IMPORTANT POINT
As there was no wilful suppression on the part of the appellant, the extended period under proviso to Section 11A(1) of the Central Excise Act, 1944 ought not to have been invoked.

Headnote:Central Excise Act, 1944-Proviso to Section 11A(1)-Payment of Excise duty on waste and scrap sent to the job workers-Appellant under the bona fide belief that scrap was exempt from levy of excise duty-Show cause issued-Excise duty and penalty imposed invoking proviso to Section 11A-Appeal to Supreme Court-Whether demand be modified? (Yes)-Appeal partly allowed.
       Held : From the facts stated above, particularly the fact that entire movement of waste and scrap to the job workers and receipt of ingots manufactured by the job workers is recorded in regular books of accounts and proper documentation is maintained in form of delivery challan and that there was no reason for the appellant to suppress as it was entitled to have facility of MODVAT Scheme, it would be difficult to hold that there was any wilful suppression on the part of the appellant which would empower the authorities to invoke extended period of limitation under proviso to Section 11A(1) of the Act. (Para 10)
       In the present case also, there is no material on record from which it could be inferred or established that duty of excise was not levied or paid by reason of any fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. It was a bonafide belief on the part of the appellant that scrap and waste, which was recovered while manufacturing batteries, was exempt from levy of excise duty. Further, appellant was entitled to get benefit of MODVAT scheme, therefore, there was no justifiable reason for the appellant to suppress any fact. In the result, the appeals are partly allowed. The matters are remitted to the Adjudicating Authority to modify the demand by confining it to the period of six months prior to issue of show cause notice and pass consequential orders. Ordered accordingly. There shall be no order as to costs. (Paras 11, 12 and 13)

JUDGMENT

Shah, J.-It is apparent that in taxation matters, amendments, clarifications, exemption notifications or their withdrawal play an important role in increasing litigation. Repeatedly, it is stated that law and procedure thereunder is required to be streamlined and simplified, yet clarifications, amendments and notifications are issued creating confusion and leaving Judges and Lawyers to search for their exact meaning. In such a state of affairs, in some cases, it is difficult to draw inference of fraud, wilful concealment or suppression of facts so as to attract penal consequences.

2. Short facts of the case are that appellant is engaged in manufacture of lead acid electric storage batteries and parts thereof falling under Tariff Heading 85.07 in its two factories, one at Hebbal and other at Mysore Road plant. Lead in the form of ingots is the main raw material required for manufacture of the batteries. During the course of manufacture of the parts, certain quantities of waste and scrap is sent to the job workers who manufacture ingots out of that and return its ingots to the appellant who use the same in the manufacture of their final products. The question is with regard to payment of excise duty on waste and scrap sent to the job workers. After issuance of show cause notice and adjudicating the matter, the authority confirmed demand of duty and imposed penalty for the period from 1st March 1986 to 13th August 1989. That order was challenged before the Tribunal.

3. Admittedly, appellant obtains lead ingots from following four sources:-

(1) imports by appellant on payment of additional duty of customs.

(2) Duty-paid lead ingots obtained through MMTC.

(3) Ingots purchased from refiners.

(4) Ingots received from job workers to whom waste & scrap of lead was sent without payment of duty to convert them into lead ingots.

4. For the purchase of ingots from first and second source, there is no dispute. With regard to the third source, namely, ingots purchased from refineries, it is exempted under Notification 37/81-CE. The relevant part of the said notification which is quoted by the Tribunal is as under:-

"The Central Government hereby exempts lead unwrought, falling under heading No. 78.01 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), if such lead unwrought is produced out of one or more of the following materials, from the whole of the duty of excise leviable thereon, namely:-

(a) old scrap of lead;

(b) scrap obtained from lead unwrought on which appropriate amount of duty of excise, or, as the case may be, the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid;

(c) lead waste and scrap, falling under heading No. 78.02 on which appropriate amount of duty of excise, or, as the case may be, the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975), has been paid;

(d) lead ash, lead slag and lead residues."

5. Thereafter, scrap was exempted under notification No. 186/84-CE dated 1.8.1984. Relevant part of the Notification is as under:-

The Central Government hereby exempts wastes and scrap of lead, falling under sub-heading No. 7802.00 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) from the whole of the duty of excise leviable thereon under section 3 of the Central Excise and Salt Act, 1944 (1 of 1944):

Provided that such waste and scrap-

(i) are manufactured from goods, falling under the Heading Nos. 78.01 to 78.05 of the said Schedule on which the duty of excise leviable under the said section 3 of the additional duty leviable under the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid, or

(ii) arise from goods, falling under any Heading or sub-heading No. of the same Schedule other than Heading Nos. 78.01

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Judicial Analysis

SupremeToday

2003 Supreme(SC) 236

IMPORTANT POINTAs there was no wilful suppression on the part of the appellant, the extended period under proviso to Section 11A(1) of the Central Excise Act, 1944 ought not to have been invoked.

Cases Referred (1)

Judicial Analysis

IMPORTANT POINT
As there was no wilful suppression on the part of the appellant, the extended period under proviso to Section 11A(1) of the Central Excise Act, 1944 ought not to have been invoked.