Custom, Excise & Service Tax Tribunal
M/S. Eternit Everest Ltd vs Cce, Bhopal on 15 October, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Block No.2, R.K.Puram, New Delhi-110066.
Principal Bench, New Delhi.
Excise Appeal No.5805/04
(Arising out of Order-in-Appeal No.546-547/CE/BPL/2004 dt.29.7.04 passed by Commissioner(Appeals), Bhopal)
M/s. Eternit Everest Ltd. Appellant
Versus
CCE, Bhopal Respondent
Appearance Sh. B.L.Narsimhan, Adv. For Appellant Sh. Virender Chaudhary, DR for Respondent Coram: Honble Mr. JUSTICE R.M.S.KHANDEPARKAR, PRESIDENT Honble Mr. RAKESH KUMAR, MEMBER (TECHNICAL) Date of hearing: 15.10.09 Date of decision:
Oral Order No._________________ Per Rakesh Kumar:
The facts leading to this appeal are, in brief, as under:
1.1 The Appellants manufacture asbestos cement corrugated sheets chargeable to Central Excise Duty under heading 6804.10 and other asbestos cement products chargeable to duty under heading 6804.20 and 6840.90 of the Central Excise Tariff. As per the facts narrated in the show cause notice dt.22.1.98 issued to the appellants, during the period from Nov92 to June94, they applied for remission of duty on unmarketable asbestos cement products totally weighing 37.444 MTs., which was allowed and, thereafter those asbestos cement products were destroyed under the supervision of the jurisdictional Central Excise Officers. The small pieces of the asbestos cement products, destroyed under Central Excise Supervision and in respect of which remission of duty had been granted, were subsequently sent under job work challans to job workers for grinding the same into power and the powder called Hard Ground Powder(HGP)/Hard Ground Waste was returned to the appellants factory from where it was sold. According to the Department, Hard Ground Power(HGP) is chargeable to Central Excise Duty under heading 68.05 of the Central Excise Tariff as mixtures with a basis of asbestos or with a basis of asbestos and magnesium carbonate and that its manufacture and sale was not disclosed by the appellants to the Department. Accordingly, a show cause notice dt.23.1.98 was issued to the appellants for demanding Central Excise Duty amounting to Rs.41,369/- on clearances of the hard ground powder without payment of duty during the period from Nov92 to June94. The show cause notice was issued by invoking extended period under proviso to Section 11A(1) of Central Excise Act,1944 and also proposed imposition of penalty on the appellants under Section 173Q(1) of Central Excise Rules,1944 read with Section 11AC of Central Excise Act. The show cause notice was adjudicated by the Asstt. Commissioner vide order-in-original dt.23.9.98 by which duty demand of Rs.41,369/- was confirmed against the appellants and besides this, penalty of Rs.41,369/- was imposed on the appellants under Section 11AC and penalty of Rs.20,000/- was imposed under Rule 173Q(1) of Central Excise Rules,1944. On appeal to Commissioner(Appeals), Bhopal against this order of the Dy. Commissioner, the Commissioner(Appeals) vide order-in-appeal dt.30.4.01allowed the appeal and set aside the Dy. Commissioners order on the ground that the show cause notice dt.23.1.98 covering the demand for the period from Nov92 to June94 is time barred and that no case is made out by the Department for imposing penalty under Section 11AC. The Department filed an appeal before the Tribunal against the Commissioner(Appeals)s order and the Tribunal vide Final Order No.A/263/02/NB dt.20.2.02 allowed the Revenues appeal and remanded the matter to Commissioner(Appeals) for denovo adjudication. The Commissioner(Appeals) was directed to record his specific findings on all the points raised by both the parties including the allegation of mis-statement and suppression of the relevant facts with intent to evade payment of duty. The Commissioner(Appeals), as per the Tribunals directions, heard this matter denovo and vide order-in-appeal No.546-547/CE/BPL/2004 dt.29.7.04 upheld the Dy. Commissioners order confirming the duty demand and imposing penalty under Section 11AC but set aside the penalty under Section 173Q(1) on the ground that when penalty under Section 11AC is imposed, there was no necessity to impose separate penalty under Rule 173Q(1) of Central Excise Rules. In this order, the Commissioner(Appeals), on the Revenues appeal against the Dy. Commissioners order-in-original dt.23.9.98, also ordered the charging of interest under Section 11AB on the duty demand confirmed under Section 11A(1). It is against this order of the Commissioner(Appeals) that the present appeal has been filed by the appellant.
2. Heard both the sides.
2.1 Shri B.L.Narsimhan, Advocate, the learned Counsel for the appellants, made the following submissions:
(1) HGP is nothing but finely ground pieces of the asbestos cement products which being not marketable, had been destroyed. Prior to 1995, this grinding was being out sourced through job workers, but since 1995, this grinding is being done in house. The Department seeks to classify HGP under heading 68.05 as mixtures with a basis of asbestos or with a basis of asbestos and magnesium carbonate. The HGP is not a mixture with a basis of asbestos or with a basis of asbestos and magnesium carbonate. It consists of cement, sand, fly ash, asbestos-powder etc. and is nothing but pulverised and powdered asbestos cement products which were unmarketable. Just because it fetches a little price, it does not mean that the same is marketable and hence excisable.
(2) Tribunal in the case of Super Engineering Co. vs CCE, Rajkot reported in 1996(82)ELT.539(Tri.) has held that the process of pulverizing, washing and cleaning of brass dross/ash does not amount of manufacture, as no new marketable commodity with a separate and distinct name, having separate physical and chemical composition or characteristic comes into existence. Attention was invited to the Tribunals observations in para 10 of its order wherein there is reference to Honble Supreme Courts judgment in the case of Hyderabad Industries Ltd. vs UOI reported in 1995(78)ELT.641 wherein it has been held that separating asbestos fibre and rock, in which it is embedded, by manual and mechanical means does not amount to manufacture. Same view has been taken by the Tribunal in the case of Mahalakshmi Metal Industries vs CCE, Allahabad reported in 2001(136)ELT.1391 wherein it has been held by the Tribunal that Ravali obtained by pulverizing and sieving the brass dross and ash is not a manufactured product and hence not liable to duty. Judgement of Honble Supreme Court in the case of Shree Ramakrishna Soapnut Works vs Supdt. of Central Excise reported in 2007(210)ELT.332(SC) was also cited wherein it was held by the Honble Supreme Court that pulverization of shikakai pods into shikakai powder does not amount to manufacture.
(3) The hard ground powder, in question, had been made by the job workers and hence even if it is held to be excisable, the duty liability would be on the job workers and not the on the appellants. The name of the job workers were known to the Department.
(4) The duty demand in respect of clearances for the period from Nov92 to June94 has been raised by a show cause notice dt.23.1.98 which is time barred as there is no fraud, wilful mis-
statement or suppression of facts with intent to evade payment of duty involved in this case. When the facility for grinding the broken pieces of asbestos cement products into powder was operational in the appellants factory in 1995, they had declared hard ground waste as a product being cleared at Nil rate of duty in their classification declaration, which, after verification, had been approved by the Department. Besides this, the issue as to whether grinding of asbestos cement products broken pieces into powder would attract Central Excise duty, had been decided by the Addl. Commissioner vide order-in-original No.39/68/69/SEC11-A/Addl. Collr. Dt.21.3.98 by which the Additional Collector had dropped the proceedings. In view of these circumstances, there is no justification for alleging suppression of facts with intent to evade payment of duty and invoke extended period under proviso to Section 11A(1).
2.2 Shri Virender Chaudhary, the learned DR, defending the impugned order and reiterating the Commissioner(Appeals)s findings, made the following submissions:
(1) The product, in question, is a powder made by grinding the pieces of broken asbestos cement products. It is correctly classifiable under sub-heading 6805.90 as mixtures with a basis of asbestos.
(2) The very fact that the product, in question, is sold by the appellants, shows that it is marketable and since it is marketable and the same is covered under sub-heading 6805.90, it would attract Central Excise Duty.
(3) The question as to whether duty is chargeable from the job workers or from the appellants, had never been raised in the proceedings before the Commissioner(Appeals) or before the Dy. Commissioner and hence this issue cannot be raised at this stage before the Tribunal.
(4) The broken asbestos sheets had been cleared under private challan to job workers without declaring to the Department and no declaration regarding the production of HGP during the period of dispute had been made to the Deptt. Therefore, the Department is justified in invoking the extended period.
3. We have carefully considered the submissions from both the sides and perused the records. As is clear from the facts narrated in the show cause notice, the goods, in question, HGP had been obtained by grinding of the broken pieces of asbestos cement corrugated sheets and other asbestos cement products, which being unmarketable, had been destroyed by the appellants under the Central Excise Supervision and in respect of which, remission of duty had been allowed. The point of dispute is as to whether the powder obtained by grinding the broken pieces of the asbestos cement products is chargeable to Central Excise Duty under sub-heading 6805.90 of the Central Excise Tariff. It is also an admitted fact that this grinding had not been done by the appellants but by the job workers.
4. Coming to the question of classification, heading 68.05, which is identical to HSN heading 68.12 is as under:
Fabricated asbestos fibres; mixtures with a basis of asbestos or with a basis of asbestos with magnesium carbonate; articles of such mixtures or of asbestos (for example, thread, woven fabrics, clothing, headgear, footwear, gaskets); whether or not reinforced, other than of heading 68.04 or 68.06 6805.10 - Gaskets 6805.90 other.
The Department seeks classification of HGP under sub-heading 6805.90 as mixtures with a basis of asbestos or with a basis of asbestos with magnesium carbonate.
4.1 Since heading 68.05 of Central Excise Tariff is identical to HSN heading 68.12, the scope of heading 68.05 of Central Excise Tariff will be same on that of HSN heading 68.12. As per HSN explanatory note to HSN heading 68.12 This heading covers asbestos fibres further worked, than beaten, cleaned, sorted or graded (e.g. carded fibres and dyed fibres). They may be for any purpose (e.g. for spinning, felting etc. or for use as filtering, insulating, packing etc. materials), crude asbestos fibres or those simply graded according to length; beaten or cleaned are excluded (heading 25.24).
This heading also includes mixtures of asbestos with magnesium carbonate, cellulose fibres, sawdust, pumice stone, talc, plaster, siliceous fossil earths, slag, aluminium oxide, glass fibres, cork, etc., used as packing for heat-insulation purposes, or as filtering material, or as a basis for moulding asbestos articles.
4.1.1 From the above explanatory notes to HSN heading 68.12 corresponding to heading 68.05 of Central Excise Tariff, it will be seen that the mixtures referred to in this heading are the mixtures of asbestos with magnesium carbonate, talc, pumice stone, cellulose fibres etc. for use as (a) packing for heat insulation purpose or (b) filtering purpose or (c) basis for moulding asbestos articles. The words articles of such mixtures or of asbestos in this heading indicate that one of the uses of the mixtures covered by this heading is fabricating various articles from it.
4.2 In this case, the HGP is a powder obtained by grinding of broken pieces of asbestos cement products. As per the Appellants submissions in the Appeal memo
(a) HGP is a totally dead material not having any chemical bonding strength and the fly ash content of HGP is also dead not having any bonding strength;
(b) fibre content present in HGP is practically zero length and it does not add any reinforcement to any finished product;
(c) the only use of this material is as landfill to avoid environment pollution and
(d) grinding of broken pieces of asbestos cement products into powder has been resorted to under compulsion of environment protection.
4.2.1 The Department has not produced any evidence in form of chemical test reports to show that the HGP has any bonding strength or that its asbestos fibre content is of usable length and that the HGP can be used for fabricating articles of asbestos. No evidence has been produced to show that HGP can be used as filtering material or as heat insulaltion material. If the Department seeks classification of HGP under sub-heading 6805.90 as mixtures with a basis of asbestos or with a basis of asbestos with magnesium carbonate, the burden of proving this would be on the Department, but other than making a claim that HGP is covered by heading 68.05, no evidence in this regard has been produced.
4.3 In view of this, we hold that the Department has failed to make out a case for classification of the product, in question, under sub-heading 68.05.90 of the Tariff.
5. On going through the records, we also find that while the show cause notice has been issued in Jan98, as early as in 1995, the appellants had filed the classification declaration wherein among other finished products, the manufacture of hard ground waste has been declared and endorsement on classification list shows that the same had been approved after verification. We also find that para 4(iv) of the Commissioner(Appeals)s order dt.29.7.04 does refer to Additional Commissioners order-in-original dt.21.3.89 with regard to duty on grinding of broken pieces of asbestos cement products by job-workers. In view of this, the Department cannot allege that it was not aware of the production of HG waste and its clearance without payment of duty and we do not agree with Commissioner(Appeals)s findings in this regard. Since the period of demand is for the period from Nov92 to June94 and the show cause notice was issued only in Jan98, the same is time barred.
6. Besides the above two points, we also find that it is not under dispute that the grinding of the broken pieces of asbestos cement products into powder had been done through the job workers and it is a settled law that the duty liability, if any, would be on the job worker not on the principal manufacturer when the transactions between the principal manufacture and the job-worker are on principal to principal basis. [Honble Supreme Courts judgments in cases of Ujjagar Prints & Others vs UOI reported in 1988(38)ELT.535, Empire Industries Ltd. & Others vs UOI reported in 1985(20)ELT.177 and CCE, Baroda vs M.M. Khambhatwala reported in 1996(84)ELT.161(SC]. In this case, it is not the allegation of the Revenue that the transactions between the Appellants and the job-worker were not on principal to principal basis, or the job-workers were just hired labour. It has been pleaded by the learned DR that the point as to who is liable to pay the duty, cannot be taken at this stage, as the same had not been raised at the original adjudication stage or before Commissioner(Appeals). We do not agree with this plea, as the fact that the grinding was being done through job-workers is mentioned in the show cause notice itself and therefore, the question as to whether the job-workers are liable to pay the duty or the Appellant are liable, is purely a point of law, which can be raised at any stage.
7. In view of the above discussion, the impugned order is not sustainable. The same is set aside and the appeal is allowed.
(Pronounced in the open Court on.).
(Justice R.M.S.Khandeparkar) President (Rakesh Kumar) Member Technical km