Customs, Excise and Gold Tribunal - Delhi
Nestle India Ltd. vs Cce on 1 June, 2004
Equivalent citations: 2004(115)ECR643(TRI.-DELHI), 2004(178)ELT590(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these two Appeal, common issue involved is whether the benefit of Notification No. 181/88-CE, dated 13.5.1988 is applicable in respect of metal containers used by M/s. Nestle India Ltd. for packaging their product "Everyday Dairy Whitner".
2. Shri B.L. Narasimhan, learned Advocate, mentioned that the Appellants manufacture, inter alia, "Everyday Dairy Whitner" which is classifiable under Sub-Heading 0401. 19 of the First Schedule to the Central Excise Tariff Act; that the Revenue sought to classify the same under Sub-Heading 0401.13 as "Skimmed milk powder";, that the Punjab and Haryana High Court classified the product under sub-Heading 0401.19 as that the said judgment has been upheld by the Supreme Court as reported in 1998 (97) ELT 402 (SC). He, further, mentioned that Notification No. 181/88-CE grants complete exemption from payment of duty to metal containers intended to be used for packing of goods specified therein namely (i) whole milk powder (ii) Skimmed milk powder (SMP) and (iii) Milk powder including SMP for infants and baby foods; that they were granted a 16 licence for availing the benefit of the Notification; that in the licence, milk powder was specifically indicated as the product for the packing of which the metal containers would be bought duty free.
3.1 In respect of Appeal No. E/2586/2001-D, the learned Advocate submitted that when the issue regarding the classification of Dairy. Whitner was pending decision before the Supreme Court, three show cause notices dated 9.10.1991 and 10.4.1992 proposing to dermand (sic demand) duty on the metal containers used during the period from 30.7.1991 to 31.12.1991 under Rule 196 of Central Excise Act, 1944 were issued to them; that the Assistant Collector confirmed the demand of duty under Adjudication Orders dated 14.5.1992 and 29.5.1992; that, however, on Appeal, the Collector (Appeals) under Order-in-Appeal Nos. 865 to 867/CE/CHD/92 dated 30.10.1992 allowed their appeals and set aside the Adjudication Orders; that the said Order-in-Appeal has attained finality as the same has not been appealed against by the Department before the Appellate Tribunal.
3.2 He further mentioned that a subsequently a show cause notice dated 19.12.1994 has been issued by the Collector demanding duty on the metal containers used during the same period from 30.7.1991 to 31.12.1991 under Rule 196; that the Additional Commissioner, under Order-in-Original No. 29/c E/ADC/2000 dated 13.6.2000, confirmed the duty demand and imposed penalty which has been upheld the Commissioner (Appeals), under Order-in-Appeal No. 306/C.E. CHD-II/2001 dated 31.8.2001.
4. The learned Counsel submitted that once the issue was raised, adjudicated and has been accepted by Revenue for the same period, it is not open to it to issue a fresh show cause notice demanding duty once again for the same period in respect of same very clearances; that by the application of the principles of constructive res judicata, fresh proceedings on the very same set of facts and circumstances cannot be sustained. He relied upon the decision in Jai Hind Oil Mills and Co. v. Union of India wherein the Bombay High Court has held that as no Appeal from the Order passed by Collector (Appeals) having been preferred by the Department, "the said order becomes final and binding and further Show Cause Notice issued by the 2nd Respondent on 22nd August, 1985 could in law be not issued and as such is illegal and bad in law. The said Order dated 30th August, 1985 passed by the 2nd Respondent on such Show Cause Notice is also bad in law, and is liable to be quashed and set aside." Reliance has also been placed on the following decisions:
(i) CCE, Meerut v. Pace Marketing Specialities Ltd.
(ii) Siddharth Tubes Ltd. v. CCE, Indore
(iii) Kwality Biscuits Ltd. v. CCE, Bangalore 2000 (126) ELT 1141 (T)
5. Countering the arguments, Shri V. Valte, learned Senior Departmental Representative submitted that the Collector (Appeals) under Order-in-Appeal dated 30.10.1992 has held that since the Appellants had purchased the metal containers, there was no question of demand of duty from them and that recovery can be made from the manufacturer and not from L-6 holders; that the said Appeal was allowed on technical grounds and not on merits; that accordingly the issue can not be held to have attained finality in view of the decision in the case of T. Tobacco Co. v. A.C. and CCE v. T.K. Paleap A. Naidu wherein it has been held that an order set aside in Appeal not on merits but on technical grounds, open to Adjudicating Authority to initiate fresh proceedings on the same grounds with a view to observe correct procedure; that hence the present proceedings is not hit by res judicata; that further, the period covered under earlier order has from 19.1.1991 to 31.10.1991 whereas the present show cause notice covers period from 24.2.1989 to 31.12.1991.
6.1 In respect of Appeal No. E/1760/2001-D, the learned Advocate mentioned that a show cause notice dated 24.2.1994 was issued by the Commissioner contending that since 'Every day Dairy Whitner' is not skimmed milk powder, they are not entitled to receive the metal containers duty free under Notification No. 181/88-CE; that the show cause notice also invoked the extended period of limitation under Proviso to Section 11A of the Central Excise Act for demanding duty for the period from 24.2.1989 to 31.1.1991; the Commissioner, under the impugned No. 35/CE/CHD II/confirmed the demand of duty under Proviso to Section 11A(1) of the Central Excise Act besides imposing penalty under Rule 173Q of the Central Excise Rules, 1944. he submitted that there is no dispute regarding the actual use of the metal containers for the packing of the Everyday Dairy Whitners; that thus the metal containers have been used for the intended purpose for which they were brought in under Chapter X procedures; that accordingly any short levy of duty on account of denial of exemption can lie against the manufacturer of the metal containers only and not against the receiver of the goods like the Appellants. He relied upon the following decisions:
(i) Arti Paints and Chemicals Industries v. CCE Bombay
(ii) CCE v. R.K. Machine Tools Ltd. 2000 (24) ELT 794 (T)
(iii) Indian Farmers Fertiliser Cooperative Ltd v. Cental Excise Lucknow 6.2 He, further, submitted that in the context of exemption under Notification No. 181/88-CE. to partially skimmed milk powder itself, in the case of their competitor, the Tribunal, in the following decisions, has held that no proceedings can lie against the assesses under Rule 196 of the Rules and the duty, if any, can be demanded only from the manufacturers of the Metal Containers;
(a) Dalmia Industries Ltd. v. CCE 1997 (19) RLT506 (T)
(b) Dalmia Industries Ltd. v. CCE 2002 (150) ELT 1088 (T) : 2000 (90) ECR 175 (T) 6.3 The learned Advocate also contended that the entire demand of duty is barred by limitation under Section 11A of the Act; that they had always declared to the Department the correct description of the product; that the entire case regarding the classification of the Dairy Whitner was within the knowledge of the Department, that in their classification list they had claimed Dairy Whitner as partial skimmed milk powder which has finally been upheld by the Supreme Court; that the provisions of Section 11A apply to Rule 196 also as held by the Allahabad High Court in the case of U.P. State Cement Corporation Ltd. v. Union of India 1996 (6) ELT 6 (All) : 1997 (69) ECR 299 (Alld), that the Special Leave Petition filed by Union of India has been dismissed by the Supreme Court as reported in 1999 (112) ELT A 44. Reliance has also been placed on the decision in the case of Laxmi Tobacco Co. v. CCE, Raipur 2000 (125) ELT 1105 (T).
7. Countering the arguments, the learned Senior Departmental Representative, submitted that the Appellants were granted 16 license in form L6 for obtaining metal container for packing of Milk Powder, Baby Foods and skimmed milk powder, they had nowhere declared that the Metal containers obtained under Notification No. 181/88-CE would be used to Pack Partially Skimmed Milk Powder; that thus they had misdeclared the facts regarding packing of partially skimmed milk powder to the Department; that CT 2 issued to them clearly mentions that Metal containers are for, packing whole milk powder, skimmed milk powder, infant foods baby foods and ghee. The learned Senior Departmental Representative also submitted that the time limit specified in Section 11A(1) of the Central Excise Act for demanding duty is not applicable to the demand of duty made under Rule 196 of the Central Excise Rules; that Rule 196 provides that in case the goods are not duly accounted for as having been used for the purpose and in the manner stated in the application, the person shall, on demand by the proper officer, immediately pay the duty leviable on goods; that Rule 196 thus is a self contained Rule and the duty has to be demanded under the said Rule; that it has been held by the Supreme Court in CCE, Jaipur v. Raghuvar (India) Ltd. that "Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the Act or the Rules...."
8. We have considered the submissions of both the sides. In respect of Appeal No. E/2586/2001-D, we observed that the Revenue has not disputed the fact that three show cause notices for demanding duty on the metal containers had been issued for the period from 30.7.1991 to 31.12.1991, the same had been adjudicated upon by the Assistant Collector and set aside by the Commissioner (Appeals), under Order-in-Appeal Nos. 865 to 867/CE/CHD/92 dated 30.10.1992. It has also not been disputed by Revenue that the said Order-in-Appeal was not challenged in any higher Appellate forum and thereby it has attained the finality. The only contention of the Revenue is that those appeals were allowed on technical grounds and not on merits and as such issue can not be held to have attained finality. There is no merit in the submissions made by Revenue as the issue was decided in favour of the Appellants by the Collector (Appeals) in very clear and specific terms. The Collector (Appeals) had held that the Appellants, being not the manufacturers of metal containers, were not liable to pay duty. The Collector (Appeals) had, therefore, set aside the Orders passed by the Assistant Collector. As the issue of demand has been settled by a quashi-judicial Authority in favour of the Appellants, it is not open to the Revenue to issue another show cause notice for the same period and confirm the demand against the Appellants. The Bombay High Court in the case of Jai Hind Oil Mills & Co., (Supra), has held that if no Appeal is filed against any Order, the said order becomes final and binding and further show cause notice and consequent Order are bad in law. The Tribunal has also expressed similar views in the case of Kwality Biscuits Ltd. v. CCE, Bangalore 2000 (126) ELT 141(T) wherein it has been held that "we agree with learned Advocate's view that after the culmination of the proceedings by one show cause notice dated 30.7.1981, the department cannot re-open the matter again by issue of fresh show cause notice dated 19.7.1984." The present chow cause notice dated 19.12.1994 is not for a different period as claimed by the Revenue. It is for the same period that is 30.7.1991 to 31.12.1991 for which earlier three show cause notices had been issued. Following the ratio of the decisions relied upon by the learned Advocate we set aside the impugned Order-in-Appeal No. 306/CE/CHD-I1/2001 dated 31.8.2001 and allow the Appeal No. E/2586/2001-D. 9.1 Coming to Appeal No. E/1760/2001-D, we observe that hon'ble Punjab and Haryana High Court in their own case Food Specialities Ltd. v. Union of India has held that Everyday Daily Whitner is partly skim milk powder. This judgment has been upheld by the Supreme Court in Union of India v. Food Specialities Ltd. 1998 (97) ELT 402 (SC), Notification No. 181/88-C.E. dated 13.5.1988 exempts, inter alia, Metal Containers from whole of the duty of excise if-
(a) such metal containers are intended to be used for packing the goods specified below, namely:
(i) Whole milk powder
(ii) Skimmed milk powder which is packed for sale in a container not more than one Kilogram nett of such skimmed milk powder;
(iii) Milk Powder, including skimmed milk powder which are specially prepared for feeding of infants, and baby foods, that is to say, foods specially prepared for feeding of infants;
(iv) Ghee; and
(b) such use is elsewhere than in the factory of production of the said metal containers, the procedure set out in Chapter X of the Central Excise Rules, is followed.
9.2 It is thus apparent that the exemption in respect of metal containers is available only if the metal containers are intended to be used for packing whole milk powder or skimmed milk powder. As the product in question packed by the Appellants in the metal container is 'Partly skimmed milk powder', the benefit of Notification No. 181/88-CE is not available to the metal containers in question. The use of the metal containers obtained by the Appellants under Chapter X procedure for packing of Everyday Dairy Whitner which is a partly skimmed milk powder cannot be considered to have been used for the intended purpose mentioned in the Notification No. 181/88-CE.
10. The learned Advocate has also contended that as there is no dispute about the actual usage of metal containers, any short levy of duty on account of denial of exemption can lie against the manufacturer of the metal containers only and not against the Appellants. He has relied upon some decisions such as in the case of Arti Paints, R.K. Machine Tools, IFFCO and Dalmia Industries in support of his contention that duty can be demanded from the manufacturer of metal containers only. A perusal of the L6 lincence granted to the Appellants reveals that the same was issued to them for procuring metal containers to be used by them in the packing of baby food and milk powder, ghee. The CT 2 Certificate brought on record clearly mentions that the license authorises them to obtain Metal containers under Notification No. 181/88-CE "for the intention of using the same for packing whole milk powder, skimmed milk powder (up to one Kg. Nett), Infant Foods, Baby foods and Ghee." It is thus apparent that the Metal containers were to be used for the purpose of packing the specified products and "Partly Skimmed Milk Powder" is not one of such specified products. The manufactures of the metal containers have supplied the metal containers on the strength of such CT 2 Certificates and in these circumstances it can not be claimed that they have short paid the duty. The onus is on the Appellants to use the metal containers for the intended purposes mentioned in the Notification No. 181/88-CE Rules, 196 of the Central Excise Rule, 1944 provides in clear terms that "if any excisable goods obtained under Rule 192 are not duly accounted for as having been used for the purpose and in the manner stated in the application...the Applicants shall on demand by the proper officer, immediately pay the duty leviable on such goods." As the Appellants have not used the metal containers for the purpose of packing whole milk powder, skimmed milk baby foods and ghee, the duty liability is cast on them under Rule 196 of the Central Excise Rules, 1944. The decisions relied upon by the learned Advocate are not applicable to, the facts of the present Appeal. For example in Dalmia Industries case 2002 (150) ELT 1088 (T), the Tribual allowed the Appeal filed by Dalmia Industries as there was no failure to account for the goods as they used the metal containers for packing the product which the applicant cleared on payment of duty. It was also argued therein that the Department had issued a Certificate for procurement of metal containers under Chapter X procedure for packing of New Sapan Dairy Special, a partially skimmed milk powder. No such Certificate has been brought on record in the present Appeal. In Arti Paints case, the Central Excise Authorities wrongly issued the L 6 licence. In view of this, the Tribunal held that it is pointless to blames the Appellants for misuse of the product obtained under L6 licence. Similarly in R.K. Machine Tools case, (supra) L6 licence & CT 2 certificates were duly issued by the Department and the Department sought to withdraw the CT 2 Certificate retrospectively. In IFFCO's case also, as the Department was at fault in granting permission to the party to procure goods at nil rat of duty, the Tribunal held that demand can not be made under Rule 196 of the Central Excise Rules. We, therefore, hold that the duty in the present Appeal is demandable under Rule 196 from the Appellants as the excisable goods obtained by them have not been used for the intended purpose.
11. The question now remains to be decided is whether provisions of Section 11A(1) are attracted in the present matter. The learned Advocate has relied upon the decision of Allahabad High Court in UP State Cement Corporation wherein it has been held that Section 11A creates a Rule of limitation and the excise authorities have to exercise their powers within the period of limitation prescribed under Section 11A of the Act. The Supreme Court has also dismissed the SLP filed by Union of India. On the other hand the learned Senior Departmental Representative has relied upon the decision in the case of Raghuvar (India) Ltd. which in our view settles the issue as to whether provisions of Section 11A of the Central Excise Act, has to be read into the provisions which are self contained for demanding duty and for imposing penalty. The issue involved therein was whether the provisions of Section 11A would get attracted necessitating the raising of the demand within six months under Rule 57I of the Central Excise Rules, 1944 before its amendment on 5.10.1988. Rule 57I provide that if the MODVAT credit has been wrongly availed of or utilized in an irregular manner, the credit so taken may be disallowed by the proper officer and the amount so disallowed shall be adjusted in the credit account or current account by the manufacturers or if such adjustments are not possible by cash recovery from the manufacturer. The Supreme Court has held as under:
Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of right and, therefore, must be specifically enacted and prescribed therefore. It is not for the courts to import any specific period of limitation by implication, where there is really none.... Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the Act or the Rules but will be attracted only to cases where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded.... The situation on hand and the one which has to be dealt with under Rule 57 I, as it stood unamended does not fall under Rule 57I, as it stood unamended does not fall under any of those contingencies provided for in Section 11A of the Act. Part AA of the Rules in which Rule 57I is found included provides a special scheme for earning credit and adjustment of duly paid on excisable goods used as inputs in the manufacture of what is referred to as "final product", and there by enable the manufacturer to utilize the credit so allowed towards payment of duty of excise leviable on the final products, in the manner and subject to the terms and conditions stipulated therein.... The recovery of credit availed of and utilized in ulter breach of faith and mutual trust and confidence which is the raison d'etre for the proper and successful working of the MODVAT Scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act.... Consequently, the situation postulated to be dealt with under Rule 57I can not be said to involve a case of manufacturer and removal of excisable goods without subjecting such goods to levy or payment of the various nature and category enumerated in Section 11A of the Act on its own terms will have no application or operation to cases covered under Rule 57I of the Rules.
The Supreme Court has further held that even if it is to assumed that the provisions of Section 11A and Rule 57 I "relate to one and the same nature of demand from the manufacturer of any amount due from him to the State, the provisions contained in Section 11A are general in nature and application and the MODVAT Scheme being a specific and special beneficial scheme, with self-contained procedure, manner and method for its implementation, providing for its own remedies to undo any mischief committed by the manufacturer in abuses thereof, the provisions of the said special scheme alone will govern such a situation and there is no scope for reading the stipulations contained in a general provision like Section 11A into the provision of the Rules in question which alone will govern in its entirety the enforcement of the MODVAT Scheme."
[Emphasis provided]
12. This judgment of the Apex Court, squarely applies while interpreting Rule 196 of the Central Excise Rules, 1944. Chapter X of the Central Excise "Rules, 1944 in which 196 is found included provides a special procedure for remission of Central Excise Duty used in a specified industrial process and thus enables a manufacturer to procure the excisable goods without payment of duty or on payment of concessional duty for use in the manufacture of final product. The recovery of duty on the excisable goods used in breach of faith and mutual trust and in violation of the provisions of Chapter X has therefore to be made under the provisions of Rule 196 as Chapter X which is a Special beneficial scheme has self contained procedure, manner and method for its implementation providing for its own remedies to undo any mischief committed by the Appellants. We, therefore, hold that the time limit provided in Section 11A of the Central Excise Act cannot be read into provisions of Rule 196 of the Central Excise Rules. Accordingly, the demand of duty is upheld. The amount of penalty, which is imposable on the Appellants under Rule 196 for the breach committed by them, is however, on the higher side. We reduce the penalty to Rs. One lakh only.
13. Both the Appeals are disposed of in the above manner.