BHARUCHA - (1.) THE appellants manufacture Liquid Paraffin I.P. It is the case of the appellants that the said liquid paraffin is packed in drums which are labelled. THE labels bear the appellant's monogram "Lubri-Chem". THE said liquid paraffin is supplied to pharmaceutical industries. THE pharmaceutical industries use the said liquid paraffin as an intermediate in the manufacture of drugs. THE said liquid paraffin was classified for the purposes of payment of excise duty under T.I. 68 and, as a drug intermediate. cleared without payment of excise duty by reason of an exemption notification.
(2.) ON 6/08/1981, the Superintendent of Central Excise issued to the appellants a notice which stated that they had manufactured and cleared the said liquid paraffin, which fell under T.I. 8, without payment of excise duty thereon. For the period 1/02/1981 to 31/07/1981, they were required to show cause why duty in the sum of Rs. 30,677.04 should not be recovered from them and why penalty should not be imposed upon them. An identical notice was issued on the same day for the period 19/06/1980 to 31/01/1981; the amount claimed thereunder was Rs. 84,836.35. The appellants showed cause. An order was made by the Assistant Collector of Central Excise on 2/12/1981, wherein he held that the demands in both notices were in order and he confirmed the same. He did not, however, impose any penalty. He came to his conclusion on the ground that there was no denying the fact that the said liquid paraffin was a mineral oil and it became a medicine only after it was marketed or labelled as such. He relied upon the opinion of the Deputy Chief Chemist who, on analysis of the said liquid paraffin, had found that it was in the form of a colourless liquid having flash point above 76 degrees Fahrenheit. It had a flame height of more than 10 mm. but less than. 18 mm. The tariff description under Item 8 as Refined Diesel Oil was that any mineral oil which had its flashing point at or above 76 degrees Fahrenheit and a flame height of 10 mm. or more but less than 18 mm. fell under T.I. 8. Accordingly, the said liquid paraffin was correctly classifiable under T.I. 8. The Assistant Collector, therefore, rejected the appellants' contention that the liquid paraffin was classifiable under T.I. 68. He held that the appellants had filed a wrong declaration and had suppressed the facts wilfully. On 3/09/1982, the Assistant Collector of Central Excise passed an order which recorded that the appellants had claimed in classification lists filed by them that the said liquid paraffin was classifiable under T.I. 68 and, under a notification dated 1/03/1975, was exempt from payment of excise duty. The appellants had been heard. When their representative was questioned about the labelling of the said liquid paraffin, it had become known that the said liquid paraffin was packed in drums which bore a label showing the monogram of the assessee. This indicated the proprietary nexus of the appellants with the said liquid paraffin. The Assistant Collector, therefore, ordered that a demand should issue against the appellants for short recoveries of excise duty, after classifying the said liquid paraffin under T.I.14-E. The appellants filed appeals against the said orders dated 2/12/1981 and 3/09/1982, before the Collector of Central Excise. The Collector (Appeals) by his order dated 17/03/1983, held that T.I. 8 gave a self-contained definition of the products falling thereunder. The product manufactured by the assessee had, on test, been found to satisfy such specifications, which fact had not been denied. In view thereof, the product was classifiable first under T.I. 8. After the first stage of manufacture the product was packed, labelled and sold for pharmaceutical purposes. On the appellants' own admission, the product was of pharmacopoeia grade. The product was sold in a drum bearing the appellants' monogram. During the personal hearing it was claimed that the product did not bear any proprietary name, but this denial had not been substantiated and was not sufficient to disprove the specific observation of the Assistant Collector that the labelling or marketing on the drum bore the monogram of the assessee showing the proprietary nexus of the assessee with the product. As packing amounted to manufacture so far as T.I. 14-E was concerned, the product was liable to pay further duty under T.I. 14-E after packing and labelling, in addition to duty under T.I. 8 before such packing or labelling. As the appellants had misdeclared the product as a drug intermediate falling under T.I. 68 and had suppressed the fact that a product satisfying the specifications of T.I. 8 came into being first and further that the same was marketed under the monogram of the asses-see, the longer period of 5 years would be available for effecting short recoveries both under T.I. 8 as well as under T.I. 14-E. The appeals were, accordingly, rejected.
(3.) THE appellants carried the matter to the Customs, Excise and Gold (Control) Appellate Tribunal. By its order dated 2/09/1983, which is the order under challenge before us, the Tribunal dismissed the appeals. It referred briefly to the facts and arguments. It then observed that there could be little doubt that the assessment under T.I. 8 was correct and it did not need to spend much time on this. THE main dispute, it said, was the assessment of the packed liquid paraffin under T.I. 14E. In this behalf, the Tribunal agreed with the contention of counsel for the excise authorities that the use of a name on the drums so that the drums and their contents could be connected to a particular person as the proprietor who manufactured or marketed the medicine was sufficient to class the goods as patent and proprietary medicine. As regards the time bar, the appellants had made no declaration that the said liquid paraffin was sold in labelled drums. THEy had claimed that the said liquid paraffin was a drug intermediate, which was assessable free of duty under T.I. 68. THE appellants had not reported that a T.I. 8 product was obtained. THE appellants had, therefore, failed to make a complete and true declaration and the longer time of 5 years was, therefore, correctly applied. THE Tribunal, accordingly, found itself unable to interfere with the decision of the appellate authority and rejected the appeals. Let us clear the ground. In Collector of Central Excise v. Chemphar Drugs and Liniments, 1989 (40) ELT 276 : (AIR 1989 SC 832), this Court has held that in order to make a demand for excise duty sustainable beyond a period of six months and up to a period of five years, under S. 11A of the Central Excises and Salt Act (earlier, Rule 10 of the Rules made under the said Act), it had to be established that excise duty had not (sic) been short-levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or the Rules with intent to evade payment. Something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise was required before the assessee could be saddled with any liability beyond the period of six months. Very fairly, Mr. M. Chandrasekharan, learned Additional Solicitor General, appearing for the excise authorities, did not contend that the appellants had been guilty of any fraud or collusion or wilful mis-statement or suppression of facts with intent to evade the payment of excise duty. The demand for payment of excise duty for the period 19/06/1980 to 31/01/1981, in the sum of Rs. 84,836.35 upon 1,93,056 litres made on 6/08/1981 must, therefore, fall.;