants from the imposition of a penalty. As already observed, the judgment of the Supreme Court in the case of D. Cawasji & Co., cited by the appellants themselves, makes it clear that ignorance cannot be taken as an excuse. Apart from this, if one compares the facts of the present case with those of the cases which formed the subject matter of the judgments relied upon by Shri Rangaswamy, it is obvious that they are not comparable. Thus, in the Union Carbide case it was found that the appellants had made a full disclosure, since they had submitted their site plan and process flow chart to the excise authorities. In the Hindustan Steel case, the Supreme Court held that the concerned officials who failed to register the company as a dealer acted under an honest and genuine belief : and in fact it might not strike an intelligent layman in that position th....
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....dishonest, or acted in conscious disregard of it obligation." Considering that the appellants were a Government department, we would leave out the reference to dishonest conduct as not applicable here. However, the various other criteria, namely deliberate defiance of law, contumacious conduct and conscious disregard of obligation, all appear to be present in this case. Therefore, far from helping the appellants the Hindustan Steel judgment fully justifies the imposition of penalties on them. 138. So also the judgment of the Supreme Court in the Cement Marketing Company of India case does not help the appellants. Shri Rangaswamy asserted that according to this judgment a person should not be penalised for "fighting for his rights". Certainly one is entitled to fight for his rights, but the fighting should be according to the rules. An assessee can contest the levy of duty, but not by continuing to remove goods which the competent authorities have told him are dutiable. It is open to him to ask for provisional assessment or to pay duty under protest. Had the appellants adopted these permissible measures, the position would have been different. What they did, however, was to adopt....
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....id. We would repeat that the appellants should not take this as an indication that we consider the offences as trivial. 141. In the light of the foregoing discussion, we dispose of the 15 appeals before us as follows : 1. No. 481/80 : The appeal is rejected (no penalty was imposed). 2. No. 133/82 : The part of the order which relates to duty on "workshop material" is set aside and the Collector is directed to readjudicate the case in so far as these "workshop materials" are concerned, after affording an adequate opportunity to the appellants (vide para 19). No further personal penalty should be imposed. The personal penalty of Rs. 2 lakhs imposed on the appellants in this case is reduced to Rs. 5,000/- (Rupees five thousand only). Except for the above, the appeal is rejected. 3. No. 147/82 : (The personal penalty of Rs. 50,000/- is reduced to Rs. 5,000/- (Rupees five thousand only). The appeal is otherwise rejected. 4. No. 149/82 : The penalty of Rs. 1 lakh is reduced to Rs. 5,000/- (Rupees five thousand only). The appeal is otherwise rejected). 5. No. 700/82 : The penalty of Rs. 2 lakhs is reduced to Rs. 5,000/- (Rupees five thousand....