Customs, Excise and Gold Tribunal - Delhi
Phoenix Mills vs Collector Of C. Ex. on 12 February, 1999
Equivalent citations: 1999(113)ELT1018(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this appeal filed by M/s. Phoenix Mills Ltd. Is whether the Printing Paste made by them is an excisable goods or not chargeable to Central Excise duty.
2. The facts in brief are that the appellants manufacture printing paste which was used by them for printing of fabrics captively without payment of duty. The Collector, Central Excise, under the impugned order dated 29-5-1992, confirmed the demand of Central Excise duty for the period of six months classifying the product under sub-heading 3204.39 of the schedule to the Central Excise Tariff Act and holding that the mixing of ingredients brought into existence a product known as printing paste; that printing paste is known differently from the raw materials like urea, emulsifier, water, binder, etc. used in its manufacture; that the process employed is covered by the scope of manufacture under Central Excise law. Reliance was placed on the decision in the case of Empire Industry -1985 (20) E.L.T. 179 (S.C.). The Collector also did not agree with the contention that the printing paste had a very little shelf life as the sample of the printing paste was sent to Chemical Examiner who analysed the same after 2 weeks from the date of drawal of sample and reported that the "sample is in a good stable condition and has not undergone any physical deterioration"; that this clearly shows that printing paste had shelf life. The Collector also mentioned in his findings that a reading of Heading 32.04 makes it very clear that unformulated or unstandardized or unprepared forms are also liable to duty and no evidence had been produced to show that the manufacturers had manufactured printing paste from out of standardized, formulated and prepared forms.
3. Shri R. Sudhinder, ld. Advocate, submitted that the show cause notice dated 30-4-1991 alleged that the printing paste is classifiable under sub-heading 3215.00, but the Collector has classified the impugned product under sub-heading 3204.29; that the appellants were not given any opportunity to explain as to why the product was not classifiable under sub-heading 3204.29 and as such the impugned order is beyond the show cause notice and is liable to be quashed. Reliance was placed on Rajasthan Spg. & Wvg. Mills Ltd. v. C.C.E. -1989 (41) E.L.T. 450 (T) and Tata Mills Ltd. v. C.C.E. -1988 (37) E.L.T. 284 (T). He further submitted that the rate of duty was 15% in respect of Heading 32.15 whereas the duty payable in respect of sub-heading 3204.29 was 30% and as such duty confirmed has exceeded the amount specified in the Notice; that the duty demanded in adjudication order cannot exceed the amount specified in the notice as held in the case of J.B.A. Printing Inks v. U.O.I. - 1980 (6) E.L.T. 121 (Bombay) and Khan Spinning Mills v. C.C.E. - 1989 (40) E.L.T. 385 (T). He also mentioned that the printing paste is prepared for instant and ready captive use and is not a marketable commodity; that the main use of the printing paste depends on its shade for printing; that the shade of the printing paste diminishes as compared to the previous day as is apparent from the analytical report dated 17-2-1992 from the department of Chemical Technology, University of Bombay; that the test of marketability is an essential ingredient for dutiability even if the goods are specified in a tariff schedule. Reliance was placed on the judgment in C.C.E. v. Ambalal Sarabhai Enterprises - 1989 (43) E.L.T. 214 (S.C.). He further contended that the Collector had not considered that the shade of the paste diminished from day to day. He further contended that printing paste is correctly classifiable under sub-heading 3204.19 as they were using pigment paste.
4. The ld. Advocate referred to the Board's Order No. 2/93, dated 21-4-1993 under Section 37B of the Central Excise Act in which it was clarified "that the printing paste prepared from formulated, standardised or prepared dyes by simple mixing with other materials shall not amount to manufacture and as such, not classifiable under sub-heading No. 3204.29 of the Tariff." He mentioned that the appellants purchased duty paid formulated standardised or prepared dyes and by mixing chemicals prepared printing paste; that Collector has not accepted their contention being unsubstantiated. He prayed that the matter may be remanded to the adjudicating authority for ascertaining the fact. Finally he submitted that as the raw materials used in the preparation of printing paste were duty paid, they should be given the benefit of Modvat credit under Rule 57A of the Central Excise Rules and merely non-filing of declaration should not come in the way of availing of the Modvat credit.
5. Countering the arguments, Shri A.K. Madan, ld. SDR reiterated the findings of the Collector as contained in the impugned order and emphasized that the issue regarding classification of the impugned product under sub-heading 3204.19 was raised during personal hearing of the case which is evident from page 20 of the impugned order. According to him there was a typographical error in mentioning sub-heading 3204.19. At the stage, the ld. Counsel for the appellants referred to the show cause notice dated 19-9-1991 issued by Superintendent Range V, Division GI of Bombay-I in which it was mentioned that printing paste was classifiable under sub-heading 3204.19 of Central Excise Tariff Act. The ld. SDR also drew our attention to the observation of the Collector in the impugned order regarding report of the chemical examiner and the fact that sample was drawn and sent for examination and it was also examined after lapse of time which proves its stability, shelf life and hence marketability.
6. We have considered the submissions of both the sides. The ld. Counsel, appearing on behalf of the Appellants, emphasised the fact that they were preparing the printing paste out of duty paid formulated, standardised or prepared S.O./pigment and other dyes by adding chemicals and as per Note 6 to Chapter 32 conversion of unformulated, unstandardized or unprepared forms of dyes into formulated, standardised or prepared forms shall amount to manufacture. We observe that the Central Board of Excise and Customs, after referring to said Note 6 to Chapter 32, clarified vide Order No. 2/93, dated 21-4-1993 issued in exercise of the powers conferred under Section 37B of the Central Excise Act, that the printing paste prepared from formulated, standardised or prepared dyes by simply mixing with other materials shall not amount to manufacture. The Board, further, mentioned in the clarification that such printing paste so prepared is not classifiable under sub-heading 3204.29 of the Central Excise Tariff Act. We also observe that the Collector, in the impugned order, did not agree with the said contention of the Appellants as he observed that their contention is not in confirmity with the scheme of levy of Central Excise duty on pigment/dyes/colouring materials and the appellants did not produce any evidence to show that they had manufactured printing paste from out of standardised, formulated and prepared form. The Hon'ble High Court of Bombay in order dated 26-10-1993 in Writ Petition No. 1906 of 1993 filed by the Appellants observed that in view of the fact that they had throughout contended that they purchased formulated, standardised or prepared dyes and by mixing other chemicals prepared printing paste, they would be entitled to the benefit of the classification issued by the Board dated 21-4-1993. The Collector did not have the Board's order dated 21-4-1993 while adjudicating the matter. As this is a matter of fact and in the interest of justice we are of the view that the matter should go back to the adjudicating authority for ascertaining the fact whether the printing paste was prepared out of duty paid formulated, standardised or prepared dyes. The Appellants have to substantiate their claim by adducing evidence before the adjudicating authority within one month of receipt of this order. As the Appellants have contended that they did not have the opportunity of representing against the classification of impugned product under sub-heading 3204.29, the adjudicating authority will afford an opportunity of hearing to them for submitting their submissions on the classification aspect also. If the product is held to be excisable and chargeable to duty, the appellants will be eligible to avail of the Modvat credit of the duty paid on inputs irrespective of the fact that no declaration under Rule 57G of the Central Excise Rules was filed and other procedure was not followed subject to the production of duty paying documents by the Appellants to the satisfaction of the adjudicating authority. We, therefore, allow the appeal by remand.