Custom, Excise & Service Tax Tribunal
M/S. Flex Industries Ltd vs Commissioner Of Central Excise on 8 June, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. I
Excise Appeal No. 1868-1870 /2006-Ex(BR)
[Arising out of Order-in-Original No. 01/Commr/NOIDA/2006 dated 23.1.2006 passed by Commissioner of Central Excise, NOIDA]
For approval and signature:
Hon'ble Mr. Justice R.M.S. Khandeparkar, President
Hon'ble Mr. Rakesh Kumar, Member (Technical)
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 :
of the 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?
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Excise Appeal No. 1868/2006-Ex(BR)
M/s. Flex Industries Ltd. Appellants
Vs.
Commissioner of Central Excise Respondent
NOIDA
Excise Appeal No. 1869 /2006-Ex(BR)
Shri A.K. Jain, Dy. GM Appellants
[
Vs.
Commissioner of Central Excise Respondent
NOIDA
Excise Appeal No. 1870 /2006-Ex(BR)
Shri Barun Verma, Ex-DGM Appellants
Vs.
Commissioner of Central Excise Respondent
NOIDA
Appearance:
Mr. B.L. Narasimhan, Advocate for the Appellants
Mr. M. Rastogi, DR for the Respondent
CORAM: Hon'ble Mr. Justice R.M.S. Khandeparkar, President
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Date of Hearing/decision : 08.06.2010
ORDER
Per Justice R.M.S. Khandeparkar (for the Bench):
Heard Shri B.L. Narasimhan, learned Advocate for the appellants and Shri M. Rastogi learned DR for the respondents. These appeals arise from the order passed by the Commissioner, NOIDA on 23.1.06 whereby the appellant company has been directed to pay the duty to the tune of Rs.67,40,961/- for clearances of multi layer laminate consisting of aluminium foil laminated on both sides with plastic classifiable under tariff heading 39.20 for the period December, 1996 to July, 1999 along with interest and with equal amount of penalty and further penalty of Rs.67,000/- by the Ex-Deputy Manager and Assistant Manager of the Company.
2. The dispute in the matter relates to classification of the product manufactured by the appellants. While it was the contention of the appellants that the product was classifiable under sub heading 7607.90, the department contended that it was classifiable under 39.20 of Central Excise and Tariff Act.
3. The appellants were inter alia engaged in the manufacture of polyester /BOPP films in their films division. The polyester / BOPP films were either cleared as finished goods on payment of duty or were used for further manufacture wherein various activities like printing, lacquering, metallising etc. were undertaken. The appellants also had a converting division wherein they were manufacturing rigid polyester film flexible BOPP / plastic films in roll or sheet form which were either coated or metallised or laminated or printed. In respect of the above goods manufactured by the them, the appellants were classifying the same under Chapter 39 and the same were cleared on payment of the duty.
4. The appellants started manufacturing aluminium foil laminated on both sides with plastic with effect from December, 1996. The appellants filed necessary classification declaration dated 19.11.1996 along with the manufacturing process claiming classification of the product under sub- heading 7607.90. The appellants filed another declaration dated 4.3.1999 claiming classification of the product under sub-heading 7607.90. The appellants were also declaring the said product along with the classification in the monthly RT-12 returns.
5. A show cause notice dated 24.2.2000 came to be issued to the appellants on the ground that the product in question merited classification under Chapter 39 and not under Chapter 76 as was claimed by the appellants. However, under order dated 31.5.2004, the said proceedings were dropped holding that in terms of Boards circular dated 6.12.2003, the product was classifiable under sub heading 76.07.
6. The appellants were again issued with show cause notice on 9.2.2001 proposing the classification of the product under Chapter 39 and requiring the appellants to show cause as to why the duty should not be ordered to be paid for the period December, 1996 to July, 1999. Though the proceedings were contested by the appellants, the adjudicating authority, relying upon the decision of the Apex Court in the matter of Sharp Industries vs. CCE Mumbai III reported in [2005 (188) ELT 146 SC] held that the product in question was classifiable under Chapter 39 and not under Chapter 76. It was specifically held that the product was classifiable under sub heading 3923.90 and not under sub heading 7607.90 as was claimed by the appellant. While confirming the demand of duty against the appellants, the learned Commissioner also upheld that the department was justified in invocation of extended period of limitation.
7. Though the impugned order was stated to be challenged on various grounds including the ground of inapplicability of the decision of the Apex Court in Sharp Industries case, the learned Advocate appearing for the appellants has fairly submitted that the issue regarding classification of the product in question is no more res integra and the same stands concluded by the said decision of the Apex Court in Sharp Industries case. He however, submitted that the impugned order cannot be sustained as in the case in hand, the department was not entitled to invoke the extended period of limitation as all the relevant facts were within the knowledge of the department. Referring to the declaration filed by the appellant on 19.11.1996 and annexures attached thereto, he submitted that same clearly disclosed that the appellants had clarified to the department that the submission of such declaration was necessitated on account of the fact that the appellants had started manufacturing aluminium foil classifiable under sub heading 7607.90. Further drawing our attention to annexure A of the said declaration, he submitted that same disclosed the manufacturing process of aluminium foil and it clearly revealed that the main raw material which was used for manufacture of the product, was polyester films which was printed in multi colours with the help of Roto Gravure Printing machines and then printed polyester film was then laminated with metallised polyester film/ metallised BOPP film/ aluminium foil / paper, flexible coated, lacquered etc. depending upon the requirement of final product required by the customers and the product was further laminated/ coated with polyethelene to impart heat sealing properties. He further submitted that the fact that the product in question was aluminium foil coated on both sides was already known to the department pursuant to the stock inspection taken by the department on 27.2.99 and in that regard, the attention was drawn to the declaration which was filed and duly accepted by the department which was confirmed further by the departmental audit party. Further, drawing our attention to the letter dated 13.7.99, the learned Advocate submitted that it further disclosed confirmation of the description of the product manufactured by the appellants and knowledge thereof to the department. Considering the same, according to the learned advocate, the finding by the learned Commissioner that there was mis-statement as regards the description of the product in the declaration filed by the appellants on 19.11.96 is contrary to the materials on record. The authorities below having approved the invocation of extended period of limitation solely on the basis of alleged mis-statement in the declaration and there being no mis-statement in the declaration, the learned Commissioner clearly erred in holding that the department was justified in invoking the extended period of limitation. Further, drawing our attention to the tariff entries under sub-headings 76.07 as well as 39.20, learned advocate submitted that for the purpose of classification of such product under either of the entries, it is immaterial whether the product is covered on both sides or on one side. Being so, by no stretch of imagination it can be said that it was the duty of the appellants to specifically mention in the declaration that the product is covered on both sides by plastic coating. Since the declaration clearly disclosed that the aluminium foil was having plastic coating that itself was sufficient to decide the classification of the product under either of the sub-heading 7607.90 or 39.20. Considering the same, according to the learned advocate, there was no case of any mis-statement as such. Drawing our attention to the various decisions including the decision in the matter of Indus Coating Pvt. Ltd. vs. CCE reported in [2007 (207) ELT 103]; Shiva International vs. CCE reported in [2004 (172) ELT 46]; Paharpur 3P, CCE Ghaziabad reported in [2004 (167) ELT 515]; CCE vs. R T Packaging Ltd. reported in [2002 (51) RLT 291]; CCE vs. R.T. Packaging Ltd. reported in [2003 (157) ELT A 35 (SC)]; CCE vs. India Foils Ltd. reported in [2001 (132) ELT 737]; Hindustan Packaging Co. Ltd. vs. CCE reported in [1995 (75) ELT 313]; India Foils Ltd. vs. CCE reported in [1998 (99) ELT 101]; Indian Aluminium Co. Ltd. vs. CCE reported in [2001 (133) ELT 759]; Champion Packaging Industries Pvt. Ltd. vs. CCE reported in [2005 (179) ELT 205]; and Shriniwas Synthetic Packers Pvt. Ltd. vs. CCE reported in [2003 (158) ELT 729], learned Advocate submitted that consistent view taken in relation to the product in question was that the same was classifiable under Chapter 39 and considering the same also there was no case even for initiating any proceeding against the appellants and taking into consideration the same aspect of the matter, it cannot be said that there was suppression of facts as such by the appellants so as to justify invokation of extended period of limitation.
8. The learned DR on the other hand, submitted that the declaration submitted by the appellants did not disclose correct description of the product and, therefore, till the date of inspection of the premises by the department in July, 1999, the department had no knowledge of detailed description of the product manufactured by the appellants. The fact that the product in question was coated by the plastic on both sides was not disclosed by the appellants in the declaration filed in the year 1995-1996. He further submitted that the Supreme Court has also held that question of backing could arise only when there was coating on one side and not on both sides. Considering the submissions of learned DR, it was obligatory for the appellants to disclose the fact that the Aluminium Foil laminated with plastic material (polyester film and polythene) on both sides in the declaration itself which they had failed to do and therefore, no fault can be found with the impugned order wherein it has been stated that there was mis-statement by the appellants regarding the description of the product. For the same reason, according to the learned DR, there was suppression of facts as such by the appellants so as to justify invokation of extended period of limitation.
9. He further submitted that even a part of the product (to the extent of export) the appellants themselves classified the product under chapter heading 39.
10. Being so, according to the learned DR, it cannot be said that the department had knowledge about the detailed description of the product manufactured by the appellants prior to July, 1999 and hence, the department was justified in invoking the extended period of limitation.
11. Learned Advocate for the appellants drawing our attention to the decision of the Tribunal in Sharp Industries (supra) submitted that the matter in the said case was similar to the case in hand. In that case, the Tribunal clearly observed that the assessee therein had specifically mentioned in the declaration that the product was backed by plastic coat. In those circumstances, if the proper officer wanted to ascertain as to whether the products were coated on both sides or one side, nothing had prevented the department to check the facts from the assessee and failure in that regard cannot give benefit to the department to accuse the assessee of suppression of facts.
12. The relevant tariff entries read thus:-
76.07 Aluminium foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm.
39.20 Other plates, sheets, film, foil and strip, of plastics, non-cellular, whether lacquered or metalised or laminated, supported or similarly combined with other materials or not
13. While dealing with the issue relating to the difference in the products prescribed in above quoted two entries, the Apex Court in Sharp Industries case held thus:
Tariff Heading 39 is thus the specific heading which covers such products. This entry covers plates, sheets, film, foil and strip of plastics, non-cellular, whether lacquered or metalised or laminated. From the test reports, it is clear that plastic predominates in the product. 70-80% of the product consists of plastic. There is no denial of this fact. Tariff Entry 76.07 only deals with aluminium foils which are backed with paper, paperboard, plastic or similar other backing material. In this case, the product is not just backed. It is coated with other material on both sides. The term backed necessarily means that the coating can only be on one side. An aluminium foil which is covered on both sides, by different materials, cannot be said to be backed. The aluminium foil is in such cases sandwiched between other materials. It is clear that there can never be backing on both sides. Chapter Note (d) of Chapter 76 also makes it clear that Tariff Heading 76.07 will not apply to products which assume the character of articles or products of other headings. In this case, since plastic predominates the product assumes the character of plastic and for this reason it could not be classified under Chapter 76. HSN Explanatory Notes to Chapter 39 also clarify that products consisting of plastic remain covered by Chapter 39 even though they are separated by a layer of another material such as foil, paper etc. provided they retain the essential characteristics of articles of plastic. The test reports show that the concerned products retain the characteristics of plastic. Therefore on merits also we find that the view taken by the lower authorities is the correct view.
14. The Apex Court, therefore, has clearly stated that the word backing relates to coating of a product only on one side whereas in case of coating on both sides of the product, it amounts to sandwiching the product in such coatings. It has been specifically submitted that there can never be backing on both sides. In other words, the term backing refers to a coating on only one side. In case of coating on both sides, it is not to be described as backed by material used for coating. Considering the same , it is difficult to accept the submissions made on behalf of the appellants that description of the product in the declaration given on 19.11.1996 was not a mis-statement but a correct declaration.
15. It is further contended on behalf of the appellants that at the relevant time, the ruling of the Supreme Court was not available and the decision of the Supreme Court was delivered only in the year 2005 and, therefore, the observations made therein would not justify the accusation of any misstatement by the appellants in the year 1996 on the matter in issue. It is settled law that the Courts do not frame the law. Courts merely state the law as it exists. Considering the same, the ruling of a Apex court can not be construed to lay down something new and different from the law as it existed during the relevant period. The ruling merely describes the difference between the two tariff entries. It neither adds nor subtracts from these entries. Entry No. 76.07 merely stated that Aluminium foil (whether or not printed or backed with). With reference to the said expression, the Apex Court taking into consideration the generic term backed, has ruled that the said term necessarily means only on one side and not on both sides of the product. Merely because the decision in this regard was delivered in the year 2005, it cannot be said that the appellants in 1996 could have presumed that the term backed could include covering on both sides of the product. The decision merely reiterate the generic meaning of the word used in the tariff statute. It is difficult to accept the contention on behalf of the appellants that in 1996, the statement of the appellants that the product was backed by plastic could not be stated to have been mis-statement inspite of the fact that the product manufactured by the appellants was in the nature of coating of plastic on both sides of the product. Certainly to that extent, in our considered opinion, there was no clear description disclosed in the declaration filed by the appellants.
12. As regards the stock taking proceedings in February, 1997 are concerned, it is true that such a report dated 27.2.97 refers to various items which were found in stock as per RG I register in the premises of the appellants, and the same included the Aluminium Foil laminates (backed) with paper/plastic classifiable under sub heading 7607.90 and about 1105.870 Kgs as closing balance. The contention of the learned advocate for the appellants was that this disclosed the knowledge of the department about the description of the products. The contention is rather difficult to accept. The decision already stated that the description in the stock report is in the nature of aluminium foil backed with paper /plastic classifiable under heading 7607.90 The description was not for the declaration of aluminium foil laminates coating with paper /plastic or the product being classified under chapter 39. Considering the nature of the description of the product in the inspection note, it cannot be said that the department had knowledge about the fact that the product manufactured was having coating of plastic as such as sought to be contended by the appellants.
13. It is pertinent to note that it was the case of the appellants that there was nothing to suggest in the Chapter 76 that aluminium foil backed with plastic only on one side would fall under the said chapter and that if it is coated by plastic on both sides, it would be under chapter 39. The aluminium foil whether it is backed on one side or coated on both sides would fall under sub heading 7607 and that was their reply dated 1.9.99 to letter dated 13.7.1999. This apparently disclosed that the appellants consciously had taken the stand that irrespective of the fact that the product was coated on both sides with plastic, it would fall under chapter 76 and not under 39. If one reads the appellants submissions in the year 1996, it is apparent that there was no clear description in the said declaration. It was not for the appellants himself to decide whether the classification would be under 76 or 39 irrespective of the description of the product and on the contrary, it was necessary for the appellants to give detailed description of the product in the declaration. This is more so, in view of the self-assessment procedure.
14. Considering all the above aspects, we do not find any infirmity in the findings arrived at by the learned Commissioner on the point of mis-statement by the appellants in the declaration which entitled the department to invoke the extended period of limitation. Learned Advocate for the appellants, however, submitted that since 1994 onwards, the consistent view taken by the Tribunal and Courts was that the product in question was classifiable under sub-heading 7607. It is true that the Tribunal in Hindustan Packaging Company Ltd. had held that the said product was classifiable under chapter 76. However, while holding so, the Larger Bench of the Tribunal has clearly ruled that the production of disputed product involve printing to paper followed by coating of the printed side with polyethelene and laminating of the other side with a combination consisting of aluminium foil sandwiched between two layers of polyethylene. It was also held that product could also be described as consisting of Aluminium foil reinforced with plastic material and backed with paper or paper board. In other words, in order to claim the classification under Chapter 76, it was necessary that the product should have been sandwiched between the coatings on either side. Undoubtedly, the fact that product of the appellants was sandwiched by plastic coat on either side was not revealed in the declaration as already stated above. Being so, even assuming that there was decision which could have justified the classification under heading 7607, it required detailed description of sandwiching of product on both sides by coating of plastics, which fact was not revealed in the declaration. To what extent, such non-declaration of the correct description could have helped the appellant in justifying their claim is a totally different issue. But the fact remains that correct description of the product was not revealed in the declaration. In those circumstances, certainly mis-statement can not be said to be un-intentional. Being so, we do not find any infirmity in the finding given by the learned Commissioner in this regard.
15. As regards the penalties imposed against the Ex-Manager and Manager of the Company, as rightly pointed out by the learned Advocate for the appellants, the impugned order no way discloses any material having been relied upon to show the involvement of said Managers in relation to mis-statement and, therefore, the said Managers could not have been held responsible or liable to pay any penalty in the matter. Merely because one of the said Managers was authorised signatory to defence filed in the case, that would not be sufficient to construe that he was responsible for the mis-statement. Being so, the penalty against the Managers cannot be sustained. In the result, the appeal filed by the appellant company fails whereas the appeals filed by the Managers succeed. Accordingly, the appeal filed by the appellant company is dismissed while the appeals filed by Managers to the extent of penalty imposed under the impugned order is concerned are allowed and the order in that regard only is set aside. The order against the appellant company is maintained.
16. The appeals are accordingly disposed of in the above terms.
( Justice R.M.S. Khandeparkar ) President ( Rakesh Kumar ) Member(Technical) ss 2