Customs, Excise and Gold Tribunal - Mumbai
Indian Organic Chemicals Ltd. vs Commissioner Of Central Excise, Mumbai ... on 28 March, 2001
Equivalent citations: 2001(76)ECC477, 2001(134)ELT426(TRI-MUMBAI)
ORDER
Gowri Shankar, Member (Technical)
1. The appellant commenced in January 1987 manufacture of potato chips. By its letter dated 16.1.1987 it informed the jurisdictional Superintendent that it would soon commence manufacturing potato chips at its factory and that these articles did not fall within the scope of the Central Excise tariff. The Superintendent apparently did not agree with this view and replied to the appellant on 3.4.1987. The counsel for the appellant states that this was not available. The appellant by its letter of 14.4.1987 said "We enclose a note on dehydration of foods by Marcus Karel which specifically says that potato chips are one of the major food products dehydrated on a large scale... Consequently, the product gets excluded from chapter 20 of the Central Excise Tariff, 1987-88 which specifically excludes dehydrated products... However, potato wafers are covered under chapter 20 but excluded for the purpose of excise duty." The department still did not agree and ultimately the manufacture applied for a licence under protest on 19.4.1987. The show cause notice issued to it in January 1987 pointed out that the appellant had cleared these potato chips without paying duty up to 19.5.1987 and proposed recovery of duty and imposition of penalty. The appellant replied in September 1987 protesting the notice, reiterating the ground that the product is not liable to duty and claimed that it acted bona fide. However, it deposited the duty payable on the chips in October 1987. The Assistant Collector noted this fact of payment of duty and saying "Since the assessee have filed the classification list under Rule 173B on 22.4.1987 w.e.f. 23.4.87 and are paying duty accordingly, it is observed that the assessee's intention is trustworthy towards payment of Central Excise duty." He imposed a penalty of Rs 25,000/-. The Commissioner (Appels) having confirmed this order, the matter is before this Tribunal.
2. The counsel for the appellant made it clear that he does not dispute the liability of goods to duty and restricts his argument to penalty. His contention is that the appellant believed bona fide that no duty was payable on the potato chips and had so informed the department and the Assistant Collector himself accepts the bona fides of the appellant.
3. During the hearing I repeatedly asked the counsel for the appellant whether he was prepared to make a statement that the process of manufacture of potato chips by the appellant involved only dehydration. He was also repeatedly asked to submit a copy of the note by Marcus Karel which the appellant cited to the department. The counsel for the appellant was unable to state categorically that in the process employed by the appellant only dehydration of potato chips was involved. He also did was not agreeable to the suggestion that the matter could be adjourned in order for the manufacturing process to be furnished. He said the matter is very old and since the concerned unit is closed, the manufacturing process would not be available. He was unable to produce the note by Marcus Karel.
4. Chapter 20 of the tariff is for preparations of fruits, nuts or other parts of plants. Note 1 to this chapter provides that the chapter "covers only products which are prepared or preserved by processes other than merely chilled or frozen, or put in provisional preserving solutions, or dried, dehydrated or evaporated. If the process employed by the appellant required only dehydration of potatoes, the chips manufactured by it would not be classifiable under this chapter. It is, however, clear it does not. I have already noted the appellant's inability or unwillingness to furnish the details of the manufacturing process, or any other evidence in support of the claim that potato chips can be made only by dehydrating potatoes. The Commissioner (Appeals) has rightly noted that the process of manufacture of potato chips involved frying of potato slices in edible oil. The fact that the appellant does not question the classification of these potato chips under chapter 20 and paid the duty is also relevant.
5. I am not able to find the slightest evidence of bona fide action or belief by the appellant that the goods were not liable to duty. The appellant had in fact tried to mislead the department by emphasising that its manufacture involved only dehydration. The claim of the counsel for the appellant that the letter which has extracted above only indicated dehydration to be one of the process involved is utterly without any basis. It is very clear that the intention behind the second paragraph of the letter of 14.4.1987 was to advise the department that as the process involved was only one of dehydration the goods, which would otherwise be classifiable under Chapter 20, became excluded. When, as is very clear the process involves not only dehydration, such a deliberate attempt to mislead the department called for a salutary penalty.
6. The Assistant Collector has confirmed the duty of Rs. 1.93 lakhs. The reason he advances for low penalty is the assessee's intention is "trustworthy towards payment of duty. It is utterly beyond my comprehension how, on the facts before him, the Assistant Collector could have come to this conclusion. I have already noted the deliberate attempt by the appellant to mislead the department by feeding half-truths to it. Despite at least two letters two letters from the department for the appellant to take a licence, it needed a show cause notice before it commenced paying duty. I am surprised that the department has not chosen to appeal his order on penalty I therefore do not have the slightest the hesitation in confirming the penalty.
7. Appeal dismissed.