- (1.) Show-cause notice issued by the Assistant Collector of Central Excise for contravention of Rules 9, 173 B, C, F, G, Q, 174 and 198 of Central Excise Rules for manufacture and clearance of fertilizer without paying excise duty has been challenged as without jurisdiction.
(2.) Rule 9(1) as it stood in 1979 prohibited removal of goods from any place where they were produced, cured or manufactured whether for consumption, export or manufacture without payment of excise duty. And if any excisable goods were removed, in contravention of Sub-rule (1) then under Sub-rule (2) of the Rule the producer or manufacture was liable to pay not only the duty leviable on it, but penalty as well and the goods were liable to confiscation. The expression, in contravention of was considered by the Hon'ble Supreme Court in N.B. Sanjana v. E.S. & W Mills (1971 S.C. 2039). It was held, "To attract Sub-rule (2) to Rule 9, the goods should have been removed in contravention of Sub-rule (1). It is not the case of the appellants that the respondents have not complied with the provisions of Sub-rule (1). We are of the opinion that in order to attract Sub-rule 2, the goods should have been removed clandestinely and without assessment."
(3.) In Murugen and Co. Pundukoila v. Deputy Collector of Central Excise Tiruchirapalli and Anr. 1977 E.L.T. (J 193) the Madras High Court applied the decision in Sanjana case and held that where goods were produced by a manufacturer under bona fide impression that they were not excisable and they were claimed without any objection by the department the clearance could not be held to be clandestine removal so as to attract Rule 9(2). In Star Paper Mills Ltd. v. Union of India 1981 E.L.T. (Del.) the Delhi High Court extended the description laid down in Sanjana case where the description of paper was mentioned as writing paper even though it was used for packing because authorities were all along aware that packing and wrapping paper was used in the packing of the reams. The Government of India itself held in a decision in re : Dabour Pvt. Ltd. Calcutta - 1980 E.L.T. 117 (G.O.I.) that even though clearance of P or P medicines a non excisable pharmacopical preparation became excisable when it carried the inscription, "Dabur" the name of manufacturer the removal could not be held to be clandestine so as to attract Rule 9(2) as the label had been approved earlier by the department and held not liable to any duty. It is thus settled that Sub-rule (2) of Rule 9 applied to those cases only where the manufacturer was guilty of removal of excisable goods without payment of duty. But if the goods were removed either under bona fide belief that were not excisable or under intimation to department with their consent and approval, then such removal was beyond the penal pale of Rule 9(2). The essential element of intention to commit an offence leading to penalty and confiscation of goods is missing when the act or omission is done with knowledge of department. The express or implied consent removes venality of act.;