Customs, Excise and Gold Tribunal - Bangalore
Venlon Polyester Film Ltd. And Ors. vs The Commissioner Of Central Excise on 8 April, 2004
Equivalent citations: 2004(175)ELT782(TRI-BANG)
ORDER
K.C. Mamgain, Mmeber (T)
1. These are four appeals filed by M/s. Venlon Polyester Films, Shri P.P. Rohera Vice President, Shri D.S. Choudhary General Manager (Production) and Shri H.S. Jagadish Sr. Commercial Officer of M/s. Venlon Polyester Films against Order-in-Original No. C.Ex 01/2000 dated 10.3.2000 passed by the Commissioner of Central Excise Bangalore.
2. Shri K. Parameshwaran learned Advocate appeared for the appellants and Shri L. Narasimha Murthy, SDR appeared for the Revenue.
3. Shri Parameshwaran submitted that the appellant are manufacturing polyester films in rolls of various grades classifiable under Chapter 39 of the Central Excise Tariff Act besides Overhead Projection Film sheets (herein after referred to as OHP films) and these OHP films were being classified by them under sub heading 3926.90 as per adjudication order NO. 293/96 9S.C.Ex dated 20.11.96 passed by the Assistant Commissioner of Central Excise Mysore-II. Division. Appellants were undertaking lot of technical developments in their Factory at Mysore. They noticed that the quality of OHP films which came out of cutting machine did not meet required standards as as such they had carried the manual process of trimming and grinding to smoothen the edges and were on the look out for undertaking technical development in this regard. They approached Central Institute of Plastic Engineering and Technology to visit their factory and give suggestions for improvisation of few manufacturing related activities in relation to the operating features of OHP film cutting machine. It became possible to obtain OHP film with standard specification which may not require any further working as was being done from the beginning of commencement production and this process of improved production of sheets was expected to be completed by Mid June-98. In order to high light these aspects and to avoid procedural controversies, the appellants submitted a detailed letter dated 15.4.98 to Superintendent, Central Excise Range D highlighting the aspect of availment of exemption under Notification No. 67/95 and further also indicating the change in the process of manufacture of OHP films which was under implementation at that stage. In the light of the above said technical improvisation made in manufacturing process of OHP films and since no further working was required to be made in the OHP films which attained the required geometric shape and the quality including smoothness when it was coming out of the cutting machine, declaration under Rule 173 B filed on 8.6.98 effective from 2.6.98 declaring the classification of OHP sheets under sub-heading 3920.31. Since some stock of OHP films was left for further working, they also filed classification declaration NO. 2/98-99 dated 19.6.98 only for the said OHP films classifying them under sub-heading 3926.90. In the mean time, the Assistant Commissioner, Central Excise Mysore II Division visited the factory of the appellants on 25.5.98 and it was informed that in view of the change over, the cutting machine was idle due to mechanical break down right from 7.5.98 onwards and it will take a couple of days before it is set right with the technical improvements. In spite of these clarifications furnished, the Superintendent of Central Excise (Preventive and Intelligence) visited their factory on 26.5.98 with his staff. The General Manager Shri D.S. Choudhary in charge of production was summoned on 12.6.98 to the O/O Assistant Commissioner Central Excise Mysore II. The Superintendent Central Excise Range B along with his officers visited the factory of appellant on 12.6.98 and drew a Mahazar by drawing of samples. Shri H.S. Jagadish Senior Commercial Officer of the applicant was present in the factory who had indicated the process of manufacture being undertaken in relation to OHP. Shri D.S. Chudhary General Manager and the Vice-president in-charge of the work appeared before the Superintendent, Central Excise (Preventive ) on 12.6.98 and his statement was recorded in relation to the manufacturing process of OHP in sheet from as well as in film form. The General Manager gave the statement under the bonafide belief that same was in relation to the improvisation of technology which is in the process of being implemented. However, on 13.6.98, in his letter he clarified the correct factual position in relation to manufacture being undertaken which was forwarded by Registered Post. Show cause notice dated 10.7.98 was issued to the manufactured being undertaken which was forwarded by Registered Post. Show cause notice dated 10.7.98 was issued to the appellants alleging contravention of various Central Excise Rules and will full mis-statement before the competent authority in getting the product OHP films classified under sub-heading 3926.90 as against sub-heading 3920.31 and consequently a demand of differential duty of Rs. 81,47,992/- under Proviso to Section 11A was issued. Penalty was also proposed under Section 11Ac and interest under Section 11AB, This show-cause notice was decided by the Commissioner under the impugned order dated 10.3.2000. He challenged the order of the Commissioner on the ground that in view of the Supreme Court decision in the case of Collector of Central Excise, Hydrabad Vs. Maheshwari Mills Ltd., reported in 2002 (142) ELT 520. Show-cause notice can not be issued demanding duty on a basis other than that approved in the classification list without seeking to vary the classification list. He said that they were paying the duty under the approved classification List. Therefore if any change in the classification list was required to be done it could have been done only for past 6 months and extended period under Section 11-A for demanding duty was not applicable in this case. He relied on the following decisions :
1. Prabhu Steel Industries Ltd. Vs. CCE (1997 (95) ELT 164)
2. Lubri-Chem Industries Ltd. Vs. CCE (1994 (73) ELT 257)
3. Amco Batteries Ltd. Vs. CCE (2000 (153) ELT 7)
4. P & B Pharmaceuticals Ltd. Vs. CCE (2003 (153) ELT 14)
5. Densons Pultretaknik Vs. CCE (2003 (155) ELT 211)
6. Bellary Steels & Alloyes Ltd Vs. CCE (2003 (9157) ELT 324
7. ITC Bhadrachalam Paper Boards Ltd. (2003 (154) ELT 162)
8. Punjab Laminates Pvt Ltd Vs. CCE (2003 (157) ELT 230
9. Shriniwas Synthetic Packers Pvt Ltd (2003 (59) RLT 386)
10. Good Year (India) Ltd., Vs. CCE (2003 (157) ELT 560)
11. Television & Components Vs. CCE (2003 (157) ELT 529)
12. S&S Power Switchgear Ltd, Vs . CCE (2002 (104) ECR 686)
13. Mattel Toys Ltd. Vs. CCE (2003) 154 ELT 752)
14. Premier Automobiles Ltd., Vs. CCE (2001 (47) RLT 1093)
15. Vora Products Vs. CCE (2002 (50) RLT 966
16. T.T.K. Pharma & Ors Vs. CCE (2001 (94) ECR 752)
17. Euphoric Pharmaceuticals Pvt Ltd. Vs. CCE (1998 (99) ELT 142) He said that the entire case of the department is based on the statement of Shri Choudhary as has been stated in the order of the Commissioner himself., That they were not doing any grinding of the edges of the sheets. He said that the Commissioner in para 51 of his order had relied on a undisclosed letter dated 13.10.97 of CIPET (the date of which was modified by the Corrigendum dated 27.3.2000 to read it as 30.11.99) addressed to Assistant Commissioner Central Excise stating that there is to such operation called grinding in the relevant manufacturing process and that this matter referred to by the assessee is clarification in nature and given at the request of the factory personnel and the operations i.e. grinding imparted to have been done by the assessee had not been physically verified by him. the learned advocate also drew out attention to pg 31 of book II submitted in Appeal No. E/677/2000 wherein, in the classification list there is a clear report of the superintendent of Central Excise range II to the following effect "I have visited the assessee manufacturing unit on 15.12.95 and verified the description of the products, studies the manufacturing process and have satisfied myself about the correctness of classification and applicability of exemption notification declared therein"
and the same was accepted by the Assistant Commissioner Mysore II Division in terms of Order-in-Original Sl. No. 293/96 dated 20.11.96. In this classification list they had classified OHP Films under subheading 3926.90. Therefore it is not correct that this classification was done by the Assistant Commissioner in 1996 without verification. He pleaded that further working on the films has been examined by the Assistant Commissioner Central Excise Division Mysore II in his impugned order in the following terms "According to Chapter No 10. to this chapter, the expression 'Plates sheets, films, foil and strip' applied only to plate sheets, films, foils and strip and to blocks of regular geometric shape; whether or not printed or otherwise surface worked (for eg., polished, embossed, coloured, merely curved or corrugated), uncut or cut into rectangles (including squares) but not further worked. (Even if when so cut, they become articles ready for use for eg. Table cloth).
Plates, sheets etc., whether or not surface worked (including squares and other rectangles cut there from) with ground edges, chilled, milled, hammered, twisted, framed or otherwise worked or cut into shape other than rectangular (including square) are generally classified as articles of headings 39.18, 39.19 or 39.22 to 39.26.
The above mentioned explanatory notes makes it clear that operations on the surface of the sheets such as polishing embossing etc., amounts to surface working and other operations such as grounding of edges, drilling, milling, framing etc., amounts to further working."
3. It was pleaded that in the present case during the process of cutting jumbo roll to sheet form, sheets acquire static charges which will spoil the quality of sheets and same will not be used for storing the date by printing or photocopying date since sheets will stick to each other and spoil the date so printed and copied. Hence the static charges acquired will be eliminated by using the anti-static device. They sheets so produced are further worked for trimming the edges and also by grinding the sides to eliminate the roughness prevailing at the edges of the sheets. The OHP sheets after making it to the required size and especially for marketability, when cut, will become articles of specific use for which they were made. They pleaded that the operations undertaken by them are trimming o edges by using hand trimmer and anti-static treatment removing of dust and storing each transparent sheet with inter-leaved paper to avoid any scraches. Therefore they have not given any incorrect information to the department and the decision arrived at by the Commissioner on the basis of the Statement of Shri Choudhary is not correct. He also referred to the cross-examination of the superintendent during the personal hearing before the Commissioner and also to the statement dated 12.6.98 of Shri D.S. Choudhary. In the statement Shri D.S. Choudhary has stated that "I have nothing more to state in respect of manufacturing process of OHP sheets. It is being carried out in our factory premises at present. Earlier to out developing cutting machines, the process after slitting were got done on job work basis at outside the factory premises."
He said, from the statement of Choudhary it is clear that what he was explaining was the present position. In reply to Question No. 15, (Page 232 of Vol II of Paper book Shri N. Sathyanarayana Superintendent preventive has clearly stated that the whole charge of suppression, wilful mis-statement etc., is based only on the statement dated 12.6.98 of Shri D.S. Choudhary. He therefore pleaded that neither the extended period is applicable as there is no suppression is no suppression of facts or any willful mis-statement nor there was any reason in demanding duty as they themselves have changed the classification from 2.6.98 when they were not further working on the sheets. Therefore, the order of the Commissioner be set aside.
4. Shri Narasimha Murthy appearing for the revenue pleaded that the Commissioner in the adjudication order in Para 46 has clearly stated that the appellants by their FAX dated 20.11.96 to the Assistant Commissioner of Central Excise, before the classification issue was being decided furnished a belief write up on various processes undertaken wherein they mis-stated that apart from trimming the edges, the grinding of sides and edges were being done to eliminate the roughness prevailing at the edges of the sheets. They failed to state how such grinding operation was being carried out in the above referred letter. All along the classification declaration was filed for manufacturing of OHP films sheets and they never informed the department about the process of grinding of the edges of the sheets except in their faxed letter dated 20.11.96 and the said fact has been followed by Shri Jagadish in his statement dated 13.6.98 and also in the statement dated 12.6.98 of Shri D.S. Choudhary General manager Production. The fact of informing the AT of a non-existing process i.e. grinding of edges of the sheet clearly establisheds the intention of the assessee to mis-lead the AC who was the adjudicating authority to get the approval of classification under 3926.96 by way of quasi judicial order. The jurisdictional superintendent of central Excise at the time of visiting the unit on 15.12.98 has gone through the process of manufacture based on the details of process furnished by the assessee's letter dated 5.12.95. Till 15.12.95, assessee has not claimed that they undertook grinding. The superintendent verified the mannual process as mentioned by the assessee in their letter dated 5.12.95. This verification report of the Superintendent only supports the fact that there was no grinding undertaken.
5. When Shri Narasimha Murthy was asked that besides grinding whether the appellants were doing any other operation on the sheets to make it further work. He referred to para 42 of the Commissioner's order wherein the following process carried out are mentioned.
i) Trimming of edges by using hand-trimmer
ii) Anti-static treatment
iii) Removing of dust
iv) Storing each transparent sheet with interleaf paper to avid any scratches He said that removing of dust and storing the transparent paper with interleaf paper to avoid scratches or anti-static treatment is not any further working. Only the trimming of the edges by using hand-trimmers is covered by further working. Since the appellants have not done this but wrongly reported to the department as is established by the Commissioner in his order, therefore, these sheets were not further worked and the order of the Commissioner is correct in law and it should be upheld. Shri Narasimha Murthy relied on the following decision that extended period of time can be made applicable under Section 11A as the show cause notice proposed to modify the classification and also demands the duty. He relied on the following decisions.
1. D.C.W. Limited Vs. CCE Madurai (1988 (35) ELT 167 (Tri)
2. Peico Electronics And Electricals Ltd., (1994 (71) ELT 1053).
He stated that this decision of the Tribunal has been confirmed by the Supreme Court as reported in 2000 (116) ELT A72 (SC)
3. Apar Ltd. Vs. CCE Ahmedabad (1998 (104) ELT 698
4. CCE Hydrabad Vs. Hyderabad Polymers 1998 (104 ) ELT 781
5. 1991 (51) ELT 378 it was upheld by the Supreme Court Therefore the Show cause notice is valid in view of the decision the case of Peko Electronics and Electricals Ltd., Vs. CCE Pune (supra) wherein it was held that issue already concluded in earlier proceedings can be reopened in subsequent proceeding for another period of time if importing fresh material give a new dimension to the matter. Limitation in such cases was to be computed from the date of issue of last show-cause notice.
6. We have carefully considered the submissions made by both sides. We find that the only issue to be decided in these appeal is whether M/s. Venlon Polyester Films were doing the further working on the OHP films by grinding or not. We find that the whole case of the department revolves around the statement of Shri D.S. Choudhary, General Manager (Production) of M/s. Venlon Polyester recorded on 12.6.98 wherein he has explained the process of manufacture of OHP films. The entire investigation was carried ut by the revenue from the facts stated in his statement dated 12.6.98. Since Shri Choudhary did not mention the they are doing grinding of OHP films after cutting, therefore, it was considered that in the past they have mis-declared that they were doing the grinding operation on the films and the classification was done wrongly under sub-heading 3926.90 as the films were considered as further worked. The main contention of the revenue is that before the OIO 293/96 dated 20.11.96 was passed by the Assistant Commissioner of Central Excise Mysore II Division, the Commercial Manager of M/s. Venlon Polyester Shri H.S. Jagadish under his FAX dated 20th Now 96 has submitted a process of manufacture of OHP sheets wherein he mentioned that "During the process of cutting from roll to sheet from, the sheets acquire static charges which will spoil the quality of the sheets and the same will not be fit for use for storing the data by printing or photocopying data since each sheet will stick to each other and spoil the date so printed or copies. Hence the static charge so acquired will be eliminated using the anti-static device. The sheets so procured will be further worked by trimming the edges and also by grinding the sides to eliminate roughness prevailing at the edges of the sheets. The said OHP sheets after making it to the required size and shape fro marketability will become an article for the specific use for which it was made unless and until the above process is undertaken."
We find that in the OIO No. 293/96 dated 20.11.96, passed by the Assistant Commissioner, Central Excise Mysore II Division there is no mention of these facts while coming to the conclusion that the sheets are classifiable under sub-heading 3926.90. We find that in the findings the Assistant Commissioner at page 5 of his order has written that : -
"In support of their case, the assessee have stated that the OHP sheets are further worked in the following manner.
a. Trimming the edges by using hand trimmer to acquire exact shape b. By giving antistatic treatment (presently done manually) to the sheets by using suitable methods).
c. Removing dust to acquire required shine by using solutions viz., Benzyle alcohol etc., and to remove the surface defects like oil etc., d. Store each transparency sheet with inter leaf paper as otherwise the sheet/film get sticked to each other and spoil the quality of the film due to scratches etc."
However on page 6 of his order in the 3rd para he has come to the conclusion which is as under :
"In the instance case, the assessee manufactures special type of polyester sheets called OHP sheets and further works on individual sheets by way of trimming the edges, grounding the (sides) edges to eliminate the roughness, sometime the four corners are also blunted and packed in the ready to use condition. They also provide the antistatic property to make it to be fit to use for printing or photocopying.
Having concluded that the trimming and grounding edges amount to further working, I am of the opinion that the OHP sheets do not merit classification under the chapter heading 39,20, or 39.21 and has to be classified under 39.18, 39.19 or 39.12 to 39.26. The OHP sheets being the articles of plastics cleared in ready to use condition specifically for overhead projector, I hold that these items merit classification under chapter heading 39.26 and subheading 3926.20 of the schedule under the Central Excise Tariff Act."
We find that no where the Assistant Commissioner has referred to the FAX message dated 20.11.96 sent by the Commercial Officer of M/s. Venlon. The Order of the AC is also signed on 20.11.96. Therefore it can not be said that the appellant had misguided the AC when the AC's order does not refer to their FAX message. We also find that in their letter dated 5.12.95 addressed to Superintendent, Central Excise, Range 'D' Mysore have clearly stated that he further processes that are done by getting the geometrical shapes are as under : -
"Further processes that are done after getting geometric shapes are as under :
a) Trimming the edges by using Hand Trimmer to acquire exact shape.
b) By giving anti static treatment (presently done manually) to the sheets by using suitable methods (We are negotiating with the suppliers to procure the required infrastructure for giving automatic static treatment to the sheets in the near future.
c) Removing dust to acquire required shine by using solutions viz Benzyl Alcholol etc., and also remove that surface defects like oil etc.,
d) Store each Transparency Sheet with interleaf paper as otherwise the sheet/film gets sticked to each other and spoil the quality of the film due to scratches etc."
Thus what is taken in the Order of the AC and what was informed by the appellants under their letter dated 5.12.95 is the same thing and there is no difference. Therefore it can not be said that the appellants have mislead the AC in coming to a different conclusion when the AC has not taken into consideration the FAX message dated 20.11.96 into consideration. We also find that the Superintendent Central Excise verified all these processes which were given on 5.12.95. On the classification declaration during the visit on 15.12.95.
7. It is for the Department to establish whether the OHP films were further worked or not by grinding. When they started investigation in May/June '98, at that time the appellants have themselves intimated that they are having the old stock of the OHP films on which grinding has been done and for that also they had filed classification declaration besides the new stock of OHP films which were coming out from their modified machines. Therefore, the department could have very well taken the samples which it appears were taken but which has not been discussed at al in the OIO. The departmental officers who are alleging the suppression of facts that no grinding is done on the films could have easily carried out the investigation with the persons who were actually doing the grinding. No investigation has been done in this direction. no evidence has been placed before us regarding any such investigation. In the absence of any such investigation merely on the statement of Shri D.S. Choudhary dated 12.6.98 where he has explained the current process, the whole case has been built up without collecting proper evidence. Therefore, in the absence of any plausible evidence to come to a definite conclusion that grinding was not being done we do not find any reason to dis-believe the appellant and that process was being done and the films were being further worked before 2.6.98. In the absence of any positive, concrete evidence, we do not find any reason to hold that further working was not being done on the OHP films. We have, therefore to give the benefit of doubt to the appellants. Accordingly, the Order of Commissioner is set aside and all the appeals are allowed.