Custom, Excise & Service Tax Tribunal
M/S. J.K. Tyre & Industries Ltd vs Cce & St, Indore on 25 November, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:26.10.2016 Date of Decision:25.11.2016
Excise Appeal No.58256/2013-EX(DB)
[Arising out of common Order-in-Original No.06/COMMR/CEX/IND/2013 dated 15.03.2013 passed by the Commissioner of Central Excise, Customs & Service Tax, Indore]
M/s. J.K. Tyre & Industries Ltd. Appellant
Vs.
CCE & ST, Indore Respondent
Appearance:
Rep. by Shri B.L. Narsimhan, Advocate for the appellant .
Rep. by Shri Amresh Jain, DR for the respondent.
Coram: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. B. Ravichandran, Member (Technical) Final Order No.55271/2016 Per B. Ravichandran:
The appeal is against order dated 15.03.2013 issued by the Commissioner of Central Excise, Indore. This is second round of litigation in the matter. Earlier, the Tribunal vide Final order No.214-215/2005 dated 25.01.2005 rejected the departments appeal on the ground that the issue of classification of cord fabrics stands settled by the Larger Bench of the Tribunal in the case of Vikrant Tyres Ltd. - 1997 (90) ELT 178 (T-LB). Against this order, the Department filed appeal before the Honble Supreme Court which vide order dated 8.5.2007 remanded the matter to the Original Adjudicating Authority for a fresh decision. The Original Authority decided the case vide impugned order dated 15.03.2013. The present appeal is against this order.
2. Briefly stated, the facts of the case are that the appellants are engaged in the manufacture of nylon tyres liable to central excise duty. They were availing modvat credit facility under erstwhile Rule 57A of the Central Excise Rules, 1944. They were also engaged in the manufacture of dipped rubberized cord fibre of high density nylon yarn in the factory, which is captively used in the manufacture of nylon tyres. The dispute is relating to classification and duty liability of the said dipped rubberized fabrics. The appellants claimed exemption under notification no.67/95-CE dated 16.03.95 for captively consumed goods. The dispute of classification is between the Central Excise Tariff Heading 5902 and 5906. Notification No.67/95-CE allowed exemption for dipped fabrics from whole of basic excise duty when used for the manufacture of final dutiable products. Since the appellants are using Dipped Rubberized Fabrics captively in the manufacture of Nylon Tyres, they are entitled to avail such exemption. However, no exemption is available from payment of Additional Excise Duty leviable under Additional Duties of Excise (Goods of Special Importance) Act, 1956 on such captive consumption.
3. The Revenue initiated proceedings by issuing various demand notices to recover the said Additional Duty of Excise. For the period August, 1996 to May, 1998. As noted earlier in this order, the classification matter had travelled upto the Honble Supreme Court, who remanded the issue to the Original Authority for a fresh consideration. The portion of the remand directions of the Honble Supreme Court are as below:-
In our view since the entire earlier round of litigation has proceeded on the basis of the applicability of the above two judgements in the case of Falcon Tyre Ltd. and Vikrant Tyres Ltd. and since we have drawn a distinction between dipped tyre cord fabric and rubberized tyre cord fabric in the case of MRF Ltd. which judgement came subsequent to the judgement impugned herein (in fact it has been given on the same date i.e. 25.01.2005) the matter needs to be reconsidered by the adjudication Commissioner after examining the process and the procedure followed by the assessee in the manufacture of the product which the assessee calls as Dipped Rubberised tyre cord fabric. We make it clear that if the Department comes to the conclusion after examining the process that the product is a rubberized tyre cord fabric then the same shall be classifiable under Chapter Heading 59.05 as held by this court in the case of MRF Ltd. However, if the product remains dipped tyre cord fabric then the Department has to give a finding both on marketability as well as on the manufacture of the product and decide the matter accordingly in the light of the judgement of this Court in MRF Ltd. Lastly, the Department will consider also as to whether in the present case the assessee has made use of the fabric of high density yarn and also proceed to decide the points raised expressly in the sow cause notice. In this connection, the Department will keep in mind the contention of the assessee that even after rubberisation, the fabric remains of high tenacity yarn of nylon and according to the assessee the effect of rubberisation has nothing to do with the high tenacity yarn and that once the product becomes a rubberized tyre cord fabric then it will fall under Heading 59.05 and not in 59.02.
4. The impugned order passed in such de novo proceedings is contested by the appellant on various grounds. The main points are as below:-
(A) The impugned order is passed in violation of the order of the Honble Supreme Court as the Original Authority did not consider in detail the judgement in the case of MRF Ltd. 2005 (180) ELT 145 (SC);
(B) Excise duty cannot be demanded as no manufacture is involved in producing the impugned goods and the said goods are not at all marketable. The Dipped Rubberized Tyre Cord Fabric is an intermediate product that emerges and is consumed in continuous manufacturing process of rubber tyres. The goods do not have any shelf life and have to be subjected to the processing immediately. As such, the product cannot be considered as marketable. The product is sticky and cannot be kept for any considerable amount of time. There is no new product satisfying the criteria for manufacture. In other words, the Tyre Cord Fabric remains Tyre Cord Fabric and there is no change in its character or use in the said process;
(C ) The goods merit classification under CETH 5906 and the Commissioner has erroneously classified the product under CETH 5902;
(D) Without prejudice to the above, exemption was rightly available for Additional Duty of Excise under Notification No.67/95. The wordings of the notification should be read as applicable to the Additional Duty of Excise also as the provisions of Central Excise Act, 1944 were made applicable to the Act, 1956 under which Additional Duty of Excise is collected;
(E) Modvat Credit of Additional Duty paid on raw tyre cord warp sheet is available for discharging duty on the Dipped Fabric. While the impugned order admitting the legal position, the benefit was not provided to the appellant;
(F) No penalty is imposable under Rule 173 Q as the whole issue relates to interpretation for classification and no penal action can be taken in such cases.
5. The Ld. AR countered the arguments of the ld. Counsel. He submitted that the remand directions have been fully followed by the Original Authority and a perusal of the order will show that minute and detailed examination of the nature of the product and legal principles applicable to decide the case have been dealt with. He drew our attention to the clear finding of the Original Authority recorded in para 3 (B), 3 (C) and 5 of the impugned order.
6. We have heard both the sides and perused the appeal records.
7. The impugned order examined in detail the process of manufacture of Dipped Rubberised Fabrics. After narrating the process of manufacture undertaken by the appellant, the Original Authority concluded that the rubberized fabrics consisted of two stages viz. (a) Rubberisation Stage-I - Dipped Fabric, i.e. pre-rubberization stage; and (b) Rubberisation stage-II - Calendared Fabric i.e. rubberised by passing through a calender and applying rubber compound on both sides of warp sheet on sophisticated machine 4 roll calendar.
8. He noted that the dispute of classification in the present case is limited to the classification of Rubberisation Stage-I Dipped fabric only. After examining Note-IV of Chapter 59 of Central Excise Tariff, the Original Authority concluded that applying the principle of predominance, the product of Rubberisation Stage-I dipped fabric is correctly classifiable under CETH 5902.
9. It is relevant to note that the appellant themselves declared dipped rubberized fabrics (pre-rubberisation stage) under CETH 5902.10 for clearance of the product to their unit at Kankroli. When it came for captive consumption, they have declared CETH 5906.10. The Original Authority examined the samples of different stage of processing and also considered the question of marketability of the impugned goods after stage-I. During the course of argument, ld. Counsel for the appellant submitted that the impugned products are not having shelf life and cannot be considered as marketable for levy of excise duty. We find that, admittedly, the appellants themselves were clearing the said product to their own plant at Kankroli as declared by them to the Department. We note that there is no common or uniform standard to determine the marketability of any given product.
10. In the present case, it is noted that the product is having shelf life and is also being transported as evidenced from the appellants own declarations. The length of the shelf life is immaterial as long as it can be established that the product has got identify and is capable of being marketed. The actual sale of such product need not be established in each case. In this connection, reference can be made to the decision of the Honble Supreme Court in Cadila Labs. Pvt. Ltd. 2003 (152) ELT 262 (SC). In the present case, it has been clearly shown that the product has been actually transported by road by the appellant on payment of duty for being used several kms away for the manufacture of excisable goods. This will indicate that the product will not be only classifiable as distinct commodity but is also capable of being transported by the road long distance and capable of being bought and sold.
11. After careful examination of the impugned order and the appellants submission, we find no reason to interfere with the findings of the lower authority.
12. Regarding appellants claim for exemption of Additional Excise Duty under Notification no.67/95-CE, we note that the said notification grants exemption only for basic excise duty i.e. duty of excise specified in the schedule to the Central Excise Tariff Act, 1985. This issue has been examined by the Original Authority, who noted that the Board vide Circular dated 22.01.2001 categorically clarified that the classification of Tyre Cord Warp Sheet is covered under Heading No.5902 on which AED is leviable from 16.03.1995 to 01.06.1998.
13. The appellants also claimed that they are eligible to avail modvat credit on the input Cord Warp and other chemicals used in the manufacture of dipped rubberized fabrics in case the same is held to be liable for payment of additional duty of excise. In this regard, we note that the said credit is rightly available to the appellants. However, the Original Authority though did not deny such proposition only recorded that the appellants had not submitted the amount of modvat available to them. We find that as the appellants are held liable to pay duty on dipped rubberized fabrics manufactured by them in their factory, they are rightly eligible for modvat credit of the duty paid on inputs used in such manufacture. On submission of proper supporting documents and records, such credit shall be available to them to discharge duty on dipped rubberized fabrics.
14. Regarding the penalties imposed on the appellants, we note that the whole issue involved is interpretation involving classification of impugned goods, which are manufactured and captively used by the appellants. No allegation of any intentional contravention of provisions of law has been alleged or discussed by the lower authority. The Original Authority only recorded that the appellant did not deposit the full liability demanded in the seven notices and hence the penalty. We find that imposition of total penalty of Rs.30 Lakhs in the present case is not justifiable and cannot be sustained. The penalties are accordingly set aside.
15. In view of the above analysis and discussions, we hold that the classification and duty demand as made in the impugned order is sustainable. The modvat credit wherever supported with due documents shall be available to the appellant to discharge the duty liability. The penalties imposed are set aside. The appeal is disposed of in the above terms.
[Order pronounced on 25.11.2016.] ( Justice Dr. Satish Chandra) President ( B. Ravichandran ) Member (Technical) Ckp.
1 E/58256/2013-EX(DB)