THIRD MEMBER ON REFERENCE : SHRI C.N.B. NAIR, MEMBER (T) EVEREADY INDUSTRIES INDIA LTD. Vs. COMMISSIONER OF C. EX., CALCUTTA

JUDGEMENT

(1.) VIDE the impugned order of the Commissioner of Central Excise, Calcutta -1, penalty of Rs. 1 Crore has been imposed on the appellants while dropping demand of Rs. 3,43,89,568.49 on the ground of time bar under Section 11A of the Central Excises and Salt Act, 1944. As per the facts on record, show cause notice dated 21 -9 -1993 was issued to the appellants, who are manufacturer of dried cell batteries alleging that they had wrongly availed the benefit of Notification No. 94/76 -C.E. during the period 1979 to 1980 and 1984 to 1985 inasmuch as the said notification granted exemption to metal jacket batteries whereas the batteries manufactured by the appellants and cleared by them by availing the exemption under the aforesaid notification were aluminium foil jacketed batteries. As per the view entertained by the department metal jacket battery is the one whose jacket was made of tin or iron and the batteries cannot be considered as metal jacketed batteries if the jacket of the battery is made of aluminium foil. The show cause notice issued by the department raising demand of duty of Rs. 3,43,89,568.49 was dropped by the adjudicating authority on the technical ground of limitation inasmuch as the demand was raised beyond even the extended period of 5 years provided under Section 11A of the Act. However, he observed that though the demand cannot be confirmed on the ground of limitation, nevertheless the appellants were guilty of deliberate suppression on their part, which resulted in evasion of duty to the tune of Rs. 3,43,89,568.49. Accordingly he imposed a penalty of Rs. 1 Crore on the appellants under Rule 173Q(1) of Central Excise Rules.

(2.) SHRI V. Sridharan, ld. Advocate appearing on behalf of the appellants submitted that he is not disputing the fact that the battery manufactured by the appellants was not metal jacketed battery and as such they were not entitled to the Notification No. 94/76. However he submits that the appellants filed a classification list effective from 29 -7 -1977 declaring their product as electric dried battery, metal jacketed battery, type 955M. In the said classification list they claimed the benefit of Notification No. 94/76, dated 16 -3 -1976. In the remarks column the appellants wrote as the jacket of this battery is made of aluminium foil. A sample battery is sent herewith. He submitted that Inspector of Central Excise conducted necessary verification and endorsed the classification list as checked the contents. Further endorsement was made by the Inspector as under : Physically verified the item and found to agree that the manufacturer has started to produce this battery type for the first time. Thereafter the classification list was duly approved by the Assistant Commissioner of Central Excise. He further submits that the second classification list filed on 15 -2 -1978 with the remarks the jacket of this battery is made of aluminium foil. A sample of the battery is sent herewith. That was verified by the Inspector who made an endorsement on 8 -3 -1978 as (this form 1 is valid up to 28 -2 -1978, the date of which has already been expired. I think they have already submitted afresh from one of this item from 1 -3 -1978. So this form 1 is not required to be approved). Similar classification lists filed by the appellants on 9 -7 -1980, 18 -3 -1988 and 18 -3 -1985 were approved by the department. He submits that in the year 1992 on the basis of certain enquiries conducted by the Director General, Anti -Evasion statements of their officials were recorded. Therein they admitted that the batteries cleared by them were with aluminium foil jacket. On the basis of investigations conducted, show cause notice dated 21 -9 -1993 was issued alleging mis -utilisation of notification and raising demand of duty for the period 1979 to 1980 and 1984 to 1985.

(3.) LD . Advocate contended that the appellants started manufacturing the said type of batteries for the first time and under a bona fide belief that the expression metal jacketed batteries would cover the batteries having jackets of aluminium foil (paper backed), submitted the classification list claiming the benefit of the notification. In the said classification list, all the materials facts that the cover of the batteries is made up of aluminium foil was disclosed to the department. A sample of the battery was also given to the department. He submitted that after conducting necessary verifications the classification list was approved and no mala fides can be attributed to the appellants so as to justify the imposition of penalty of Rs. 1 Crore. He submitted that the observations of the adjudicating authority that the appellants are leader in this industry and they should not have misguided the department by holding out a battery manufactured with aluminium foil as a metal jacketed battery are against the facts on records, inasmuch as the appellants and the department were entertaining a bona fide belief that the aluminium foil batteries are to be considered as metal jacketed batteries in the absence of any definition of metal jacketed batteries in the notification. He argued that though the duty has been dropped by the Commissioner on the technical ground of demand having been raised after a period of five years, the fact remains that there was no suppression on the part of the appellants. As such the imposition of penalty in the absence of any such ingredients in the proviso to Section 11A, was not justified. He also argued that though there is no specific time limit provided for imposition of penalty under the law nevertheless the imposition of penalty being ancillary to the power to levy the duty, would be equally barred when the assessments itself is barred.