Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Hindustan Newsprint Ltd. on 24 June, 1992
Equivalent citations: 1993(41)ECC49
ORDER
9-9-1991 S.L. Peeran, Member.
1. This appeal and cross appeal is filed by the Revenue and the assessee respectively against the Order-in-Appeal dated 30.6.87 passed by the Collector of Central Excise (Appeals) Madras.
2. The assessees are manufacturers of newsprint falling under sub Item (1) of Item 17 of the First Schedule to the erstwhile tariff. The assessee removed 1753.460 Kgs. (MT?) of paper during May 1982 without payment of duty to their Area Managers at New Delhi, Bombay, Calcutta, Madras Cochin. It was alleged by show cause notice dated 23.10.82 that they did not produce any proof to the satisfaction of the proper officer of supplies actually made to the newspaper establishment for use in the printing' of newspaper or for printing of text books or other books of general interest as stipulated in the notification No. 163/67 dated 23.10.82(sic) and hence a demand for duty of Rs. 29,45,812.80 were demanded for them.
3. The assessee explained by its reply dated 1.8.83 that the quantity of 1753.460 MT had been disposed off as below:
(1) Quantity sold to genuine publisher as per notification in question 1547.598 MT (2) Damaged quantity received back for reprocessing 33.722 MT (3) Quantity lying unsold in their respective depots 172.140 MT
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1753.460 MT
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During the personal hearing before the Asst. Collector, the assessee produced their register in Appendix III, which revealed that out of 33.722 MT shows as damaged quantity received back for reprocessing, a salvaged quantity of 7.254 MT has been subsequently sold to genuine users and a quantity of 26.468 MT used for making pulp. They could not also account for 25.290 MT but by their list dated 23.4.86 they stated that 12 MTs were distributed as free samples for trial purpose to genuine users like Indian Express, Hindustan Times, Times of India, etc., who were registered under RNI. For remaining quantity, they explained that it was damaged. The explanation given for 25.290 MT were recorded in Order-in-Original as follows:
(1) Quantity supplied to different newspaper publishers as free samples 5.118 MT (2) Short delivery at different destinations 2.460 MT (3) Quantity damaged during transit 0.604 MT (4) Quantity sold to Rajastan Patrika, Jaipur as per delivery order No. 8415 dated 9.6.82 10.000 MT (5) Quantity for which details not furnished 7.108 MT
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25.290 MT
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The Assistant Collector went through the records regarding disposal of newsprint (1753.460 MT) as furnished by the assessee at different times and got it verified and the same is recorded in page 4 of Order-in-Original.
(1) Quantity of newsprint sold to genuine newspaper publishers and invoices and declarations (end-use) filed and got verified ... 1591.597 MT (2) Qty. of newspaper said to be sold to Lok-Prakashan, Ahmedabad vide Inv. No. 211 dt. 10.7.82 (But Inv. shows a different Quantity) ... 23.385 MT (3) Qty. for which invoices not filed but delivery orders filed ... 41.612 MT (4) Qty. for which invoices filed but declarations are not filed ... 47.854 MT (5) Qty. received back under Rule 173-L and sold out subsequentlyently (invoices declarations filed) ... 7.254 MT (6) Qty. received back under Rule 173-L repulped in the factory as per register 'Appendix III' ... 26.468 MT (7) Qty. Supplied as free samples ... 5.118 MT (8) Qty. short delivered at different destinations ... 2.460 MT (9) Qty. damaged during transit ... 0.604 MT (10) Qty. for which details not furnished ... 7.108 MT
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Total 1753.460 MT
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The Asst. Collector has held that he is satisfied that the quantity of 1753.460 of newsprint satisfied the first condition of the notification in containing not less than 50% of fibre content.
4. As regards the second proviso for which show cause notice had been issued, he held that the assessee was eligible for exemption for quantity of 1666.931 MT and held that they could not satisfy regarding quantity of 86.529 MT (Sl. No. 2, 4 and 10 in the above list) valued at Rs. 5,53,785.60 cleared during May 1982, as intended for use in the printing of newspapers, text books or other books of general interest and hence duty of Rs. 1,38,446.40 as BED Rs. 6922.32 as SED was confirmed.
5. The assessee appealed to the Collector (Appeals) Madras. He held that serial No. 7 pertaining to 5.118 MT which is supplied as free sample, the benefit could be granted provided the assessee produced within one month proof of such supply to the Asst. Collector. Otherwise the demand would get confirmed.
6. He granted relief to Sl. No. 4 pertaining to 47.854 MT for which invoices were filed but declarations had not been filed. This quantity had been sold to M/s.Lalta Prasad Shaw Co. Calcutta. The Asst. Collector had disallowed as enduse certificate had not been produced. The Collector (Appeals) held that the notification does not call for any end use certificate. The Collector, however, confirmed the duty regarding 7.108 MT for which the assessee had admitted failure to correlate the same. Except, to the extent indicated above, the Collector (Appeals) confirmed the findings of the Asst. Collector.
7. In this appeal, the Revenue is aggrieved with the relief granted by Collector (Appeals) on 47.854 MT and 5.118 MT. In the grounds of appeal, the Revenue admits that notification No. 163/67 does not require the physical and actual end use but only requires that at the time of clearance the newsprint should be intended for such use. The ground made out is that the proper officer can call for certain proof for the purpose of his satisfaction that the newsprint was used for the specific purpose for which it is cleared and that such use should be to the subjective satisfaction of the proper officer in the notification.
8. In the cross appeal, the assessee has challenged the order of Collector (Appeals) also. They contend that Collector (Appeals) has wrongly confirmed the order of Asst. Collector demanding duty on 23.385 MT and 7.108 MT on the ground that the sale of 30.200 MT of the newsprint to Lok Prakashan, Ahmedabad covered by invoice No. 211 dated 10.7.82 was not the newsprint they have challenged the finding that these two figures was not exactly working out to 30.200 MT. They contend that neither of the two figures was based on any document. They contend that the figure 7.108 MT was a balancing figure to make up the total quantity. They contend that the figure 23.385 MT was itself not correct and hence the figure 7.106 MT could not be a fixed figure. They contend that the invoice No. 211 dated 10.7.82 showed the quantity sold to Lok Prakashan, Ahmedabad and that there was no other sale to that party out of the quantity of 1753.460 MT. Therefore, they contend that it was not correct for the Collector to accept that 30.200 MT was nothing but the same total of 23.385 MT and 7.108 MT. They contend that the duty can be demanded only at 15% ad valorem and not at 25% ad valorem as charged.
9. They further contend that Collector (Appeals) had erred in upholding Asst. Collector's order demanding duty on 2.460 MT of newsprint short delivered at various sales depots. They contend that this small difference could be due to error in weighment at either end and that there was no valid reason to demand duty on a difference of mere 0.01% in a total of 1753.460 MT.
10. We have heard Shri L.N. Murthy, learned JDR and Shri Gopal Prasad, learned Consultant for the assessee.
11. Shri L.N. Murthy submitted that even if the notification did not provide for production of end use certificate yet the proper officer should be satisfied regarding the grant of benefit under the notification. He contended that no documents had been produced in respect of 47.854 of paper supplied to Swadeshi Indore Lalta Prasad Shaw Co. and hence Asst. Collector had held that there was no satisfaction regarding end use and hence Asst. Collector's order is sustainable.
12. Shri Gopal Prasad contended that the Collector was satisfied with the evidence produced for supply of 47.854 of paper to Swadeshi Indore M/s. Lalta Prasad Shaw Co. and that this order of Collector (Appeals) is sustainable. Shri Gopal Prasad, learned Consultant relied on the following rulings:-
1. Collector of Central Excise v. Orient Paper Mills .
2. Collector of Central Excise v. A.P. Paper Mills Ltd. - Order No. 25/91-C dated 9.1.91.
3. Collector of Central Excise, Hyderabad v. Sirpur Paper Mills Ltd.--Order No. 285/91-C dated 22.3.91.
As regards the assessee's ground, he contended that 30.200 MT supplied to Allahabad party should be accepted. However, he admitted that except declaration and invoice there was no other evidence available for supply of the goods in question. But the supply is admitted by the party and hence the lower authorities ought to have accepted the assessee's explanation and the duty demanded for 30.200 MT is not justified. He further contended that 47 tons supplied to Calcutta party and it is not denied by Department that they are registered publisher. It is a sufficient proof. It could be verified by Calcutta officers. He submitted that Collector (Appeals)'s rejection is only on technical ground.
13. We have carefully considered the submissions of both the sides and perused the records. The question that arises for our consideration is (i) as to whether the Collector (Appeals) was satisfied with regard to supply of 47.854 MT supplied by Invoice No. 237 dated 11.10.82 and 004 dated 25.11.82 to M/s.Swadeshi Indore and to M/s.Lalta Prasad Shaw Co. under the notification No. l63/67-CE dated 21.7.67 and dropping of demand was justified? (ii) Collector (Appeals)'s order pertaining to 5.118 MT regarding free supply? (iii) Was the Collector (Appeals) justified in rejecting the claim of assessee regarding 30.200 MT and 7.108 MT and is the duty demanded at 25% ad valorem justified?
i) The Asst. Collector has held regarding 47.854 MT declaration (end use certificate) from those parties had not been produced. He held that in the absence of production of end use certificate, the said removal cannot be held as removal for the printing of newspaper as envisaged in Notification No. 163/67 dated 21.7.67. The learned Collector has held that there is no such condition laid down in the notification and hence he has set aside the demand pertaining thereto. The Notification No. 163/67 dated 21.7.67 stipulates that the proper officer should be satisfied regarding the supplies actually made to the newspaper establishments for use in the printing of news paper or for printing of text books or other books of general interest. In the Show Cause notice the assessee were called upon to produce proof of such supplies. The assessee had contended that the supplies were made to genuine publishers and had produced the invoices. The Asst. Collector had insisted on end use certificate which has been negatived by the collector. In this appeal, the proper officer should be satisfied regarding the use of paper for the purpose for which the benefit is granted. The majority view in Collector of Central Excise v. Orient Paper Mills it is held as follows:
12. We consider that in order to prevent abuse of concession in excise duty e.g. by way of diversion of the paper after its removal from the factory or by selling or misutilisation, of paper by the consignee, the 'proper officer' would be competent to enquire into the actual use of this essential commodity. If this incidental power is not read into the notification it would mean interpreting it contrary to the well settled principles of construction of laws, namely, a construction which leads to evasion should be avoided. We consider that the incidental power to look into actual utilisation is necessary for another reason. It is that there is necessary for another reason. It is that there is no nexus between the Paper (Control) Order, 1979 and either of the two exemption notifications except the commonality of the 'retention price' in the former and the actual wholesale cash prices mentioned in the notifications. Clauses (3) and (4) of the said Paper (Control) Order enables the Central Government to direct disposal of stock, or sale, of white printing paper, among other varieties, on such terms and conditions as may be spent out in the general or special order of the Government. In other words, the 'order' of the Government for disposal or sale of paper may not necessarily be for the educational purposes. It is also worth noting here the allotment letters issued by the Hindustan Paper Corporation Ltd. to the publishers of books and brought on record do not indicate precisely that the allotment is for publication of so and so book considered to be for educational purposes, nor do the allotment letters indicate as to in which of the five categories (mentioned in the said allotment letters) the particular allotment falls. Had the intention of the notification been that the 'proper officer' was not required to look into the actual utilisation of the paper so supplied as long as it was supplied by a manufacturer under the allotment letter issued under the Paper (Control) Order, 1979, the notification would have been suitably worded on the analogy of notification providing concessional rate of duty for levy sugar (Ref. Notification No. 28/83-CE dated 1.3.1983). We also observe that it should not be difficult for the manufacturer to procure such evidence from the consignees because the latter are already furnishing the necessary data to the Education Ministry, Government of India in terms of its guidelines dated 22.6.1979.
13. In view of the above incidental power with the Proper Officer to prevent misuse of the excise duty concession we consider this to be a fit case for remand to the Assistant Collector of the Central Excise concerned to satisfy by the respondent here has been actually used for the purpose for which it is claimed to have been supplied. The appeal of the Department is allowed only to the aforesaid limited extent and disposed of in the above terms.
Therefore, the proper officer is entitled to satisfy himself regarding the supply of paper and as to whether it is actually used for the purpose for which it is claimed to have been supplied.
In view of the ruling given in Orient Paper Mills case, the findings of the Collector (Appeals) requires to be set aside and remanded to Asst. Collector for de novo consideration, with a direction to dispose off the grant of concession for this quantity of paper i.e., 47.854 MT in terms of the guidelines laid down in para 12 13 of Orient Paper Mills case, which are extracted above.
(ii) Learned Collector has passed a conditional order regarding 5.118 MT. He has held that if the assessee produces acknowledgements within one month from the date of the order to Asst. Collector then they would be entitled to the benefit. Both sides have not argued on this aspect of the order and no dispute is also raised. Hence there is no need to interfere with this aspect of the order. There is no merit in the appeal of the Revenue on this aspect and hence the appeal of Revenue on this ground is rejected.
As regards the issue (iii) raised in cross appeal the assessee has contended that supplies to the Ahmedabad is by invoice and that it is admitted by the party. They challenged the rate of duty also. The Collector (Appeals) has rejected the assessee's claim as they could not produce the invoices. Shri Gopal Prasad contended that the supplies are not disputed and that there are other documents evidencing the supply and it is verifiable. This aspect requires verification and it could be done only on de novo adjudication by the lower original authorities. A similar view has been taken in case of Collector of Central Excise v. A.P. Paper Mills Ltd. in Order No. 25/91-C dated 9.1.91 and also Collector of Central Excise Hyderabad v. Sirpur Paper Mills Ltd. in Order No. 285/91-C dated 22.3.91 and also in Collector of Central Excise v. Orient Paper Mills as reported in 1989 (40) ELT 181. There is no reason to differ from this ruling. Hence, the cross appeal is allowed by remand to original authorities to readjudicate the claim of the assessee on their claim raised in their cross appeal.
14. In the result, appeal is partly allowed and cross appeal is allowed by remand to original authorities for de novo consideration.
17-06-1992 S.K. Bhatnagar, Member
15. With due respects to Hon'ble Member (Judicial) my views and orders in the matter are as follows.
16. In the case before us the basic question revolves round the responsibility or the liability of the assessee. Once the benefit of notification 163/67 had been claimed and the product supplied to the newspaper publisher(s) for printing of newspaper or text books or other books of general interest (as per notification) does the responsibility stands discharged in terms of the notification?. Or is it incumbent upon the manufacturer to show that the quantity issued by the mill, after availing of the benefit has been actually used by the receivers of the goods for the intended purposes?
17. In my opinion once the goods had been sold to genuine publishers for the intended purposes or distributed free samples to such users (as Indian Express, Hindustan Times, Times of India, etc.) the responsibility stood duly discharged, inasmuch as the relevant part of the notification 163/67 states that "provided that it is proved to the satisfaction of the proper officer that such paper is intended for use in the printing of newspapers, text books or other books of general interest".
18. This view draws sustenance from the ratio of Supreme Court's judgement in the case of State of Haryana v. Dalmiya Ltd. reported in 1988 SC 342 in which it was held that "we are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are "goods for use by it in the generation or distribution of such energy" (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as for example, "goods actually used" or "goods used".
19. In the notification 163/67 with which we are concerned the crucial words are "intended for use". Hence if the documents evidencing supply of the goods to genuine publishers of text books etc., or newspaper establishments and receipt thereof by the latter were genuine and there was no reason to doubt that they were fradulantly obtained by the assessee in collusion with the recipients, the benefit of the notification could not be denied in respect of the quantity so supplied and received by genuine users.
20. It was of course open to the department to conduct necessary investigations, whenever called for, and to take such action as may be open in law in case of diversion of the material for unintended purpose(s) or misuse of the concession granted to the manufacture; But the burden in such circumstances to prove misuse would lie on the department.
21. The cases of
(i) Collector of Central Excise v. Orient Paper Mills ,
(ii) CCE v. Andhra Pradesh Paper Mills--Order No. 25/91-C dated 9.1.1991 and
(iii) CCE v. Sirpur Paper Mills are distinguishable in as much as in these cases the issues involved were different. In all these cases the basic question was as to whether the type of books published by the Geeta Press, Gorakhpur and others were of a category to which the benefit of notification 68/76, 69/76 or 280/82 may be extended in view of the fact that these notifications granted exemption only in case of printing and writing paper supplied for educational purposes.
22. Furthermore the orders in these cases do not take into account the Supreme Court's judgement in the case of State of Haryana v. Dalmiya cited above and the same appeared to have escaped notice; And according to Solmond's Jurisprudence Salmond on Jurisprudence Twelfth Edition by P.J. Fitzgerald, M.A. (Page 151). "It is clear law that a precedent loses its binding force if the Court that decided it overlooked on inconsistent decision of a higher Court".
23. Therefore, apart from the fact that the primary rule of literal construction and its corollary mentioned by Maxwell (Maxwell on The Interpretation of Statutes Twelfth Edition by P.St.J. Langan (At Page 33) that "omissions" are "not to be inferred" are more appropriate for interpreting such exemption notifications; And, as cited by him, "we are not entitled to read words into an Act of Parliament" or a notification for that matter, in the normal course, I consider myself bound by the ratio of the Supreme Court's judgement cited above and to take it into account for the purpose of this case.
24. With reference to this context I consider that the Collector (Appeals) was right in extending the benefit of notification with regard to 43.45 MT. cleared as newsprint intended for use in the printing of newspaper/text books or other books of general interest and 5.118 MTs of paper as entitled for duty subject to production of evidence of their due receipt by genuine users for intended purposes in view of the aspects already discussed above.
25. Insofar as the respondents' grievance regarding 30.20 MT of newsprint is concerned I find that in their cross-objection in para 5 they have shown the figures of sale to M/s. Lok Prakash "as 30.200 MT (23.385 + 6.815)". Whereas in para 12.1 they have shown the same as 30.220 MT as equal to 23.385 + 7.108 MT)". Obviously both could not be right and the total of the later two figures in the bracket does not even come to 30.200 MT but as observed by the learned Collector it comes to 30.493 and does not agree with the invoice quantity.
26. As far as 2.48 MT of goods is concerned the learned Collector has observed that there was no indication that it was cleared for the purpose indicated in the notification and again so far as 7.108 MT had remained unaccounted for and the appellants have admitted their failure to correlate the same in the grounds of appeal filed before him, and the appellants have not been able to satisfactorily explain the discrepancy even now.
27. In view of the above discussion I find that the whole order of the learned Collector (Appeals) was correct and there was no reason to interfere with the same. I therefore reject the appeal of the department as well as the cross-objection of the respondents and confirm the order.
23-06-1992 N.K. Bajpai, Member
28. I had the benefit of reading the orders written by the learned Vice President and learned Member (Judicial) and I am in agreement with the view taken by the former. However, I would like to add a few sentences to expain what I have in mind.
29. The material portion of Notification 163/67 upon which the dispute revolves is as under:-
Provided that it is proved to the satisfaction of the proper officer, as defined in the Central Excise Rules, 1944 that such paper is intended for use in the printing of newspapers, text books or other books of general interest. (Emphasis supplied)(Here italicised)
30. The essential condition of the Notification is that the intended use of the paper in the printing of newspapers text books or other books of general interest should be proved to the satisfaction of the proper officer. The Notification does not specify what would constitute such satisfaction. We have, therefore, to see whether the evidence asked for by the Assistant Collector is of such a nature as is necessary to prove to his satisfaction that the paper is intended for the specified uses. Since the satisfaction is to be made at the time of clearance of the goods when they are assessed to duty, the evidence has naturally to be of the "intended use" and cannot be of the end use in the nature of a certificate of actual use. This itself would show that any stipulation on the part of the Assistant Collector to call for evidence of actual use is not only incapable of being furnished at the time of clearance of the goods but is also beyond the terms of the exemption. In this view of the matter, the order calling for evidence of actual use is contrary to the requirements of the law and is, therefore, liable to be set aside. I agree with the view of the learned Vice-President on this point.
31. The question that remains to be answered is what then is the nature of evidence which would prove to the satisfaction of the authorities that the paper is intended for use for purposes specified in the Notification. The considerations which can weigh with the authority can be one or more of the following types in asking for appropriate evidence:-
(a) Whether the buyer is a person of repute who has regularly been printing newspapers and text books or other books of general nature
(b) Whether the buyer of paper is one who is engaged in using it in the printing of newspapers and text books or other books of general nature
(c) Whether the buyer has made such purchases in the past or has placed orders for supply of such paper from manufacturers of such paper
(d) Whether evidence of actual sale in the form such as invoice and other documents has been furnished
(e) If the transaction is not genuine,
(f) Whether the authorities have received any complaints that paper supplied to particular buyers has not been used in the printing of newspapers or text books or other books of general nature even though it was granted exemption from duty under the Notification on the ground that it was intended for use for the specified purposes.
32.I have indicated only some of the consideration which could generally go into making this decision. There could be many others depending upon the circumstances of each case. As far as (f) above is concerned, the authorities would be competent to apply stricter tests to satisfy themselves since it is true that what the Notification prescribes is their satisfaction and that would surely be of a higher standard in a case in which they have received a complaint of misuse. But in ordinary cases, the nature of evidence would be of the type as is illustrated by the considerations listed from (a) to (d) in the preceding paragraph.
33. In the light of the above, I agree with the learned Vice-President that the order of Collector (Appeals) has to be upheld and the appeal of the Department rejected. So is the cross-appeal of the respondents also liable to rejection.
Final order In view of the majority opinion, the appeal of the Collector of Central Excise, Cochin as well as the cross appeal of M/s. Hindustan News Prints Ltd. are both rejected.