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

This appeal under Section 35-L of the Central Excises and Salt Act, 1944 (Act for short) is directed against the order dated 7-6-1985 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (Tribunal for short) in Appeal No. ED(SB)A 104/84.C. Facts leading to and relevant for disposal of the appeal are as under.2.On 30-1-1983 a team of Central Excise (Preventive) Officers of Buisar Division paid a surprise visit to the factory premises of M/s Growel Chromates, a division of M/s Grauer and Weil (India) Ltd., Bombay, the appellants herein, situated in Plot No. 407, G.I.D.C., Vapi. They found that the appellants, who are engaged in the manufacture of Sodium Bichromate (falling under Item No. 14-AA of the First Schedule to the Act) under a valid licence, had removed their product, on payment of Central Excise duty and under gate passes, for captive consumption to their Chromic Acid Section situated adjoining to their manufacturing premises, for the manufacture of Chromic Acid flakes. The officers further found that those flakes, (falling under T.I. 68) were manufactured with the aid of power and were removed under delivery challans of the appellants without payment of duty. The officers detained 98 drums containing 4900 kgs. of Chromic Acid flakes lying in the Chromic Acid Section for making further enquiry into the matter. On a subsequent visit on 2-2-1983, the officers seized 126 drums of Chromic Acid flakes (which included the 98 drums detained earlier) in fully manufactured condition weighing 63, 000 kgs. and valued at Rs 1, 89, 000 on the reasonable belief that the goods were liable to confiscation as the appellants were not entitled to exemption from duty under Notification No. 46/81 dated 1-3- 1981. The goods were provisionally released to the appellants on their executing requisite bonds.3.In due course a notice was issued to the appellants on 14- 7-83 charging them with contravention of Rule 173-F read with Rule 9(1), Rule 173-B, Rule 173-C, Rule 173-G(2) read with Rule 52-A, Rule 173-F(4) read with Rule 53 of the Central Excise Rules, 1944 and they were asked to show cause why penalty should not be imposed on them, why the goods seized and subsequently released provisionally should not be confiscated and why they should not be called upon to pay duty on 1, 52, 950 kgs. of Chromic Acid flakes valued at Rs 44, 95, 475 illicitly manufactured and cleared by them during the period from September 1981 to January 1983.4.On consideration of the cause shown by the appellants and the oral submissions made on their behalf the Collector made and recorded the following order onI impose a penalty of Rs 5, 00, 000 on M/s Growel Chromates of Vapi under Rule 473-Q(1) of Central Excise Rules, 1944. (ii) The goods namely "Chromic Acid flakes" weighing 6300 kgs. contained in 126 drums valued at Rs 1, 89, 000 seized from their possession from Chromic Acid Section and subsequently released provisionally on execution of B11 bond are liable to confiscation. Accordingly under Rule 173-Q(1) of the Central Excise Rules, 1944, 1 confiscate the same and order that the assessee shall pay a fine of Rs 1, 89, 000 in lieu of confiscation within one month of receipt of this order by them. On redemption, the confiscation goods shall be properly accounted for by them and cleared in accordance with law, if not already done. (iii) I order that M/s Growel Chromates of Vapi shall pay the duty of excise at the appropriate leviable rate on 1, 52, 950 kgs. of Chromic Acid flakes falling under Tariff Item 68, valued at Rs 44, 95, 475 illicitly manufactured and removed by them without paying the duty leviable thereon, during the period from September 1981 to January 1983 or thereabouts, as shown in Annexure A to the show-cause notice, under the proviso to sub- section (1) of Section 11-A of the Central Excises and Salt Act, 1944, read with Rule 9(2) of the Central Excise Rules, 1944."Aggrieved by the above order the appellants filed an appeal before the Tribunal. The Tribunal while upholding the order of the Collector directing payment of excise duty, set aside the order of confiscation and imposition of fine in lieu thereof. The Tribunal also upheld the order of imposition of penalty but reduced it to Rs 1, 00, 000. Hence this appeal.

Reasoning: 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.