Customs, Excise and Gold Tribunal - Delhi
Chitavalasah Jute Mills vs Collector Of Central Excise on 9 May, 1988
Equivalent citations: 1988(17)ECR353(TRI.-DELHI), 1989(39)ELT157(TRI-DEL)
ORDER V. P. Gulati, Member (T)
1. These appeals were heard together with the consent of both the parties as these involve a common issue.
2. The appeals relate to two manufacturers - M/s. Chitavalasah Jute Mills, Chittavalasah and M/s. Nellimarla Jute Mills Company Limited) Except in two cases where the Mills are in appeal before us, the Collector of Central Excise is the appellant in all other cases against the orders of the Collector of Central Exci$e (Appeals) Madras. The issues were dealt with by the Collector of Central Excise (Appeals) at length in his Order No. 29-32/83 (G) passed in the case of Chitavalasah Jute Mills and this Order of the Collector (Appeals) has been impugned in Appeal No. ED/1642/83-D filed by M/s. Chitavalasah Jute Mills and Appeal No. ED/2092/83-D filed by the Collector of Central Excise, Guntur. Based on his findings in this order, the Collector (Appeals) has passed various other orders which are subject matter of the appeals in other cases before us. The Collector (Appeals) while adopting the ratio of his decision in the case of Chitavalasah Jute Mills in his order No. 29-32/83 (G) referred to supra, has madefurther observations and given separate conclusions also in some of his other orders impugned before us. We observe as will be seen from the narration of facts in the following paragraphs that the Collector (Appeals) has given contradictory findings to those given in his order No. 29-32/83 (G) in some of his other orders. We also find that except for in Appeal No. ED/2243/83-D and Appeal No. ED/2244/83-D (impugned appellate order No. 102/83 (G) and No. 101/83-G respectively) which relate to the approval of the classification lists, all other impugned orders relate to the demands raised.
3 & 4. Brief facts of the case are that M/s. Chitavalasah Jute Mills and M/s. Nellimar-la Jute Mills manufactured jute yarn, twine, rope, sacking cloth and sacking gunny bags and as seen from the record of the proceedings before us had been clearing the goods from the factory after complying with the necessary Central Excise formalities after filing the classification lists in respect of the sacking cloth and jute bags manufactured by them and they had been filing the necessary statutory returns in regard thereto. Apart from Central Excise duty payable under the Central Excise Tariff in respect of the goods cleared by them, the jute mills were required to pay cess also in terms of Section 9(1) of the Industries (Development & Regulations) Act, 1951 read with Notification No. SO 135(E) dated 28.2.1981 at the rate prescribed under the said notification during the relevant period covered in the appeals before us. In respect of the jute bags cleared by them, the jute mills paid cess in terms of this notification at the rate of Rs. 562 per tonne applicable to Sacking in terms of Entry 3 in the Table to the said notification. The appellants, in fact, had been paying cess at this rate for quite some time in terms of the predecessor notifications to SO 135 (E) issued under Section 9(1) of the Industries (Development and Regulations) Act, 1951 from 1976 onwards on these jute bags at the rate applicable to "Sacking" in these notifications and the Department had accepted this position. This notification No. SO 135 (E) also carried another heading at serial No. 7 with the following description :
"The manufactures (other than those specified at serial Nos. 1 to 6 above containing 50 per cent or more of jute by weight)".
The rates applicable to goods at Serial No. 7 is at the rate of Rs. 6.25 per tonne. Likewise some of the predecessor notifications to notification No. 135 (E) mentioned above also carried a separate similar heading. However, some time in 1982, the Revenue sought to levy cess on jute bags at the rate applicable to manufactures of the description given at S. No. 7 of the notification cited above. This rate being higher at the relevant time than that applicable to the heading "Sacking", differential cess was demanded in respect of the jute bags claimed by the jute mills as "Sacking". The classification list filed by the jute mills were also amended by the adjudicating authority after following the procedure under the law and the jute bags were held to be falling under S. No. 7 for the purpose of levy of cess. The original authority also demanded cess separately for the sacking cloth captively consumed for manufacture of sacking bags cleared by the mills at the rate applicable to sacking under S. No. 3 as above @ 5.62 per tonne. Thus differential amount was demanded on jute bags manufactured. The original authority also raised demand against jute mills applying extended time limit under Section 11A invoking proviso clause to Sub-section (1). The matters were taken up in appeal by the jute mills before the Collector of Central Excise (Appeals) Madras, who, as mentioned in the opening paragraph, dealt with the issue at length in his orders No. 29-32/83(G) and which have been impugned in Appeal No. ED/1642/83-D and Appeal No. ED-2092/83-D. The Collector (Appeals) partially allowed the appeals holding in favour of the jute mills on the question of time bar and demand of differential cess in respect of jute bags. For proper appreciation of the facts, the relevant portions of the Collector (Appeals) orders in No. 29-32/83(G) are reproduced below:
** ** ** ** ** "I find, these four appeals are disposed of as under:
(a) Less charge demands in respect of cess leviable on sacking cloth, manufactured but consumed captively by appellants in their factory, is sustainable. However the demands have to be confined to the period of six months calculated from the relevant dates in respect of each consignment cleared for further manufacture. The lower authority's order invoking proviso clause to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944, is set aside.
(b) Classification of jute gunny bags under Serial No. 7 of the Table annexed to the Notification as "jute manufactures" is not sustainable. Jute gunny bags are correctly classifiable as 'sacking' under SI. No. 3 of the Table to the relevant notification. Accordingly, this portion of the impugned orders demanding the differential amounts of cess, consequent on classification of jute gunny bags against SI. No. 7 of the Table is not sustainable and is set aside."
The other appeals on the same issue as pointed out were decided by him with reference to his findings above. However, while recording his decision in some of the other appeals, his conclusions appear to be at variance with the findings in above-mentioned Order No. 29-32/83(G). It is therefore necessary that the operative portions of these appellate orders impugned before us are reproduced. For convenience of reference a Table of appeals filed before us and the orders impugned therein is given below:
S.No. Appeal No. Cause Title Order-in-Appeal
No.
1. ED/1642/83-D Chitavalasah Jute Mills v. CCE: Guntur No. 29-32/83G
2. ED/1679/83-D Nellimarla Jute Mills v. CCE : Guntur No. 42-42/83G
3. ED/1891/82-D Collector of Central Ex., Guntur v. Nel- No. 130/84G
limarla Jute Mills Company Ltd.
4. ED/1892/83-D -do- No. 42-43/83G
5. ED/2092/83-D CCE: Guntur v. Chitavalasah Jute Mills No. 29-32/83G
6. ED/2243/83-D CCE : Guntur v. Nellimarla Jute Mills No. 102/83G
7. ED/2244/83-D -do- No. 101/83G
8. ED/2500/83-D -do- No. 105/83G
9. ED/2501/83-D -do- No. 104/83G
There are some supplementary appeals No. ED/Supl. 1717/87-D to ED/Supl/1720/87-D & Sup/2455/87D also filed in some of the appeals above. Extracts of the orders-in-appeal in the appeals above are as under:
S. No. 1. (a) less charge demands in respect of cess leviable on sacking cloth, manufactured but consumed captively by appellants in their factory, is sustainable. However, the demands have to be confined to the period on six months calculated from the relevant dates in respect of each consignment cleared for further manufacture. The lower authority's order invoking proviso clause to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944, is set aside.
(b) classification of jute gunny bags under Serial No. 7 of the Table annexed to the Notification as "jute manufactures" is not sustainable. Jute gunny bags are correctly classifiable as 'sacking' under SI. No. 3 of the Table to the relevant notification. Accordingly, this portion of the impugned orders demanding the differential amounts of cess, consequent on classification of jute gunny bags against SI. No. 7 of the Table is not sustainable and is set aside."
SI. No. 2 "My findings on which these decisions are based are recorded in my Order-in-Appeal No. 29-32/83 G. Therefore, it is not necessary to reproduce them here. However, for the sake of completeness of record, a copy of the said order-in-appeal which is self-explanatory is enclosed."
SI. No. 3 "I have considered the appeal. I observe that this issue was examined by this authority in respect of a number of appeals lodged by various jute manufacturers and it was held that gunny bags are to be classified as sacking for purposes of levy of cess, in the context of the notification issued under the Industries (Development and Regulations) Act, 1951. In tune with the rationale of my earlier decisions, I allow this appeal and set aside the impugned order with consequential relief. A copy of my order in appeal No. 101/83(G) dated 27.7.1983 is enclosed for purpose of record."
SI. No. 4 "My findings on which these decisions are based are recorded in my Order-in-Appeal No. 29-32/83 (G). Therefore, it is not necessary to reproduce them here. However, for the sake of completeness of record, a copy of the said Order-in-Appeal which is self-explanatory is enclosed."
SI. No. 5 "As in Serial No. 1 above."
SI. No. 6 The issue to be decided in the instant case is whether "jute gunny bags" are to be classified as "sacking" or "jute manufactures" for the purpose of levy of cess.
This issue is identical to the one decided in the orders in appeal bearing Nos. 42-43/83(G) dated 19.4.1983 filed by M/s. Nellimarla Jute Mills, wherein it was held that jute gunny bags are correctly classifiable as sacking under SI. No. 3 of the table appended to the relevant notification for the purpose of levy of cess. This decision is equally applicable to the present appeal. Accordingly the impugned order is set aside and appeal is allowed directing the original authority to classify jute gunny bags as "sacking" for the purpose of levy of cess."
SI. No. 7 'The issue before me is whether jute gunny bags manufactured by appellants are to be classified as sacking' or jute manufactures' for the purpose of levy of cess under the Industries (Development & Regulations) Act, 1951.
I have already held that jute gunny bags are classifiable as 'sacking' in my Order-in-Appeal No. 42-43/83 dated 19.4.1983 in respect of the same appellants. I hold the same view in this case also for the reasons recorded in my above mentioned order-in-appeal. Appeal is allowed and the impugned order is set aside."
SI. No. 8 "My findings are as under :
(a) Cess is payable on the jute gunny bags under item 3 of the table to the relevant notification as sacking for the reasons recorded in my order-in-appeal No. S 29-32/83 G dated 22.3.1983.
(b) Cess is payable on jute yarn and twine, even if they are captively consumed for the reasons recorded in my order-in-Appeal No. 96/83, while deciding the appeal filed by the same appellants.
(c) The question of differential cess on jute gunny bags does not arise since sacking and jute gunny bags fall under the same Sub-item of the relevant notification.
(d) Appellants have not quoted any exemption notification, exempting jute yarn and jute twine used for stitching and hemming of jute gunny bags from cess. Hence, there is no merit in their plea. The notification No. 56/72 dated 17.3.1972 cited by appellants relates to Central Excise duty under Central Excises and Salt Act, 1944 and this is not relevant to cess.
(e) Since jute yarn and twine has to pay cess, even if used for captive consumption there is case for non levy merely because they form part of jute gunny bags on which appropriate cess is paid.
(f) As regards jute yarn and twine used for stitching and hemming of bags, the weight of such yarn i.e. 2% or less is not the subject matter, either of show cause notice or of the order. Hence, the issue namely, that it is less 2% by weight of jute gunny bags has to be agitated separately and a speaking order obtained in that regard.
The impugned order is modified to the above extent and appeal is partially allowed with consequently relief to appellants."
It is seen that the Collector (Appeals) has not passed order as to the levy of cess on sacking cloth in terms of the lower authority's order.
SI. No. 9 "This authority has decided earlier in orders-in-appeal Nos. 29-32/83G dated 22.3.1983 that 'sacking' and 'jute gunny bag' fall under the same Item No. 3 of the Table to the relevant notification. It therefore follows that cess is leviable either at the sacking stage or at the stage of 'jute gunny bags', but if cess was already paid on jute gunny bags at the time of clearance, then cess cannot be demanded on sacking cloth captively consumed in the manufacture of bags.
Similarly differential demand on jute gunny bags (classifying them as jute manufactures) is not sustainable, as they are correctly classified as 'sacking' only for the purpose of cess."
"In view of the foregoing, the order of lower authority is set aside and appeal is allowed insofar as it relates to jute gunny bags and captive consumption of sacking cloth used in the manufacture of jute gunny bags."
It is seen that the Collector (Appeals) has given findings contrary to what he has held in other appeals in regard to levy of cess on sacking cloth.
5. From the narration of facts above, we observe that the questions that arise for our consideration are -
(i) whether in terms of proviso to Section 11 A(i) cess could have been demanded for the extended period of five years?
(ii) whether jute bags would be covered by the description at serial No. 3 or SI. No. 7 of Table to the Notification 135 (E) dated 28.2.1981?
(iii) whether cess is leviable on sacking captively consumed for the manufacture of jute bags in addition to the cess charged on jute bags in the manufacture of which this sacking cloth is used?
So far as issjue at SI. No. (i) is concerned, it is relevant only in some of the cases before us. Before going into the other issues we propose to deal with this at the very outset.
6. We observe that the Collector (Appeals) has given very cogent reasons for holding that the extended period in terms of proviso to Section 11A(1) of the Central Excises and Salt Act was not applicable for raising the demand in the facts of the cases where the proviso was invoked by the original authority. His findings in this regard in Order Nos. 29-32/83-G which form the basis of his order in other cases also have already been reproduced in para 4 above. The learned advocate for the assessees in the proceedings before us has pleaded that they had been manufacturing jute bags etc. for a long time and had been filing the necessary classification lists and other statutory returns. He pleaded that there is no plea from the Revenue that the Department was not aware that the assessees were manufacturing sacking cloth part of which they were captively consuming in manufacture of jute bags. There is also no plea that the appellants misdescribed the jute bags at any point of time in the documents filed by them with the Department. In fact he pleaded that up to a point of time the Revenue and the assessees both considered the jute bags as sacking for the purpose of levy of cess and even when during the earlier periods when in the relevant notification there was no residuary item of other manufactures, the assessees were paying cess on the bags treating the same as sacking and revenue accepted this position. He pointed out no demands were separately raised for cess on sacking cloth captively consumed and that it was only at a later point of time that the Revenue interpreted the scope of the term "Sacking" to cover only sacking cloth and not the jute bags and sought to levy cess on the same under residuary item jute manufactures at SI. No. 7 of the Table to the said notification. No facts have been placed before us that the appellants at any point of time suppressed the facts in any way or misstated the position in regard to sacking cloth and jute bags manufactured by them. In fact, factories were functioning under the Central Excise control and from the various returns filed by the assessees as also the records maintained by them and which would have been scrutinised by the departmental authorities as required under procedures for control over the factories, authorities can be taken to have been in full knowledge of the fact of use of sacking cloth captively consumed for the manufacture of jute bags and also about payment of cess in respect of jute bags under the heading "Sacking". In fact the learned Departmental Representative has not adduced any serious agrument as to the applicability of the extended time period. We observe that under Section 11 A, the Department would be entitled to invoke the longer time limit if they are able to establish that there had been any fraud or collusion or wilful mis-statement or suppression of facts or contravention of relevant provisions with intent to evade payment of duty. We in view of what we have stated above hold that no case has been made out by Revenue for applicability of proviso to Section 11 A(1) for raising the demand beyond six months for a period of five years, in fact, in the Show Cause Notice issued there is no mention that there was any intention on the part of the appellants to evade payment of duty by reason of suppression of facts or mis-statement with intent to evade payment of duty. It cannot be also argued that the goods had been clandestinely removed for captive consumption. As we have mentioned earlier full facts in regard to manufacture and utilisation of sacking cloth in the factory of the appellants and so also payment of cess on jute bags under the heading sacking were within the knowledge of the departmental authorities. In view of this, we hold that wherever cess demand is held to be maintainable, the same shall be raised only for a period of six months and extended period of five years in terms of proviso to Section 11 A(1) is not available for the purpose.
7. In regard to the point that jute bags are covered by the description 'Sacking', the learned JDR for the Department at the very outset stated that he is aware of the Order of this Tribunal in the case of Mis. Nellimarla Jute Mills : Order No. 141-142/87-D dated 12.2.1987 :1987 (31) ELT 209 whereby this Tribunal has held that jute bags are covered by the term 'Sacking' and therefore are chargeable to cess under this heading. He pleaded that in that case the Tribunal was concerned with levy of cess during the period 1.5.1984 to 30.9.1984 after coming into force of the Jute Manufactures Cess Act 1983 while in these appeals we are concerned with the period before coming into force of the said Cess Act. His plea is that the decision given in the light of the Cess Act 1983 could not be made applicable to the present cases which fall under the old Cess Act of 1951 and the rules framed thereunder. He, however, could not show how the facts of the present case are distinguishable from the facts of the case decided by the Tribunal so far as levy of cess on jute bags under the heading "Sacking" was concerned. The Bench pointed out to him that the entries relating to the sacking and other manufactures under the old Act and rules have been retained under the new Act and rules. Notwithstanding this he has pleaded in the written submissions before us that the Tribunal did not take into consideration the notifications issued earlier and said distinction between the two items i.e., sacking and jute bags was not properly brought out.
He also drew our attention the following observations of the Tribunal :
"However, we find that it has been accepted by the authorities (and this position has been notified by trade notices by different Collectors) that sacking bags and sacking cloth both fall under item No. 3. There is no contention raised before us to the contrary. Item No. 10 reads "any other article of jute manufacture". The view that sacking cloth and sacking bags are both covered by the term "sacking" (Serial No. 3) appears to us to be the correct view. In this view, since sacking cloth and sacking bags both fall under the same serial number of the Schedule, the aforesaid requirements of the 3rd proviso to Rule 9 is fulfilled."
He pointed out that in the notifications issued earlier for levy of cess, the description at SI. No. 2 was for jute and Hessian fabrics other than sacking and SI. No. 3 covered sacking, jute twine and yarn. He pleaded since sacking was also a fabric it was taken out of the category of Hessian and jute fabrics and listed separately at SI. No. 3. He pleaded that in view of the earlier notifications and the wording used therein following the doctrine of con-temporanea expositia sacking should be taken to be only covering sacking cloth. In this view of the matter, he pleaded that the sacking could be taken to be covering sacking fabrics only and not sacking bags. He, at the same time, conceded that the Tribunal in that case took note of the fact that the Collector had issued Trade Notice holding sacking as covering jute bags also.
8. Learned advocate for the respondents, Shri Singhvi, pleaded that by the order of this Tribunal: Order No. 141 -142/87-D, the issue as to whether the term "Sacking" covers jute bags or not stands concluded vide the observations of the Tribunal in para 20 of the said order (reproduced above). He pleaded that there was no merits in the pleas of the learned JDR that the ratio of the decision of the Tribunal given in the context of Cess Act 1983 was not applicable in the present facts of the case as covered under Cess Act 1951 as there is hardly any change in the entries relating to sacking and other manufactures. He pointed out that so far as SI. No. 3 used in the Schedule to Jute Manufactures Cess Act 1983 is concerned in clause 3 of the Table, the description of the item is 'sacking' and clause 10 of the same Schedule used the phrase 'Other articles of Jute Manufactures.'. He stated that similarly Table to Jute Manufactures Cess Act 1951 also used the same words 'Sacking' in clause 3 of the Table and clause 7 covered jute manufactures although worded slightly differently. He pleaded that the issue decided in the order of the Tribunal referred to supra was in the context of sacking vis-a-vis other manufactures and jute bags were held to be covered by the term Sacking'. He pleaded that ratio of this decision squarely applies to the facts of the cases before us. He pleaded that before early 1977 when the residuary item 7 for other manufactures was introduced, bags were being treated as sacking and duty all along at the rate applicable to sacking was being paid and accepted by revenue as such. He pleaded the evidence was produced before the lower authority which is also part of the record before us that the trade as well as the governmental authorities, Jute Commissioner, considered the term "Sacking" to be covering both sacking cloth and the sacking bags. He particularly drew our attention to the following :
"(a) The affidavit of Shri V.P. Bhattad, Joint Secretary, Andhra Pradesh Gunny Traders Association (Regd), Vijayawada which states that sacking includes gunny bags of different types and is understood to mean gunny bags in its ordinary, popular and commercially accepted sense;
(b) The clarification of the Jute Commissioner which states that in practice, sacking includes bags of different types;
(c) The opinion of the Director, Indian Jute Industries Research Association (IJIRA) to the same effect;
(d) The certificate issued by the Secretary, East India Jute and Hessian Exchange Ltd. to the same effect;
(e) The clarification issued by the CCE to the effect that "sacking" includes sacking bags and hessian includes hessian bags."
He pleaded that it is well established proposition of law that the proper test to judge the nature and classification of an item whether it is subjected to cess or Central Excise levy is the test of commercial parlance or alternatively common usage. He pleaded the documentary evidence clearly goes to show that these tests are undoubtedly satisfied for consideration of the jute bags as sacking. He drew our attention also to the ISI Specifications for Jute Sacking : 9113-1979 carrying the heading Specifications for Jute Sacking to the General Requirements. He pleaded that under this general heading, both bags and fabrics have been covered in the ISI. He drew our attention to Heading "Foreword" Sub-para 0.2 and which for convenience of reference is reproduced below :
"This standard covers the general requirements about construction, manufacture, sampling and testing of the various sackings (fabrics as well as bags) like A-twill, B-twill, L-twill, DW-flour, etc."
He pointed out that the term "Sacking" has been elaborated to cover both fabrics as well as bags. He also drew our attention to Supplement to the Manual of Departmental Instructions issued for jute manufactures/products. He pointed out Chapter II has the heading "Assessment and Clearance" and provides a ready reckoner. The rate shown against SI. 1 at page 1 is for sacking cloth and bags thus showing that the department also considered the term "Sacking" to be covering both cloth and bags. He further pointed out that under Heading 'Trade Samples" although at SI. No. 1 and 2, sacking bag and sacking cloth have been covered separately, it goes to show that the term sacking applies to both cloth and bags. In the same Supplement, he pointed out, at page 5, it is stated :
"Where necessary the advice of IJMA or that of the Director, Technical Laboratories of the Indian Central Jute Committee may also be obtained informally. The decision of the Government shall however be final in all such cases."
According to the Supplement, he stated that IJMA or the Director of Technical Laboratories of the Indian Central Jute Committee was recognised as a proper authority for giving advice in the matter of assessment etc. He pleaded inasmuch as the clarifications of these authorities produced show that these authorities recognise the term Sacking to be covering both jute bags and cloth this should be taken to be accepted so by those who deal with it as covering both the items. He also pointed out that IS 2580-82 provides for separate specifications for jute bags for packing cement. Under heading General Requirements at 3.1, the position regarding the sacking as under:
"3.1 Sacking - The bags shall be made from single pieces of double warp plain weave sacking of uniform construction and of 71 cm width; the weft running along the length of the bags. The value shall also be made from sacking of the same construction as used for the manufacture of bags."
He also pleaded that the evidence produced by him from the trade also goes to show that the people in the trade understood the term Sacking to be covering both the bags and the cloth.
9. We observe that this Tribunal after taking into account all the facts has come to the conclusion in the Order No. 141-142/87-D that term "Sacking" covers sacking bags also and normally there should have been no need for entering into any lengthy discussion in this regard unless some new facts had been brought to light to distinguish the facts of this case from the facts in the case dealt with in the order of the Tribunal. However, inasmuch as the learned JDR has taken the plea and also given the impression that the decision of Tribunal was taken on the ground that there was no contradiction in regard to treating of jute bags as sacking from the Department, we would like therefore to give our findings in this regard to put the position beyond doubt.
10. The plea of the learned JDR for the Department is that "Sacking" for the purpose of levy of cess has been carved out as a separate category from the item of jute fabrics right from the beginning. We observe that in the notification for the earlier period had description of item No. and S. No. 3 as under :
"2. Hessian and jute fabrics other than sacking, carpet backing and cotton, bagging
3. Sacking, jute twine and yams."
These descriptions are more or less the same in the subsequent notifications also so far as the jute fabrics and sacking are concerned. We observe that all that can be read in the description in item No. 2 is that it covers jute fabrics other than sacking which in the context of this entry at SI. No. 2 can be considered only as sacking cloth. It does not follow that all types of goods answering to the description "Sacking" have been excluded from item No. 3. The description of Item No. 2 covers only jute fabrics of various types and anything excluded specifically from the term jute fabrics has to be read in the context of this entry to be covering fabrics variety of that item. When the term "Sacking" has been listed separately this term has to be interpreted independently without reference to the description at SI. No. 2 and if sacking is found to be covering something more than fabrics then the entry No. 3 will have to be interpreted accordingly.
11. Next point, therefore, for our consideration is whether the term Sacking by itself stands only for sacking cloth or for sacking bags also. Inasmuch as there is no definition of the term sacking given in the notification under which the cess has been levied, the term will have to be interpreted as it is understood by those who deal with it and other jute products and on the basis of how it is understood in the trade. In view of the fact that Revenue itself had been understanding the term Sacking to be covering sacking bags also and had all along been collecting the cess on jute bag leviable under the head "Sacking" and various jute mills also had been paying cess regularly on the same understanding, it has to be held that the prevailing understanding was that the term Sacking covered the jute bags also. It was only later quite some time after the residuary item of 'Manufactures other than those specified undar the other heads in the Tables to the notification' was introduced as residuary item for the purpose of levy of cess that the Revenue sought to assess the jute bags under this residuary item.
12. The learned advocate for the assessees before us has filed evidence by way of ISI specifications and the extracts of the departmental instructions. These show that the term 'Sacking' covered two varieties, i.e., sacking cloth and sacking bags. The Jute Commissioner and other authorities dealing with the affairs relating to the jute industry have also given clarifications that Sacking covered both bags and fabric. The evidence produced from the trade also points to the same direction. It is pertinent to note that term "Sacking' used in the notification for the purpose of levy of cess is not qualified by the word cloth or bags.
13. We observe that in tne 'New Webster Dictionary', the word 'Sack' has been defined as under :
"Sack, sak. no (O.E. = O. FR. FT. sac 11t sacco : L Saccus : Gr. Sacks, bag, sack, sackcloth...."
The word "Sacking" has been defined as under :
"A coarse woven fabric, as of hemp of flax, used to make sacks."
It is seen that the word 'Sack' covers sackcloth also while sacking means cloth to make sacks. The two words 'Sack' and Sacking" it is seen are interchangeable. In view of the above and also the overwhelming evidence produced before us, we hold that the term "Sacking" covers both the cloth and the bags.
14. Next question that arises for our consideration is whether sacking cloth used captively for manufacture of bags can be charged to cess in addition to cess charged on jute bags. This Tribunal in their Order No. 141-142/87-D has held that the sacking cloth captively consumed cannot be charged to duty. In this regard the findings of the Tribunal are as under :
"One of the contentions of the appellants is that the third proviso to Central Excise Rule 9 would apply to the present case and would achieve the result of exempting jute manufactures taken into captive consumption for manufacture of other jute manufactures from payment of cess under the Cess Act. We have examined this contention with reference to the provisions of Rule 9. The Rule provides that no excisable goods shall be removed from the place of production inter alia for the manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid in the manner prescribed. The Rule is subject to several provisos. The third proviso inserted by Central Excise Notification No. 187/83 dated 9.7.1983 is relevant for the present purpose. It reads as follows :
Provided also that such goods may be removed without payment of duty leviable thereon, if they are consumed or utilised in the place where such goods are produced or manufactured or any premises appurtenant thereto so specified under this Sub-rule, either as raw material or as component parts for the manufacture of any other commodity which -
(i) is excisable goods specified by the Central Government by notification under Sub-rule (1) of Rule 56A,
(ii) falls under the same item number in the First Schedule to the Act as such goods so consumed or utilised fall under, and
(iii) is neither exempt from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty.
Several things have to be noted in connection with the applicability or otherwise of Rule 9 read with the third proviso to the facts of the present case. The proviso stipulates 3 conditions. The first is that the finished commodity (this expression is being used by us to connote the final product for the manufacture of which excisable goods are permitted to be used either as raw material or component parts) must be excisable goods specified by the Government by notification under Sub-rule (1) of Rule 56A. Jute, twist, yarn, thread, ropes and twine, all sorts, and jute manufactures (these fall under item Nos. 18D and 22A respectively of the CET) are specified in the list of goods to which Rule 56A applies. The second condition is that the finished product should fall under the same item number in the CET as the excisable goods consumed or utilised in their manufacture fall. It may be seen that jute, twist, yarn, thread, ropes and twine, all sorts on the one hand, and jute manufactures on the other, fall under different items and not under the same item of the said CET. Insofar as the Schedule to the Cess Act is concerned, jute yarn and twine fall under SI. No. 4 whereas sacking falls under SI. No. 3. Thirdly, the finished product should neither be exempted from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty. This condition may be said to be satisfied in the present case.
In view of the facts that jute yarn on the one hand and sacking manufactured out of such jute yarn captively consumed within the appellant's factory fall under different SI. Nos. or items of the Schedule under the Cess Act, the requirement of the third proviso to Rule 9 that the finished product should fall under the same item number as the excisable goods consumed or utilised in their manufacture fall, Is not fulfilled. Therefore, the demand for cess on yarn captively consumed by the appellants in their factory for the manufacture of sacking during the period prior to 1.10.1984 was correctly made."
Learned JDR for the Department pleaded that the benefit in the context of amendment of Rule 9 as set forth above would be available only with effect from the date of amendment of the Rule, i.e., from 9.7.1983. We do not propose to give any findings in the context of the amended Rule 9 as above in view of our findings hereinbelow that the sacking cloth captively consumed and sacking bag answer to the same description.
15. The learned JDR cited the case of Mahabir Jute Mills v. CCE: 1984 (16) ELT 477 (Tribunal) in support of his plea that sacking cloth captively consumed are chargeable to cess.
16. We observe that in that case this Tribunal upheld the levy of cess on jute yam and jute twine captively consumed for the manufacture of sacking etc. In that case both the input items captively consumed and the final products were covered under separate descriptions of the goods as set out in the notification for the purpose of levy of cess. In the cases before us the question to be decided is the levy, of cess on the captively consumed sacking cloth used for the manufacture of sacking bags when both these items, i.e., input and the final product answer to the same description 'sacking'. The case cited is not on all fours to the cases before us and the facts in the case of Mahabir Jute Mills are distinguishable from the facts in the present cases. The ratio of the decision cited therefore cannot be made applicable to facts of the present cases.
17. It has been also argued by Shri Singhvi that in case the cess is required to be paid first on sacking cloth and again on bags, then the levy on the sacking will go beyond the statutory limit of levy of 13% of the value of the goods as fixed under the Industries (Development & Regulations) Act, 1951. We agree that the ceiling as provided for in the Schedule has to be kept in mind and this means that the levy of cess under the same heading and same description 'sacking' has to be only once whether at the cloth stage or the bag stage.
18. In view of the above discussion, we hold that there is no warrant for demanding cess separately on sacking cloth captively consumed for making the bags once the cess has been paid in respect of the bags cleared.
19. We have pointed out in the earlier paragraphs that the Collector (Appeals) has in one of his order held that cess could be charged only at one stage either on the sacking cloth stage or the jute bag stage while in the other order he has held that cess in addition to that paid on bags is chargeable on the sacking cloth captively consumed in the making of the bags cleared from the factory and in respect of which the mills had already paid the cess under the heading 'sacking' under serial No. 3. There is an apparent contradiction in the findings of the Collector (Appeals). We, however, find that except for cases in Appeal No. ED/1642/83-D and Appeal No. ED/1679/83-D where the mills are in appeal before us, in other cases where the mills have not filed appeals against this finding of the Collector notwithstanding what we have held in our order, the orders of the Collector in those cases for the levy of cess on sacking cloth captively consumed have become final. No relief can be given to them in the appeals filed by the Revenue. With the above observations, we allow the appeals filed by M/s. Chitavalasah Jute Mills and Nellimarla Jute Mills so far as these relate to levy of cess on sacking cloth captively consumed and dismiss the appeals filed by the Collector at SI. No. 3 to 9. The Supplementary appeals are also decided in terms of the appeals to which they relate.