TaxTMI 
TaxTMI 
1984 (2) TMI 318
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....atters (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 poles where such usage was feasible, The ....
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....gadda 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 ₹ 30 lakhs and from 18-6-1977 to 31-3-1978 as not over ₹ 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 letter issued by the Superintendent of Central....
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.... 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 Government of India letter dated 5-2-1980. He added that so....
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....ed 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 duty, it is proper to demand further excise duty on the poles? VII. Penalty unjust. VIII. Communications from other sources cannot be relied upon whilst dealing with a particular....
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....s, 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 Manufacturers Ltd., reported in 1983 E.L.T. 825, relating to a chemical plant, and another order of the Tribunal in the case of J.K. Export Industries, reported in 1983 E.L.T. 2390, relating to a deal mill assembled and erected at site attached to earth. 14. Opposing Shri Rangaswamy's contentions, Shri Tayal argued that the concrete poles were admittedly made from raw mate....
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....d 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 the Board, it may be considered that no one else in Andhra Pradesh would wish to purchase them (though even this would not rule out their use for some other purpose as pillars, etc.), but this only makes them a kind of "monopoly product", and does not prevent them from being "goods". The analogy sought to be drawn to elevators, chemical plants, etc., is far fetched and inapplicable, since....
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....ng 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 Rangaswamy, in the same context, advanced an alternative argument, that the contractors should have been deemed to be the actual manufacturers and, even if what they did was not considered as job work and full duty was held to be leviable, it was the contractors who were liable for the duty, and not the Board. (Since each contractor did a limited amount of work, it would apparently have followed, on....
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....ically 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 to have been clubbed together for the exemption limit under Notification 176/77 applicable to Small Scale Industries under Item 68? - Shri Rangaswamy argued that each of the units should have been considered as an independent one. Even if what they manufactured was excisable, the production of all the units should not have been clubbed together. According to him, although the purchase of materials was p....
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....y 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 manufacturers. 32. Issue No. V - State function and not liable to excise. - The proposition is that the goods being the property of the State Government and used for purpose of a statutory function are not liable to excise duty in view of the provisions of Article 285 of the Constitution. 33. On Shri Rangaswamy stating the above proposition, the Bench pointed out to him that the matter had been con....
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....om 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." Shri Rangaswamy argued that what was communicated to the Board in connection with some other unit could not have been taken into account by the Collector when dealing with the case of the Gudur unit. 38. Replying to this argument, Shri Tayal submitted that all the units functioned under the Board, and all the appeals were in the name of the same Board. For the reasons stated earlier, the Board should be considered as a ....
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.... 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. Therefore, it cannot be said that the use of power was unusual or impossible. This being a question of fact should have been raised at the material time when there was a possibility of verifying it. However, the appellants failed to do so. We do not think we would be justified in going into this aspect at this distance of time. We are, therefore, unable to accept this ground. 44. Issue No. X - Whether the Collector had erred in not accepti....
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....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 into account. 49. Issue No. XV - Whether the principles of natural justice had been violated? - Shri Rangaswamy stated that this plea was with reference to one appeal, that is No. 304/83-D. He further stated that he was not pressing this ground. Accordingly, it is not necessary for us to go into it. 50. Issue No. XVI - Whether the benefit of exemption Notification No. 118/75, dated 30-4-1975 could be denied? - The above-mentioned notification p....
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..... 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 clear the goods without payment of duty. They made representations which were turned down, holding that the goods were dutiable. Their appeals and revision applications were also rejected. In the meantime a notice was issued to them under Rule 10A, demanding duty on the goods manufactured from January, 1963. This was contested by the petitioners in their Writ Petition. They, inter alia, took the ground that Rule 10A was invalid. The counsel for the Central Gover....
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....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 the proposition that Rule 9(2) could only apply to a case where there had been a deliberate attempt with knowledge to evade the duty. 57. Another judgment cited by Shri Rangaswamy in this regard is that of the Calcutta High Court in the case of Union Carbide Co. Ltd. v. Assistant Collector of Central Excise and Ors., reported in 1978 E.L.T. 180. In para 27 of that judgment reference has been made to the maxim that "everybody is presumed to know the law". The Court obse....
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.... 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 appellants were directed to take out a licence, it could be said that limitation would stop running. Shri Rangaswamy replied that in he case of Devidayal Rolling & Refineries (P) Ltd., reported in 1983 E.L.T. 338, the Bombay High Court had no doubt held that the issue of a demand without issuing a separate show cause notice was sufficient to make the recipient aware and conscious of the legal position, and that though the notice did not in so many terms describe it as a show cause notice....
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....on 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 judicial decisions on the question of limitation. The first of these was the judgment of the Supreme Court in the case of Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd., reported in 1978 E.L.T. J 416. Shri Tayal relied on paras 20 to 22 and 25 of the judgment, in which the terms levy, collection and assessment have been distinguished. He pointed out that for Rule 10 to be attracted there had to be an assessment. In the present case, there had been no assessment pri....
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....y 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 applicable. 76. In the light of the above decisions, Shri Tayal submitted that the cases before us were squarely covered by Rule 9(2). The appellants had not come forward to say that they were manufacturing the concrete poles and even after the Department had directed them to comply with Central Excise formalities they had not done so. Thus, there had been no assessment and no short levy so as to bring the provisions of Rule 10 into operation. 77. Shri Tayal then referred to Shri Rangaswamy's argument that t....
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....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 with the requirements of law as brought to their notice. They could have done so without prejudice to their rights and contentions, by seeking provisional assessment or paying duty under protest, and following the remedies available to them under the law. This, however, they did not do. The subsequent correspondence clearly showed that they had no intention to pay duty. He submitted that in these circumstances it would not be appropriate to allow them to take the plea of limitation. 84. Shri Tayal also referred to Shri Rang....
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....ufacture 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. Elphinstone Spinning & Weaving Mills Co. Ltd. So far as the Supreme Court decision is concerned, the facts can be clearly distinguished from those in the present case. In that case the manufacturers had duly filed AR-1 Forms before the Central Excise authorities and made a declaration that the excise duty payable was "NIL", and this was accepted by the excise authorities. It was observed by the Supreme Court that all the removals by the manufacturers during the relevant period were shown by them as not liable to pay any excise duty and were also a....
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....e 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 to duty as there was in Sanjana's case. On the question whether the removals were clandestine, at least prior to 16-7-1977 (or 12-7-1977), they could very well be considered as clandestine, in the light of the facts of these cases and of the observations in Sanjana's case. As regards the subsequent period, Shri Rangaswamy had argued that once the Department was aware that the goods were being manufactured and removed, the removal could not be said to be clandestine. In this connection we note that the observations in Sanjana's case were made with referen....
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....(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 which is incurred under Section 3 because of manufacture or production of goods. A rule which is framed to carry out the purpose of an Act cannot be read or go to the extent of frustrating its purpose instead of giving effect to it." (Emphasis added)." The Delhi High Court also, in the case of Gopal Paper and Board Mills (1981 E.L.T. 97) had made certain observations, vide para 71 above. This would also be an authority to show that a case of the present type would be covered by Rule 9(2). The Bombay High Court, in the case of Devi Dayal Rolling and Refineries....
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....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 verbatim by Section 11A. Both Rule 10 and Section 11A provided for a time limit of six months, which is extended to five years where the non-levy or short-levy is due inter alia to wilful mis-statement or suppression of facts or contravention of the provisions of the Rules with intent to evade payment of duty, by the person concerned. Instead of setting out in extenso the provisions relating to time limit, Rule 9(2) brings in the same time-limit by using the parenthetical clause "within the period specified in Rule 10" (before 17-11-1980) and "within the period speci....
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....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 to 16-5-1980. In the Collector's order-in-original dated 27-9-1980, he has ordered that the appellants should pay duty under Rule 9(2) "on all clearances from 1-3-1975 on which no duty has been paid". To this he had added "due to the deliberate evasion, the time limit will run for five years". Since the two sentences are at variance with each other, the appellants are entitled to the more favourable interpretation, which would also be in line with the view taken by the Collector in his order in appeal No. 149/82, that is, that the demand would be limited to a period of ....
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....ts 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. Thus, so far as limitation is concerned, we hold that it does not affect any of the demands except the four which we have specifically referred to above, and to the extent indicated above. (We may incidentally add that, while Shri Rangaswamy argued at great length on the general principles of limitation and the applicability of various Rules, he did not place before us submissions based on a detailed study of each of the demands. However, we have felt it necessary, in the interests of justice, to make such a detailed study of all the demands, and to give appropriate relief whe....
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....udgment 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 dutiable, there was no case for the imposition of personal penalties. In the alternative, he submitted that there should be some uniformity in the treatment of different cases. Since in some cases no penalties had been imposed, the other cases should be similarly treated. 112. Replying to Shri Rangaswamy, Shri Tayal submitted that the decisions cited by Shri Rangaswamy were not applicable to the cases before us. Thus, the judgment of the Supreme Court in the case of Hindustan Steel (AIR 1970 S.C. 253), referred to the question of registration for the purposes of levy of sales-tax. Here it was not....
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....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 in the D. Cawasji case, the above proposition has been condemned as a slovenly way of stating the truth that ignorance of the law is not in general an excuse. Thus, the Supreme Court was re-affirming the axiom that one cannot get away from the consequences of his acts by pleading ignorance of law. Once this latter principle is accepted, it would suffice for the purposes of dealing with the present appeals, and there is no need to refer to the "slovenly" and untenable proposition that every man is presumed to know the law. 121. Coming to the judgments of the Andhra Pradesh High Court in the case of Gyanoba Y....
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....m 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 material to the contractors and was on that account liable to pay sales tax at the appropriate rates. Further, since the company had failed to register itself as a dealer, penalties were imposed on them. 124. On the matter ultimately being taken before the Supreme Court, it was held that the supply of the building materials did constitute a sale. So far as the imposition of penalty was concerned, it was held, as seen from the above extract, that those in charge of the affairs of the company, in failing to register the company as a dealer, acted on an honest and genuine belief, and that no case for imposition of pena....
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....ontending 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 they were apprised by the Department that the poles were liable to duty, they contended themselves with giving replies which as seen above were cryptic or curt. The use of the word "advised" implies that they were being guided by legal advice. If this was so, we are constrained to observe that the legal advice given to them was not sound or well considered. 130. As we have already observed, the two replies of the Board give very little indication of the reasoning, if any, which they or their legal advisers adopted. However, in paragraph 8 of their written submissions dated 27-9-1980, to the Collector of Central Excise, Hyderabad,....
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....e 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 substance was not put in the market would not make any difference if what was produced was "goods". Therefore, whoever went into the matter and studied the relevant judicial decisions ought to have been aware that the mere fact that a manufacturer himself used the goods he manufactured did not absolve him from payment of excise duty. It may be observed that this was not a case of goods being consumed in the process of manufacture, but of goods being manufactured and taken out to various other sites for use and permanent installation there. 132. It therefore appears to us, with all respect of whoever might have advised the Board in this ....
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....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 that he could be regarded as a "dealer". In the Cement Marketing Company's case, the Supreme Court observed that the point at issue, namely whether in an F.O.R. sale the freight element should have been included, was a highly arguable one which required the serious considerations of the Hon'ble Court. Here again, the position might not have been expected to be obvious to the persons concerned. The Elphinstone Mills' case was also similar to the Union Carbide case, in that the information regarding removals were duly submitted to the Excise authorities in the AR-1 forms, and they had made a 'NIL' assessment. Thus, in all these cases the perso....
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.... 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 a course of conduct which amounted to defiance of statutory requirements. (In passing, we may mention that "fighting for one's rights" does not appear to be a wholly appropriate description of what has happened in these cases. Thus, one of the arguments before us was that even if duty was leviable, we should look for payment, not to the appellants themselves, but to the respective contractors. Without wishing to be unfair to the Board, it appears to us that their arguing, in the face of all the facts and their own arguments, that the petty contractors employed by them were independent manufacturers and that we should look to them for payment of....
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....akhs imposed on the appellants in this case is reduced to ₹ 5,000/- (Rupees five thousand only). Except for the above, the appeal is rejected. 3. No. 147/82 : (The personal penalty of ₹ 50,000/- is reduced to ₹ 5,000/- (Rupees five thousand only). The appeal is otherwise rejected. 4. No. 149/82 : The penalty of ₹ 1 lakh is reduced to ₹ 5,000/- (Rupees five thousand only). The appeal is otherwise rejected). 5. No. 700/82 : The penalty of ₹ 2 lakhs is reduced to ₹ 5,000/- (Rupees five thousand only). The demand for duty shall be limited to a period of five years from the date of the show cause notice. The appeal is otherwise rejected. 6. No. 745/82 : The penalty of ₹ 50,000/- is reduced to ₹ 5,000/- (Rupees five thousand only). The appeal is otherwise rejected. 7. No. 227/83 : The appeal is rejected. (Penalty imposed was ₹ 2,000/- only). 8. No. 304/83 : The penalty of ₹ 10,000/- is reduced to ₹ 5,000/- (Rupees five thousand only). The appeal is otherwise rejected. 9. No. 2057/83 : For the reasons stated in para 48 above, the Collector's order is set aside, with a direction to readjudicate the....