QUILON METAL INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellant, M/s. Quilon Metal Industries is a manufacturer of metal containers. The manufacture is undertaken as a job work for M/s. Vijayalakshmi Cashew Company, Kollam. The latter supplies the raw materials to the former who fabricates the containers from metal sheets. For the fabrication work carried out, M/s. Vijayalakshmi Cashew Company makes a payment @ Rs. 2.35 per piece. As the fabrication work was being carried out without the aid of electric power, manufacturer was exempt from the liability to duty. The appellant was also exempt from the Central Excise Licencing Controls in view of total exemption. However, the exemption was discontinued w.e.f. 1.4.94 and was reintroduced w.e.f. 17.11.94. Thus, the metal containers produced during the period 1.4.94 to 17.11.94 became liable to Central Excise duty. However, no duty was discharged by the appellant. The Central Excise authorities detected the non -payment of duty and issued show cause notice No. V/73/15/4/95 Cx. Adj. -Sl. No. 39/35 dated 2.5.95 demanding the duty, thus not paid and also proposing penalties. The appellant resisted the proposals in the show cause notice, in the adjudication and in the appeal proceedings before the Commissioner (Appeals), Central Excise, Cochin. But failed. Hence the present appeal.

(2.) The appellant resists the duty demand on the ground of limitation as well as on merits. The appellant's main contention on merits is that since the appellant was receiving only Rs. 2.35 per piece of tin containers manufactured, the total value of the goods manufactured should have been computed by treating the job work charges so received as the value of the tin containers manufactured. It is submitted that if the value is so worked out, the appellant will remain within the small scale exemption and no duty would be payable. This plea has been rejected by the lower authorities on the ground that the value of an excisable item must include all costs like the cost of the materials used in the manufacture and other costs and not merely fabrication charges. The finding of the lower authorities on this score is correct both in law as well as in terms of cost accounting principles. Therefore, that contention has to fail.

(3.) We find that the appellant's contention on limitation is on firmer ground. The show cause notice for recovery of the non -paid duty has been issued beyond the normal period of six months provided in Section 11 A(1) of the Central Excise Act. The demand is being sustained by invoking the extended period of five years as allowed in the proviso to that Section. The exception allowed in the proviso is attracted only in cases involving fraud, collusion, suppression or misdeclaration of facts with intent to evade payment of Central Excise duty. The Revenue authorities have blamed the appellant for suppression of facts with intent to evade payment of Central Excise duty on the ground that the appellant had not intimated the Central Excise authorities about the manufacture of excisable goods during the dutiable period of 1.4.94 to 17.11.94. It is also pointed out that the appellant, being liable to Central Excise duty during the said period, was not exempt from the Central Excise Licencing requirement. The appellant has contested this by submitting that his unit was in existence well before the period in question and that, being a Unit working without the aid of power, his production was exempt from duty. The appellant also submits that he was not aware of the discontinuation of exemption for a short period of about 7 months between 1.4.94 to 17.11.94. It is his submission that the failure to take the Licence and to report production to the Central Excise authorities was not the result of any intention to evade payment of Central Excise duty, but merely because the appellant was ignorant of the changed legal provision. During the hearing of the case, the learned Counsel representing the appellant has pointed out that it is well settled that the proviso to Section 11A(1) was not attracted to cases of bona fide omission or failure. Something more positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information, when the manufacturer knew otherwise, is required before it is saddled with any liability beyond the period of six months had to be established. In this connection, the learned Counsel for the appellant has drawn our attention to the following observation of the Apex Court in its judgment in the case of Padmini Products, 1989 (24) ECC 362 (SC): 1989 (43) ELT 195 (SC):