Customs, Excise and Gold Tribunal - Delhi
Pratap Rajasthan Copper Foils And ... vs C.C.E. on 12 May, 1999
Equivalent citations: 1999ECR720(TRI.-DELHI), 1999(112)ELT431(TRI-DEL)
ORDER
P.C. Jain, Vice President
1. Briefly stated facts of the case are :-
Appellants herein are manufacturer of cotton fabric dipped in phenol formaldehyde resin completely. Thereafter they are dried up by passing through heated chambers. A question has arisen about the classification of such fabrics dipped in phenol phermaldehyde resin and dried thereafter.
1.1 Revenue has contended that these are classifiable under Tariff Heading 59.03 whereas the learned Advocate, Shri A.R. Madhav Rao for the Appellants submits that these are classifiable under Chapter Heading 3922.90. Learned Advocate has produced before us a sample. It is the submission of the appellants' counsel that Note 2(a)(3) of Chapter 59 excludes the products from classification under Tariff Heading 59.03, if the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of colour. Learned Advocate submits that the adjudicating authority has held that the coating or covering can be seen with the naked eye (Reference Para 13 of the impugned order).
1.2 The question that remains to be decided for application of exception provided in sub-para (3) of Note 2(a) is whether the textile fabric is either completely embedded in plastics or not. The expression 'embedding' has not been defined in the Tariff, submits the learned Advocate, nor there is any light in the H.S.N. Notes on this expression. He, however, draws our attention on the meaning of the expression 'embedding' as available in KIRK-OTHMER Encyclopedia of Chemical Technology (Volume 8, Third Edition). He submits that embedding is a very wide expression covering various processes, namely, (i) casting (ii) potting (iii) impregnating (iv) encapsulating (v) transfer molding.
1.3 Learned Advocate further submits that the adjudicating officer himself has held that by dipping the fabric in phenol formaldehyde resin solution, the process of impregnation has been undertaken. He, therefore, submits that in view of the meaning of the word embedding in KIRK-OTHMER's (supra), the process of 'impregnation' is included within the expression 'embedding'. He, therefore, submits that the fabric under consideration is governed by exception No. (3) to Note 2(a). Therefore, the classification of the product would be under Tariff Heading 3922.90 and not Tariff Heading 59.03.
1.4 He also draws attention to the Board's Clarification vide Ministry of Finance Telex F. No. 114/18/86-CX. 3, dated 26-5-1986 which holds that fabrics coated or covered with plastics on both sides would, by virtue of Note 2(a)(3) of Chapter 59 would be classifiable under Chapter 39 and not in Chapter 59 of Central Excise Tariff. He further submits that it was this classification of the Board which was also noted by the Superintendent in his letter dated 18-7-1986 addressed to the appellants herein confirming classification of the product under Chapter 39. Learned Advocate, therefore, submits that on merits the goods are classifiable under Tariff Heading 3922.90 and not 59.03 as held by the adjudicating authority.
1.5 Arguing on the limitation, learned Advocate submits that at the show cause notice stage there was no allegation of collusion, while during the course of adjudication proceedings, the adjudicating authority felt that there was clear case of collusion between the Assistant Collector and the Range Officer on the one hand and the appellants on the other. Circumstances pointing to the collusion, as found by the Collector are -
(i) The description of the product before 1-3-1986 was given as "fabric impregnated in phenol formaldehyde resin solution;"
(ii) a show cause notice proposing change in the classification to Tariff Heading 59.03 as against one claimed by the appellants was pending adjudication; and yet
(iii) a classification list with a different description of the goods, namely, "cotton fabric completely embedded in plastic or entirely coated or covered with plastics on both sides" was furnished by the appellants and the said Classification List was approved by the Assistant Collector without raising any objection although a show cause notice on the same issue was pending adjudication as mentioned above.
The Collector has, however, held that allegation of wilful misstatement or suppression of facts cannot be sustained against the appellants (Para No. 28 of the adjudication order).
1.6 It is also on record that while changing the allegation from suppression of facts to collusion, adequate opportunity of rebutting the allegation was given to the learned Advocate for the appellants and then only a finding has been made by the adjudicating authority in that behalf. Learned Advocate submits that the finding of collusion given by the Collector is not at all tenable in view of the fact that no action has been taken against the officers who are alleged to have colluded. Further they have not been made noticees in the proceedings initiated by the Department resulting in the impugned order. He, therefore, submits that the charge of collusion cannot be sustained and the inference of collusion drawn by the Collector on the basis of the aforesaid circumstances is merely inferential and there is no adequate evidence for that. He, therefore, submits that the show cause notice issued on 22-3-1988 for the period March, 1986 to February, 1987 is wholly barred by time having been issued beyond the normal limit of six months when the Department was fully aware of the activity of such fabric for a long time because this is only an intermediate process in the manufacture of their final product laminates.
2. He, therefore, submits that on both the counts the impugned order deserves to be set aside and the appeal be allowed.
3. Opposing the contention, Shri R.S. Sangia, learned JDR reiterates the findings of the adjudicating authority as mentioned above, namely, -
(i) Exception provided in sub-para (3) of Note 2(a) is not applicable to impregnated cotton fabrics; and (ii) There was a collusion between the appellants on the one hand and the Assistant Collector and the Range Officer on the other hand.
4. We have carefully considered the pleas advanced by both sides. We observe that the sole controversy on which the classification has been decided against the appellants by the lower authority is that they are not covered by exception in sub-para (3) of Note 2(a). The reason advanced for not being covered by that exception by the adjudicating authority is that the process of impregnation has not been included within that exception. We are not satisfied with this finding of the adjudicating authority. The said exception talks not only of coating and covering of the cotton fabric entirely but also of 'embedding' of the cotton fabric completely. As pointed out rightly by the learned Advocate, embedding will include the process of 'impregnation' as well on the authority of KIRK-OTHMER, mentioned above. We, therefore, agree with the learned Advocate for the Appellants that the fabric under consideration before us is covered by exception in Para (3) of Note 2(a) of Chapter 59; thereby classification under Tariff Heading 59.03 is ruled out and the classification will be under Chapter 39 as suggested in the said Exception (3) to Note 2(a).
5. Even on limitation, we are agree with the submissions made by the learned Advocate. The colluding officers of the Revenue have not been made parties in the present case. If they had colluded in evasion of Revenue, there is no reason as to why they should not have been proceeded against for imposition of penalty in the proceedings before the Collector in terms of Rule 209A. We also find that the finding of collusion is arrived by the Collector without seeking an explanation from the colluding officer. Finding of the Collector is passed merely on three circumstances set out above. Those circumstances, we are of the view, do not necessarily lead to the conclusion of collusion. It may be that the Assistant Collector was not aware of the show cause notice, we have nothing on record that he was aware of the show cause notice and yet he approved the classification list. It will also not be correct to say that change in the description of the goods after introduction of the new Tariff is deliberate and the officers colluded in that change, it may be that the appellants have changed it having a bona fide belief that the expression 'embedding' will also cover impregnation as well. We are, therefore, of the view that the show cause notice is barred by time inasmuch as, has already been held by the adjudicating authority no charge of wilful mistatement or suppression of facts can be sustained against the appellants, the manufacturing activity being well known to the Revenue officers
6. In short, the impugned order deserves to be set aside. We order accordingly and allow the appeal with consequential relief to the appellants.