Custom, Excise & Service Tax Tribunal
M/S Micro Rubber Industries Pvt. ... vs Cce, Delhi on 25 September, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi, Court No. 1 Date of hearing/decision: 25.09.2014 For Approval and Signature: Honble Mr. Justice G. Raghuram, President Honble Mr. R. K. Singh, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Excise Appeal Nos. 1433 - 1434 of 2005 (Arising out of order-in-original No. 04/2005 dt. 27.01.2005 passed by the Commissioner of Central Excise, Delhi-II) M/s Micro Rubber Industries Pvt. Limited Appellant S. K. Bajaj, M. D. Vs. CCE, Delhi Respondent
Appearance:
Shri V. Lakshmi Kumaran, Advocate for the appellant Ms. Sweta Bector, DR for the Respondent Coram: Honble Mr. Justice G. Raghuram, President Honble Mr. R. K. Singh, Member (Technical) Final Order Nos. 54183 54184/2014 Per: R. K. Singh:
Appeals have been filed against order-in-original No. 04/2005 dt. 27.01.2005 in terms of which the duty demand of Rs. 85,83,210/- for the period 01.01.1992 to 22.08.1996 was confirmed and penalty of Rs. 20 lakhs was imposed on M/s Micro Rubber Industries Pvt. Limited and a further penalty of Rs. 5 lakh was imposed on Sh. S. K. Bajaj, Managing Director of the company. The fine of Rs. 5 lakh was also imposed in lieu of confiscation of the goods seized.
2. The issue involved in this case is classification of micro cellular rubber sheets and applicability of exemption Notification No. 80/95-CE dated 16.03.1005. The appellants have contended that in the impugned order the classification has been decided on the basis of the test report in respect of the sample which was drawn from the finished product namely micro cellular rubber sheet while for the purpose of deciding classification, the sample has to be drawn in accordance with the statutory requirement of Chapter Note 4(a) of Chapter 40 of the Central Excise Tariff.
3. Learned Advocate explained in considerable detail the manufacturing process of the product and how the sample which was drawn contained prohibited materials (fillers, extender and withdrawn after balkanization).
4. After going through the adjudication order, we find that the appellants contention in this regard is correct. We also find that the issue of classification of micro cellular rubber sheets manufactured by another company M/s Papular Rubber Industries vs. CCE, Delhi-I 2000 (167) ELT 469 and 2000 (117) ELT 65 (T) stands decided by Honble CESTAT. The facts of the present case are similar to those obtaining in the case of Popular Rubber Industries (supra).
5. In para 6 of the order the Tribunal observed as under:
6. We have considered the submissions of both the sides. The impugned order has been passed classifying the impugned product under sub-heading 3921.19 relying upon the test reports received from Central Institute of Plastics Engineering and Technology and applying Rule 3(b) of the Rules for the interpretation of the schedule to the Central Excise Tariff Act. The Advocate appearing for the appellants have vehemently argued about the manner in which samples have been drawn by referring to Notes 1 and 4 to Chapter 40. We observe from Note 1 to Chapter 40 that synthetic rubber falls within the meaning given to the expression rubber in the schedule to the Central Excise Tariff Act. The expression synthetic Rubber has been explained in Note 4 and as per Note 4(c) synthetic rubber applies to natural rubber modified by mixing with plastic and satisfying the requirement concerning vulcanisation, elongation and recovery as mentioned in Note 4(a). The appellants have contended in the manufacture of MCEVA rubber sheets, they are using natural rubber ranging between 10% to 35% and this has not been rebutted by the Revenue. We also observe from the show cause notice dated 22.09.1997 that the samples were drawn from the finished goods for the purpose of test. We, therefore find substance in the submissions of the learned Advocate for the appellants that the material sent for test was of finished product which contained fillers, plasticisers, extenders and other agents, the presence of which is not permitted for the purpose of test as per Note 4(a) to Chapter 40. Explanatory Notes of HSN also provides that for the purpose of the test required by Note 4, a sample of the unsaturated synthetic substance or a substance of a kind specified in Note 4(c) (in the condition of unvulcanised raw material) is to be vulcanised with sulphur and then subjected to elongation and recovery test. Accordingly, in the case of substance containing materials not permitted by Note 4... the test is to be carried out on a sample which does not contain such materials or from which such materials have been removed. The explanatory notes also mentions that in the case of vulcanised rubber articles, which cannot be tested as such, it is necessary to obtain a sample of the unvulcanised raw material from which the articles are made, in order to perform the test. The classification of the impugned product is to be determined on the basis of test report only and as the proper sample has not been sent for the purpose of test, the impugned classification cannot be sustained and matter has to be remanded.
6. Indeed, in the present appeal also, while deciding the case denovo the Commissioner has relied upon the very same sample which was drawn out of the finished product and not drawn in accordance with the requirements of Chapter note 4(a) referred to above. We find that the judgment of the Tribunal in the case of Papular Rubber Industries (supra) is squarely applicable to the present case. In that order the Tribunal has categorically held that the impugned goods are classifiable under heading 4008.11 and not under 3921.19 (as held by the impugned order). As the issue stands decided, any detailed analyses of the appellants contentions shall be an idle exercise.
7. Coming to the issue of applicability of Notification No. 18/95-CE dated 16.03.1995, we find that the relevant entry exempts goods falling under heading 4008.11 or 4008.29 (Plates, blocks, sheets and strips of micro-cellular or non-cellular rubber [excluding plates, blocks, sheets and strips of latex foam sponge]) if used in the manufacture of soles, heels or soles and heels combined, for footwear. The adjudicating authority has taken a view that the assessee must produce evidence to show their eligibility for the said exemption by proving that the impugned goods were used in the manufacture of soles, heels or soles, heels and soles & heels for footwear. The adjudicating authority also relied upon the statement of three customers who claimed to have used the goods for purposes other than soles and heels for footwear. The appellant have contended that the sales to these three customers were minuscule and they only experimented to see if these goods could be used for any purpose. Normally, an exemption notification is required to be interpreted strictly and the onus is on the assessee who claims the benefit to establish that they satisfy the condition as specified therein. This very issue in respect of the impugned goods has however been decided by CESTAT in the case of Pololight Industries Ltd. vs. CCE, Vapi 2009 (93) RLT 42 (CESTAT). Para 7 and 8 of the decision are particularly relevant and therefore are reproduced below:-
7. After appreciating the submissions made by both the sides, we note that there is no dispute about the fact that the clearances of the appellants product, in majority of the cases, is to the manufacturers or to the persons who use it for the manufacture of heels, soles or heels and soles combined for footwear. The statements of the Managing Director, Executive and the Director of the company recorded during the course of investigation indicate to the above fact. We also note that the statement of the purchasers of the finished product sheets was also recorded during the course of investigations wherein some of the purchasers were able to establish that sheets purchased by them were not actually put to the above uses. The adjudicating authority has observed that these purchasers in their statements have deposed that they were under no condition by the appellant to use the material in the manufacture of footwear. Accordingly he has come to a finding that inasmuch as there was no condition put by the appellant, the goods might have been used somewhere else, thus earning their exit from sub-heading 4008.21.
8. The expression used in heading 4008.21 is used in the manufacture of Whether such expression has to relate to the actual use (emphasis provided) or the same has to be interpreted so as to mean that to be ordinarily used or intended use. If the interpretation advanced by the Revenue is accepted, the same would mean that the manufacturer of the rubber sheets is required to establish in each and every clearance that the same were actually used in the manufacture of soles or heels etc. for footwear. Further such sales may not be always to the always to the actual users but may be through the traders, who further sell the goods to footwear manufacturers, in which case it is not only impractical but would be impossible for any manufacturer to verify the use of such goods at the customers end and to establish (subsequent to clearance of the goods) that the same were actually used in the manufacture of soles or heels for footwear. Such an interpretation, on the face of which would defeat the entry. The same product, if actually used for soles and heels would earn its claim under heading 4008.21 and if not actually used would be ousted from the said claim. In our views the expression used in the manufacture of refers to the intended used of the goods or the ordinary use of the goods or the kind used in the manufacture of heels & soles etc. The same is only description of the goods required to be classified under the said sub-heading and is not restricted to only those clearances of sheets which are ultimately actually used in the manufacture of heels, soles etc. The said expression is appearing under the column description of the goods and has to be held as relating to the goods which are of a kind used for the specified purposes.
The Honble Gujarat High Court in the case of M/s Viswa & Co. vs. State of Gujarat [1966 (17) STC 581 (Guj.)] has observed as under-
A domestic electrical appliance, in our opinion, would be an electrical appliance of a kind generally used for domestic purposes. It may also be used at places other than the home or the house, but that would not destroy the character of a domestic electrical appliance which attaches to it by reason of its being a kind of an electrical appliance generally used for the household.. It is of course not necessary that an electrical appliance, in order to satisfy the description of a domestic electrical appliance, must be actually used in the home or the house. What is necessary is that it must be of a kind which is generally used for household purposes and if that test is applied, there is no doubt that electric fans are domestic electrical appliances and the tribunal was therefore right in holding that they fall with entry 52 of Schedule B. As such it can be safely concluded that the expression used in the manufacture of, appearing against the Sl. No. 4008.21 does not relate to the clearances actually used for the specific purposes but would cover all the clearances, even if in some of the cases the goods have not been actually shown to have been used for the said purposes.
9. In any case, we find that there is no evidence produced on record by the Revenue to establish that the sheets cleared by the appellant were actually put to some other uses, other than the one specified against the entry. The Revenues entire case is based upon only one fact that the appellant have not been able to show that the sheets have actually been used for the specified purposes. We note that there is no such requirement in the entry to produce any end used certificate for the purpose of claiming the coverage. In the absence of any such requirement in the tariff itself, such a condition cannot be introduced by the Revenue. Wherever legislature intended to grant benefit based upon the actual end use, proper guidelines stand prescribed. This establishes that insistence on end use certificate is not warranted when there is no such specific statutory requirement. As such, even in the absence of any evidence showing the actual end use of the goods, the same would be classifiable under heading 4008.21, as long as they are of the kind to be used for soles and heels.
In the wake of the decision of CESTAT in the case of Pololight Industries Ltd (supra) the appellants are eligible for the benefit of Notification No. 18/95-CE dated 16.03.1995.
8. In the light of the foregoing, we allow the appeals and set aside the impugned order.
(Operative portion of the order pronounced in the open Court).
(Justice G. Raghuram) President (R. K. Singh) Member (Technical) Pant