Custom, Excise & Service Tax Tribunal
The Bombay Dyeing & Mfg. Co. Ltd vs Commissioner Of Central Excise, Raigad on 27 January, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/469/07 (Arising out of Order-in-Original No.34 (MS) (23)/Commr/RGD/06-07 dated 17/01/2007 passed by Commissioner of Central Excise, Navi Mumbai) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== The Bombay Dyeing & Mfg. Co. Ltd., Appellant Vs. Commissioner of Central Excise, Raigad Respondent Appearance:
Shri.M. H. Patil, Advocate for appellant Shri.Manish Mohan, SDR, for respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 27/01/2011 Date of Decision : 27/01/2011 ORDER NO Per: Ashok Jindal
1. By the above appeal, the Appellants have challenged Order-in-Original No.34 MS(23)COMMR/RGD/06-07 dated 17.1.2007, by which Ld. Commissioner has confirmed duty on DMT-Residue for the period March, 1986 to Feb., 2005 (except for August, 1991 to December, 1991), holding it to be marketable. The demand is confirmed by invoking comparable sales price of IPCL-Baroda of Rs.150/- per MT and also invoking extended period, holding that emergence of DMT Residue and its quantum was not shown in RG-1 and RT-12 Returns. Ld. Commissioner also imposed penalties under Section 11AC for the period August, 1996 to Feb. 2005 and under Rule 173Q of CER, 1994, over and above ordering interest under Section 11AB.
2. The facts, succinctly, could be summarized as under:
a) The Appellants, during the material period, were engaged in manufacture of Dimethyl Terephthalate (DMT) falling under Chapter 29 of the Schedule to CETA, 1985. During the course of manufacture of DMT, there arises waste known as DMT Residue.
b) As early as on 22.4.1985, the Appellants informed the Dept. of such emergence of DMT-Residue and enquired whether they were required to take license, as, such Residue was not an excisable product and was also not sold, but was destroyed by using as fuel in Boiler, along with other inputs. On the basis of advice of the Dept., the Appellants submitted application for L-4 license on 27.4.1985 and L-4 license was issued to them. The sample of DMP Residue was also drawn for the test purpose by the Dept. on 25.7.1985. The Supdt., by letter dated 25.4.1985, also had clarified that residue obtained and meant for sale would be covered under Tariff Item 68 and have to follow the procedure. The Appellants did not pay duty on DMT residue, as the same was not cleared outside the factory, but was used captively as fuel in furnace.
c) However, Ld. Collector of Central Excise, Bombay-III, by Notice to Show Cause dated 2.4.1991, demanded duty on DMT Residue for the period 1.3.1986 to 31.3.1990. The notice did not allege extraneous grounds like suppression of facts, willful mis-statement, etc.
d) By defence reply dated 30.8.1991, the Appellants resisted said Notice on the ground that not only residue was not a commercial product for demanding duty, but also demand would be barred by limitation, in view of their approaching the Dept. voluntarily; obtaining L4 licence; drawal of sample by Dept. etc.
e) By Order-in-Original dated 25.11.1991, the proceedings in the SCN dated 2.4.1991 were dropped, holding that DMT Residue was not marketable.
f) In the meantime, eleven Notices to Show Cause were issued for the period April, 1990 to March, 1995, demanding duty on DMT Residue and the same were adjudicated by the Ld. Commissioner, Mumbai-III, vide Order-in-Original dated 31.10.1995. Ld. Commissioner confirmed the demand covered under the said SCNs. However, he held that penalties were not imposable, as there was no deliberate intention on the part of the assessee to contravene the provisions and/or not to pay duty.
g) Both the said Orders-in-Original were challenged before Tribunal, former one by the Dept. and latter one by the assessee. Latter Order-in-Original dated 31.10.1995 was set aside by the Honble Tribunal, by its Order No.2391/96/WRB dated 1.7.1996 and remanded the matter to Commissioner for fresh adjudication, holding that Dept. should make available evidence and the basis of valuation and marketability, as Notice did not specify that IPCL-Baroda had cleared identical goods on payment of duty. Former Order-in-Original dated 25.11.1991 was also set aside by Tribunal, vide its Final Order No.75/2001-C dated 18.5.2001, following its earlier judgment dated 1.7.1996 (supra) and matter was remanded, in the light of the above.
h) In remand, Ld. Commissioner, by Order-in-Original dated 31.1.2006, confirmed demand for the period March, 1986 to Feb. 2005, holding disputed product as marketable based on manufacture of same DMT residue by IPCL-Baroda. Ld. Commissioner imposed penalty equal to duty, along with interest. This order was challenged by the Appellants before Honble Tribunal, being Appeal No.E/757/06.
i) The Honble Tribunal, by its Order No.A/1032/WZB/06/C-I/EB dated 5.5.2006, again set aside the Order-in-Original and remanded the proceedings to Ld. Commissioner, with a specific direction that the Dept. should bring evidence on marketability from an independent market enquiry and decide afresh, considering the law as settled by Apex Court.
j) In remand, Ld.Commissioner, by impugned Order-in-Original No.34/ MS(23)COMMR/RGD/06-07 dated 17.1.2007, once again confirmed the demand and imposed penalties based on the findings:
i) that IPCL-Baroda have accounted for DMT-Residue in their RG-1 for the period March, 1991 to May, 1998 and have cleared it on payment of duty, declaring the value of Rs.150/- and Rs.125/- per MT;
ii) that the process of manufacture of IPCL and the Appellants is similar and the same would substantiate the stand that the disputed product is marketable;
iii) that although Appellants had filed Classification List for DMT Residue, mentioning no commercial value, they were not accounting the production in RG1 and were also not showing the same in RT-12 Returns and, hence, extended period is invocable;
iv) that comparable sales price of IPCL-Baroda would apply for valuation.
3. The Appellants are in appeal, challenging the impugned order of Ld. Commissioner and claiming that disputed product (DMT-Residue) was not marketable; that Dept. did not conduct any independent market enquiry to substantiate marketability, as per the direction of Honble Tribunal; that evidence of IPCL-Baroda was already there even before the Honble Tribunal; that in the absence of any suppression, mis-declaration etc. whatsoever, major portion of the demand is barred by limitation; that penal provisions also would not get attracted, etc.
4. The Ld. Advocate, appearing for the Appellants, made the following submissions:
(a) that although there are catena of judgments to substantiate that the disputed product is not marketable, as mere selling of a commodity does not mean that it is excisable, he preferred to argue on various other points, keeping the issue of marketability open.
(b) that the ld.Advocate provided a chart showing the rates of duty on DMT and DMT-Residue, during different periods, as under:
DMT (Dimethyl Terephthalate) DMT Residue Year Sub-Heading Rate of duty Sub-Heading Rate of duty 1986-1987 2907.30 Nil 3801.90 15% 1987-1988 2917.10 Nil 3823.00 15% 1988-1989 2917.10 Nil 3823.00 15% 1989-1990 2917.10 Nil 3823.00 15% 1990-1991 w.e.f.
20.3.1990 2917.10 15% adv. + Rs.5 per Kg.
Effective rate Rs.3.60 per kg. (Notfn.24/90-CE. Dt.20.3.90) 3823.00 15% 1991-1992 2917.10 15% + Rs.5 per kg.
Effective rate 15% (Notn.24/90-CE. dt.20.3.90 as amended by Notn.107/90-CE dated 16.5.1990) 3823.00 15% 1992-1993 2917.10 15% + Rs.5 per kg.
Effective rate 15% 3823.00 15% 1993-1994 2917.10 15% + Rs.5 per kg.
Effective rate 15% 3823.00 15% 1994-1995 2917.10 20% 3823.00 20% 1995-1996 2917.10 20% 3823.00 20% 1996-1997 2917.10 20% 3823.00 20% 1997-1998 2917.10 18% 3824.90 18% 1998-1999 2917.10 18% 3824.90 18% 1999-2000 2917.10 16% 3824.90 16% 2000-2001 2917.10 16% 3824.90 16% 2001-2002 2917.10 16% 3824.90 16% 2002-2003 2917.10 16% 3824.90 16% 2003-2004 2917.10 16% 3824.90 16% 2004-2005 2917.10 16% 3824.90 16% 2005-2006 2917.37.00 16% 3825.69 00 16% Along with the chart, he also submitted compilation of provisions of law, Notifications & CBEC instructions:
(c) With the above, it was submitted that DMT, a final product, was fully exempt upto 19.3.1990. With effect from 20.3.1990, DMT was chargeable to duty, at the effective rates as above, and was being cleared by the Appellants on payment of duty, which is not in dispute.
(d) For the period 20.3.1990 onwards, the Appellants would be eligible for exemption under Notn.217/86-CE dated 2.4.1986 (upto 15.3.1995) and, thereafter, under succeeding Notn.67/95-CE dated 16.3.1995. Notifications for the relevant periods would substantiate that all goods falling under Chapter 38 (where DMT-Residue was classified) were specified as inputs and goods falling under Chapter 29, wherein DMT falls, was specified as final product. Since duty on DMT was paid, exemption to DMT-Residue was undisputedly available to the Appellants, during the disputed period.
(e) Ld. Commissioner, in the impugned order itself, accepts utilization of DMT residue as fuel, in Boiler, for generation of steam, as reproduced below:
Further the learned Commissioner in his O-I-O No.82-95/95-Commr. dated 31.10.95 had verified the so called destruction process of the said residue in the factory of the assessee wherein the said Commissioner finds that the said residue is in the paste form under normal atmospheric pressure. The said residue was slightly liquefied by heating process and the said liquid is sprayed in the boiler with the help of special nozzles. The said process of destruction, as claimed by the assessee, on the contrary appears to be controlled utilization of residue as fuel in the furnace. Therefore the learned Commissioner came to the conclusion that the said residue is utilized by the assessee as a fuel to its maximum in generating the steam in the boiler. Since said residue was used as fuel for generation of steam, which, in turn, was used for manufacture of DMT, which was cleared on payment of duty, the benefit under the said Notifications would be available.
(f) The ld. Advocate also submitted that in any case, credit of modvat of duty paid on DMT-Residue was available, based on the Rule 57A(4) r/w Rule 57B(1)(iv) and such credit could have been utilized for payment of duty on DMT. There is a specific mention of eligibility of credit on inputs used for generation of steam, used for manufacture of final products, or for any other purposes, within the factory and, hence, he claims that it would be a duty neutral exercise. Looked from this angle also, the demand is not sustainable, based on settled position on the issue.
(g) That the demand for the entire period of March, 1986 to March, 1990, covered under SCN dated 2.4.1991, is barred by limitation, in view of their voluntarily approaching the Dept,; applying and obtaining L-4 Licence; their claiming the disputed product to be not marketable; Supdts letter dated 25.4.1985 clarifying classification and dutiability, if residue obtained was meant for sale; various other correspondence. Further, first Order-in-Original dropping the demand, holding it to be non-marketable; second Order-in-Original not imposing penalty; non-challenging of second Order-in-Original by Dept. etc. would also support that there was no suppression and malafides on the part of the Appellants.
(h) Ld. Advocate prayed for decision, without even entering into the aspect of marketability, although he does not give up this issue.
5. On the other hand, Ld.SDR, Shri Manish Mohan, vehemently argued in support of the Revenue and made the following submissions, in his support.
(a) that exemption for captive consumption under Notn.217/86-CE and succeeding Notn.67/95-CE or, for that matter, availability of modvat of duty payable on DMT residue were not the issues raised before Lower Authorities and, hence, the same are not permissible to be raised before the Tribunal;
(b) that although Appellants filed Classification Lists, they did not account for the production of DMT residue in RG-1 and the same was also not reflected in their RT-12 Returns and, hence, demand would not be barred by limitation. Therefore, Lower Authorities were right in invoking the extended period of limitation.
(c) Ld.SDR further reiterated that in remand orders, Tribunal had only directed the Commissioner to decide on marketability and valuation of the disputed product by obtaining evidence by the Dept. from an independent market enquiry and decide the law on the issue considering the Apex Court judgment, which was done by providing evidence of clearance of DMT Residue by IPCL-Baroda.
6. The Ld. Advocate for the Appellants, in his rejoinder, claimed that availability of captive consumption exemption and modvat credit, being purely point of law, which needs no verification, can be taken at any stage of appeal, including before the Honble Tribunal. Further, he claims that even Honble Tribunal had appreciated this aspect, which gets evidenced from para 4 of its Order No.A/1032/WZB/06/C-I/EB dated 5.5.2006, wherein it has been spelt-out thus: Thereafter all issues in this appeal be re-determined, which clearly indicates that all issues were kept open. The Ld. Advocate, in support of his claim that eligibility of exemption and modvat can be entertained even at appellate stage, relied upon Honble Apex Court judgment in Share Medical Care v/s. Union of India [2007 (209) ELT 321 (SC)], wherein it has been held that even if an assessee does not claim benefit under a particular Notification at initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage. He also relied upon the Honble Supreme Court judgment in Devangere Cotton Mills v/s. CCE, Belgaum [2006 (198) ELT 482 (SC)], wherein it has been held that Rule 10 of CESTAT Procedure Rules, 1982, is widely framed to allow the Tribunal to decide appeal even on grounds not taken in memorandum of appeal and when Tribunal itself considering the issue on a contested hearing, Appellants cannot be shut out from pleading its case on same basis. The Ld. Advocate also pleaded that, in any case, it was incumbent upon the Assessing/Adjudicating Authority to grant the benefit of exemption and modvat credit, even if not claimed by the assessee, in support of which he relied upon Honble Apex Court judgment in the case of Anchor Pressing, reported in 1987 (27) ELT 590 (SC).
7. After hearing both sides at length before going into the issue of marketability of the impugned products, viz., DMT- residue. First we will consider the submissions made by the Ld. Advocate (a) whether the demands confirmed for the period 01/03/86 to 31/03/90 are barred by limitation or not? (b) and for the period subsequent to 20/03/90, whether the appellants are eligible for exemption under notification No.217/86-CE dated 02/04/86 (upto 15/03/95) and thereafter under notification No.67/95-CE dated 16/03/95 or not?
8. The Ld. Advocate has submitted that on 22/04/85 the appellants informed to the department that during the course of manufacture of DMT, DMT-residue emerges for which a enquiry was made from the department i.e. whether the appellants are required to take license as the said residue is not excisable products and was also not sold by the appellants, but the same was destroyed by them using as fuel in boiler along with other inputs. Thereafter, on the advice of the department, the appellants submit an application for L-4 license on 27/04/85 and L-4 license was issued to them. The sample of DMT-residue was drawn by the department on 25/07/85 and it was held that the said residue is meant for sale and would be covered under tariff item 68. He further submitted that it is an admitted fact that the appellant has not cleared the DMT-residue outside their factory and the same was consumed captively as fuel in the furnace by them. These facts were in the knowledge of the department since 1985.
9. A show-cause notice dated 02/04/91 issued for the period 01/03/86 to 31/03/90 by invoking extended period of limitation is not sustainable as there is no suppression of facts or in the absence of any of the following viz., fraud, collision, mis-statement, suppression of facts and contravention of rules with an intent to evade duty. In the absence of the above ingredients, the extended period of limitation is not invocable. Hence, no demands prior to six months to the show-cause notice is sustainable.
10. We do agree with the submissions of the Ld. Advocate that these facts were in the knowledge of the department since 1985 that during the course of manufacture of DMT, DMT-residue emerges and the appellant has informed to the department all such emergence of DMT-residue and it is also on record the end use of DMT-residue and the same has been explained by the appellant to the department in 1985 itself. With these observations, the demands for the period 01/03/86 to 31/03/90 are barred by limitation as the show-cause notice is issued beyond the period of limitation.
11. For the demands after 25/03/90, whether the appellant is eligible for availment of exemption under notification No.217/86-CE, 67/95-CE is entitled or not ?
12. On this point the Ld. DR submitted that this issue is not opened before this Tribunal as in the remand proceedings this Tribunal has remanded the matter with the following observations:-
The conduct of the Ld. Commissioner has resulted in this matter being allowed as remand once again. We find that the Commissioner should comply with the direction of this Tribunal. In case they have any grievance, they could always take up the matter in appeal. Such an act, as committed in this case of non compliance of two remand orders, does not speak well about the conduct of a senior officer sitting as a quasi judicial adjudicator. The Commissioner sitting as an adjudicator is required to be fair and impartial in his approach, to determine the issues which are placed before him. We hope that in this remand proceedings now being ordered, the material from an independent market enquiry along with the law as now settled by the apex Court as regards the excisability of all kinds of residue and waste; thereafter apply the law to the facts so ascertained after supplying the material to the manufacturer and hearing them on the same. Thereafter all issues in this appeal be redetermined.
13. From the perusal of the said order, it was directed to the adjudicating authority the issue was to be decided by the adjudicating authority of the marketability of the products viz., DMT-resident in remand proceedings. The adjudicating authority has held that the said product is marketable after making enquiries from the market. Now, it cannot be left open to the Tribunal to examine other issues in the matter and the Tribunals are not to dispense justice but the Tribunals are bound to pass the order within the Act itself.
14. We are not in agreement with the contention of the Ld. DR that the Tribunals are not to dispense justice. First of all, we want to brring out on record that in the remand proceedings vide order dated 05/05/06 this Tribunal has directed after deciding the issue of excisability of the impugned order i.e. DMT-residue, all other issues in the appeal redetermined. From the above, it is clear that the remaining issues were kept open. Moreover, the Tribunals are created to shift the work from the Courts on the ground of pendency and delay of matters in the Courts.
15. The Honble apex Court in the case of UOI Vs. R Gandhi reported in 2010 (261) ELT 3 (SC) in para 36 has observed that in R.K. Jain Vs. UOI 1993 (65) ELT 305 (SC) observed as :-
The Tribunals are set up [under] Articles 323A and 323B of the Constitution or under an Act of Legislature are creatures of the Statute and in no case claim the status as Judges of the High Court or parity or as substitutes.
16. Further in para 41 the Honble apex Court has observed that The fundamental right to equality before law and equal protection of laws guaranteed by Article 14 of the Constitution, clearly includes a right to have the persons rights, adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognized principles of adjudication. Therefore wherever access to courts to enforce such rights is sought to be abridged, altered, modified or substituted by directing him to approach an alternative forum, such legislative act is open to challenge if it violates the right to adjudication by an independent forum
17. In para 44 of the said judgement, the Honble apex Court summarized decision as follows:-
(a) A Legislature can enact a law transferring the jurisdiction exercised by courts in regard to any specified subject (other than those which are vested in courts by express provisions of the Constitution) to any tribunal.
(b) All courts are tribunals. Any tribunal to which any existing jurisdiction of courts is transferred should also be a Judicial Tribunal.
18. From the above observation, it is clear that the Tribunals are set up to do justice with the litigants within the framework of law. Moreover, in the Excise Act, Section 2 (a) defines the adjudicating authority, which means any authority competent to pass any order with in this Act. It means that the adjudicating authority has to pass order within the Act.
19. We find that in this case although the adjudicating authority has arrived at a decision that the impugned goods viz., DMT-residue is marketable then the liability casts on the adjudicating authority to arrive at a correct assessable value, to classify product correctly and to ascertain whether the assessee is entitled for benefit of any exemption notification or not and thereafter to arrive at the correct liability.
20. We have observed that the adjudicating authority has arrived at the decision that the product in question is marketable (which is not admitted by the appellant), but thereafter the adjudicating authority has failed to do his duties under the act ie., whether the appellant is entitled to the benefit of the notification No.217/86 upto 15/03/1995 and notification No.67/95 dated 16/03/95 thereafter.
21. We have gone through the notification, which grant exemption for captive use. In this case, it is no doubt that DMT-residue has been used by the appellants in their own factory for generation of steam in boiler for further manufacturing of the final products viz., DMT. This fact has not been considered by the adjudicating authority and it is a question of law whether the appellants are entitled for the benefit of above said notification or not. It can be raised at any stage of proceedings. Hence, after going through the facts of this case, we hold that the appellants are entitled for the benefit of the above said notifications for the period with effect from 20/03/90 till 2006. We also found the force in the contention of the Ld. Advocate that the credit of modvat duty paid on DMT-residue was available based on Rule 57A (4) read with Rule 57B (4) and such credit could have been utilized for payment of duty on DMT. There is a specific mention of eligibility of credit on inputs used for manufacture of final products or for any other purpose, within the factory, hence it is a revenue neutral situation.
22. We also relied on the decision of the Honble apex Court in the case of Share Medical Care Vs. UOI, reported in 2007 (209) ELT 321 (SC), wherein it was held that even if the assessee does not claim the benefit under a particular notification at initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage. We also relied upon the Honble Supreme Court judgement in the case of Devangere Cotton Mills Vs. CCE, Belgaum, reported in 2006 (198) ELT 482 (SC), wherein it was held by the apex Court that Rule 10 of CESTAT Procedure Rules, 1982 is widely framed to allow the Tribunal to decide appeal even on grounds not taken in memorandum of appeal and when Tribunal itself considering the issue on a contested hearing, the appellants cannot be shut out from pleading its case on same basis.
23. In view of the above discussion, we find that it is the duty of the adjudicating authority itself to ascertain the correct duty liability by classifying the goods correctly by ascertaining correct assessable value and to give the benefit of the exemption notifications mentioned above to the appellants in this case, which the adjudicating authority has failed to do so.
24. As discussed herein above that the appellants are entitled for the benefit of exemption notification No.217/86 & 67/95.
25. In view of the above discussion, we hold that the demands confirmed against the appellants for the period 01/03/86 to 31/03/90 are barred by limitation and demands raised for the period post 20/03/90 are not sustainable as the appellants are entitled for the benefit of notification No.217/86 & 67/95 as discussed herein above.As the appellants have succeeded on limitation and benefit of the exemption notification discussed above, we need not to go into the issue of marketability.
26. When demands are not sustainable no penalties are warranted, hence, the impugned order is set aside the appeal is allowed with consequential relief (if any).
(Pronounced in Court) (P.R. Chandrasekharan) Member (Technical) (Ashok Jindal) Member (Judicial) pj 1 2