TEJ STRAW BOARD (P) LTD. Vs. CCE, CHANDIGARH

JUDGEMENT

(1.) THE appeal challenges the order in appeal dated 31.5.1991 passed by Collector of Central Excise (Appeals) Chandigarh upholding the order passed by the Assistant Collector in terms of which the latter had confirmed duty demand of Rs. 31,893.75 as Central Excise Duty from the appellant in respect of straw board manufactured and cleared during the year 1983 -84. It was the stand of the department that appellant had manufactured and sold such product in the previous year at a price of Rs. 1500/ - per metric tonne (p.m.t.) whereas during the material period the prices have been depressed and cleared at Rs. 990/ - p.m.t. Such a reduction in the price was found to be not in consonance with the general trend of price of raw materials, cost of labour etc. The value of clearances of straw board by the appellant during the period involved in the dispute was recomputed by applying the earlier price of Rs. 1500/ - and on that basis it was held that appellant had crossed the exemption limit of Rs. 7.5 available under the relevant exemption notification and determined duty liability on the excess over the said ceiling. The show cause notice issued proposing recovery of the alleged non -levied duty was resisted by the appellant. The defence plea was not accepted by the Assistant Collector who confirmed the demand. This order having been upheld by the Collector (Appeals), the present appeal has been filed. Col. T.S. Bakshi, Managing Director of the appellant company states that during the year 1982 -83 they were producing straw board by using coal as fuel for production of steam required for drying the straw board manufactured. During that period they were using raw materials like bagasse and wheat straw as the material for the manufacture of straw board. In 1983 Finance Bill introduced in March 1983, duty was raised on straw board manufactured other than by sun -dry process, making their product uncompetitive vis -a -vis the straw board made by sun -dry process. Because of this, they had to adopt cost reduction exercise and hence they stopped using coal as fuel and switched over to rice husk as fuel and rice straw as the raw material. As a result they were able to bring down the price and filed price list accordingly. They were approved by the departmental authorities and they cleared the goods at declared prices. After nearly two years, department issued show cause notice alleging non -payment of duty by them. Shri Bakshi mentioned that they had sold the goods at the price declared by them and there was no misstatement or under declaration of price. He pleaded that the impugned order be set aside and their appeal allowed. Resisting the submissions in support of the appeal, Shri M. Ali learned departmental representative stated that the appellant was asked to substantiate their claim of having switched over to cheaper fuel and cheaper raw material but no clarification was given by them. In the circumstances, the department was justified in confirming the demand based upon the price which the appellant company itself had been charging in the previous year. The price lists had been approved by the department in the normal course accepting the declaration given but later on when it was found that the appellant had mis -declared the price by declaring the prices much lower than what has been charged earlier, notice was issued. The longer period of limitation is applicable in the present case because of the mis -declaration involved which had been resorted to by the appellant with a view to compress a larger quantity of material within the exemption limit of Rs. 7.5 lakhs.

(2.) THE arguments have been considered. We find that a copy of show cause notice has not been made available in the appeal papers. However, on a perusal of order -in -original passed by the Assistant Collector we find that the show cause notice issued by the superintendent was dated 22.4.1985. The period involved financial year 1983 -84 which ended on 31.3.1984. Obviously the show cause notice has been issued for a period beyond six months by invoking the longer period of limitation under the proviso to Section 11A(1) of Central Excise Act, 1944. Since, however, the notices have been issued in April, 1985 prior to the amendment of the said provision in December, 1985 there is no requirement that the notices should have been issued by the Collector. Further the adjudication order itself has been passed on 16.12.1985, again before the amendment came into effect. Be that as it may, the only basis for the department's proceeding in that matter against the appellant was the lower price declared in the price list as compared to the earlier price. The declaration of such lower price was not objected to by the concerned departmental officials at the time of receiving price list. It was in the knowledge of the department that appellant had been filing price list earlier at a higher level namely Rs. 1500 p.m.t. With that information in their knowledge, when the appellant filed a price list showing a much lower price, the department should have been able to notice the steep fall in the price declared in the price list and instituted necessary enquiries. Not having done so, the matter was sought to be rectified by issue of demand after considerable lapse of time. On the contrary, the explanation of the appellant for the lower price is plausible. There is no evidence available with the department that appellant had actually sold the goods at a price higher than the declared one of Rs. 950/ - p.m.t. In the circumstances, we are not inclined to uphold the findings of the Assistant Collector as upheld by the Collector (Appeals) and accordingly set aside the impugned order. The appeal is allowed.