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Jaiprakash Industries Ltd. v. Commissioner Of Central Excise, Chandigarh .
Factual and Procedural Background
The appellants are engaged in construction activities and, as part of their business, crush boulders into “bajari” for use in construction. Believing that crushing boulders into bajari did not constitute “manufacture,” they neither obtained a licence nor paid excise duty.
Two show-cause notices were issued: (i) on 26-2-1992 demanding duty of Rs 17,565 for the period October 1991 to January 1992; and (ii) on 3-5-1993 demanding duty of Rs 12,05,187 for the period 1-4-1988 to 30-9-1991. The appellants replied to both notices.
On 14-6-1993, the Assistant Collector, Central Excise confirmed the demands and imposed a penalty of Rs 1,00,000. On 19-11-1993, the Collector (Appeals) affirmed the Assistant Collector’s order. The appellants appealed to the Customs, Excise and Gold (Control) Appellate Tribunal, which dismissed the appeal by order dated 8-10-1999. The present appeals are against that Tribunal order.
Legal Issues Presented
- Whether crushing boulders into “bajari” amounts to “manufacture” so as to bring into existence a new product with a distinct name, character or use.
- Whether the Revenue could invoke the extended period of limitation under Section 11-A for the demand raised in the show-cause notice dated 3-5-1993.
Arguments of the Parties
Appellants' Arguments
- Relied on the Supreme Court decision in Padmini Products v. Collector of Central Excise, Bangalore, to contend that the extended period under Section 11-A is inapplicable where there is scope to believe the goods are not excisable and there is no fraud, collusion, wilful misstatement, suppression of facts, or contravention.
- Cited several Tribunal decisions said to have taken an identical view on the inapplicability of the extended limitation in similar circumstances.
Respondent's Arguments
This information was not available in the provided opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Padmini Products v. Collector of Central Excise, Bangalore, (1989) 4 SCC 275; (1989) 43 ELT 195 |
- Extended period under Section 11-A is inapplicable where there is scope to believe goods are not excisable and no licence is required. - Mere failure or negligence to obtain a licence or pay duty does not, by itself, attract the extended period. - Invocation of the extended period requires evidence of fraud, collusion, wilful misstatement, suppression of facts, or contravention; these ingredients postulate a positive act; knowledge that duty was liable and licence required must be shown. |
Applied as the governing law. The Court held that, given bona fide doubt and absence of any evidence of fraud/suppression etc., the extended period under Section 11-A could not be invoked for the 3-5-1993 notice; consequently, that demand was set aside. |
| Hindustan Construction Co. Ltd. v. CCE, (1997) 89 ELT 123 (Tri) (CEGAT) | Tribunal decision said to take an identical view to Padmini Products on extended limitation under Section 11-A. | Cited by appellants; the Court noted the citation but found it unnecessary to discuss Tribunal decisions in view of the settled law by the Supreme Court. |
| Jaypee Rewa Cement v. CCE, (1994) 73 ELT 91 (Tri) (CEGAT) | Tribunal decision said to take an identical view to Padmini Products on extended limitation under Section 11-A. | Cited by appellants; not analyzed by the Court beyond noting the citation. |
| Bhawanthadi Minerals v. CCE, (1997) 23 RLT 260 (CEGAT) | Tribunal decision said to take an identical view to Padmini Products on extended limitation under Section 11-A. | Cited by appellants; not analyzed by the Court beyond noting the citation. |
| New Vikram Cement v. CCE, (1998) 27 RLT 474 (Tri) | Tribunal decision said to take an identical view to Padmini Products on extended limitation under Section 11-A. | Cited by appellants; not analyzed by the Court beyond noting the citation. |
| Duraiappa Lime Products v. CCE, (1998) 104 ELT 505 (Tri) (CEGAT) | Tribunal decision said to take an identical view to Padmini Products on extended limitation under Section 11-A. | Cited by appellants; not analyzed by the Court beyond noting the citation. |
Court's Reasoning and Analysis
The Court addressed first the question of the extended limitation period under Section 11-A for the demand raised by the show-cause notice dated 3-5-1993. It reiterated the settled legal position from Padmini Products that:
- Mere failure or negligence to obtain a licence or pay duty does not justify invoking the extended limitation; there must be a positive act such as fraud, collusion, wilful misstatement, suppression of facts, or contravention.
- Where there is scope to believe the goods are not excisable (and therefore no licence is required), the extended period is inapplicable unless the requisite culpable elements are proved.
Applying these principles, the Court noted that there had been divergent views among various High Courts on whether crushing larger stones or boulders into smaller pieces amounts to “manufacture.” This divergence created a bona fide doubt regarding excisability of the activity. In such circumstances, the mere omission to take out a licence or pay duty could not trigger the extended limitation. Furthermore, there was no evidence that the appellants’ failure stemmed from fraud, collusion, wilful misstatement, suppression of fact, or contravention of any provision or rule. Accordingly, the invocation of the extended period under Section 11-A was unwarranted, and the demand under the 3-5-1993 notice was set aside.
As to the earlier show-cause notice dated 26-2-1992 (for October 1991 to January 1992), the appellants’ counsel stated that the amount had already been paid and that the appeal was not pressed regarding that demand. Given this position, the Court found it unnecessary to decide the other question—namely, whether crushing stones amounts to manufacture and whether a new product comes into existence—and expressly left that substantive question open.
Holding and Implications
HOLDING: The demand raised under the show-cause notice dated 3-5-1993 was set aside on the ground that the extended limitation under Section 11-A was not attracted in the circumstances. The appeal was not pressed in respect of the demand under the show-cause notice dated 26-2-1992. The appeals were DISPOSED OF accordingly, with no order as to costs. The question whether crushing stones into “bajari” amounts to manufacture was left open.
Implications: The appellants obtain relief from the larger demand (Rs 12,05,187) raised for the period 1-4-1988 to 30-9-1991 due to inapplicability of the extended period under Section 11-A, in the absence of any proven fraud, suppression, or similar culpable conduct and in light of bona fide doubt arising from divergent High Court views. The earlier, smaller demand (for October 1991–January 1992) stands paid and was not adjudicated upon. No broader new precedent was set on the “manufacture” question, which remains unresolved in this proceeding.
S.N Variava, J.— These appeals are against an order dated 8-10-1999 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter called “the Tribunal”).
2. Briefly stated, the facts are as follows:
The appellants are engaged in construction activities. As part of their business they crush boulders into “bajari” which is then used in the construction work. The appellants did not consider the activities of crushing boulders into bajari to be a manufacturing activity. They, therefore, did not apply for any licence nor paid excise duty.
3. On 26-2-1992 a show-cause notice was issued to them demanding duty of Rs 17,565 on the crushed bajari for the period October 1991 to January 1992. Another show-cause notice was issued to them on 3-5-1993 demanding duty of Rs 12,05,187 for the period 1-4-1988 to 30-9-1991. The appellants filed a reply to both the notices.
4. On 14-6-1993, the Assistant Collector, Central Excise confirmed the demand and also imposed a penalty of Rs 1,00,000. On 19-11-1993, the Collector (Appeals) confirmed the order of the Assistant Collector. The appellants, therefore, filed an appeal before the Tribunal. By the impugned judgment the appeal has been dismissed.
5. Two questions were raised before the Tribunal viz. (a) whether the activity of crushing boulders into bajari amounts to manufacture and whether the “bajari” is a new product having a distinct name, character or use, and (b) whether the respondent could have invoked the extended period of limitation under Section 11-A for the demand under the show-cause notice dated 3-5-1993.
6. We will first take up the second question. The law on this point is well settled. In the case of Padmini Products v. CCE (1989) 4 SCC 275, (1989) 43 ELT 195 this Court has held that wherever there is the scope for believing that the goods are not excisable to duty and, therefore, no licence is required to be taken out, then the extended period of limitation for demand under Section 11-A is inapplicable. This Court has held that mere failure or negligence on the part of the manufacturer in not taking out a licence and in not paying duty does not attract the extended period of limitation. This Court has held that there must be evidence to show that the manufacturer knew that the goods were liable to duty and that he was required to take out a licence. This Court has held that for invoking the extended period of limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of fact or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.
7. Mr Sridharan, Advocate for the appellant, has apart from this authority also relied upon a number of other authorities wherein the Tribunal has taken an identical view. In our view, the law having been settled by this Court, it is not necessary to refer to the decisions of the Tribunal. As the decisions have been cited, we merely set out the citations viz.:
(a) Hindustan Construction Co. Ltd. v. CCE (1997) 89 ELT 123 (Tri) (cegat).
(b) Jaypee Rewa Cement v. CCE (1994) 73 ELT 91 (Tri) (cegat).
(c) Bhawanthadi Minerals v. CCE (1997) 23 RLT 260 (cegat).
(d) New Vikram Cement v. CCE (1998) 27 RLT 474 (Tri).
(e) Duraiappa Lime Products v. CCE (1998) 104 ELT 505 (Tri) (cegat).
8. In this case, there was a divergent view of the various High Courts whether crushing of bigger stones or boulders into smaller pieces amounts to manufacture. In view of the divergent views of the various High Courts, there was a bona fide doubt as to whether or not such an activity amounted to manufacture. This being the position, it cannot be said that merely because the appellants did not take out a licence and did not pay the duty the provisions of Section 11-A got attracted. There is no evidence or proof that the licence was not taken out and/or duty not paid on account of any fraud, collusion, wilful misstatement or suppression of fact. We, therefore, set aside the demand under the show-cause notice dated 3-5-1993.
9. As regards the demand under the show-cause notice dated 26-2-1992, Mr Sridharan states that the appellant has already paid the amount. He states that he is not pressing this appeal in respect of the demand under that show-cause notice. Thus we see no reason to decide the other question viz. whether crushing of stones amounts to manufacture and whether a new product has come into existence. We leave this question open.
10. The appeals stand disposed of accordingly. There will be no order as to costs.
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