Supreme Court of India
PADMINI PRODUCTSversusCOLLECTOR OF CENTRAL EXCISE, BANGALORE
- Citation
- 1989 INSC 247
- Decided
- 18 August 1989
- Disposal
- Disposed off
- Bench
- SABYASACHI MUKHERJI
Holding
The Supreme Court held that the goods were not handicrafts and that mere failure to obtain a licence or pay duty does not invoke Section 11‑A, limiting the demand to six months.
Summary
Padmini Products, a manufacturer of agarbatis and dhoop sticks, claimed exemption from excise duty and licensing on the ground that the products were "handicrafts" under Notification 55/75 and thus exempt under Notification 111/78. The Collector rejected the claim, holding the items were not handicrafts; the Tribunal affirmed this view and allowed a demand for five years under Section 11‑A, treating the failure to obtain a licence as indicative of fraud. On appeal, the Supreme Court examined the definition of handicrafts, the role of machine assistance in manufacture, and the requirement of fraud, collusion or wilful misstatement before Section 11‑A could be invoked. The Court held that the Tribunal was correct that the goods were not handicrafts and that mere failure to obtain a licence or pay duty does not automatically attract Section 11‑A. Consequently, the demand could be limited to six months prior to the show‑cause notice, and the appeal was allowed in part with a remand to the Tribunal to modify the demand and consider penalty and confiscation.
Issues considered
- Whether agarbatis and dhoop sticks qualify as "handicrafts" within the meaning of Notification 55/75 and are therefore exempt from excise duty and licensing.
- Whether the failure to obtain a licence and to pay duty attracts the penal provisions of Section 11‑A of the Central Excises and Salt Act, 1944, thereby extending the limitation period to five years.
- Whether the demand for duty can be confined to the six‑month period prescribed under Rule 9(2) of the Central Excise Rules.
Legislation cited
- Central Excise Rules, 1944s. Rule 174, s. Rule 9(2)
- Central Excises and Salt Act, 1944s. 11-A, s. 35-L
Subjects
handicraftsexcise duty exemptionlicensingSection 11-ACentral Excise Actagarbatidhoop sticksfraudcollusionmisstatementlimitation periodpenaltyconfiscation
Judgment
) PADMINI PRODUCTS
A
v.
COLLECTOR OF CENTRAL EXCISE, BANGALORE
AUGUST 18, 1989
[SABYASACHI MUKHARJI AND B.C. RAY, JJ.] B
Central Excises and Salt Act 1944/Central Excise Rules, 1944:.
Section lJA Rules 8, 9 and 174--Persons required to take out licence--
, Recoveries of duty not levied not barred-Failure to pay duty or take
out licence is not necessarily due to fraud, collusion or wilful mis-
statement.
c
The appellant was a manufacturer of agarbatis, dhoop sticks,
dhoop coil and dhoop powder falling under Tariff Item No. 68 of the
Central Excise Tariff. It claimed exemption from duty of excise on the
ground that these items being handicrafts were fully exempt from such
payment under notification No. 55/75. The appellant's further case was D
that under Notification No. 111/78 all goods which were exempt from
the whole of duty of excise leviable thereon unconditionally were
exempted from the operatfon of Rule 174 of the Central Excise Rules,
which required a manufacturer to take out a licence.
The Collector rejected the claim of the appellant and held that · E
these items were not handicrafts.
It was contended before the Tribunal that dhoop sticks, coll and
power were agarbaties and agarbaties were 11ccepted as handicrafts by
various authorities including the Central Government; mere use of
power in the manufacture of these items did not bar them from being F
called handicrafts; and, in any event, there was no warrant in invoking
longer time limit for live years for raising the demand.
The Tribunal rejected the contentions of the appellant. It was
found by the Tribunal that the mai11 part of the manufacture of
agarbaties, etc. was done with the aid of power; only a very small part G
of the required work was done by band; and that it was difficult to
accept that these were handicrafts merely because some authorities
had chosen to treat agarbaties as handicrafts. The Tribunal held that
the Revenue was entitled to levy tax for a period of live years prior to
the issue of show-cause notice and not six months pursuant to rule 9(2)
of the Central Excise Rules. H
873
874 SUPREME COURT REPORTS [1989] 3 S.C.R.
A Before this court, it was contended on behalf of the appellant that .A
in order to sustain the order of the Tribunal beyond a period of six
months and upto a period of 5 years under section ll-A it had to be
established that the duty of excise had not been levied or paid by reason
of either fraud or collusion or wilful mis-statement or suppression of
facts or contravention of any provision of the Act or Rules made there-
B under, with intent to evade payment, as provided in the proviso to
sub-section (1) of section 11-A. In this context, it was urged that there
was scope for believing that agarbaties were entitled to exemption and if
that was so, then there was enough scope for believing that there was
not need of taking out a licence under rule 174 of the Central Excise
Rules, 1944. On the other hand, the Revenue contended that the failure
to take out the licence and thereafter to take the goods out of the factory
C gate without payment of duty was itself sufficient to infer that the
appellant came within the mischiefofsection 11-A of the Act.
While partly allowing the appeal, and remanding the case to the
Tribunal to modify the demand, this Court,
D
HELD: (1) In view of the evidence examined by the Tribunal ahd
in the light of the well settled principle and the background of the
definition of handicrafts, the Tribunal ·was right in holding that
agarbaties were not handicrafts. [88ID-E] )-
E M.S. Company Private Limited v. Union of India, [1985] ECR
110 SC, referred to.
(2) Failure to pay duty or take out a licence is not necessarily
due to fraud or collusion or wilful mis-statement or suppression of
facts or contravention of any provision of the Act. Suppression of -1'
p facts is not failure to disclose the legal consequences of a certain
provision. [884B]
Collector of Central Excise, Hyderbad v. M/s. Chemphar Drugs
and Liniments, Hyderabad, [1989] 2 SCC 127, referred to.
G (3) Mere failure or negligence on the part of the producer or
manufacturer either not to take out a licence in case where there was
scope for doubt whether goods were dutiable or not, would not attract
section 11-A of the Act. [884D]
(4) In the facts and circumstances of the case, there were
H materials to suggest that there was scope for confusion and the
'
\
PADMINIPRODUCTSv. COLLECTOROFC.E. (MUKHARJJ, J.) 875
appellants believing that the goods came within the purview of the
A
concept of handicrafts and as such were exempt. If there was scope
for such a belief or opinion, then failure either to take out a licence
or to pay duty on that belief, when there was no contrary evidence
that the producer or the manufacturer knew that these were excis-
able or required to be licenced, would not attract the penal provi-
sions of section 11-A of the Act. If the facts were otherwise, then B
the position would be different. [884E-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4080
r of 1988.
From the Judgment and Order dated 18.3.88 of the Customs
Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal c
No. ED/SB/1201/84-C.
V. Lakshmikumaran, N.M. Popli and V.J. Francis for the
Appellant.
D
A.K. Ganguli, K. Swamy, T.V.S.N. Chari and P. Parmeswaran
for the Respondent.
i The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. This is an appeal by the revenue E
under section 35L of the Central Excises & Salt Act, 1944 (hereinafter
referred to as 'the Act') against the order No. 195 of 1988-C dated 8th
March, 1988 passed by the Customs, Excise and Gold (Control)
Appellate Tribunal (hereinafter referred to as 'the Tribunal').
The appellants at all relevant times were manufacturing agarba- F
ties, dhoop sticks, dhoop coil, dhoop powder falling under Tariff Item
No. 68 of the erstwhile Central Excise Tariff. The relevant period
involved in the present Civil Appeal is from the year 1979 to 1983-84.
The appellants claimed exemption under notification No. 55/75 dated
1st March, 1975. By the said notification, the Central Government had
exempted goods of the description in the Schedule annexed to the G
notification and falling under Tariff Item 68 of the First Schedule to the
Actfrom the whole of duty of excise leviable thereon. In the serial No.
8 of the Schedule to the said notification, 'Handicrafts' were listed. It
is, therefore, clear that 'handicrafts' were fully exempt from payment
of duty of excise, according to the appellants. Under the notification
No. 111/78 dated 9th May, 1978, the appellants were exempted from H
876 SUPREME COURT REPORTS [1989) 3 S.C.R.
licensing control. That is the case of the appellants. The provision
A -~
requiring a manufacturer to take out a licence is controlled by Rule
174 of the Central Excise Rules, 1944. The relevant provision of Rule
174 at the relevant time provided, inter alia, as follows:
"Rule 174. Persons requiring a licence:
8 ~-
Every manufacturer, trader or person hereinafter
mentioned, shall be required to take out a licence and shall
not conduct his business in regard to such goods otherwise
than by the authority, and subject to the terms and condi-
tions of a licence granted by a duly authorised officer in the }I
proper Form"
c I
It is the case of the appellants that by this notification, all goods ~
which were exempt from the whole of duty of excise leviable thereon
unconditionally were exempted from the operatio.n of Rule 174. The
appellants were manufacturing dhoop sticks, coil and powder which
J1) the appellants contended before the Tribunal, were handicrafts under
notification No. 55/75 and as such were exempt from licensing control
under notification No. 111/78. It is, therefore, necessary at this stage,
in view of the contentions raised in this appeal, to refer to the notifica-
tions. By first notification, i.e., notification No. 55/75, in exercise of
the powers conferred by sub-rule (1) of rule 8 of the Central Excise
r-
E Rules, 1944, the Central Government had exempted goods of the
description specified in the Schedule annexed thereto and falling
under Item No. 68 of the First Schedule to the Act from the whole of
the duty Of '
excise leviable thereon and, as mentioned hereinbefore,
Item No. 8 of the Schedule annexed to the notification included among
the exempted goods 'Handicrafts'. The second notification, i.e., notifi-
cation No. 111/78-CE dated 9th May, 1978, the Central Government ~~
F
exempted from the operation of rule 174 of the said Rules, inter alia,
all goods that are exempt from the whole of the duty of excise leviable
thereon unconditionally. The effect of this notification, was that
manufacture of such goods were exempt from the operation of rule 174
of the said Rules. As a result, it was not necessary to take out a licence
G as enjoined by rule 174. The appellants had indicated the process of
manufacture of dhoop sticks, coil and powder before the Tribunal and I
the process was as follows: ~
"1. The various ingredients/raw materials like perfumes,
essential oils, natural oils and other raw materials are first
H mixed in specific proportions, by manual labour.
PADMINIPRODUCTSv. COLLECTOROFC.E. (MUKHARJI, J.] 877
2. These raw materials along with jigget and saw dust after
A
seiving by hand are mixed in a barrel with a stirrer with
hand and made into a paste.
3. This paste is kneaded in the kneading machine operated
by power.
B
4. This paste is put by hand in the extruder.
5. The extruder extrudes the paste in the form of needles
~ with the aid of power.
\
6. As the paste is extruded from the extruder it is collected
f on a wooden tray which is of a particular size. As it is c
collected on the tray it is cut on both sides to the accurate
size by hand.
7. The thin long incense is then transferred by hand from
the individual trays of long big tray by hand. D
8. After transferring it is properly arranged by hand in a
consolidated manner on the long big tray.
9. Another tray which has four slits called the cutting tray
is placed on top of the long tray with the incense. E
10. After placing the cutting tray a hand roller cutter is
rolled along the slits of the cutting trays to cut the incense
t to the required sizes.
11. The extra length or width of the incense on the tray is F
then removed by hand.
12. The cut incense is then transferred to a drying tray by
hand.
13. The incense is dried by stocking the trays in the drying
~
G
I
yard.
14. The dried incense is broken at the cut ends.
15. The ten incense sticks are inserted into the packe<.
H
878 SUPREME COURT REPORTS [ 1989) 3 S.C.R.
-~\
16. The incense packets are first punched with an eyelet.
A
17. Then twelve 1packets are wrapped in a cellophane
wrapper."
The revenue had issued trade notices indicating that agarbaties
B were handicrafts and were eligible to the exemption contained in the
notification No. 55/75 dated 1st March, 1975. Our attention was drawn
by Shri V. Lakshmi Kumaran appearing for the appellant to the trade
notice issued on 10th October, 1977, which read as follows:
"PUNE TRADE NOTICE NO. 258/1977, (NO. 3/T.1. 68/
1977) DT. 18.10.77
c
Agarbaties are exempt under Notfn. 55/75
Attention of the trade is invited to this Collectorate
Trade Notice No. 179/1975 (No. 4/T.I. 68/1975) dated
D 4.10.75 on the above subject.
2. The issue has been reconsidered and it has been
advised that Agarbaties are handicrafts and would be eligi- ~
ble to the exemption contained in the notification No. 55/
75-CE dated the 1st March, 1975 (as amended)."
E
He also drew our attention to the certificate furnished by the
Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion
Council, which stated as follows:
"This is to certify that Dhoop Sticks, Incense Cubes and
F Cone, Coils, Joss Sticks, are agarbaties in different physi-
. cal forms. The ingredients as well as end use for Agarbaties,
Dhoop Sticks, Incense cubes and Cone, coils, joss sticks
are one and the same.
Government of India has therefore categorised Dhoop
G Sticks, Incense cubes and cone, . coils, joss sticks as
agarbaties and thus eligible for the same rate of export
incentives."
It was contended before the Tribunal on behalf of the appellants
that dhoop sticks had been recognised by the Indian Handicrafts
H Board as handicrafts and that these were nothing else but agarbaties.
PADMINIPRODUCTSv.COLLECTOROFC.E. [MUKHARJI, l.I 879
As indicated hereinbefore, Basic Chemicals, Pharmaceuticals and
A
Cosmetics Export Promotion Council had also indicated that dhoop
sticks, incense cubes and cone, coils joss sticks are agarbaties ii) diffe-
rent physical forms and that the end-use of these and the ingredients
used therein were one and the same and for that reason these had been
made eligible for the benefit of export incentives as agarbaties.
Learned counsel for the appellants submitted that in the report on the B
Marketing of Handicrafts under the title "Survey of Indian Handic-
rafts" sponsored by the All-India Handicrafts Board, which was
brought out by Indian Cooperative Union, agarbaties were men-
tioned, which according to counsel, indicated that these were recog-
nized as handicrafts. A letter was placed before the Tribunal which
was issued by the Deputy Director, All India Handicrafts Board func-
tioning under the Ministry of Commerce, Department of Export Pro- c
duction which had certified that the agarbaties were the products of
the Indian Handicrafts Board, Ministry of Commerce. Certain notifi-
cations were also drawn attention to of the Tribunal which indicated
that agarbaties were handicrafts eligible for exemption tinder notifica-
tion No. 55/75. It was, therefore, contended that dhoop sticks, coil and D
powder were agar\laties and agarbaties were accepted as handicrafts
by various authorities inc\udiI1g the Central Government and mere use
of power in the manufacture of these did not bar them from being
called as handicrafts. It was further contended that in any event, there
was no warrant in invoking longer time limit of five years for raising
the demand and if at all demand should be raised it should be for a E
period of six months reckoned from the date of six months prior to the
issue of the show cause notice. In those circumstances, it was submit-
tetj that the appellants should not be made liable beyond the period of
six months from the date of issue of the show cause notice. The Tri-
bunal, however, referred to the definition of the term 'handicrafts'
given in the Concise Oxford Dictionary; 7th Edition, which stated as F
follows:
"Manual skill; manual art or trade or occupation;· man skil-
led in a handicraft."
Therefore, in order to be handicrafts, the Tribunal proceeded, G
on the basis that it should be the result of manual skill. But the respon,
dent before the Tribunal pleaded that the raw materials for the dhoop
are kneaded with the aid of power and after kneading the same, are
extruded and the manual work that was don~ in the process was only in
feeding of the raw materials by hand and later in the cutting of the
sticks to the desired length. The distinction between handicrafts and H
880 SUPREME COURT REPORTS [1989] 3 S.C.R.
A those which are machine-made, would be clear from tbe definition
adopted by UNCTAD. The same reads as follows:
"Some good may be produced partly by machine and partly
by hand: (l.e. a dress made up by hand from machine made
cloth, perhaps with·additional hand embroidery or other
B decorations) ... in such cases a product should be regarded
as hand-made or handicrafts if the essential character of the
product in its finished form is derived from the 'hand made'
aspect of its production."
In tbe Import Policy of 1984-85, handicrafts and agarbaties and
C dhoop figured under a Heading apart from handicrafts and stated that
dhoop and agarbaties had been listed under traditional item in
Appendix 17 at Serial No. V under Group Heading "Teiletry and
Prefumery" while the handicrafts had been given separately in that
Policy and this envisaged the handicraft to be manufactured by hand.
General Note I against tbe entry 'Handicrafts' in the Policy Book
D stated as follows:
"Articles which are classifiable elsewhere in this policy will
be deemed to be 'Handicrafts' falling in this group only if
such articles, besides being made by hand, have some
artistic or decorative value; they may or may not possess
E functional utility value in addition. Artistic or decorative
value of the article exported need not necessarily come out
of any art work, engraving or decoration done on the
article but tbe very form, shape or design of the article could
also be artistic and suggestive of the fact tbat the article is
primarily meant for decorative and not for utility pur-
F poses."
After analysing the findings and the trade notices and relying on
the decision of this Court in M.S. Company Private Limited v. Union
of India, [ 1985] ECR 110 SC, the Tribunal in the light of the definition
of "handicrafts" in the Encyclopaedia Britannica, came to the conclu-
G sion that in the manufacture of a product skill of the worker and the
use of hand are two pre-requisites for a product to qualify as a handic-
raft. In the Encyclopaedia Britannica, handicraft has been defined as
follows:
"Occupation of making by hand usable products graced
H with visual appeal. Handicrafts encompass activities that
PADMINIPRODUCTSv. COLLECTOROFC.E. [MUKHARJI, J.] 881
require a broad range of skills and equipment, including A
needle work, lace-making, weaving printed textile, decora-
tion, basketry, pottery, ornamental metal working, jewel-
ling, leather working, wood working, glassblowing, and the
making of stained glass."
It was found by the Tribunal that raw materials were mixed by B
hand and the first essential procedure in the manufacture of dhoop
etc., is kneading of the raw materials and the next essential stage is the
formation of the dhoop into sticks or coils. Both these processes were
carried out by the aid of power. Only cutting of the sticks to the
desired length was stated to be by hand. It was not the case of the
appellant that the formation of the dhoop sticks or coils, etc., there C
had been use of the skill of the human hand to give the dhoop its
essential character. But the Tribunal found that it was difficult to
accept that these were handicrafts merely because some authorities
have chosen to treat agarbaties as handicrafts. Therefore, the Tribunal
agreed with the Collector that these were not handicrafts. In that view
of the matter, the Tribunal upheld the order of the Collector on this O
point and held that these were dutiable. In view of the evidence
examined by the Tribunal and in the light of the well settled principle
and the background of the definition of handicrafts, it appears to us
that the Tribunal was right in coming to the conclusion that only a very
small portion· of required work was done by hand. The main part of the
manufacture of agarbaties, etc. was done with the aid of power. It was E
the machine that produced predominantly the end product. In that
view of the matter, we are of the opinion that the Tribunal was right in
holding that .agarbaties were not handicrafts. In coming to the
aforesaid conclusion the tribunal had considered all relevant materials
and records and applied the correct principles of law. These findings of
the tribunal on this aspect are unassailable. In the premises, when the F
appeal was filed and came up before this Court for hearing on 2nd
March, 1989, on examination of these materials, this Court was
satisfied that this contention of the appellant cannot be accepted and
agarbaties were not handicrafts. It was, however, further held by the
Tribunal that the revenue was entitled to levy tax for a period of five
years prior to the issue of show-cause notice and not six months G
\
pursuant to rule 9(2) of the Central Excise Rules. The relevant portion
j of rule 9(2) provides as follows:
"(2) If any excisable goods are, in contravention of sub-
rule (1) deposited in, or removed from, any place specified
therein, the producer or manufacturer, thereof shall pay H
882 SUPREME COURT REPORTS [1989] 3 S.C.R.
the duty leviable on such goods upon written demand made
A
within the period specified in section l lA of the Act by the
proper officer, whether such demand is delivered person-
ally to him, or is left at his dwelling house, and shall also be
liable to a penalty which may extend to two thousand
rupees, and such goods shall be liable to confiscation."
B
It may be mentioned that rule 9(1) of the said Rules stipulated
that no excisable goods shall be removed from any place where they
are produced, except in the manner provided in the rules. Therefore,
the question that arises in this appeal is whether section 11-A of the
Act applies or not. The relevant provisions of section 11-A are as
follows:
c
"11-A. Recovery of duties not levied or not paid or short-
levied or short-paid or erroneously refunded.-( 1) When any
duty of excise has not been levied or paid or has been
short-levied or short-paid or erroneously refunded, a
D Central Excise Officer may, within six months from the
rele••mt date, serve notice on the person chargeable with
the duty which has not been levied or paid or which has
been short-levied or short-paid or to whom the refund has
erroneously been made, requiring him to show cause why
he should not pay the amount specified in the notice:
E
Provided that where any duty of excise has not been
levied or paid or has been short-levied or short-paid or
erroneously refunded by reason of fraud, collusion or any
wilful misstatement or suppression of facts; or contraven-
tion of any of the provisions of this Act or of the rules made ~
F thereunder with intent to evade payment of duty, by such
person or his agent, the provisions of this sub-section shall
have effect, as if the words "Central Excise Officer" the
words "Collector of Central Excise", and for the words
"six months", the words "five years" were substituted.
G Explanation. -Where the service of the notice is
stayed by an order of a Court, the period of such stay shall
be excluded in computing the aforesaid period of six
months or five years, as the case may be."
Shri V. Lakshmi Kumaran, learned counsel for the appellant
H drew our attention to the observations of this Court in Collector of
PADMINIPRODUCTSv.COLLECTOROFC.E. lMUKHARJI, J.] 883
)
Central Excise, Hyderabad v. Mis Chemphar Drugs and Liniments,
A
Hyderabad, [ 1989] 2 SCC 127 where at page 131 of the report, this
Court observed that ·in order to sustain an order of the Tribunal
beyond a p.eriod of six months and up to a period of 5 years in view of
the proviso to sub-section (1) of section 11-A of the Act, it had to be
established that the duty of excise had not been levied or paid or
short-levied or short-paid, or erroneously refunded by reasons of B
either fraud or collusion or wilful misstatement or suppression of facts
or contravention of any provision of the Act or Rules made there-
under, with intent to evade payment of duty. It was observed by this
Court that something positive other than mere inaction or failure on
the part of the manufacturer or producer or conscious or deliberate
withholding of information when the manufacturer knew otherwise, is
required before it is saddled with any liability beyond the period of six c
months had to be established. Whether in a particular set of facts and
circumstances there was any fraud or collusion or wilful misstatement
or suppression or contravention of any provision of any Act, is a ques-
tion of fact depending upon the facts and circumstances of a particular
case. The Tribunal, however, had held contrary to the contention of D
the appellants. The Tribunal noted that dhoop sticks are different
products from agarbaties even though they belonged to the same
category and the Tribunal was of the view that these were to be treated
differently. Therefore, the clarification given in the context of the
agarbaties could not be applicable to dhoop sticks etc., and the
Tribunal came to the conclusion that inasmuch as the appellant had E
manufactured the goods without informing the Central Excise
authorities and had been removing these without payment of duty,
these would have to be taken to attract the mischief of the provision of
rule 9(2) and the longer period of limitation was available. But the
~- Tribunal reduced the penalty. Counsel for the appellants contended
' before us that in view of the trade notices which were referred to by F
the Tribunal, there is scope for believing that agarbaties were entitled
to exemption and if that is so, then there is enough scope for believing
that there was no need of taking out a licence under rule 174 of the said
Rules. and also that there was no need of paying duty at the time of
removal of dhoop sticks, etc. Counsel further submitted that in any
I event apart from the fact that no licence had been taken and for which G
.'t no licence was required because the whole duty was exempt in view of
notification No. 111/78, referred to hereinbefore, and in view of the
fact that there was scope for believing that it was exempt under
Schedule annexed to the first notification, i.e., 55/75, being handi-
crafts, the appellants could not be held to be guilty of the fact that
excise duty had not been paid or short-levied or short-paid or erron- H
884 SUPREME COURT REPORTS [1989] 3 S.C.R.
A eously refunded because of either any fraud or collusion or wilful
misstatement or suppression of facts or contravention of any provision
of the Act or Rules made thereunder. These ingredients postulate a
positive act. Failure to pay duty or take out a licence is not necessarily
due to fraud or collusion or wilful misstatement or suppression of facts
or contravention of any provision of the Act. Suppression of facts is
B not failure to disclose the legal consequences of a certain provision.
Shri Ganguly, appearing for the revenue, contended before us that the
appellants should have taken out a licence under rule 174 of the said
Rules because all the goods were not handicrafts and as such were not
exempted under notification No. 55/75 and therefore, the appellants
were obliged to take out a licence. The failure to take out the licence
and thereafter to take the goods out of the factory gate without pay-
c ment of duty was itself sufficient, according to Shri Ganguly, to infer
that the appellants came within the mischief of section 11-A of the
Act. We are unable to accept this position canvassed on behalf q.f the
revenue. As mentioned hereinbefore, mere failure or negligence on
the part of the producer or manufacturer either not to take out a licence
D in case where there was scope for doubt as to whether licence was
required to be taken out or where there was scope for doubt whether
goods were dutiable or not, would not attract section 11-A of the Act.
In the facts and circumstances of this case, there were materials, as
indicated to suggest that there was scope for confusion and the appel-
r -
lants believing that the goods came within the purview of the concept
E of handicrafts and as such were exempt. If there was scope for such a
belief or opinion, then failure either to take out a licence or to pay
duty on that belief, when there was no contrary evidence that the
producer or the manufacturer knew that these were excisable or
required to be licenced, would not attract the penal provisions of
section 11-A of the Act. If the facts are otherwise, then the position
F would be different. It is true that the Tribunal has come to a conclu-
sion that there was failure in terms of section 11-A of the Act. Section
35-L of the Act, inter a/iu, provides that an appeal shall lie to this
Court from any order passed by the Appellate Tribunal relating,
among other things, to the determination of any question having a
relation to the rate of duty of excise or to the value of goods for
G purposes of assessment. Therefore, in this appeal, we have to examine ,
the correctness of the decision of the Tribunal. For the reasons indi- ·-{
cated above, the tribunal was in error in applying the provisions of
section 11-A of the Act. There were no materials from which it could
be inferred or established that the duty of excise had not been levied or
paid or snort-levied or short-paid or erroneously refunded by reason of
H fraud, collusion or any wilful misstatement or suppression of facts, or
PADMINIPRODUCTSv. COLLECTOROFC.E. [MUKHARJI, J.] 885
contravention of any of the provisions of the Act or of the rules made A
} thereunder. The Tribunal in the appellate order has, however,
reduced the penalty to Rs.5,000 and had also upheld the order of the
confiscation of 'the goods. In view of the fact that the claim of the
revenue is not sustainable beyond a period of six months on the ground
that these dhoop sticks, etc. were not handicrafts entitled to exemp-
tion, we set aside the order of the tribunal and remand the matter to
B
the tribunal to modify the demand by confining it to the period of six
months prior to issue of show-cause notice and pass consequential
orders in the appeal on the question of penalty and confiscation. The
appeal is allowed to the extent indicated above and the matter is,
- ~""-.··
therefore, remanded to the tribunal with the aforesaid directions. This
appeal is disposed of accordingly. c
f R.S.S. Appeal allowed.
;
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