Case: Sarabhai M.Chemicals Vs. Commnr. Of Cent.Excise,Vadodara

case, we are concerned with the proviso to section 11A(1). 24. In the case of Cosmic Dye Chemical vs. Collector of Central Excise, Bombay reported in 1995(75) ELT 721), this Court held that intention to evade duty must be proved for invoking to section 11A(1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression fraud and collusion but mis-statement and suppression is qualified by the preceding word wilful. Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for invoking the proviso to section 11A. 25. In case of Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay reported, in (1995 (78) ELT 401 ), this Court has held that the extended period of five years under the proviso to section 11A(1) is not applicable just for any omission on the part of the assessee, unless it is a deliberate attempt to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done does not constitute suppression of fact. 26. Applying the tests in the aforestated judgments to the facts of the present case, we find that the demands raised by the department in the impugned three show-cause notices were time-barred. The first show-cause notice was dated 30.12.1987. It was in respect of period 1.4.1986 to 30.11.1986. The second show cause notice was dated 6.4.1988. Under the said notice, the department has demanded duty for the period 1.3.1984 to 28.2.1986. The last show-cause notice was dated 20.6.1988, for the period 1.4.1986 to 30.4.1987. Therefore, section 11A(1) was not applicable. 27. The question is, whether in the present case, there was any wilful suppression of facts. On facts, as stated above, we find that the appellant had filed a classification list indicating notification no. 234/86 dated 3.4.1986 as well as the chapter under which the goods fell. We have gone through the classification list. It indicates the claim for exemption. The classification list was duly approved by the department. So also monthly returns were filed by the appellant in the form of RT-12 in which there was a complete disclosure regarding the nature of the goods. These returns were regularly assessed by the department. The material placed on record shows filing of gate passes, invoices, classification list. They indicated the names of the consignees. A mere reading of these names would indicate that sorbitol solution was sold to non-pharmaceutical companies like, M/s Golden Tobacco Co. Ltd., Despite such disclosure, the department approved the classification list as well as RT-12 returns. There was no reopening of the approvals and assessments within the stipulated period. In the circumstances, the judicial Member of the Tribunal was right in holding that no case was made out for invoking the extended period of limitation. As stated above, the end use was built in the exemption notification. Therefore, the department could have demanded duty within one year from the relevant date under section 11A(1). However, this was not done. In the absence of evidence of suppression of facts, the J.M. was right in setting aside the show-cause notices. 28. In the case of Jayant Vitamins Limited vs. Union of India reported in (1991) (53) ELT 278 ), show-cause notice-cum-demand was issued by the department alleging non-user of bulk drugs for specified purpose. In that matter, goods were cleared without payment of duty, as in the present case, on the basis of certificate from Drugs Controller. In that case, same notification no. 234/86 was relied upon by the assessee. However, on facts, the High Court found that the assessee had disclosed the relevant facts in the gate passes and, therefore, it was held that the department was not entitled to invoke the proviso to section 11A(1). In our view, the judgment of the Madhya Pradesh High Court in Jayant Vitamins Ltd. (supra), is not on the applicability of the notification no. 234/86, as it is sought to be urged on behalf of the appellant. The said judgment is only on the point of limitation. It only states that the department was not entitled to invoke the proviso to section 11A(1) as the assessee had indicated in the gate passes the material facts. On this point, before concluding, we may mention that in the present case, we have come to the conclusion that there was no wilful suppression of facts on the part of the appellant as the appellant had filed the gate passes, invoices and monthly returns, which were all duty approved by the department from time to time. The invoices, gate passes and the monthly returns indicated the names of the consignees from which it was possible for the department to infer sale of sorbitol solution to non-pharmaceutical companies and yet no steps were taken by the department to raise the demand in time and, therefore, we hold that there was no wilful suppression of material facts for invoking the proviso to section 11A(1). The facts of the present case are not confined only to gate passes clearances. In such cases, it would not be proper to Courts to rely on the evidence furnished only by gate passes. 29. In the circumstances, although on merits the department succeeds, these appeals need to be allowed as the impugned show-cause notices-cum-demands were time barred and as no case is made out by the department for invocation of the proviso to section 11A(1) of the said Act. 30. Before concluding, we may point out that numerous judgments were cited on behalf of the appellant under the Food Adulteration Act, the Essential Commodities Act and the matters concerning classification dispute. It is not necessary for us to burden this judgment with those cases, particularly, in view of the fact that in the present case, we are concerned with interpretation of an exemption notification. 31.

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

Explanation:
1[ds]We do not find any merit in the preliminary submission made on behalf of the appellant. In the present case, we are concerned with exemption notification. It is well settled that an exemption notification has to be strictly interpreted. The conditions for taking the benefit of the exemption have to be strictly interpreted. In the present case, the Third Member has rightly rejected the contention advanced on behalf of the appellant that more than one view was possible on interpretation of exemption notification no. 234/86. The Third Member has recorded a finding that the appellant has not disputed that a certain quantity of sorbitol solution and vitamin C stood cleared to non-pharmaceutical units, namely, soaps, ceramics, rubber and cigarette units. The appellant had conceded before the Tribunal of having cleared 3.87% of the total clearances to non-pharmaceutical companies who could not have used the said solution as drugs or medicines. Moreover, in the present case, the department has not demanded the duty in respect of quantity sold to pharmaceutical concerns for pharmaceuticals or medicinal purposes. In the present case, the dispute was not whether the appellant was entitled to the benefit of the exemption notification in respect of the entirety of goods manufactured and cleared during the period in question, but the dispute was regarding the taking of exemption benefit under the notification in respect of the quantum of bulk drugs cleared to consumers other than the pharmaceutical concerns. In the circumstances, the Third Member was right in deciding the question of limitation as well as the question of applicability of exemption notification no. 234/86. In any event, the said two questions are interlinked and, therefore, we do not find any merit in the preliminary objection raised on behalf of the appellantOur interpretation is supported by the language of the notification. Under the proviso read with the explanation to the said notification to the said notification, there were three conditions required to be satisfied by way of certification by the Drugs Controller. Firstly, that the bulk drugs should have the same meaning as mentioned in the explanation to the notification. Secondly, that such bulk drugs should be normally used for the specified purposes; and, thirdly, that the bulk drugs are used as such or as an ingredient in any formulation. Plainly read, the third condition has to mean that the goods, for which exemption was sought, were actually used as such or as an ingredient in any formulation. If the arguments advanced on behalf of the appellant in accepted then the second and third condition would have the same meaning and there would be no point in specifying them as separate conditions. In the explanation to the notification, we have two expressions, namely, normally used and used as such. We have to read both these expressions in juxta position. If so read, it becomes clear that the expression used as such in the proviso qualifies the actual use and not the capacity of use. These words as by way of emphasis. They are a condition to be actually satisfied before the exemption can be availed and granted. Consequently, every manufacturer of a bulk drug cannot seek the benefit of exemption under the said notification merely by reason of normal use of the drug. The words normal use indicate the possible use whereas the expression used as such indicates the actual use. The certificates issued by the Drugs Controller, quoted above, shows that they did not deal with uses other than normal uses of such bulk drugs. In the circumstances, the Tribunal was right in holding that the benefit of the exemption was available only to those drugs which went into the stream of diagnosis, treatment etc. and not to the use of any other profit making activity. In the circumstances, on the question of applicability of the notification, we do not find any infirmity in the impugned decision of the Tribunal. In the case of Cosmic Dye Chemical vs. Collector of Central Excise, Bombay reported in 1995(75) ELT 721), this Court held that intention to evade duty must be proved for invoking to section 11A(1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression fraud and collusion but mis-statement and suppression is qualified by the preceding word wilful. Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for invoking the proviso to section 11A25. In case of Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay reported, in (1995 (78) ELT 401 ), this Court has held that the extended period of five years under the proviso to section 11A(1) is not applicable just for any omission on the part of the assessee, unless it is a deliberate attempt to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done does not constitute suppression of fact26. Applying the tests in the aforestated judgments to the facts of the present case, we find that the demands raised by the department in the impugned three show-cause notices were time-barred. The first show-cause notice was dated 30.12.1987. It was in respect of period 1.4.1986 to 30.11.1986. The second show cause notice was dated 6.4.1988. Under the said notice, the department has demanded duty for the period 1.3.1984 to 28.2.1986. The last show-cause notice was dated 20.6.1988, for the period 1.4.1986 to 30.4.1987. Therefore, section 11A(1) was not applicable.The question is, whether in the present case, there was any wilful suppression of facts. On facts, as stated above, we find that the appellant had filed a classification list indicating notification no. 234/86 dated 3.4.1986 as well as the chapter under which the goods fell. We have gone through the classification list. It indicates the claim for exemption. The classification list was duly approved by the department. So also monthly returns were filed by the appellant in the form of RT-12 in which there was a complete disclosure regarding the nature of the goods. These returns were regularly assessed by the department. The material placed on record shows filing of gate passes, invoices, classification list. They indicated the names of the consignees. A mere reading of these names would indicate that sorbitol solution was sold to non-pharmaceutical companies like, M/s Golden Tobacco Co. Ltd., Despite such disclosure, the department approved the classification list as well as RT-12 returns. There was no reopening of the approvals and assessments within the stipulated period. In the circumstances, the judicial Member of the Tribunal was right in holding that no case was made out for invoking the extended period of limitation. As stated above, the end use was built in the exemption notification. Therefore, the department could have demanded duty within one year from the relevant date under section 11A(1). However, this was not done. In the absence of evidence of suppression of facts, the J.M. was right in setting aside the show-cause notices. In the case of Jayant Vitamins Limited vs. Union of India reported in (1991) (53) ELT 278 ), show-cause notice-cum-demand was issued by the department alleging non-user of bulk drugs for specified purpose. In that matter, goods were cleared without payment of duty, as in the present case, on the basis of certificate from Drugs Controller. In that case, same notification no. 234/86 was relied upon by the assessee. However, on facts, the High Court found that the assessee had disclosed the relevant facts in the gate passes and, therefore, it was held that the department was not entitled to invoke the proviso to section 11A(1). In our view, the judgment of the Madhya Pradesh High Court in Jayant Vitamins Ltd. (supra), is not on the applicability of the notification no. 234/86, as it is sought to be urged on behalf of the appellant. The said judgment is only on the point of limitation. It only states that the department was not entitled to invoke the proviso to section 11A(1) as the assessee had indicated in the gate passes the material facts. On this point, before concluding, we may mention that in the present case, we have come to the conclusion that there was no wilful suppression of facts on the part of the appellant as the appellant had filed the gate passes, invoices and monthly returns, which were all duty approved by the department from time to time. The invoices, gate passes and the monthly returns indicated the names of the consignees from which it was possible for the department to infer sale of sorbitol solution to non-pharmaceutical companies and yet no steps were taken by the department to raise the demand in time and, therefore, we hold that there was no wilful suppression of material facts for invoking the proviso to section 11A(1). The facts of the present case are not confined only to gate passes clearances. In such cases, it would not be proper to Courts to rely on the evidence furnished only by gate passes29. In the circumstances, although on merits the department succeeds, these appeals need to be allowed as the impugned show-cause notices-cum-demands were time barred and as no case is made out by the department for invocation of the proviso to section 11A(1) of the said Act