Customs, Excise and Gold Tribunal - Delhi
C.C.E., New Delhi vs M/S. Plastikot (Sundersons) Inds. & ... on 9 November, 2000
Equivalent citations: 2001(138)ELT700(TRI-DEL)
ORDER K.K. Bhatia, Member (T)
1. The appellants M/s. Plastikot (Sundersons) Industries, Proprietor - M/s. Chaukhani India )P Ltd., Sonepat manufactures coated cotton fabrics and coated man-made fabrics falling under Items No.19 (III) and No. 22 (3) respectively of the erstwhile Central Excise Tariff. On 21.2.85, their factory premises and registered office were raided by the Officers of the Anti Evasion Wing of the DRI and Officers of Central Excise Department. On verification of their stock, 7867 mts. of coated cotton fabrics were found in excess of the recorded balance in their RG.1 Register for which separate proceedings were initiated against them.
2. From the seized records, it was learnt that they had purchased 60,114 mtrs. of cotton fabrics. As per the ledger of M/s. Ambika Textiles, Burhanpur, this party had supplied to the appellants the aforestated cotton fabrics against 9 bills during the months of June and July, 1984. There was no entry of this quantity of cotton cloth in their Form IV register. The suppliers of this cloth had received a sum of Rs.60,482.96 in cash. Another quantity of 1,03,312 mtrs. of cotton cloth were supplied to the appellants by M/s. Ambika Textiles against 14 No. bills during July to September, 1984. The search of the premises of another supplier - M/s. Ram Lal Durgadutt & Bros., Ahmedabad on 9.9.85 and scrutiny of their records, it was further revealed that the appellants had purchased goods measuring 93,186.5 mts. against 11 No. bills during November, 1984 to February, 1985. All these quantities were not entered into their Form IV register. Consequently, it was averred by the investigating authorities that cotton fabrics measuring 2,62,691.5 mts. was not accounted for in Form IV register by the party and the same was used by them for the manufacture of coated cotton fabrics which was subsequently cleared without payment of duty. Taking the value of the coated cotton fabrics @ Rs.10/- per meter, the Department prima facie held the view that the duty of excise amounting to Rs.9,98,227.70 had not been paid by the party. Consequently, a show cause notice dt. 1.1.86 was issued to the party calling upon them to show cause why duty amounting to Rs.10,42,841.60 should not be demanded from them under Section 11A of the Central Excise Act, 1944 and why penalty should not be imposed on them under Rule 173Q of Central Excise Rules, 1944.
3. The above proceedings culminated in the Principal Collector of Central Excise, New Delhi passing an Order dt. 31.10.88, in which, he confirmed the duty of Rs.10,27,225/- on the appellants apart from imposing a penalty of Rs.1 lakh on them. The party filed an appeal against this order and the CEGAT vide its Final Order No.92/89-D dt. 23.3.89 set aside the order of the Principal Collector and remanded the matter to the Collector for fresh proceedings according to law.
4. On remand, a fresh show cause notice dt. 29.5.89 was issued to the party. In this, the party was called upon to show cause why duty amounting to Rs.9,98,227.70 should not be demanded from them and why a penalty should not be imposed on them. They were further called upon to show cause why land, building, plant & Machinery, material, conveyance etc. Should not be confiscated under Rule 173Q (2).
5. On considering the reply of the party, the Collector of Central Excise, Delhi passed Order No.23/90/13.6.90 which is in appeal in the present proceedings. The Collector in his order has observed that though samples of coated cotton fabrics were drawn on 22.2.85 by the visiting Officers yet the demand in the case related to such goods as were already removed by the party without payment of duty. The copies of the test reports were supplied to the party on 12.4.90. The party asserted in their reply that the fabrics manufactured by them with PVC lamination were not classifiable under Tariff Item 19(III), as the cotton content in the finished product was less than 25%. It was contended by the party that the test reports showed that the cotton fabrics contents by weight varied from 10.21% to 20.42%. It was contended hat the cotton contents being less than 50% by weight in the product, the same did not fall under Tariff Item 19(III) and though, the Department had been approving the classification of their product under this Tariff Item, they had all along protested the Department's approval under the said heading. The Collector in his order has observed that at these contentions are of academic interest only and have no bearing on the issue in hand. He has observed that since the representative samples subject matter of test reports were not from the goods allegedly clandestinely removed, therefore, no reliance could be placed on such reports. The Collector has further observed in his order that the party produced a protest letter dated 6.6.81 on the issue charging the AED as also regarding availing of the benefit under Notfn. No.201/79. However, their protest was not categorically against the classification under Tariff Item 19(III). In any case, it is observed that after approval of the Classification List by the Department under Tariff Item 19(III), the protest seized to have any value especially when for the subsequent periods the party had claimed classification of their product under Tariff Item 19(III) time and again. It is also observed that approval of their Classification List Under Tariff Item 19(III) was not appealed against by the party and once the Classification List is approved, Sub-rule (8) of Rule 233B debarred the party to have the benefit of the provisions of Rule 233B(6) thereafter.
6. With regard to the specific charge of manufacture and clandestine removal of coated cotton fabrics, the Collector in his order has observed that the party received a total quantity of Rs.2,62,691.5 mts. fabrics on different dates which were not accounted for in their Form IV register. The party attempted to account for a quantity of 1,11,257.5 mts. and another quantity of 93,186.5 mts. cotton cloth is stated to have been entered in their Form IV register on 23.2.85, 4.3.85, 5.3.85, 2.5.85 and 30.8.85. This quantity was received against bills dt. 24.11.84 and 11.2.85 from M/s. Ram Lal Durga Datt between 23.2.85 and 30.3.85. The Collector in his order has observed that on enquiries from transporters, M/s. Jaipur Golden Company. It is learnt that the delivery against the bills issued in January, 1985 were taken on 1.2.85 and the date of taking the delivery in Form IV register has been manipulated to read as 21.2.85. With regard to the quantity of 18,071 mts. accounted for in Form IV register on 18.10.84, the Collector has given benefit of doubt to the appellants. However, he has observed that remaining quantity of 1,51,434 mts. is also not satisfactorily accounted for. He has rejected the plea of the party that these goods were defective and the same were disposed of through Shri Kamal Kumar Dalal in open market and the sale proceeds of such defective cloth were made over to M/s. Ambika Textiles directly through the Dalal. The Collector has observed that this contention is not acceptable, as on the face of it, it is contrary to normal trade practice and it is unbelievable that such large quantities of fabrics produced by a manufacturing Company would be defective for such a long period of time and that the party would keep receiving and storing these defective goods and then disposed them in open market through a Dalal who would make payment directly to the consignor company. He has observed that the party kept receiving the raw material knowing fully well that the same will not be utilised for manufacture of coated cotton fabrics when they had in store large quantities of textile fabrics. He has observed that the plea of breakdown of machinery is also not tenable, as they were manufacturing excisable goods during October, 1984 which is apparent from Form IV register. He has stated that since the main raw material is the base fabrics and the assessee has to maintain an account of this raw material in Form IV register, the reference to the shortage of other raw materials in the allegations is not relevant/necessary. It is observed that a value @ Rs.10/- per meter is taken in the Show Cause Notice as an average between the maximum and minimum rates shown in the Price Lists. The Collector in his order has observed that taking this rate ignoring the quantum of sales made at the maximum and minimum prices would be artificial. The Collector has therefore taken an average price @ Rs.4.85 per meter as by and large, the product manufactured by the party was of cheap variety. The Collector has also rejected the claim of the party for exemption under Notfn. No. 128/85-CE dt. 24.5.85 as the suppression of production and clandestine removal pertained to a period prior to 21.2.85 whereas the exemption notification is dt. 24.5.85. Accordingly, the Collector in his order has held that the quantity of cotton fabrics not accounted for during the period 1984-85 (upto 27.2.85) is 2,44,620.5 mts. and its value @ Rs.4.85 per meter comes to Rs.11,86,409.40. Consequently, he has confirmed a duty of Rs.4,50,835.57 on the appellants apart from imposing a penalty of Rs.50,000- on them.
7. The present appeal is filed by M/s. Plastikot (Sundersons) Industries Ltd. against the above order. The Revenue are also in appeal against the reduction of the value of the fabrics from Rs.10/- per meter to an average of Rs.4.85 per meter for the purpose of calculation of duty. We have heard Shri R. Swaminathan, Consultant for the appellants and Smt. Rashida Hussain, SDR for the Revenue. The Id. Consultant for the appellants submitted that the matter was remanded to the Collector with the observation that the earlier order was passed without ascertaining the relative percentage of constituents of the final product. The Collector in the earlier order had ingnored the case law citations given by the appellants and had come to the conclusion without obtaining the necessary data. It is contended that the Tribunal in its remand order had held that in fairness and justice, the Collector should have ascertained the relative percentage of constituents of the final products before passing the impugned order. It is contended that though the Collector has communicated the test reports and has taken note of the percentage of constituents but he has held that the same may not apply to the products alleged to have been removed clandestinely. It is contended that this allegation was never there and the same was not pleaded before the Tribunal. This reason therefore cannot be sustained. It is stated that there was no allegation or doubt in the proceedings that the products manufactured and cleared by them were different from those which were available and from which the samples were drawn. The drawn samples were representative in nature and the results would apply to the products alleged to have manufactured and cleared as a whole. It is contended that it is for the Department to prove that the goods alleged to have been cleared were different from normal varieties manufactured by the appellants. It is further contended that the appellants had all along been submitting that their products did not have more than 25% fabric in the total weight as this aspect had not been disputed or contradicted by the Department. Further, this submission of the party was only fortified and confirmed by the test reports made available to them on 12.4.90. Therefore, the Collector had no basis by which he could deny the nature of the goods to that of the samples drawn.
8. We have considered these submissions. In our view, controversy raised by the appellants at this belated stage with regard to the classification of the cotton coated fabrics under consideration is wholly uncalled for. The issue relating to the classification of the cotton coated fabrics of the type under consideration, whether they would fall under Tariff item 19(III) or under Tariff item 68 of the then existing tariff is no more res-integra, as the same has been fully resolved by the judgment of the Hon'ble Supreme Court in the case of CCE Hyderabad vs. M/s. FENOPLAST (P) LTD. 1991 (72) ELT 513 (S.C.). In this judgement, the Apex Court on taking into consideration the whole of the entry under Tariff item 19 (III) including the proviso and appended Explanations under it came to the conclusion that the predominance and percentages referred to in respect of the coated cotton fabrics in main clause of this tariff entry shall be in relation to the base fabrics which are impregnated, coated or laminated as the case may be. It is observed that the predominance and percentages referred to in the main clause of this item should be applied to the impregnated, coated or laminated fabrics. It is held that in view of the clear language of the proviso read with Explanation (I), there remains no room for the arguments that the predominance referred to in the main definition clause of this item must be applied in relation to the base fabrics but in relation to the coated fabrics or for that matter impregnated or coated fabrics. It is not in dispute that the base fabric in the present case which was subject to coating/lamination was made of 100% cotton. Since in view of the above judgement of the Apex Court, it is only the constitution of the base fabrics which would determine the classification of the coated/laminated cloth, the impugned goods are rightly held to be classifiable under Tariff item 19(III) and we hold it so. The appellants were paying duty on the cotton coated fabrics manufactured by them under this item and result of the test reports also do not indicate anything to the contrary.
9. Now we come to the allegation of removal of the coated cotton fabrics without payment of duty. It is contended that it is for the Department to prove that the appellants had manufactured coated cotton fabrics and removed the same clandestinely. It is further contended that the Collector has accepted the submissions of the appellants in respect of the entry of 18,071 mts. Similarly, it is argued that he should have given relief in respect of the quantity of 93,186.5 mts. which was taken into Form IV Register. It is further contended that appellants should have been given the benefit of the provisions of Section 4(4))d)(ii) of the Central Excise Act by taking the same price to the cum-duty price. The Id. Consultant relies on the following decisions in support of his arguments:
(a) M/s. Saheli Synthetics (P) Ltd. vs. CCE Vadodara - 1999 (113) ELT 1000 (T),
(b) M/s. Gurpreet Rubber Industries vs. CCE Chandigarh - 1996 (82) ELT 347 (T),
(c) M/s. Premier Packaging (P) Ltd. vs. CCE New Delhi - 1986 (26) 333 (T), and
(d) M/s. Amba Cement & Chemicals & Others. vs. CCE Allahabad - 2000 (90) ECR 265 (T).
10. In this case, it is not disputed that the appellants and their proprietors - M/s. Chaukhani India (P) Ltd. had produced large amount of raw materials of the cotton fabrics from time to time from the manufacturers of these textiles i.e., M/s. Ambika Textiles, Burhanpur which were received in the factory of the appellants but not accounted for in the raw material register in Form IV Register. The ledgers of the textile manufacturers vouched for the supply of these materials to the appellants. The suppliers of the cotton fabrics received the payment for the material in cash which is reflected in the ledger of the M/s. Ambika Textiles. The detailed particulars of these suppliers of the cotton textile fabrics are given in the opening paras of this order and same are not in dispute. In fact, Shri R.P. Chaukhani in his statement dt. 1.8.85 and 20.12.85 had admitted that they had purchased these goods either in the name of M/s. Chaukhani India (P) Ltd. or M/s. Plastikot (Sundarsan) Industries and had used the same in the manufacture of PVC Coated fabrics in their factory. In respect of the goods purchased from M/s. Ambika Textiles, Burhanpur and M/s. Haryana Textiles etc., he admitted that these goods were received by them but the same were returned. The Collector had rejected the plea of the party that the defective goods were disposed of through one Shri Kamal Kumar Dalal.
11. It is however, observed that in the Order of the Collector, no evidence - direct or indirect is forth-coming which could have led him to conclude that the purchased cotton cloth - even though unaccounted for - was used to manufacture the coated cotton fabrics measuring 2,62,691.5 mts. and the same was removed without payment of duty. There is no tangible ground to subject these goods to the rate of Rs.4.85 per meter which is also objected to by the Revenue in their appeal. In view of these facts, we are of the view that the order of the Collector is non-speaking on this count and is passed without considering all the points raised by the appellants. We, therefore,set it aside and remand the matter to him for passing a fresh speaking order taking into account all the submissions made by the noticee party. The Commissioner shall afford a reasonable opportunity of hearing to he appellants. Further, since the matter is pending since long, the Commissioner should pass the de-novo order within four months form the date of receipt of this order.
12. The appeals of the party and that of the Revenue are disposed of by remand in the above terms.