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SUPREME COURT OF INDIA
SABYASACHI MUKHARJI AND B.C. RAY, JJ.
M/s. Padmini Products, Appellant
Versus
Collector of Central Excise, Bangalore, Respondent.
Civil Appeal No. 4080 of 1988
Decided on 18-8-1989.
Central Excises & Salt Act, 1944 – Section 35L and 11A - Central Excise Rules – Rule 9(2) - Central Excise Tariff - Claim exemption - This is an appeal by Revenue under S. 35L of Central Excises & Salt Act, 1944 against the Order - Appellants at all relevant times were manufacturing agarbatis, dhoop sticks, dhoop coil, dhoop powder falling under Tariff Item No. 68 of erstwhile Central Excise Tariff - Relevant period involved in present Civil Appeal is from the year - Appellants claimed exemption under Notification - By the said notification, Central Government had exempted goods of description in Schedule annexed to notification and falling under Tariff Item 68 of First Schedule to Act from the whole of duty of excise leviable thereon - In the serial No. 8 of Schedule to said notification, Handicrafts were listed - It is clear that handicrafts were fully exempt from payment of duty of excise, according to appellants - Under the Notification appellants were exempted from licensing control - That is the case of appellants - Provision requiring a manufacturer to take out a licence is controlled by R. 174 of Central Excise Rules, 1944 - Whether goods were dutiable or not would not attract S. I 1-A of Act – Held, learned counsel for appellant drew our attention to observations of this Court in Collector of Central Excise, Hyderabad v. M/s. Chemphar Drugs and Liniments, Hyderabad, (1989) 2 SCC 127 where, this Court observed that in order to sustain an order of Tribunal beyond a period of six months and up to a period of 5 years in view of the proviso to sub-sec. (1) of S. I 1-A of Act, it had to be established that duty of excise had not been levied or paid or shortlevied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of Act or Rules made thereunder, with intent to evade payment of duty - Tribunal in the appellate order has, reduced the penalty and had also upheld order of confiscation of goods - In view of the fact that claim of the revenue is not sustainable beyond a period of six months on ground that these dhoop sticks, etc were not handicrafts entitled to exemption, court set aside the order of Tribunal and remand matter to Tribunal to modify demand by confining it to the period of six months prior to issue of show-cause notice and pass consequential orders in appeal on question of penalty and confiscation - Appeal is allowed to the extent indicated and the matter is therefore remanded to Tribunal with aforesaid directions - This appeal is dispose of accordingly - Order accordingly.
JUDGMENT
SABYASACHI MUKHARJI, J. :— This is an appeal by the Revenue under S. 35L of the Central Excises & Salt Act, 1944 (hereinafter referred to as the Act) against the Order No. 195 of 1988-C dated 8th March, 1988 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as the Tribunal).
2. The appellants at all relevant times were manufacturing agarbatis, dhoop sticks, dhoop coil, dhoop powder falling under Tariff Item No. 68 of the erstwhile Central Excise Tariff. The relevant period involved in the present Civil Appeal is from the year 1979 to 1983-84. The appellants claimed exemption under Notification No. 55/75 dated 1 st March, 1975. By the said notification, the Central Government had exempted goods of the description in the Schedule annexed to the notification and falling under Tariff Item 68 of the First Schedule to the Act from the whole of duty of excise leviable thereon. In the serial No. 8 of the Schedule to the said notification, Handicrafts were listed. It is, therefore, clear that handicrafts were fully exempt from payment of duty of excise, according to the appellants. Under the Notification No. 111/78 dated 9th May, 1978, the appellants were exempted from licensing control. That is the case of the appellants. The provision requiring a manufacturer to take out a licence is controlled by R. 174 of the Central Excise Rules, 1944. The relevant provision of R. 174 at the relevant time provided, inter alia, as follows:
"Rule 174. Persons requiring a licence :
Every manufacturer, trader or person hereinafter mentioned, shall be required to take out a licence and shall not conduct his business in regard to such goods otherwise than by the authority, and subject to the terms and condidtions of a licence granted by a duly authorised officer in the proper form ........."
3. It is the case of the appellants that by this notification, all goods which were exempt from the whole of duty of exicse leviable thereon unconditionally were exempted from the operation of R. 174. The appellants were manufacturing dhoop sticks, coil and powder which the appellants contended before the Tribunal, were handicrafts under Notification No. 55/75 and as such were exempt from licensing control under Notification No. 111/78. It is, therefore, necessary at this stage, in view of the contentions raised in this appeal, to refer to the notifications. By first notification i.e., Notification No. 55/75, in exercise of the powers conferred by sub-rule (1) of R. 8 of the Central Excise Rules, 1944, the Central Government had exempted goods of the description specified in the Schedule annexed thereto and falling under Item No. 68 of the First Schedule to the Act from the whole of the duty of excise leviable thereon and, as mentioned hereinbefore, Item No. 8 of the Schedule annexed to the notification included among the exempted goods Handicrafts. The second notification, i.e., Notification No. 111/78-CE dated 9th May, 1978, the Central Government exempted from the operation of R. 174 of the said Rules, inter alia, all goods that are exempt from the whole of the duty of excise leviable thereon unconditionally. The effect of this notification, was that manufacture of such goods were exempt from the operation of R. 174 of the said Rules. As a result, it was not necessary to take out a licence as enjoined by R. 174. The appellants had indicated the process of manufacture of dhoop sticks, coil and powder before the Tribunal and the process was as follows :
"1. The various ingredients/raw materials like perfumes, essential oils, natural oils and other raw materials are first mixed in specific proportions, by manual Labour.
2. These raw materials along with jigget and saw dust after seiving by hand are mixed in a barrel with a stirrer with hand and made into a paste.
3. This paste is kneaded in the kneading machine operated by power.
4. This paste is put by hand in the extruder.
5. The extruder extrudes the paste in the form o
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