Case: M/s. Grauer and Weil Ltd Vs. Collector of Central Excise, Baroda

their letter dated 19-9-1981 addressed to the excise authorities: "Further to our Declaration dated 15-4-1981 we have to inform you that the premises where Chromic Acid is manufacturing is not a factory within the meaning of Section 2(m) of Factories Act, 1948. This premises is completely segregated and the goods manufactured therein are wholly exempted from the payment of duty, by virtue of Notification No. 46/81 dated 1-3-1981, as amended by Notification No. 92/81 dated 1-4-1981." * That they honestly believed that their Chromic Acid Section is not a factory and on such belief did not pay excise duty on the flakes manufactured therein till the Excise authorities held otherwise. According to the appellants, the above contents of the letter not only prove their bona fides but negate the allegations of fraud, collusion, wilful misstatement or suppression of facts also. To bring home their above contention the appellants have relied upon the following passage from the judgment of this Court in C.C .E. v. Chemphar Drugs &Liniments I: (SCC p. 1 3 1, para 9) "In order to make the demand for duty sustainable beyond A period of six months and up to a period of 5 years in view of the proviso to subsection (1) of Section II -A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something 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, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case." * (emphasis supplied) 14.As has been observed in the above quoted passage the question as to whether in a given case the requirements for invoking the proviso are fulfilled o r not is one of fact. It has therefore to be ascertained whether in the set of facts and circumstances of the instant case, the Collector and Tribunal were justified in concluding that the appellant was guilty of wilful misstatement and suppression of facts. On perusal of the record we find that in arriving at the above conclusion the Collector and the Tribunal relied upon the following facts and circumstances: (i) The reference to the declaration dated 15-4-198 1 by the appellants in their letter dated 19-9-1981 was incorrect and misleading inasmuch as the said declaration related to Growel Chromates Pvt. and was filed for availing exemption under Notification No. 105/80 dated 19-6-1980, which pertained to factories wherein the total investment on plant and machinery was not over 10 lakhs, and had no reference or relevance to Notification No. 46/81 dated 1-3-1981;(ii) The copy of the prescribed form of the above declaration dated 15- 4-1981, which was filed in the impugned proceedings indicates that, against the column "reference to the notification under which exemption from duty is claimed" is the remark "105/80 dated 19-6- 1980; Not as 92/81 (not falling under Factories Act having less than 10 workers)" but in the original of the declaration form the words "Not No. 92/81 (not falling under Factories Act having less than 10 workers)" are significantly missing;(iii) The claim of the appellants that the Factories Act authorities had on 9-2-1982 approved their layout plan wherein the Chromic Acid Section has been described as "premises which do not come under Section 2(m) of the Factories Act ", was unfounded for it had not been signed by a duly empower ed officer administering the Factories Act;(iv) The statement of non-factory status of the Chromic Acid Section in the letter dated 19-9-1981 was a conclusion drawn without any factual basis for the same, for, on the own showing of the appellants, the endorsement regarding the "non-factory" status of the said section was made for the first time on or around 9-2-1 982; and(v) Though the appellants showed the Chromic Acid Section in the ground plan submitted to the Factories Act authorities and claimed , non-factory status for it, in the ground plan submitted to the Excise authorities for approval of licence for manufacture of Sodium Bichromate they did not even indicate its existence. 15. In our opinion from the above facts and circumstances when taken together, a reasonable conclusion can certainly and legitimately be drawn that the appellants wilfully and deliberately made misstatements and suppressed material facts to avoid payment of excise duty. In other words it is no t a case of simple inaction or faliure on the part of the appellants to furnish material information.16. It has lastly been contended that in any view of the matter the appellants could not be asked to pay penalty as the breach in question flowed from the bona fide belief that they were not liable to pay excise duty. In support of this contention the appellants have relied upon the following passage from the judgment of this Court in Hindustan Steel Ltd. v. State of Orissa2: (SCC p. 630, par a 8)"An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation." *17. Since we have already found that the appellants have acted in conscious disregard of their statutory obligations and deliberately suppressed material facts the above contention can neither be accepted nor the above quoted passage pressed into service.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]15. In our opinion from the above facts and circumstances when taken together, a reasonable conclusion can certainly and legitimately be drawn that the appellants wilfully and deliberately made misstatements and suppressed material facts to avoid payment of excise duty. In other words it is no t a case of simple inaction or faliure on the part of the appellants to furnish material information.16. It has lastly been contended that in any view of the matter the appellants could not be asked to pay penalty as the breach in question flowed from the bona fide belief that they were not liable to pay excise duty. In support of this contention the appellants have relied upon the following passage from the judgment of this Court in Hindustan Steel Ltd. v. State of Orissa2: (SCC p. 630, par a 8)"An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation." *17. Since we have already found that the appellants have acted in conscious disregard of their statutory obligations and deliberately suppressed material facts the above contention can neither be accepted nor the above quoted passage pressed into service.