Customs, Excise and Gold Tribunal - Delhi
Shroff Textiles Ltd. vs Collector Of Central Excise on 18 October, 1996
Equivalent citations: 1997ECR364(TRI.-DELHI), 1997(89)ELT516(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. In both the appeals, common question of facts and law is involved and hence we have taken up together for disposal as per law. The misc. application for production of additional documents was heard in open Court and allowed.
2. A. No. E/2632/88-C:
The appellant is aggrieved with the Order-in-Original 16/88, dated 6-9-1988 passed by the Collector of Central Excise, Bombay. By this order, the ld. Collector has confirmed a duty demand of Rs. 7,30,262.97 on low density polyethylene expanded flexible (cellular) sheets manufactured and cleared by them during the period from 4-3-1986 to 9-12-1986 under Rule 9(2) of the Central Excise Rules, 1944 read with Sub-section (2) of Section 11A of the Central Excises and Salt Act, 1944. He has also ordered for confiscation of low density polyethylene flexible (cellular) sheets measuring 16807.9 L.Mtrs. and 1050 kgs. of scrap valued at Rs. 5,68,213.00 under seizure under Rule 173Q read with Rule 9(2), Rule 52A of the Central Excise Rules, 1944. However, he has given an option of redemption on payment of fine of Rs. 1.50 lakhs in lieu of confiscation. He has also ordered confiscation of 88 rolls and 19 sheets measuring 2861.66 L. Mtrs. valued at Rs. 86,591.25 under seizure under the said Rules. However, he has given an option to redeem the goods on payment of Rs. 25,000/-. He has also imposed a penalty of Rs. 50,000/- only under Rule 173Q(1) of the Central Excise Rules, 1944 on the appellants.
3. Appeal No. E/3454/88-C :
This appeal arises out of order-in-appeal passed by the Collector (Appeals) by his order dated 9-9-1988. By this order, he has confirmed the order-in-original dated 15-5-1987 passed by the Assistant Collector of Central Excise Division IX, Bombay-II. By this order, the Collector (Appeals) has confirmed the classification of the goods manufactured by the appellants namely "Low Density Polyethylene Sheets (Flexible) of various thickness of 1 mm and above under sub-heading 3921.12 as Cellular plastic sheets. The ld. Collector has also confirmed the Assistant Collector's order denying the benefit of Notification No. 269/88-C.E. on the ground that the notification extends the concessional rate of duty in respect of sheets of a thickness not exceeding 0.25 mm. Whereas in the case of the appellant, the thickness of the sheet is 1 mm and above.
4. The facts of the case arises in Appeal No. 2632/88-C and during the course of transit checks on 30-10-1986, the officers of Central Excise (Prev.) Division IX, Bombay-II intercepted a tempo bearing Registration No. MMP-4880 on Western Express Highway opposite Bhor Industries, Borivli. On enquiry, the driver of the tempo produced a challan bearing No. STL/F/68/ 86-87, dated 30-10-1986 issued by the appellants showing the description and particulars of the goods loaded in the tempo as under :-
-------------------------------------------------------------
S. No. Product Qty.
-------------------------------------------------------------
1. Low Density Polyethylene (expanded) 134 sheets
sheets -1.5 mts. x 2 mts. x 9 mm.
2. Low Density Polyethylene (expanded) 247 L. Mtrs.
4 mm. black 7 rolls.
-------------------------------------------------------------
Since these goods were exempted from payment of excise duty under Notification No. 132/86, dated 1-3-1986, the officers allowed the tempo to proceed to its destination. However, the officers made further enquiries and found that the appellant had filed a declaration on 11-4-1986 with the Superintendent of Central Excise, Range-Ill, Division IX, describing the product as 'Expanded Low Density Polyethylene Flexible Sheets' and claimed its classification under sub-heading No. 3920.32 of Central Excise Tariff Act, 1985. They had also declared that since the product was manufactured out of duty paid goods of Heading Nos. 39.01 to 39.14, the same was exempted from payment of duty as provided at S. No. 35 of Notification No. 132/86, dated 1-3-1986. However, it was observed by the officers that the exemption granted under Notification No. 132/86 against S. No. 35 was in respect of "Acrylic sheets" produced out of the artificial resins or plastic materials of Heading Nos. 39.01 to 39.14 or scrap of plastics, or methacryslate monomer on which duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975, has been paid. It was, therefore, alleged that the exemption stipulated against S. No. 35 of Notification No. 132/86 was not admissible to the product 'Expanded Low Density Polyethylene Sheets' manufactured by the appellant. On their premises, the officers visited the factory of the appellant on 1-12-1986 and took samples of the product for being sent to Dy. Chief Chemist, Bombay for analytical test. They also examined the correct classification of the product and it was found that the same was required to be classified under sub-heading No. 3921.12 of the Central Excise Tariff Act, 1985 chargeable to duty at 35% ad valorem. Therefore, the officers visited the factory again on 9-12-1986 and seized the goods lying in the factory measuring 16807.9 L. Mtrs. and 1050 kgs. of scrap in the reasonable belief that the appellant had contravened the provisions of Central Excises and Salt Act, 1944 and the Rules framed thereunder. The officers again carried a follow-up action and visited the godown-cum-office premises of the appellant on 12-12-1986 and seized the stock of 88 rolls and 19 sheets of Expanded LDPE Flexible totally measuring 2861.66 L.Mtrs. valued at Rs. 86,591.25, on the reasonable belief that the said goods were manufactured without obtaining a Central Excise licence and cleared without payment of Central Excise duty in contravention of the provisions of Central Excises & Salt Act, 1944 and Rules framed thereunder.
5. The Dy. Chief Chemist, Bombay, to whom the sample of the product was sent for test reported that the product was composed of expanded (cellular) polyethylene. On the basis of these material facts, the appellants were charged for suppression of facts of manufacture of these goods and also was alleged that the said goods were classifiable under Heading 3921.12 of Central Excise Tariff Act, 1985. They were also required to show cause as to why the department should not recover duty of Rs. 10,16,137.62 for the clearances made during the period 1-3-1986 to 9-12-1986 (including on the goods seized at factory premises on 9-12-1986) under Rule 9(2) of Central Excise Rules, 1944. read with Section 11A(1) of the Central Excises and Salt Act, 1944. Before the Collector, the appellants explained that they had correspondent with the department and on the basis of the opinion given by the department by their letter dated 12-10-1987, they had proceeded to take the exemption and therefore, there is no ground to allege any mala fide on their part. They also drew attention to the letter dated 25-6-1986 of the Superintendent, Range-HI informing them that their goods were exempted from payment of Central Excise Duty under Notification No. 132/86 for the year 1986-87. They had also stated that the Dy. Chief Chemist had also confirmed that the terms 'Cellular Plastic' and 'Expanded Plastic' are synonymous and are used interchangeably. In the light of these facts and also that they had already handed over the sample of their product to the Range Superintendent along with their letters dated 6th March, 1986 and 11th April, 1986, they contended that it was clear that their product was of cellular nature. They also produced a letter dated 23-12-1986 issued by the Assistant Collector (Preventive) to the effect that the Assistant Collector of Central Excise had reported that their unit is exempted from payment of Central Excise Duty. Therefore, on the basis of these correspondences of the Department, they had argued that the demands were barred by time for a period beyond 6 months from the date of show cause notice. They had submitted that even though the Dy. Chief Chemist and Chief Chemist had opined that their goods are of cellular nature, it is their bona fide belief that their goods are not of cellular nature nor they are known in the commercial parlance as cellular plastic. Therefore, they had pleaded that depending on the classification of their goods, the rate of duty chargeable should be only 25% and not 35% as alleged in the show cause notice.
6. The ld. Collector on an appreciation of their evidence and submissions rejected their contention. Ld. Collector has observed that it is true that the party had initially approached the department for the classification of their product. However, from the above facts noted by him in the order it indicated that they were aware of the product being not of non-cellular nature nor acrylic sheet and therefore, vide their letter dated 21-4-1986, they had given the misleading information regarding their product being acrylic sheet falling under 3920.31 or 3920.32 both the sub-headings related to non-cellular products. The ld. Collector had also rejected their contention that 'expanded plastic' and 'cellular plastic' are synonymous. The ld. Collector has held that though they had initially approached the department for guidance, at the crucial time they did feed the department knowingly with wrong information and this was deliberately done with a view to evade payment of duty. Their product is not non-cellular. He has held that low density polyethylene flexible sheets are manufactured out of raw-materials "Low Density Polyethylene Proon". Acrylic sheets are manufactured with main raw material 'acrylic resin'. Therefore, he has held that 'LDPE Flexible Sheets' and 'acrylic sheets' are two different types of plastics and cannot be equated with each other. Therefore, he has held that the party at a crucial stage did misdeclare their product as acrylic sheet which actually it was not so. The ld. Collector has referred to their letter dated 10-3-1986 wherein they had given an undertaking that they would pay whatever excise duty leviable on pending correct classification, if applicable. In the view of this undertaking, they have been allowed clearances of their goods. The ld. Collector has held that they had not observed the classification list to the proper officer that is the Assistant Collector, who alone can decide about the classification. As there was no classification list submitted by them till the letter dated 25th June, 1986 issued by the Range Superintendent, the letter of the said Range Superintendent on the basis of which they have claimed exemption, is not the order of a proper officer and hence their claiming exemption cannot be considered as legal. In that view of the matter, the ld. Collector has held that recovery of duty beyond six months is permissible. The ld. Collector has also confirmed the classification and rejected the material produced by the appellants. He has also held that the benefit of the notification is not available to them.
7. We have heard Sr. Advocate Shri A.N. Haksar for the appellant and Shri V.C. Bhartiya, ld. JDR for the Revenue. Ld. Sr. Advocate did not contest the classification adopted by the department in respect of the impugned goods under sub-heading 3921.12 of the Central Excise Tariff Act, 1985 but however, very vehemently argued regarding the extension of larger period and confirmation of duty beyond six months in the present case. He submitted that the show cause notice has been issued on 12-2-1987 for clearances made for the period March, 1986 to December 1986, which is clearly barred by time. ld. Counsel has strongly relied on the correspondence of the appellants and the reply of the Superintendent dated 16-4-1986 wherein he had clearly stated as follows:
"Office of the Supdt. Central excise, Range III Bombay Div. No. IX.
No. RIII/Shroff/Exempt/86/T06 Palghar, dated 16th April 1986 M/s. Shroff Textiles Ltd., J-78, MIDC Tarapore, Dist. Thane.
Gentleman, Sub :- Submission of declaration claiming exemption from licencing control under Notification 174/86, dated 1-3-1986.
On going through the declaration dated 11th April 1986 claiming exemption from licencing control under Notification 174/86, dated 1-3-1986 for the year 1986-87 it is seen that the clearance value of the goods effected by you during 1985-86 is more than five lakhs. Moreover from the information furnished in your declaration it is seen that you are manufacturing expanded Polyethylene Sheets which falls under Heading 3920.32 and liable to pay Central Excise duty @ 3590 Adv. As you have exceded the clearance valuemore than five lakhs and the finished product manufactured is liable to pay Central Excise Duty and as such you are required to take out Central Excise Licences. It is not clear from your declaration of the end use of your finished product. It is requested to furnish the end use of the product. Please treat this as most urgent.
Thanking you, Yours faithfully, Sd/-
Superintendent C.Excise II Range III Bombay Div. No. IX".
Ld. Counsel also referred to letter, dated 25-6-1986 issued by the supdt. Central Excise which is extracted herein below:
"Office of the Superintendent of Central Excise, Range - III "Shivka" PALGHAR 401404 F.No.R-III/ST/III/78/86 Dated 25th June, 1986 To, M/s. Shroff Textiles Ltd., Plot No.J/78, Tarapur MIDC, Tarapur.
Dear sir, With reference to your declaration filed by you on 15-4-1986 in this office.
I have to state that, as you are manufacture of low density polyethylene sheets out of duty paid material and not claiming any set off or Modvat benefit on Raw Material. You are exempted from payment of C. Ex. duty under Notification No. 132/86(35), dated 1-3-1986 for the year 1986-87.
Please note that if any change came in force during the above period, you will require to inform this office immediately.
You are also requested to maintain a simple Register as prescribed under Notification No. 111/78, dated 9-5-1978".
Ld. Counsel also referred to the declaration filed by them wherein they have spelt out all the details which are required to be given in respect of the impugned goods. He argued that it is clear from this declaration as well as the correspondence that the appellant, had informed the department and the department had replied to them and, therefore, there was no suppression of any kind. He also submitted that the Collector's finding that the Supdt. was not a proper officer to correspond and such correspondence cannot be relied, is a totally wrong approach of the Collector. The ld. Counsel also produced a letter, dated 29-12-1988 (which is a part of the misc. application) issued by the Under Secretary of Central Board of Excise & Customs to the appellant. By this letter, the Board has informed the appellant that the Collector of Central Excise has been duly instructed by their letter No. 93/48/87-CX. 3, dated 13-10-1987 clarifying that the criteria of thickness of 0.25 mm envisaged in Notification No. 269/86-C.E., dated 24-4-1986 was applicable only to plastic films and sheets falling under sub-heading Nos. 3920.11,3920.12,3920.30 and 3920.32. It also states that the restriction did/does not apply to cellular films or sheets falling under sub-heading Nos. 3921.11 and [3921.12]. The letter states that the Collector of Central Excise, Bombay-II, has been advised to consider allowing the concessional rate of 25% to the products falling under sub-heading Nos. 3921.11 and 3921.12 as per the said notification. Therefore, Counsel argued that the benefit of notification cannot be denied to them.
8. Ld. JDR defending the Collector's order submitted that the appellant had not furnished full details as required and the conclusion of the Collector in respect of the invokation of larger period is a correct order. Therefore, he submitted that appeal should be dismissed.
9. We have carefully considered the submissions made by both the sides and have perused the records. The appellants have not challenged the classification of the product in question. The only question that requires to be considered is as to whether the demands are barred by time and as to whether the benefit of the exemption notification can be extended to the impugned goods. It is seen from the first letter addressed by the appellants on 6-3-1986 to the Supdt. that they had informed the department that they are manufacturing "Flexible Expanded Low Density Polyethylene Sheets" and about its classification under Item No. 15A(2) and it is being an exemption from payment of duty under Notification No. 149/82, dated 22-4-1982. They have also requested in that letter to educate them under which tariff heading, the said goods would come under, The annexure to this letter is the declaration which is required to be filled in the concerned proforma. The S. No. 2 of the said declaration reads as follows:
"2 Full particulars of new ex- We manufacture 'Flexible Expanded Low cisable commodities pro- Density Polyethylene Sheets' and were earlier duced sub-tariff wise if any classified under Item No. 15A(2) and were exempted from the whole of the duty of excise leviable under Notification Number 149/82, dated 22-4-1982. We request you to educate the code number under which we are classified in the C.E.T., 1985".
S. No. 10 - the particulars of manufacturing process which is also noted herein below:
"10 Particulars of manufactur- LDPE granules are fed into extruder
ing process through hopper and freon is added to
make flexible expanded LDPE sheets
which comes out of die".
10. They again wrote on 10-3-1986 to the Supdt. by which they have referred to the letter of the Supdt. dated 6-3-1986. By this letter, they have stated that they would be clearing the goods from their factory till further advice by the Department and also have undertaken to pay whenever excise duty is leviable pending correct classification. The Supdt. by his letter dated 13-3-1986 informed them that the goods are classifiable under 3920.32 and was eligible for exemption under Notification No. 132/86, dated 1-3-1986. The party had filed fresh declaration on 11-4-1986 and on coming into existence of New Central Excise Tariff. In Col. No. 4 pertaining to full description of the goods, they have stated; "Expanded Low Density Polyethylene Flexible Sheet. In S. No. 9, the process of manufacturing has been shown as "Extrusion Process". The Supdt. by his letter dated 16-4-1986 which has already been extracted, informed them that the goods were exempted and that they need not take C.E. Licence. The party again wrote on 21-4-1986 in response to the Supdt's letter and gave him further details of their product. The Supdt. by his letter dated 25-6-1986 which has already been extracted, has also informed them that they were exempted from payment of duty in respect of low density polyethylene sheets out of duty paid material on not claiming any set off or Modvat benefit of raw-material, as per Notification No. 132/86, dated 1-3-1986. The appellants have also submitted that they had given the samples of the goods to the department and the Supdt. has informed them by his correspondence dated 16-4-1986 and 25-6-1986 about their goods being exempted. In that view of the matter, it is their plea that there is no suppression and also that the department could have made further investigations in the matter if need be. They contend that as there has been no mala fide on their part and they had approached to the department on their own with all the details, they cannot be alleged to have suppressed any information with a view to evade Central Excise Duty. On a perusal of these documents, we find force in the submission of the appellants and in the arguments advanced by the Sr. Advocate, The ld. Collector has come to a very peculiar conclusion that the proper officer is the Asstt. Cellector and the correspondence with the Supdt. of Excise has no significance. It is very strange finding. Indeed, the Supdt. is also a Gazetted Officer and is in direct supervision of the appellant's factory. It cannot be said that the correspondence with the Supdt. and the Supdt's letter has no significance and that the Deptt. can still proceed to allege suppression and mis-declaration on the ground that the appellant had not filed classification list with the Asstt. Collector. We are of the considered opinion that there is no suppression or mis-declaration in this case. The Deptt. could have granted provisional approval pending further investigation. The appellants had clearly sought for [advice] in this matter and it can be assumed that the department has granted the permission and issued a letter only after due inquiry as per law. Therefore, we hold that the recovery for extended period tinder Proviso of Section 11 A(l) of the Central Excises & Salt Act, 1944 is not invokable. We also observe that the Rule 9(2) of the Central Excise Rules, 1944 can be invoked only in cases of clandestine removals and not in cases where the department is aware of the manufacture of the goods. The appellants have filed a letter dated 29-12-1988 issued by the Board clarifying regarding the applicability of the notification in question. This matter is, therefore, required to be examined by the Collector for granting the exemption for the future clearances. In the result, we pass the following final order :-
1. As the classification is not challenged, we hold that the impugned goods are rightly classifiable under sub-heading 3921.12 of CET, 1985.
2. On the question of grant of benefit of the notification, the matter is remanded for de novo consideration.
3. Confirmation of demands for period beyond 6 months is set asideand we hold that the demands beyond six months are not recoverable.
12. In the result, the appeals are allowed in the above terms.
Sd/-
(S.L. Peeran) Member (J) 25-1-1995 S.K. Bhatnagar, Vice President
13. With due respects to Hon'ble Member (J), my views and orders are as follows :-
14. I observe that as Classification dispute has already ceased, by the appellant's acceptance of departmental determination and is not challenged before us at this stage, therefore, we are not called upon to record any further orders in this respect.
15. As regards the extended period of time is considered, I agree with Hon'ble Member (J) that the benefit thereof is not available to the department in the facts and circumstances of the case already mentioned by him and therefore, the amount beyond the period of six months is not recoverable.
16. In so far as the question of exemption notification is concerned, I find that Notification No. 132/86 automatically stands ruled out in view of the admitted position regarding the classification of the product under 3921.12 since this heading is not covered by the said notification.
17. As regards Notification No. 269/86 is concerned, there is nothing on record to show that its benefit was claimed at the time of clearance or earlier. In any eventuality, there is unfortunately nothing to show that the conditions of this notification were duly satisfied.
Our attention has been drawn to the show cause notices and the description of the seized goods mentioned therein but this description is apparently based on the basis of the accompanying documents only. The Chemical Test Report of the DYCC does not help us as it does not indicate the thickness. No other test report or technical or commercial literature has been produced to show that the specifications are satisfied. This is apart from the other conditions subject to which the benefit could be claimed. The goods are no longer available. Therefore, in my opinion at this stage remanding the matter would not serve any purpose. Further the Collector has already extended the benefit of Notification No. 222/86, dated 3-4-1986 as amended from time to time and the appellants have not shown as to why this notification would not be attracted.
18. Therefore, in view of the above discussion, the assessment as done by the Collector is confirmed.
(ii) The demand is however, restricted to the normal period of time of six months.
(iii) Confiscation (and fine in lieu of confiscation) and penalty are set aside.
Sd/-
(S. K. Bhatnagar) Vice President 20-3-1995
19. In view of the difference of opinion between Hon'ble Member (J) and the Vice President, the matter is submitted to the Hon'ble President for reference to a third Member on the following point :-
1. Whether in the facts and circumstances, the matter is required to be remanded to the Collector as proposed by Hon'ble Member (J) or the appeal is required to be disposed of in the terms proposed by the Vice President.
Sd/- Sd/- (S.L. Peeran) (S. K. Bhatnagar) Member (J) Vice President 21-3-1995 21-3-1995 K. Sankararaman, Member (T)
20. Heard Shri A.N. Haksar, learned Senior Counsel and Shri B.S. Ganu, learned Joint Chief Departmental Representative on the difference of opinion matter.
21. The operative part of the two orders are as follows :-Order proposed by Shri S.L. Peeran, Judicial Member -
1. As the classification is not challenged, we hold that the impugned goods are rightly classifiable under sub-heading 3921.12 of CET, 1985.
2. On the question of grant of benefit of the notification, the matter is remanded for de novo consideration.
3. Confirmation of demands for period beyond 6 months is set aside and we hold that the demands beyond six months are not recoverable.
Order prepared by Shri S.K. Bhatnagar, Vice President -
18. Therefore, in view of the above discussion, the assessment as done by the Collector is confirmed.
(ii) The demand is, however, restricted to the normal period of time of six months.
(iii) Confiscation (and fine in lieu of confiscation) and penalty are set aside.
The difference of opinion between the aforesaid two orders which has been actually referred to the third Member is as below :-
1. Whether in the facts and circumstances, the matter is required to be remanded to the Collector as proposed by Hon'ble Member (J) or the appeal is required to be disposed of in the terms proposed by the Vice President.
22. From these orders it is clear that they are agreed on the question of classification of the goods in question. The decision on classification passed by the departmental authorities, Collector in one appeal and by Collector (Appeals) in the other are approved by the Judicial Member as well as the Vice President. They are also agreed that the longer period of limitation is not applicable. The difference of opinion which has been spelt out and referred to the third Member for decision is limited to the question whether the matter requires to be remanded for a fresh decision about the admissibility of Exemption Notification 269/86-C.E., dated 24-4-1986 as proposed by Member (Judicial), Shri Peeran or the appellants not having claimed the benefit of the said exemption earlier and the goods not being available, a remand may not serve any purpose at this stage and hence such a course is not to be followed as held by the Vice President. Apart from this difference of opinion that has been formulated and referred to the third Member, there is another latent difference not spelt out in the referring order. That relates to the question of confiscation of the goods and imposition of penalty. While Shri Bhatnagar has specifically ordered setting aside of the fine and penalty, Shri Peeran has not specifically adverted to these question. He has allowed the appeals "on the above terms". Such terms as decided by him do not relate to confiscation and penalty.
23. I accept the plea of the learned Senior Counsel that the claim for the benefit of Exemption Notification 269/86 has to be examined on merits. It cannot be denied to them on the ground that they had not claimed it earlier. Learned Senior Counsel referred to the Supreme Court decision in Anchor Pressings (P) Limited v. Commissioner of Income Tax, U.P. reported in 1987 (27) E.L.T. 590 wherein it was held that even if relied was not claimed in assessment proceedings the Assessing Officer was under obligation to grant statutory relief. Shri Ganu, learned JCDR submitted that it was a rectification proceedings under Section 154 of Income Tax Act and not applicable to the present case. I do not agree. There are any number of decisions on the Central Excise side to justify the claim made. The letters addressed to the appellants and the Collector of Central Excise by the Central Board of Excise & Customs throw light on the applicability exemption to the product in question. These find a mention in the order of the Judicial Member. Paragraph 74 of his order refers in this connection. This represents the correct understanding of the Notification. Thickness of below 0.25 mm is not a criterion for applying the Notification 269/86, dated 24-4-1986 to the subject product. That leaves the requirement of establishing that the goods were manufactured from duty paid materials to decide the applicability of the exemption notification. As this is an essential requirement, this aspect will have to be looked into for which there is no escape from the need to remand the matter to the Assistant Commissioner for fresh decision from this angle. Accordingly I agree with the order proposed by the Judicial Member, Shri Peeran.
24. The papers may be placed before the referring Bench for passing appropriate order as per the majority view. The question of setting aside of the confiscation and penalty may also be kept in view by the Bench.
(K. Sankararaman) Member (T) 13-9-1996
25. In view of the majority opinion the matter is remanded to the Collector (now Commissioner) for reconsideration in the light of observations and findings of Hon'ble Member (Judicial).
26. During de novo proceedings it will also be open to the Commissioner to consider afresh the aspect of confiscation and penalty depending upon his decision on merits.