Per Shiben K. Dhar :

The appellants are alleged to have manufactured and cleared electric motors and cheese winding machines without following Central Excise procedures and without payment of duty during the period 11.4.86 to 31.3.87. The appellants were issued a show cause notice dated 4.6.87 for the period from 4.12.86 to 31.3.87 by the Superintendent of Central Excise. Subsequently, however, a revised show cause notice dated 30.6.88 covering the period from 11.4.86 to 31.3.87 was issued by the Additional Collector. This show cause notice mentions that it includes the period already covered in the show cause notice issued by the Superintendent of Central Excise. The Additional Collector in his order demanded excise duty at standard rates for the clearance of goods during the period 1.4.86 to 30.6.86 in respect of cheese winding machines. He also confirmed differential duty on the value of electric motors and cheese winding machines which were cleared after Notification 46/81 was rescinded.

2. Arguing for the appellants, learned Consultant submits that they have filed declarations both in respect of electric motors and cheese winding machines. Upto August 85, they were exempted under Notification 46/81 and subsequently they were covered under exemption Notification relating to small scale industries. In any case, he submits that the mere non-filing of declaration would not take away the substantive benefit under law and cites in this connection the case reported in 1997 (92) ELT 703 (T) in the case of Lokhandwala Construction Industries Ltd = 1997 (18) RLT 862 (CEGAT-WRB).

3. Learned DR reiterates the findings of the Department.

4. We have heard both sides. We find that the Collector himself in regard to cheese winding machines, admits that the appellants had filed two declarations one in April 85 in respect of TI 68 and the other in June 86 relating to electric motors for the year 1985-86. He has, therefore, given benefit to them for the financial year 1985-86. He, however, holds that the Notification 46/81 was rescinded and, therefore, the declaration filed in regard to this Notification was not valid to avail Small Scale concession under Notification 175/86. At the same time, however, he holds that nothing precludes them from availing concession during this period under Notification 46/81. He however holds that since this Notification has been rescinded in August 85, they were required either to avail the small scale concession under the new Notification 175/86 dated 1.3.86 or to pay excise duty at the standard rate in case they had not fulfilled the condition specified in this Notification. He goes on to record that the appellants continued to avail exemption under Notification 46/81 even when it was rescinded and, therefore, they are not eligible to SSI exemption. After having recorded all this, while proceeding to impose penalty, the Additional Collector records "I keep in view that the Unit is a small scale unit and in any case would be eligible for small scale concession had they resorted to following the proper procedure". We are constrained to note that this is not a correct proposition of law. A substantive benefit otherwise available under law cannot be nullified through a procedural irregularity. The Tribunal in the case of Lokhandwala case held that the benefit of Notification 75/86 cannot be denied for non-filing of the declaration when the requirements of Notification in question are otherwise satisfied. The Tribunal relied upon its earlier decision reported in 1995 (79) ELT 147. Apart from this, the very fact that they were otherwise eligible to small scale exemption as recorded by the Collector himself indicated that there could possibly be no suppression, collusion, fraud, or wilful misstatement with intent to evade payment of duty. In regard to electric motors we agree with the learned Consultant that show cause notice did not raise any charge and confines itself to cheese winding machines. The learned Co