Customs, Excise and Gold Tribunal - Delhi
Commissioner Of Central Excise vs Entremonde Polyecoaters Ltd. on 6 November, 2000
Equivalent citations: 2001(73)ECC220
ORDER
K. Sreedharan, J. (President)
1. This appeal has come up before us on a reference made by a Bench of two Members evidenced by Miscellaneous Order No. M/69/2000-D dated 30.8.2000. The question referred is:
Whether the product manufactured by the respondents is eligible for concessional rate of duty in terms of serial No. 2 of the Table annexed to Notification No. 63/87-CE dated 1.3.1987 for the period from 1.3.1987 to 11.6.1989?
2. Revenue questions the correctness of Order-in-Original No. 416/CEX/93 dated 23.12.1993. That order happened to be passed by Collector of Central Excise and Customs, Aurangabad in a proceeding initiated pursuant to show cause notice dated 5.6.1992. Respondent, Entremonde Folycoaters Ltd. are engaged in the manufacture of impregnated, coated, covered or laminated cotton textiles classified under Chapter 59 of the Schedule to the Central Excise Tariff Act, 1985. They claimed concessional rate of duty in terms of Notification No. 63/87-CE dated 1.3.1987. As per the show cause notice, respondent could not have claimed concessional rate of duty in terms of that notification, because they were using the knitted cotton fabrics falling under Chapter sub-heading 6001.11 instead of fabric falling under Chapter 52 as required by the notification. It was the case in the show cause notice that the respondent wrongly availed concessional rate of duty during the period from 1.3.1987 to 11.6.1989. Hence, duty amounting to Rs. 63,68,842.48 was claimed.
3. Claim put forth by the department in the show cause notice was disputed by the manufacturer. They also contended that there was no suppression of any material from the department and so the show cause notice issued on 5.6.1992 in relation to transactions covering the period from 1.3.1987 to 11.6.1989 is barred by limitation.
4. Collector of Central Excise and Customs, Aurangabad by the impugned order withdrew all the proceedings initiated pursuant to the show cause notice. The said officer took the view that there was no reason for invoking the proviso to Section 11A(1) of the Act; that the show cause notice is barred by limitation and that the duty paid by the manufacturer during the period was correct. It was also held that the manufacturer did not conceal any material fact from the notice of the department.
5. In this appeal the main ground urged by the learned Departmental Representative is that the respondent/manufacturer was not entitled to claim the benefit of Notification No. 63/87-CE dated 1.3.87 and that they actually suppressed the fact that knitted cotton fabrics classifiable under Chapter 60 were used in the manufacture of the finished goods. The contention raised by the department is that since base fabric used by the respondent in the manufacture of the finished goods was not falling under Chapter 52, benefit of Notification No. 63/87-CE is not available to the assessee.
6. For a proper understanding of the notification and the relevant entry, we read the same:
Exemption to Certain specified goods of Chapter 59. -- In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (3) of the Table annexed and falling under heading No. or subheading No. the Schedule to the Central Excise Tariff, 1985 (5 of 1986) specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the said Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table, subject to the conditions, if any, laid down in the corresponding entry in column (5) thereof.
TABLE
S. Heading No. Description of goods Rate Conditions
No. or sub
heading No.
(1) (2) (3) (4) (5)
(2) 5903.19 textile fabrics, Rs. 7 per square
impregnated, metre plus the
coated covered duty for the time
or laminated being leviable on
with plastics. the base fabrics
under Chapter 52,
if not already
paid.
It is common case that the finished product manufactured by the respondent falls under Tariff sub-heading 5903.19. It is also the admitted case of the parties that the base fabric used by the respondent in the manufacture of the finished goods did not fall under Chapter 52 of the Tariff. In such a situation, how duty on the finished goods falling under Tariff sub-heading 5903.19 is to be levied is the question that arises for consideration.
7. Chapter Heading 59.03 deals with textile fabrics, impregnated, coated, covered or laminated with plastics other than those of heading 59.02. This chapter Heading 59.03 makes it clear that the goods mentioned in this Heading should be "of base fabrics of cotton." The items, which fall under Heading 59.03, are sub-divided into two categories, namely, 5903.11 and 5903.19. Sub-heading 5903.11 dealt with coated or laminated with preparations of low density polyethylene. Other types of goods falling under Heading 59.03 are to fall under sub-heading 5903.19. Item 2 to the Table to Notification No. 63/87 related to this type of goods.
8. As stated earlier, base fabric used by the respondent in the manufacture of finished product was cotton. They were using knitted cotton. Knitted cotton was not one falling within Chapter 52. Base fabric being cotton, what should be the duty payable by the manufacturer in terms of the notification? Column 4 of the Table attached to the notification provided for the rate of duty. The rate of duty was Rs. 7.00 per square metre plus the duty for the time being leviable on the base fabric under Chapter 52, if not already paid. This prescribed the yardstick for levying duty on the finished product. Whatever be the nature of the base fabric, whether it falls under Chapter 52 or not. if the base fabric is of cotton, then the duty payable as per the notification is Rs. 7.00 per sq. metre plus duty leviable on base fabrics falling under Chapter 52. In other words, so long as the base fabric used in the manufacture of the finished product remains cotton and the finished product fall within the Tariff sub-heading 5903.19, then, irrespective of the classification of the base fabric used in the manufacture, duty payable will be that fixed for base fabrics under Chapter 52 of the Tariff plus Rs. 7.00 per square metre.
9. Respondent was purchasing the base fabric of cotton from its manufacturers. So, when the goods were so purchased by them, it was subject to payment of duty. That duty was paid by its manufacturers. The base cotton fabric, which was subjected to duty, was worked upon by the respondent to bring out the finished product falling under sub-heading 5903.19. The duty liability on the finished product was the duty paid on the base fabric paid by its manufacture plus Rs. 7.00 per sq. metre. This duty liability was discharged by the manufacturer, namely, the respondent herein when they cleared the goods which fell under Tariff sub-heading 5903.19.
10. The stand taken by the Revenue is that the base fabric used by the respondent being not one falling under Chapter 52 must be subjected to duty fixed under the Tariff Act. This havi.ig not been paid, proceedings were initiated by issuance of the show cause notice. This stand taken by the department is incorrect. Reference in this regard may be made to the decision of the Supreme Court in J.K. Steel v. Union of India . A close reading of Notification No. 63/87-CE shows that finished products falling under Tariff sub-heading 5903.19 made out of base fabrics of cotton should be liable to duty leviable on base fabrics falling under Chapter 52 plus Rs. 7.00 per sq. metre.
11. The contrary view canvassed by the department in this appeal is unsustainable.
12. We answer the question referred by the referring Bench as stated above and dismiss the appeal.