PADMINI PRODUCTS versus COLLECTOR OF CENTRAL EXCISE, BANGALORE

Citation: [1989] 3 S.C.R. 873 · Decided: 18-08-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Disposed off

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

) 
, 
P ADMINI PRODUCTS 
v. 
COLLECTOR OF CENTRAL EXCISE, BANGALORE 
AUGUST 18, 1989 
[SABYASACHI MUKHARJI AND B.C. RAY, JJ.] 
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. 
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 
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. 
A 
B 
c 
D 
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 
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 17 4 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. 
D 
While partly allowing the appeal, and remanding the case to the 
Tribunal to modify the demand, this Court, 
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 
.A 
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 
r 

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