Customs, Excise and Gold Tribunal - Tamil Nadu
Psl Ltd. vs Commissioner Of C. Ex. on 28 February, 2007
ORDER P.G. Chacko, Member (J)
1. The adjudicating authority has confirmed demand of duty of over Rs. 25.00 crores against the appellants in respect of coal tar enamel coated and polyethylene-coated pipes cleared by them during the period August 2004 to March 2005 and has adjusted Cenvat credit amount of over Rs. 18.00 crores against such demand. The balance duty payable by the appellants in terms of the impugned order is a little over Rs. 7.00 crores. There is also a penalty on them, which is equivalent to such balance duty. The present application seeks waiver of predeposit and stay of recovery in respect of the balance amount of duty and penalty.
2. After examining the records and hearing both sides, we note that the appellants were engaged in the activity of coating materials like coal tar enamel and polyethylene over ERW pipes to be supplied to M/s. Indian Oil Corporation. These pipes were classified by the manufacturers thereof under Heading 73.06 of the CETA Schedule and such classification was apparently accepted by the jurisdictional departmental authorities. The activity of coating over such pipes was not considered to be 'manufacture' upto 17-4-2006. It was only with effect from 18-4-2006 that Heading No. 73.06 became a part of Note 5 to Chapter 73. This Chapter Note provided a fiction of "manufacture" for the process of coating pipes and tubes with cement or polyethylene or other plastic material. Prior to 18-4-2006, such pipes and tubes of Headings 73.04 & 73.05 only were considered to be "manufactured" goods, on account of having been coated with one or thee other of the aforesaid materials. On 18-4-2006, Heading 73.06 was also added to the Chapter Note. According to the appellants, during the period of dispute, which is prior to 18-4-2006, their activity did not amount to "manufacture" and therefore the above demand of duty is unsustainable. Learned Consultant for the appellants submits that this claim of the appellants was accepted by the Tribunal in respect of their Vishakapattinam factory as per Order Nos. A/473-475/WZB/06/C-II, dated 24-3-2006 - 2006 (200) E.L.T. 609 (T) - in Appeal Nos. E/859 & 860/2004 and E/2598/2005. It is further pointed out that Service tax of over Rs. 2.00 crores was paid by the assessee in respect of the same activity, which was treated by the department as a taxable service. If the demand of duty is held to be sustainable, the above Service tax will have to be set off against that demand. It is pointed out that, in another case of the same assessee, a similar setoff was allowed by the Bench vide Stay Order No. 155/2007, dated 13-2-2007 passed in Appeal No. 928/2006.
3. Learned SDR opposes the present application on the strength of the findings recorded by the adjudicating authority. He submits that the uncoated pipes and tubes were classifiable under various Headings in Chapter 73, depending on the nature of the materials and/or dimensions. According to him, such pipes and tubes were classifiable under Headings 73.03 to 73.05 of the CETA Schedule during the period of dispute. It is submitted that Chapter Note 5 was applicable to these headings and consequently coating of enamel or plastic material over these pipes and tubes during the above period amounted to 'manufacture' and therefore the demand of duty on the coated pipes and tubes has to be sustained.
4. After considering the submissions, we find that the classification of the subject pipes and tubes under Heading 73.06 is not in dispute. The relevant show cause notice did not rake up any such classification dispute. The final order of the Tribunal cited by learned Consultant is apparently applicable to the issue arising before us in the present case. Therefore, the appellants can claim strong prima facie case against the demand raised on them in the impugned order. We have also taken note of the fact that an amount of Rs. 2.00 crores was paid by the assessee as Service tax in respect of the same activity for the same period. In the event of the present demand of duty being sustained, the above payment of Service tax cannot be accepted by the Revenue.
5. For the reasons stated above, there will be waiver of predeposit and stay of recovery in respect of the balance amount of duty and penalty.
6. Having regard to the high stake involved in the case, we are of the view that the appeal should be disposed of as early as possible. Accordingly, it is directed to be posted to 10th April 2007.
(Dictated and pronounced in open Court)