(A.K. Sikri and Rohinton Fali Nariman, JJ.)
Jayant Juneja _________________________ Appellant
v.
Commissioner of Central Excise, Jaipur _____ Respondent
Civil Appeal No(s). 1305/2008, decided on November 24, 2015
With
C.A. No. 1302/2008, &, C.A. No. 1304/2008
The Order of the court was delivered by
Order
1. The facts in brief are that on 13.1.1992, M/s. Sita Juneja & Associates (hereinafter referred as M/s. SJA), was awarded a contract by M/s. ITC Ltd. to make different items of furniture for a Five Star Hotel at Jaipur, known as Hotel Rajputana Palace Sheraton. The work was to be done on labour contract basis and as per the drawings and specifications supplied by M/s. ITC Ltd. all the materials for the work were supplied by M/s. ITC Ltd. and any wastage thereof was to the contractor’s accounts.
2. The work was executed by M/s. SJA through sub-contractors in 1992-93, with the raw material supplied by ITC Ltd. and as per the specifications, drawings and designs supplied by ITC Ltd.
3. On the basis of an information that M/s. Hotel Rajputana Palace Sheraton, a Five Star Deluxe Hotel owned by M/s. ITC Ltd., had entered into agreements with different manufactures of furniture for the manufacture of different items of furniture ‘at site’ on labour contract basis as per the terms, conditions and rates set out in the respective agreements, the Officers of the Central Excise visited Hotel Rajputana on 12.12.1995 and directed the representatives of M/s. ITC Ltd. to furnish complete information relating to the manufacture of different items of furniture for use in their premises. M/s. ITC Ltd., in response, furnished inter alia the copies of the agreements entered into by them with M/s. SJA, represented by the appellant herein for the manufacture of furniture ‘at site’ on labour contract basis under their letter dated 11.01.1996.
4. Statements of one of the partners of M/s. SJA and one Shri Abhijit Chakrawarthy of M/s. ITC were recorded under Section 14 of the Central Excise Act, 1944 (for short ‘the Act’) On the basis of scrutiny of the agreement, details furnished, and statements recorded, it appeared that M/s. SJA had engaged itself in the manufacture of items of furniture on job work basis for M/s. ITC Ltd. and, accordingly, they are the ‘Manufacturer’ of the said excisable goods within the meaning of Section 2(f) of the Act.
5. Accordingly, show cause notice dated 22.10.1996 was issued to M/s. SJA asking it to show cause as to why Central Excise Duty amounting to Rs. 23,90,715 should not be demanded from it under Rule 9(2) of Rules, 1944 for the extended period as per the proviso to Section 11A(1) of the Act. The said show cause notice proposed to demand the amount comprising of cost of raw materials, job-charges paid to M/s. SJA, plus drawings and design charges for the furniture items on the ground that the same should be treated as the assessable value of furniture supplied to ITC hotels at Hotel Raputana Palace. The show cause notice also proposed to impose penalty on M/s. SJA and appellant herein (one of the partners of M/s. SJA).
6. Appellant’s case is that the firm had been dissolved on 05.10.1996 and one of the partners namely, Sita Juneja as proprietress was running the business thereafter under the name and style of “Sita Juneja & Associate”. The demand made was resisted by the erstwhile partners in their replies to the notice on various grounds, one of which was that the partnership firm was no more in existence. According to the appellants, there were no provisions in the Central Excise Act or any rules framed thereunder for assessment and demand of duty of excise on a partnership firm after its dissolution and in absence of any such provisions, it was not open to the Department to raise a demand of duty after 05.10.1996. They relied on the decision of Supreme Court in case of State of Punjab v. Jullundur Vegetables Syndicate [(1966) 17 STC 326] and Khushi Ram Behari lal & Co. v. Assessing Authority Sangrur [(1967) 19 STC 381].
7. The Commissioner vide its Order-in-Original dated 08.01.1998 adjudicated the dispute and confirmed the demand duty of Rs. 17,51,329/- under Section 11A read with Rule 9(2) and imposed penalty of equal amount under Section 11AC. The Commissioner held that appellant along with other in the capacity as partners of the erstwhile firm were jointly and severally liable to pay the duty and penalty amounts as also to pay interest under Section 11AB on the duty amount. The Commissioner imposed penal of Rs. 1.5 lacs on appellant and Rs. 10 lacs on M/s. Hotel Rajputana under Rule 209A. M/s. Hotel Rajputana was given option to redeem the goods by paying Rs. 5.25 lacs as redemption fine along with the duty amount of Rs. 17,51,329/-.
8. Being aggrieved, the appellant along with other partners and M/s. Hotel Rajputana challenged the order by filing their separate appeals before Tribunal. Both the appeals were clubbed together. The main issue raised by the appellant herein was whether after the dissolution of the firm, any goods manufactured by M/s. SJA could validly be assessed to duty in their names and whether any demand of such duty could be raised on them under the Act and the relevant rules framed thereunder.
9. The Member (Technical) and Member (Judicial) of the Tribunal differed with each other and the matter was referred to before the President and the President consented with the view taken by Member (Technical) The Tribunal vide its order dated 29.08.2007 dismissed the appeal filed by the appellant and partly allowed the appeal filed by M/s. Hotel Rajputana Sheraton.
10. The learned Member (Judicial), held that there cannot be a duty demand on the partners jointly and severally for the goods manufactured by M/s. SJA when the same has been dissolved that too when it was not the Department’s case that dissolution of the firm was unlawful and not genuine and effected to defraud the Department. It was also held that items in question are not handicraft and not entitled for benefit of Notification No. 76/86 CE though the goods are made pre-dominantly by hand and are covered by the description of ‘other furniture’ under Heading 94.03. It also held that M/s. SJA is not liable to pay any penalty since the duty demand was for the period prior to insertion of provisions. The quantum of redemption fine was also reduced to Rs. 3 lacs. However, no finding was given on the aspect of the immovability of the items in question and the issue of limitation.
11. On the other hand, Member (Technical), only gave a finding on the first issue and held that even after the dissolution of firm, partners of the firm were liable to pay duty for the goods manufactured and cleared by them prior to dissolution. It also set aside the penalty. No finding was given on the other issues i.e. whether handicrafts are entitled to the benefit of Notification No. 76/86 CE, the items are immovable and cannot be held as furniture under the heading 94.03 as also on the aspect of limitation.
12. The President, as a third Member, followed the decision of the Larger Bench of the Tribunalon the same issue decided in the case of Gopal Industries v. CCE and agreed with Member (Technical). Hence, these appeals.
13. After hearing the learned counsel for the parties, we are of the opinion that the appeals warrant to be allowed solely on the ground that the show cause notice issued was beyond the period of limitation and extended period of limitation as per the proviso to Section 11A(1) of the Act invoked by the Department was impermissible in the facts of the present cases. We may note in this behalf that the assessees had taken a specific plea to the effect that they bona fide believed that the manufacture of wooden furniture manually by artisans/craftsmen were wholly exempt from payment of duty under Notification No. 76/86-CE. It was also pleaded that as early as in the year 1986 the assessees had sought opinion from an expert and it was clarified by the expert that such furniture items were exempt from payment of duty. A specific declaration to this effect was furnished with the Central Excise Department at New Delhi vide letter dated 16.07.1987 about the activity carried out by the assessees and on that basis, it was claimed that the said furniture items supplied by the assessees under the aforesaid contract to M/s. ITC Ltd. were exempt for payment of excise duty. Thus, insofar as the appellants are concerned, they had taken a particular stand in the declaration filed as early as on 16.07.1987 disclosing all relevant facts. However, the Central Excise Department at New Delhi did not take any action thereof. Issuance of show cause notice on 22.10.1996, after a long gap, would clearly be time barred and under the aforesaid circumstances, it is not a case where the proviso to Section 11A(1) of the Act could be invoked inasmuch as there was neither any misrepresentation nor any misstatement for concealment of relevant facts on part of the appellants.
14. These appeals are, accordingly, allowed on the aforesaid ground without going into the merits of the cases.
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