Customs, Excise and Gold Tribunal - Hyderabad
Itw India Ltd. vs Cc on 7 September, 2007
Equivalent citations: 2008(124)ECC16, 2008(150)ECR16(TRI.-BANGALORE), 2008(222)ELT257(TRI-BANG)
ORDER
R.K. Abichandani, J. (President)
1. The appellant challenges the order of the Commissioner (Appeals) only to the extent that it rejects the contention of the appellant that the show cause notice was time barred. It is made clear, at the very outset, by the learned Counsel appearing for the appellant that the appellant does not challenge the impugned order on the question of classification of the goods in question, namely, ZYGLO-ZB-4B and 9CZ.
2. The appellants were manufacturers of non-destructive testing equipment and consumables. According to the Revenue, they were having a godown at shed No. 31 APIIC, Phase-II, IDA, Pashyamylaram, in Medak District. These premises were not registered nor declared with the Central Excise Department. The appellants were re-packing certain chemicals in the said premises. The chemicals, namely, ZYGLO-ZP-4B and 9C RED concentrate were received in bulk packing of 205 litre of drums and these were re-packed into small packs of 1 kg. and cleared as 'trading goods' without payment of duty. From the investigation, it transpired that, the goods ZYGLO-ZP-4B were classifiable under chapter sub-heading 3206.20 and by virtue of Note 3 to Chapter 32, the activity of re-packing in smaller packs and labelling amounted to manufacture. According to the Revenue, therefore, the appellants had deliberately suppressed the information relating to the composition of the product as also the literature relating to it with an intention to evade payment of duty. The other product 9C RED was also re-packed and sold in the trading premises. According to the Revenue, no information was given in respect of such activity on the pretext that it was classifiable under Heading 3204 to which Chapter Note 3 was not applicable and, therefore, re-packing did not amount to manufacture. According to the Revenue, the goods 9C RED were appropriately classifiable under Heading 2821.90. It appears that, Chapter Note 10 was incorporated in Chapter 28 as per which, in relation to the products of Chapter 28, labelling or re-labelling of containers and re-packing from bulk packs to retails packs or adoption of any other treatment to render the product marketable to the consumer amounted to manufacture.
3. The adjudicating authority, on the basis of the material on record, held that, the product ZYGLO-ZP-4B merited classification under Chapter sub-heading 3206.40, while the product 9C RED was classifiable under sub-heading 2812.90. The adjudicating authority held that the assessee had suppressed the facts and mislead the Department because the process of re-packing and selling as trading items in respect of ZYGLO-ZP-4B and 9C RED in shed No. 31 had not been specifically declared to the Department.
4. The Appellate Commissioner upheld the demand in respect of the goods by classifying ZYGLO-ZP-4B under Chapter 3206.20 and 9C RED under Chapter Heading 2821.90. On the issue of limitation, it was held that, the appellants did not show that they declared the fact of repacking the goods to the Department. The contention that the notice was time-barred, was, therefore, rejected.
5. The learned Counsel appearing for the appellant contended that, an intimation was given to the Department on 28th July, 1992 about the nature of the activity carried out by the appellant in respect of the said goods. He submitted that, though the classification as now declared by the Commissioner (Appeals) is not challenged by the appellant, the nature of intimation sent on 28.07.1992 was sufficient to put the Department to notice about the fact that the appellant was converting the material into small packs. He submitted that, if according to the Revenue such process amounted to manufacture by virtue by Chapter Note 3 of Chapter 32 and Chapter Note 10 of Chapter 28, the show cause notice should have been issued within six months which was the period prescribed at the relevant time for issuance of such notice. It was submitted that, since the nature of activity in respect of the said two items was mentioned in the communication dated 28.07.1992, the extended period of limitation was not available to the Revenue for issuing the show cause notice dated 29.03.2000 in respect of the removal of ZYGLO effective between 16th March, 1995 and 30th March, 1998 and those of 9C RED effected between 1 st March, 1997 and 30th May, 1999. The learned Counsel placed reliance on the decision of the Tribunal in the case of CCE, Hyderabad v. ITW Signode India Ltd. , in which it was held, on the basis of the correspondence, referred to para 7 of the judgment, that, the said case was not a case of any fraud or wilful mis-statement or suppression of fact etc. with an intent to evade payment of duty.
6. The learned authorized representative for the Department strongly contended that as per the provisions of the Act and the Rules, as they prevailed in the year 1991, the manufacturer was required to give a notice to the Collector. He drew our attention to Rule 43 for submitting that the notice addressed to the Asstt. Collector on 28.07.1992 cannot be considered to be a sufficient intimation of the correct facts, as required to be sent under that Rule. He argued that, in the said communication dated 28th July, 1992, it was stated that the trading activity was carried out in Phase-II, IDA, Plot No. 36, Pashyamylaram, while the investigation had revealed that the appellant was having a godown in shed No. 31, IIC, Phase-II, IDA, Pashyamylaram, in Medak District. Therefore, there was no intimation that they were carrying out the manufacturing activity at the same place. It was also submitted that, no further intimation was given in respect of the other premises and the intimation earlier given for Plot No. 36, cannot be held to be valid for Shed No. 31. Referring to the meaning of the word 'bonafide' from Black's Legal Dictionary, he argued that, the act of showing wrong sub-heading was calculated to mis-lead the Department into a belief that there was no manufacturing activity done by the appellant. He argued that, as per the aforesaid Chapter Notes, the activity carried out by the appellant in respect of the said goods, was a manufacturing activity and not a trading activity. He, therefore, submitted that the extended period of limitation was correctly invoked and the show cause notice was correctly issued within the extended period of limitation.
6. We are not called upon to decide the issue of classification in view of the categorical statement made on behalf of the appellant that, the appellant has accepted the classification of the goods as done under the impugned order. The short point that survives for our consideration is, whether the intimation sent to the Revenue on 28th July, 1992 about the nature of activities in connection with the said two products was sufficient, so as to preclude the Revenue from invoking the extended period of limitation. It appears from the said intimation that it was addressed to the jurisdictional Asstt. Collector of Central Excise, with a view to bring to the notice of the Revenue the facts mentioned therein. The subject of the said communication was "Central Excise, certain non-excisable items not involving manufacture". There were several items mentioned in the said communication of which we are concerned in the present appeal only with the items ZYGLO-ZP-4B and 9C RED. As regards the products ZYGLO-ZP-4B and 9C RED, para 6 of the said communication read with Annexure-IV are relevant. In para 6, it was stated that, the appellant was importing the goods listed in Annexure-IV. It was further stated that, the appellant re-packed the bulk goods into smaller packs and sold them with their brand name. It was specifically contended that re-packing bulk goods into smaller packs did not amount to manufacture in relation to any of the Chapter of Excise Tariff in which the imported goods were classified in the Bill of Entry, under which they were imported. It was stated that the said activity was a trading activity and did not amount to manufacture and there was no liability to pay excise duty in respect of these goods. It was then stated that the trading activity was carried out in Phase-II, IDA, Plot No. 31, Pashyamylaram. In Annexure-IV to the said communication, the said two items ZYGLO-ZP-4B and 9C RED were included indicating that the process thereon adopted by the appellant was of re-packing.
7. After this intimation, having known the process adopted by the appellant in respect of the goods described in the communication, it was open for the Department to question the classification suggested by the appellant and take suitable steps against the appellants on the ground that as per the Chapter Note, the activity indicated in the communication amounted to manufacture. The material placed in the communication was sufficient to alert the Revenue on the aspect, whether the activity should be treated as 'manufacture' and necessary action initiated as required by Section 11-A of the Act. It transpires from the record that, the Deputy Commissioner had made an order on 03.02.1998 (41/98), on the basis of the said letter dated 28.07.1992, in respect of one of the items covered thereunder and held that, there was no suppression of facts in the case as the assessee has already brought the matter to the notice of the jurisdictional Asstt. Commissioner under the said letter. If under the same communication, the Revenue considered that there was no suppression of facts in respect of one of the items, namely, 8A RED, it does not stand to reason as to why a different stance should be adopted by the Revenue for the said two products in respect of which the intimation was clearly given as to the nature of the activity, namely, re-packing bulk goods into smaller packs and labelling them with their own brand name. The communication was addressed to the Asstt. Collector of Central Excise, who, at the relevant time, was the proper officer. The Revenue cannot dis-own such communication as was sought to be done during the arguments by the learned Departmental Representative by pointing out that, the "Collector" was the authority mentioned in Rule 43. The submission ignores the scheme of delegation of powers contemplated by Rule 5 of the Central Excise Rules, 1944, and the nature of the powers delegated to the Asstt. Collector at the relevant time.
8. For the foregoing reasons there was no warrant for invoking the extended period for issuing the show cause notice dated 29.03.2000 and the show cause notice is therefore time barred. The impugned order is, therefore, set-aside to the extent that it holds that the show cause notice was not time-barred.
9. The appeal is accordingly allowed.
(Dictated and pronounced in the open Court on the 7th day of September, 2007)