Customs, Excise and Gold Tribunal - Delhi
Safari Industries (I) Pvt. Ltd. vs Collector Of Central Excise on 12 February, 1991
Equivalent citations: 1991ECR303(TRI.-DELHI), 1991(54)ELT308(TRI-DEL)
ORDER Varalakshmi Rajamanickam, Member (T)
1. The issue in question is that the aluminium frames processed out of duty paid aluminium section are claimed to be not excisable, and no duty is attracted.
2. The appellants are engaged in the manufacture of travel goods viz. suitcases/brief-cases, vanity cases etc., falling under Heading 42.01/4201.10. The appellants also manufacture plastic shells, aluminium frames, etc., as intermediate products. The aluminium frame is prepared by bending aluminium sections procured form the supplier. The bending of the aluminium frames is done manuajly with the help of male and female dies. The frames undergo various processes such as finishing, drilling, anodising and pinching, subsequently in order to use them as components in making of travel goods. The Department has held that these aluminium frames are goods falling under Heading 8307.00 of the Central Excise Tariff and subsequently held these as classifiable under Heading 8302.90.
3. The appellants claim that the Department has all along been aware of the production of the aluminium frames and no suppression can be attributed. In the earlier proceedings about classification of plastic shells emerging as an intermediate stage in the course of manufacture of suit-cases, the officers had known about the machines installed in the factory for making the aluminium frames and the Collector had in the proceedings made note of the process of manufacture about the aluminium sections and making of aluminium frames.
The appellants had informed the Assistant Collector vide their letter, dated 24-4-1985, about recovering aluminium scrap generated during process of bending duty paid aluminium section into frames.
That during the period from 1982-86, the audit parties had visited the factory and the process of manufacture was within the knowledge of the department.
The appellants had submitted the classification list effective from 28-2-1986, with the introduction of the new tariff and the detailed process of manufacture along with the process of aluminium frames being bent from duty paid sections, was mentioned.
The officers of the Department, on visit to the factory on 27-12-1986 observed that the aluminium frames were excisable goods falling under Heading 8307 and seized 3451 pieces of aluminium frames valued at Rs. 62,118/-. A show-cause notice, dated 22-6-1987 was issued for recovery of duty of Rs. 11,87,749.49 for the frames manufactured from 1-3-1986 to 27-12-1986 under Rule 9(2) of the Central Excise Rules read with proviso to Section HA of the Act, alleging suppression.
Subsequently, the Collector issued a letter, dated 31-8-1989, that the aluminium frames were classifiable under Heading 8302.90. The order of the Collector confirmed the demand for a higher amount of duty amounting to Rs. 15,83,605.99.
4. The appellants contend that the findings of the Collector for classification under Heading 8302.90 is beyond the scope of the show-cause notice, as the amount has been confirmed without issue of show cause notice.
The aluminium frames are in semi-finished form and are not known in the trade as goods and are not marketable.
The show-cause notice, dated 22-6-1987, for recovery of duty for the larger period between 1-3-1986 to 27-12-1986 is hit by limitation, as the activities of the appellant were within the knowledge of the Department and there was no suppression.
The classification under Heading 83.02/8302.90 is an error and is irrelevant as the frames were not goods known to the market and the penalty of Rs. 5 lakhs was not justified.
5. Shri Dushyant Dave, Advocate for the appellant reiterated the above points and stated that three issues are relevant.
(i) There was no manufacture as aluminium sections remain aluminium section even after bending and drilling.
(ii) The frames are not marketable
(iii) The show-cause notice is hit by limitation and he challenges the fine and penalty.
The learned advocate referred to the affidavits given by prominent persons in the trade stating that these are not goods and the frames are not known in the market and are for the captive consumption of the appellant alone in his factory. While referring to the order of the Collector, the learned advocate drew attention to the finding of the Collector, wherein he has stated that a new commodity with distinct identity has emerged and had cited the decision of the-Hon'ble Supreme Court in the case of Empire Industries Ltd., reported in 1985 (20) ELT 179 for determining the term "manufacture". On the limitation aspect, the Collector has stated that the letter dated 24-9-1982 of the appellant, addressed to the Range Superintendent describing the manufacture of travel goods, makes an incidental remark that aluminium frame is prepared by bending aluminium section, which will not tantamount to making a declaration.
The learned advocate submitted that the process of bending and drilling do not amount to manufacture. He cited the following case laws in his favour.
(i) 1989 (40) ELT 280 (SC) - Bhor Industries Ltd. v. Vie Collector of Central Excise, on marketability - It should be goods known in the market.
(ii) 1989 (43) ELT 214 (SC) - The Collector of Central Excise v. Ambalal Sarabhai Enterprises - Captive consumption no evidence of marketability.
(iii) 1978 (2) ELT (J 159) - Hindustan Steel Ltd. v. State of Orissa in respect of penalty for technical breaches.
(iv) 1985 (20) ELT 120 (Tribunal) - The Collector of Central Excise, Madurai, v. Sun Paper Mills Ltd., Cheranmahadevi - Regarding validity of demand after issue of first show-cause notice.
(v) 1987 (30) ELT 463 - Natural Organic Chemical Industries v. Collector of Central Excise - The show-cause notice subsequently amended by another letter would be barred by limitation.
6. In reply, Shri M.S. Arora, the learned JDR stated that the issue on classification under Heading 8302.90 was raised in the second show-cause notice and both the show-cause notices were within the time frame of the extended period. He relied on the case law, Hindustan Aluminium Corporation Ltd. v. Supdt. Central Excise, Mirzapur and Ors., reported in 1981 (8) ELT 642, (2) 1986 (26) ELT 81 (Tribunal), Collector of Central Excise, Meerut v. Star Paper Mills Ltd.
"Demand - First show cause notice issued within six months - Subsequent show-cause notice, though by itself, beyond the period of six months, referring to previous show cause notice -Subsequent show cause notice not hit by limitation being in continuation of previous one - Rule 10 of the Central Excise Rules, 1944 - Section 11-A of the Central Excises & Salt Act, 1944 - A simple perusal of the show cause notice, dated 20-8-1982 shows that there is mention of the earlier show cause notice, dated 29-12-1979 therein. The subsequent show cause notice was in continuation of the earlier show cause notice. As the demand pertains to the period from 1-7-1979 to 24-7-1979 and the earlier show cause notice was issued on 29-12-1979, i.e. within six months, it is not hit by limitation."
On merits, the learned JDR referred to the process of manufacture of the frames, viz;
"They are purchasing aluminium sections from different manufacturers on payment of Central Excise duty. These sections are first taken on bending machines and sections are bent without aid of power. Thereafter drilling is done with the aid of power, then the process slotting is carried out with the help of hand machines and frame is completely made for use in the moulded luggage."
The process of manufacture is in consonance with the product dealt with in the case of Paxma Axle and Springs (P) Ltd. v. Collector of Central Excise of Delhi, Order No. 2/90-B1`, dated 29-12-1989 reported in 1990 (47) ELT 639 (Tri.).
He relied on the case law, Tata Iron and Steel Company Limited v. Union of India and Ors. reported in 1988 (35) ELT 605 (SC), the process undertaken was incidental or ancillary to the process of manufacture. The goods being captively consumed, he relied on the decision of the Supreme Court reported in 1987 (32) ELT 234 (SC), J.K. Spinning and Weaving Mills Ltd., and Anr. v. Union of India and Ors.
In respect of the case laws cited viz, 1989 (40) ELT 280, Bhor Industries Ltd. v. Collector of Central Excise, 1989 (43) ELT 214 (SC), Collector of Central Excise v. Ambalal Sarabhai Enterprises and 1985 (21) ELT 3 (SC), Indian Aluminium Cables Ltd. v. Union of India and Ors. The learned JDR stated that the products in these cases, they were not complete products and even as per the case law, Union Carbide India Ltd. v. Union of India and Ors., reported in 1986 (24) ELT 169 (SC), he distinguished the same by stating that these referred to rough unfinished products, not capable of being sold in the market, unlike the appellant's products. On the aspect of limitation, that the activity of the manufacture of frames was within the knowledge of the department, it was contended by the learned JDR, that the appellant had not declared the manufacture of frames in the classification list, and he relied on the judgment of the Tribunal reported in 1989 (40) ELT 74 (Tribunal), Pushpam Pharmaceutical v. CCE, Bombay, for attributing sufficient knowledge of manufacturing activity to the Department and also decision of the Supreme Court reported in 1989 (40) ELT 284 (SC), Jaishree Engineering Company (P) Limited v. Collector of Excise, that visit by the officers of the Department was no reason for truly and properly describing the goods.
7. The views submitted arc considered. The main plea is that the aluminium frames manufactured from the duty paid aluminium sections by process of bending and drilling, does not amount to manufacture, the frames are not marketable and hence they are not goods, and the extended period under Section 11 A, alleging suppression is untenable.
It is seen that the aluminium frames are used in the moulded luggage, and the Department has issued a show cause notice, dated 22-6-1987 alleging that the product manufactured falls under Heading 8307.00 of the Tariff Act, which reads as under;
"Clasps, frames with clasps, buckles, buckle clasps, hooks, eyes, eyelets, and the like, of base metal, of a kind used for clothing, footwear, awnings, hand bags, travel goods or other made up articles, tubular or bifurcated rivets, of base metal, beads and spangles, of base metal."
Subsequently, by a letter, dated 31-8-1989, the Department proposed to classify the aluminium frames under Heading 8302.90 which reads as follows;
"Base metal mountings, fittings and similar articles suitable for furniture, doors, staircases, windows, blinds, coach work, saddlery, trunks, chests, caskets or the like; automatic door closers of base metal, castors with mountings of base metal."
"Base metal mountings, fittings and similar articles suitable for steel furniture - Other"
Without going into the merits of the classification, the appellant's main contention is that frames in question were not goods known in the market as such and have relied on the various decisions of the Supreme Court referred to. The question of manufacture and marketability assume as being essential characteristics only where there is no such item in the tariff. Whether, the Department chooses to classify them under Heading 8307.00 or 8302.90 as per the more specific description into which the frames fit in, the new Central Excise Tariff has these items specified under the respective headings. Therefore, where an item manufactured is covered by a tariff item, it becomes an excisable goods. The definition of "excisable goods" means goods specified in the (Schedule to the Central Excise Tariff Act, 1985) as being subject to a duty of excise and includes salt," (the Central Excise Tariff Act is later substituted). Hence, where specific entry in the Tariff is applicable to the goods, manufactured, they become excisable, hence, as between 8307 or 8302.90, the aluminium frames are excisable goods and hence the concept of marketability as contended and urged by the appellant is not the determining factor.
The next question is, whether there was any suppression, the appellants have stated that the manufacturing process of moulded luggage, whereby aluminium frames are manufactured, and these references to the same in the classification list, will tantamount to have made the Department aware of the manufacturing activity and no suppression is involved. They plead that when the new Tariff Act came into force, they submitted a fresh classification list 1/85-86, effective from 28-2-1986, and along with it, they submitted a detailed process of manufacture which referred to manufacture of aluminium frames by bending duty paid aluminium sections. The Department has contended that no declaration regarding these goods has been made. As an assessee under the self-removal procedure, the assessee is required to file a classification list under Rule 173B of the Central Excise Rules, giving the full description of the excisable goods produced or manufactured by him and all other goods produced or manufactured by him. In having failed to give these particulars in the classification list, there is a clear omission on the part of the appellant, in not properly declaring the goods. But, will this failure be a sufficient cause for alleging suppression. The Supreme Court in Collector of Central Excise v. Chemphar Drugs and Liniments reported in 1989 (40) ELT 276 (SC) has held that "something positive other than mere inaction or failure on the part of the manufacturers or producers or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, beyond the period of six months". This decision is applicable in the present case, and hence the period of limitation has to be restricted to the period of six months from the date of issue of show cause notice. The appellants have contested that the second show cause notice is hit by limitation. To which, the learned JDR referred to the case law, Collector of Central Excise, Meerut v. Star Paper Mills Ltd., reported in 1986 (26) ELT 81 (Tribunal), meaning thereby that the subsequent show cause notice was in continuation of the previous one. But the second show cause notice issued on 31-8-1989, sought to reclassify the goods under Heading 8302.90, thereby, there is a change in the grounds, rate of duty and also amount of duty vis-a-vis, the earlier show cause notice, dated 22-6-1987. This, therefore, cannot be stated to be in continuation of the earlier one, but would tantamount to revising the classification and the demand for duty has now to be limited to a period of six months from 31-8-1989 and has to be revised accordingly. The demand rasied in the show cause notice, dated 22-6-1987 for classification of the frames under Heading 8307.00 has also to be restricted to a period of six months from the date of the show cause notice and upto the period of six months from the date of the second show cause notice, as the second show cause notice was not in supersession of the earlier one and the first show cause notice was still in force. Therefore, the demands have to be revised accordingly. As for the fine and penalty, since it has been held that no suppression can be alleged, confiscation is not liable and consequently, fine and penalty are set aside.
8. The appeal is disposed of accordingly with consequential reliefs, wherever admissible, as ordered.