T.P. Nambiar, Member (J) - (1.)THIS is an appeal filed by the appellant against the decision of the Collector of Central Excise, Calcutta-I in Order (Original) No. 198(6) 86-Collr-46/88, dated 5-8-1988. In terms of that order he ordered the appellant to pay a Central Excise duty amounting to Rs. 1,94,181.12 under Rule 9(2) of Central Excise Rules, 1944 read with Section HA of Central Excises and Salt Act, 1944. A penalty of Rs. 1 lakh was also imposed on the appellant.
(2.)The brief facts of the case as per the Department are that the appellants used to manufacture metal containers assessable to duty under erstwhile T.I. 46 of the First Schedule to the Central Excises and Salt Act, 1944. They used to supply metal containers to various industrial buyers after manufacturing them according to customer's specification. The customers who received such containers used them for packing goods for sale. These containers were being manufactured out of the coated steel sheets of different thickness. In the course of scrutiny of records of the appellant company, it was noticed that many times the customers used to return the goods, sometimes in full, sometimes in part, stating the reasons for such return in their return challan. The appellants used to bring back those containers in their factory at Kaikhali under Rule 173H of the Rules. They used to submit intimation of receipt of such goods to the jurisdiclional officer of Central Excise, but in no case they mentioned any reasons for such return in the intimation submitted to the Department excepting that those were received for repair. Since no reasons were mentioned in the intimations so submitted, in order to ascertain the correct position, the factory was visited by the Officers of Calcutta 'F' Division on 11-12-1985 when the said company handed over the relevant D-3 intimations, passing challan and the register of returned goods for further scrutiny. On scrutiny of the records of the appellant it was noticed that a number of consignees, notable among whom were M/s. Hindustan Lever Ltd., M/s. Ganesh Flour Mills Ltd. (now M/s. Hindustan Vegetable Oils Corporation Ltd.) and M/s. Indian Oil Blending Ltd. returned many containers, after stating reasons in their challans. The reasons were mainly "Rejected & Returned, Delivery not as per schedule, Rust inside, Body short, Bottom fitting light, weak handle, Body thickness being abnormally high and above specification, too much variation in thickness, Rusty spot inside, colour defect, colour shed widely varies from standard, colour sheds very...shedding out perfect manufacturing defect, poor quality P.P. Caps sealing not possible, under weight." While submitting the intimation or receipt of returned goods under Rule 173H, the said company deliberately omitted to mention the reasons for such rejection. Due to deliberate suppression of (he vital facts, the department, at the material time could not examine the goods to ascertain whether any repair of the returned containers was possible without damaging the get up and show of the containers. Since the appellants removed similar number of containers under Nil duty gate passes issued under Rule 173H, without mentioning the extent of repair undertaken in the register for repaired goods, the aforementioned three consignees were asked by the Department to intimate whether they received fresh goods or repaired goods in place of rejected ones. M/s. Indian Oil Blending Ltd. intimated that they accept containers meeting their purchase specification. M/s. Hindustan Lever Ltd. intimated that they treat all deliveries as fresh supplies subject to quality control checks. M/s. Hindustan Vegetable Oils Corporation Ltd. intimated that the tins sent back were replaced by the party with tins as per their specification. Since from the remarks of the consignee regarding rejection of some containers and the buyers' remarks that they received fresh supplies according to their specification, there was reasonable belief that the appellants deliberately omitted to mention the reasons of rejection in the intimation under Rule 173H so that they could replace them by fresh ones without being detected by the Central Excise Department. Therefore, the records rendered by the assessee on 11-12-1985 were seized under C. No. Prev/12/HEC/Cal. F/85/1932, dated 22-5-1986 for further action. The seized records revealed that the appellants removed 2,72,229 pcs of metal containers of assorted sizes, under cover of Nil duty G.P.1s issued under Rule 173H of the said Rules between July, '81 and Nov., '85 as mentioned in the annexure to the show cause notice. For reasons stated above, there was reasonable belief that the containers so removed under Nil duty G.P.1s were fresh ones removed in place of the rejected ones. The value of the goods was worked out on the basis of assessable value at the material time and total figure came to Rs. 12,32,895.68. On the basis of above assessable value the duty was calculated at Rs. 1,84,934.40 (Basic) & Rs. 9,246.72 (Spl.), Total Rs. 1,94,181.12. The appellants were, therefore, called upon by a notice dated 12-6-1986, issued by the department to explain as to why the Central Excise duty amounting to Rs. 1,94,181.12 should not be demanded and realised from them under Rule 9(2) of the Central Excises & Salt Act, 1944 and why a penalty shall not be imposed upon them under Rule 173Q of the Central Excise Rules, 1944.
The appellants filed a reply to the show cause notice. It was mainly contended therein that they had submitted D3 intimation carrying proper cross references of the transport documents, so as to enable the Central Excise Officers to verify the particulars entered in the D3 intimation together with the customers' challans. It was also stated that in 90% of their cases the proper officers actually visited the factory and verified the goods physically with the concerned G.P., and customers challan and after satisfaction, had countersigned the entries affixing initial and putting the date therein. These facts will be revealed on perusal of the returned goods register under Rule 173H. It was also pointed out in the reply that the jurisdictional officers have verified their records like R.G.I, production slip, annual stock-taking reports etc., during the period referred to in the show cause notice. It was also stated that whenever they are satisfied that the returned goods were within tolerance limit, they used to approach their customers for re-examining them and in almost all cases the customers accepted the returned goods after the repairs are carried out. That this fact is proved from the fact that subsequent gate pass covering the returned goods were accepted. Further, the subsequent 'Nil' duty gate pass invariably carriers the full reference of the original gate pass. They also stated that in a few cases where the returned goods could not be reprocessed, as mentioned in Annexure A, to the show cause notice were rejected by customers, such goods were also verified by the Central Excise officers and they had initialled and dated the same in the returned goods register. It was also pointed out that the departmental officers examined the returned containers and at no time they had found that the same could not be repaired without damaging the get up and show of the containers except a few of them as mentioned in Annexure A to the show cause notice. They also prayed for cross examination of the Central Excise officers and representatives of their customers. They also requested for the copies of the letters written by their customers so as to effectively meet the charges in the show cause notice. It was also pleaded that the demand is barred by limitation and on the facts of the case the extended period of five years under Section 11A of the Central Excises and Salt Act, 1944, cannot be done. It was also pointed out that there was no material to hold that there was fraud, wilful suppression, or contravention of rules with intent to evade payment of duty. Thereafter, a personal hearing was granted to the appellants and the learned Collector passed the impugned order.

(3.)THE learned Advocate Shri Tapan Chandra Dutta appearing for the appellants contended before us that the show cause notice does not mention the ingredients of Section 11A and also does not mention anything with respect to the allegation of fraud, or misstatement, or suppression of fact or clandestine removal with an intent to evade payment of duty. THErefore, the show cause notice having been issued after the period of six months is barred by limitation. In support of his contention, he relied on the following decisions:
(1) 1980 (6) E.L.T. 121

(2) 1983 (14) E.L.T. 1994

(3) 1984 (17) E.L.T. 499

(4) 1989 (40) E.L.T. 276