Customs, Excise and Gold Tribunal - Tamil Nadu
Itc Bhadrachalam Paper Boards Ltd. vs Commr. Of C.E. And C on 6 January, 1997
Equivalent citations: 1997(93)ELT584(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. The prayer in the application filed under Section 35 of Central Excise Act, 1944 is for dispensation of pre-deposit of duty amount of Rs. 1,04,80,495/- and a penalty of Rs. 1,05,00,000/- payable in terms of the impugned order. The demand has been made in respect of the wrapping paper for which the appellants had availed of the benefit of Notification No. 217/86. The learned lower authority has demanded the duty holding that this benefit was not available as the appellants did not fulfil the requirements of Notification 217/86 for the purpose of clearance of the wrapping paper for captive consumption.
2. The learned Consultant for the appellants has pleaded that the show cause notice dated 4-5-1993 which was received by the appellants on 7-5-1993 was for recovery of the duty on wrapping paper captively consumed for wrapping other types of paper for the period 1988-89 to 1992-93. He pleaded that the learned lower authority has denied the appellants out of the benefit of Notification 217/86 in respect of this paper as according to him the value of this wrapping paper was not included for the purpose of arriving at the assessable value of the paper which was wrapped in the same and inasmuch as the value of this wrapping paper was not included in the total price of the paper charged and since no duty therefore in respect of this paper came to be paid at the time of clearance of the paper wrapped in the same, the benefit of Notification 217/86 should not be allowed. In this connection he referred us to show cause notice and the allegations contained therein and also to the reasoning of the learned lower authority for demanding duty. He pleaded that there was practice in the paper industry to arrive at the notional rate of the paper cleared in the wrapped condition and the manner in which the same was arrived could be seen from the copy of the letter No. 347/PMA dated 30th May, 1978 from the Indian Paper Makers Association, Calcutta is aside para 6 of this letter, (a copy of which has been filed before us). This para 6 is reproduced below for convenience of reference:
"It is also the practice in the Paper Industry both in India as well as in International Trade that the weight declared of reams of Paper and Paper Board are inclusive of weight of wrapper, and in the case of reels the weight declared on the package includes weight of reel core, wrapper and any side discs of board used for protecting the sides. As the chargeable weight tolerance includes the wrapper in the case of reams, and reel core, side disc and the wrapper in the case of reels, it is not possible or advisable to indicate net weight of the package as specified under Rule 11 of Chapter 2 and Rule 29 under Chapter 3."
On a query from the Bench, he clarified that this letter was issued in the context of the requirements of Standard of Weights and Measures ( Packaged Commodities) Rules 1977. He has pleaded that this packaged weight is marked on the packages and the reams of the packed paper and is inclusive of the weight of the wrapper. His plea is that the appellants had been as it is marking the gross weight on the packet weight of the paper. In this connection he referred us to the order of the learned lower authority and he has pleaded that the learned lower authority taking note of the endorsement on the two gate passes regarding the manner in which the notional weight of the paper had been arrived at has come to the conclusion that the appellants for the entire period had arrived at the notional weight of paper in the same manner and has demanded duty by holding that the weight of wrapping paper had not been taken into reckoning for arriving at the total weight of the paper as was cleared from the factory and the invoice was raised for the weight excluding this wrapper weight and therefore the wrapping paper could not be taken to have suffered duty. He pleaded that the appellants had followed the practice in the paper industry while paying duty and therefore no fault could be found in this regard by the authorities. He pleaded that earlier to the period in question the proceedings had been drawn in respect of the inputs credit taken on the inputs used in the manufacture of wrapping paper when the appellants had claimed in the classification list the benefit of exemption Notification 217/86 for reason of the use of the wrapping paper captively and these proceedings had been dropped ultimately. On appeal, the Collector (Appeals) held that in view of Rule 57D(2) the appellants were eligible to take Modvat credit on the input which was used for manufacture of wrapping paper which ultimately was used in wrapping other papers cleared from the factory. On going through the facts he fairly conceding that the issue in that case was in regard to the benefit of input credit in respect of the inputs used in the manufacture of wrapping paper. He however pointed out that the context was regarding availment of the benefit of Notification 217/86. He also urged that the appellants had all along filed the price lists as well as the classification lists which had been approved from time to time and these approvals, he has pleaded, would not have been given in a mechanical manner and would have been granted after due verification. He pleaded in this background no mala fide can be attributed to the appellants and the longer period of limitation could not be invoked.
3. In this connection he referred us to the order of the Tribunal bearing No. 682/96, dated 6-5-1996, filed in the paper book. He has pleaded that the benefit of Notification 217/86, has been allowed to the appellant both the wrapping paper and the paper find a place in the Notification 217/86 and the wrapping paper has been used in the manufacture of the final product. He has pleaded in case the limitation of 6 months is applied the appellants are entitled to pay only Rs. 6.00 lakhs. In the facts and circumstances of the case he had pleaded there was no warrant to levy and penalty and in any case the penalty levied was disproportionate in the facts and circumstances of the case.
4. The learned SDR for the Department pleaded that the demand has been raised taking into consideration the formula adopted for arriving at the notional weight. The authority below, he has pleaded, has applied the formula as is adopted in the trade and as per the ISI. He has pleaded that there is no averment by the appellants before the learned lower authority nor even before the Tribunal that the formula as applied by the Commissioner for raising the demand was in fact not adopted as the basis for arriving at the notional weight. He has pleaded it has been clearly stated in the show cause notice as also in the order of the learned lower authority that the formula applied by the appellant for giving at the notional weight did not take into reckoning the weight of the wrapping paper. He has pleaded that the appellants have not come on record with any acceptable documentary evidence to establish their case in this regard. He has pleaded inasmuch as the wrapping paper was not taken into reckoning for arriving at the notional weight of the paper, the duty on the weight of the wrapping paper cannot be taken to have been paid by the appellants and for that reason therefore the benefit of Notification 217/86 should not have been availed of. The learned lower authority, he has pleaded, has entered a clear finding in this regard in para 13 of his order. This para for convenience of reference is reproduced below :
"Bhadrachalam Paper denied the allegations levelled against them in the show cause notice. One of the main arguments on which Bhadrachalam Paper based their defence was that the invoices had been raised only in respect of total weight noted in the gate passes and thus the sole consideration for sale had been only the payments received with reference to the total quantity as shown in the gate passes and respective invoices and that it would follow that the weight of the wrapper was included therein as otherwise the manufacturer would have no means of recovering the cost of the wrapper. This contention is not acceptable. What is relevant here is whether appropriate duty has been paid on the said wrapper. Billing for weight shown on the respective invoices does not imply that the weight of the mill wrapper is included or that proper duty had been paid on it. It is observed that quantity, value and duty particulars of the mill wrappers were not separately shown on the duty paying documents. In the absence of such a vital evidence, I am not inclined to accept the contention of Bhadrachalam Paper that weight of wrapper was included in the weight shown on the duty paying documents which has been arrived at by them as per a formula based on certain assumptions and presumptions."
5. In regard to limitations, he again referred us to the order of the learned lower authority. Detailed reasoning has been given bringing out the fact that the appellant had not brought to the notice of the authorities the manner in which they have arrived at the notional weight. As per the method adopted it was only from the two gate passes it came to light that the appellants had been adopting the formula for arriving at the notional weight without taking into reckoning the weight of the wrapping paper. Regarding any financial hardship the learned Consultant had no specific plea to make.
6. We have given a careful thought to the pleas made by both the sides. We observe that the charge against the appellants is that they were not taking into reckoning the weight of the wrapping paper while arriving at the notional weight of the paper and they were working out the value of the paper sold based on the notional weight arrived at excluding the weight of the wrapping paper. The inference drawn by the lower authorities is that the benefit of notification would not be available where in terms of the explanation to Notification 217/96 under which it is stated that the packaging materials, the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final product under Section 4 of the Central Excise and Salt Act, 1944. The issue therefore to be considered is in the context of this explanation.
7. The learned lower authority has observed that the appellants had arrived at the notional weight by adopting the formula as -
A x B x C where R = -------------------
1000R is the weight of the paper in Kgs.
A is the weight of a sheet (GSM) B is the No. of sheets contained in the ream C is the nominal area of each sheet in sq.mts.
There is no averment from the appellants before the learned lower authority or even before us that the appellants had not adopted this formula for arriving at the notional weight. We observe that the appellants themselves have referred to the clarification given by the Indian Paper Makers Association (copy of which has been filed in the paper book) in para 6 which has been reproduced above. It clearly shows that the practice in India and in International trade is to declare the weight of the reams of paper and paper board packed is by including the weight of wrapper. The appellants, as seen from the formula that was found incorporated in the gate passes, did not take into reckoning the weight of the wrapping paper for notional weight purposes as above. The appellants have not produced any evidence documents to show that in fact the weight of the wrapping paper had been included while declaring the notional weight of the paper cleared in reams as declared in the invoices. In this view of the matter we find prima facie the learned lower authority's findings are sustainable in law. A plea has been taken that some earlier proceedings were drawn in respect of the eligibility to Modvat credit in respect of the inputs used in the manufacture of wrapping paper when the wrapping paper was cleared duty-free under Notification 217/86 and that once the issue has been decided in their favour the same issue cannot be reopened. We observe that the issue in that case and the present case are totally different and reference to Notification 217/86 is only in the context of eligibility of Modvat credit for inputs when the paper was cleared duty-free under exemption Notification. Here the question before us is whether the requirements of Notification 217/86 in respected of the paper in question had been satisfied. The condition to be satisfied under Notification 217/86 is in terms of the Explanation in the operative part of the Notification which is reproduced below :
Explanation - For the purpose of this notification, 'inputs' does not include-
(i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products;
(ii) Packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products;
(iii) packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final products under Section 4 of the Central Excises and Salt Act, 1944 (1 of 1944); or
(iv) cylinders for packing gases.
Here it is seen that in the light of the discussion above, prima facie condition as per para (iii) to the explanation since the weight of the wrapping paper and cost thereof has not been included for arriving at the assessable value under Section 4, the same therefore, cannot be considered as an eligible input and therefore cannot be taken to have discharged the duty liability. We, therefore, prima facie find no force in the plea of the appellant in this regard. A plea has been taken that the issue stood decided by the judgment of the Delhi Bench of the Tribunal in order No. 682/96, dated 6-5-1996. We observe that in that order, the issue for consideration was whether wrapping paper in question in terms of provisions of Rule 57 D (2) would be eligible for the benefit of the Notification 217/86 and the Tribunal held that wrapping paper would be covered within the ambit of Notification 217/86. The issue regarding satisfaction of the conditions of the notification in regard to wrapping paper was not posed before the Bench. In the present case, the issue with which we are concerned is whether the appellants had satisfied the conditions of Notifications cited supra for the purpose of availment of the benefit of the exemption Notification and therefore, the ratio of the above decision does not prima facie apply to the facts of this case.
8. In regard to limitation the plea taken is that the appellants had been filing the price list and the classification list and which had been duly approved from time to time and therefore, the authorities can be taken to be aware of the method adopted by the appellants for arriving at the notional weight. We observe that there is no plea from the appellants that they had declared the method adopted for arriving at the notional weight in the price list or in the classification and it is not their case that they were endorsing the same on all the gate passes relating to the clearance which had been made during the relevant time. In fact their plea is that they endorsed the formula on 2 gate passes and that cannot form the basis for raising the demand for the entire period. What follows prima facie is therefore that the appellants had not come on record as to the method adopted for notional weight they were adopting nor they have come on record with evidence which had been contemporaneously maintained by them for their purpose to show that the wrapper weight had been taken into reckoning while arriving at the notional weight of paper in reams. The appellants therefore, we hold, had prima facie withheld the information from the Department when they fully well knew the practice in trade was to take the weight of the wrapping paper into consideration. There is no explanation from them for not doing so and we hold that prima facie this was done with intention to evade payment of duty and to avail the benefit of Notification 217/86.
9. We observe that prima facie it is seen that the appellants have paid duty based on the invoiced weight and they arrived at the values based on that weight which did not include the weight of the wrapping paper. For this reason we hold that this weight of the wrapping paper prima facie has been rightly held by the learned lower authority not to have been taken into reckoning for the purpose of arriving at the assessable value and for that reason the condition of Notification 217/86 cannot be taken to have been complied with for the purpose of exemption for the wrapping paper under this Notification. We therefore find no infirmity prima facie in the order of the learned lower authority. Inasmuch as the financial hardship has not been pleaded taking into consideration the facts and circumstances of the case we direct the appellants to pre-deposit the entire duty as demanded in terms of the impugned order and a sum of Rs. 10,00,000/- (ten lakhs) towards penalty on or before 27th February, 1997 and report compliance by 28th February, 1997. Subject to the above, the pre-deposit of the balance amount of penalty shall stand dispensed with pending appeal. The matter will be called on 28th February, 1997 for reporting compliance.