Customs, Excise and Gold Tribunal - Delhi
Raasi Ceramic Industries Ltd. vs Collector Of C. Ex. on 27 May, 1997
Equivalent citations: 1997(95)ELT401(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from the Order-in-Original dated 12-1-1989, passed by the Collector of Central Excise, Hyderabad.
2. By this order, the Collector has held that the assessee had contravened the provisions of Rule 9(2) of Central Excise Rules, 1944, therefore, liable to pay duty of Rs. 4,02,142.81 and has imposed penalty of Rs. 50,000/- under the Central Excise Rules, 1944 on account of the fact that
(i) the assessees were manufacturing Ceramic products like wash basins, urinals, pans, etc. falling under Chapter sub-heading 6908.10.
(ii) Plaster of paris moulds falling under Chapter sub-heading 6807.00.
3. It was alleged against the appellants that they had filed classification list for products falling under Chapter sub-heading No. 6908.10. On verification, the officers found that the assessees neither filed a classification list nor claimed any exemption for the manufacturer of plaster of paris moulds manufactured and utilised in the factory of production for manufacture of ceramic products, including the process of manufacture of ceramic products and plaster of paris moulds. It was also alleged that exemption under Notification No. 217/86-C.E., dated 2-9-1986 is available to excisable goods if manufactured and used within the factory of production, in the manufacture of finished goods; except the following namely, machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substances in or in relation to the manufacture of the final products. It was alleged that in the instant case, the plaster of paris moulds are used for shaping the sanitaryware. The plaster of paris moulds are filled with slip for obtaining the required shape of the ceramic products. The moulds remain unchanged. It was alleged that in other words, the plaster of paris mould is only an apparatus or equipment for setting the sanitaryware to the required shape and size and hence the exemption is not applicable to apparatus/equipment.
4. The assessee before the Collector, in rely to the show cause notice, has denied any wilful suppression of facts by them. It was stated that while obtaining the licence for manufacture of ceramic products in their factory, they had submitted an application in form A.L. 4, including a ground plan and also a declaration in form D-2 in the said ground plan which covered all the sections of production, the section in which moulds are prepared was also indicated. They stated that they had also enclosed the process of manufacture containing details similar to the one which was given to "the Assistant Collector (Anti-Evasion) enclosed to the show cause notice. They stated that ceramic appliances namely wash basins, urinals, pans, etc. are manufactured by them by casting them in moulds made out of plaster of paris. Factories all over India make moulds in their own premises according to their own specifications and designs. These moulds are manufactured manually without power and the life of a mould is not more than two months. After two months, these moulds are thrown away as waste as they cannot be marketed since their use is only confined to the factory which makes the same to suit the specifications and designs. They admitted that they did not include about this activity in their classification list on a bonafide and reasonable belief that the item is not goods in terms of Section 3 of the Central Excises and Salt Act, 1944 to attract duty. They also stated that the item is not an intermediate product and covered by Notification No. 217/86, dated 2-4-1986 as both the inputs and the final products are indicated in the table to the Notification. They further stated that they are also entitled for benefit of Modvat in terms of Notification No. 177/86, dated 1-3-1986 in respect of which they paid duty on the inputs utilised for the manufacture of final product. They denied any wilful suppression of facts with an intention to evade duty and in this regard relied on several judgments in their favour. The learned Collector did not agree with their contention and held that the item is not an intermediate product and that it does not go into the manufacture of final product., as the moulds remains unchanged and they can be repeatedly used. These are not consumed in the manufacture of finished goods, as the moulds carry out the specific function of giving a final shape and size to the various manufactured products and hence they are in the nature of apparatus, tools or appliances and included in the ambit of Notification No. 217/86. The Collector referred to the Notification No. 221/86, dated 2-4-1986 as amended by Notification No. 267/86, dated 24-4-1986 which exempts certain specified inputs and wherein at Sl. No. 5 of the table of the Notification plaster of paris moulds had been specified as inputs eligible for exemption, if these are used within the production in the manufacture of ceramic products. He has held that the said input namely, plaster of paris moulds were omitted from the table of specified inputs annexed to Notification No. 221 /86. Therefore, in that view of the matter, plaster of paris moulds manufactured and used in the final products in the factory of production are exempted from the whole of the duty of excise leviable thereon during the period from 24-4-1986 to 28-2-1987. However, for the period 1-3-1986 to 23-4-1986 and from 1-3-1987 to 31-3-1988, they are liable to pay duty when utilised in the factory of production in view of the fact that they were not covered by the Notification No. 267/86, dated 24-4-1986. He also rejected their plea for claim for Modvat in terms of Notification No. 174/86 or under Notification No. 177/86 as the moulds did not go into the manufacture of the finished product and as they cannot be termed as input for availing intermediate product relief (Modvat). He has held that the appellants had suppressed the facts and hence extended period in terms of proviso to Section 11A of the Central Excises and Salt Act, 1944 is justified including imposition of penalty.
5. We have heard the learned Advocate, Shri V.K. Dorai Raj, for the appellants and the learned DR, Shri M. Haja Mohideen, for the Revenue.
6. The learned Advocate reiterating the pleas raised by the assessee before the Collector relied on the judgment of the Tribunal rendered in the case of Hindustan Sanitaryware & Industries Ltd. v. Collector of Central Excise, as reported in 1991 (55) E.L.T. 248, wherein it has been held that the plaster of paris used in the production of plaster of paris moulds is entitled to the benefit of the Notification No. 221/86. It also further held that the moulds in question are exempted from duty in terms of Notification No. 221/86, when used as inputs for the manufacture of ceramic products. The contention of the Revenue in that case was that the first proviso to the Notification No. 217/86, which states ('provided that nothing contained in this Notification shall apply to inputs vised in or in relation to the manufacture of final products which are exempted from whole of the duty of excise leviable thereon are chargeable to nil rate of duty'), therefore, comes into play and acts as a bar to duty exemption to plaster of paris used in the manufacture of moulds, was rejected by the Tribunal. The Tribunal further held in para 12 that the Notification No. 217/86, as amended, exempts goods classifiable inter alia under Chapter 25 of the Schedule (under which plaster of paris falls) which are used in or in relation to the manufacture of final product classifiable inter alia under Chapter 68 of the Schedule (under which plaster of paris moulds falls) and Chapter 69 of the Schedule (ceramic products fall under this Chapter). It also held in that case that plaster of paris has been used in the manufacture of plaster of paris moulds which, in turn, have been used in relation to the manufacture of ceramic products. In the process of manufacture employed by the manufacturers, plaster of paris moulds are not the final product. They are not cleared outside the factory. If they are cleared outside the factory, only then the question whether they are to be treated as final products for the purpose of Notification No. 217/86 arise. The Tribunal observed that the appellants' contention that plaster of paris moulds are not goods for the purpose of excise levy would then need be considered. The Tribunal observed that such was not the case. Even presuming that plaster of paris moulds are goods falling under Chapter 68 of the Schedule, the Tribunal observed, that it does not see any reason, why the benefit of Notification No. 217/86 cannot be extended to plaster of paris used in the manufacture of plaster of paris moulds, which are used in relation to the manufacture of ceramic products. Therefore, the Tribunal took the view that the first proviso to the notification would come into operation only if plaster of paris moulds are sought to be cleared from the factory as final product and, then again, only if they are exempted from duty in terms of any notification in force. In para 13, the Tribunal held that the above view would also lead to a harmonious construction of Notification Nos. 217/86 and 221/86. In terms of the latter, plaster of paris moulds used in the factory of their production for manufacture of ceramic products are exempted from excise duty. It held that in that case, plaster of paris moulds had been produced in the appellants factory and they are used for manufacture of ceramic product. It held that plaster of paris moulds can only be manufactured from plaster of paris. If it is held that plaster of paris moulds are final products for the purpose of Notification No. 217/86 and are denied benefit of Notification No. 221/86 on the ground that they are exempted in terms of Notification No. 221/86 when used in the manufacture of ceramic products, the net result would be that plaster of paris moulds produced in the factory are used in the manufacture of ceramic products would be denied exemption from duty though this is one of the specific objects of Notification No. 221/86. The Tribunal held that such an obviously absurd result cannot be brought about by a process of construction. Therefore, the Tribunal set aside the demands raised on plaster of paris moulds. The learned Counsel submits that this ruling fully applies to the facts of this case.
7. The learned Advocate also submits that they had furnished the ground plans and also the details of process of manufacture and all the facts were within the knowledge of department, therefore, the extention of larger period in the present case and imposition of fine does not arise. They have not paid the duty on reasonable belief that plaster of paris moulds are not goods within the ambit of the Act.
8. The learned DR submits that the Collector has confirmed the duty only for the period indicated in the order for which there was no exemption and Modvat is also not applicable in terms of the judgment rendered in the case of W.S. Industries (India) Ltd. v. Collector of Central Excise, as reported in 1991 (56) E.L.T. 267 (Tribunal).
9. Countering the arguments, the learned Advocate submits that the citation is not relevant in the present case.
10. We have carefully considered the submissions made by both the sides and have perused the records. We notice that the appellants had produced the ground plans including the process of manufacture to the department, in respect of final goods manufactured by them namely, sanitary ware. In such circumstances, we are of the view that all the facts were within the ambit and knowledge of the department as can be seen front the manufacturing process which is in Annexure 3 at page 5 of the paper book and the ground plans which are annexed to the paper book. It therefore, cannot be stated that there was a deliberate suppression of any material facts from the department and that there has been clandestine removal of the goods to attract proviso to Section 11 of the Central Excises and Salt Act, 1944. It is also seen that the appellants have taken a stand that they held a bona fide belief that intermediate goods namely, plaster of paris moulds were not goods, hence they had not disclosed about the same in the classification list, although the details of the plaster of paris moulds and the process of manufacture had been disclosed to the department. There is a force in this submission. The Hon'ble Supreme Court in number of judgments have held that the burden of proof is on the department to show that there has been a deliberate suppression of material facts to evade duty and it is for the department to show that there had been clandestine removal of goods with an intention to evade payment of duty. It is on record that the appellants had disclosed about the process of manufacture in respect of sanitaryware. The appellants were clearing sanitaryware on payment of duty. Therefore, it is very clear that the department was aware of the utilisation of moulds in the manufacture of sanitaryware. It is reasonable to hold that the department has not proved that the appellants had intention to evade duty. The judgments rendered by the Hon'ble Supreme Court in the case of Collector of Central Excise v. H.M.M. Limited, as reported in 1995 (76) E.L.T. 497, Collector of Central Excise v. Chemphar Drugs & Liniments as reported in 1989 (40) E.L.T. 276 and that of Padmini Products v. Collector of Central Excise, as reported in 1989 (43) E.L.T. 195 is clearly applicable to the facts of the present case. The show cause notice has been issued on 15-7-1988. The Collector has confirmed the duty for the period 1-3-1986 to 23-4-1986 and 1-3-1987 to 31-3-1988. Therefore, the demands raised for the period from 1-3-1986 to 23-4-1986 would be barred by time and also demands raised 6 months prior to period 15-7-1988. However, we notice that part of demands in terms of show cause notice dated 15-7-1988, falls within 6 months prior.
11. The learned Advocate has relied on the judgment rendered in the case of Hindustan Sanitaryware & Industries Ltd. (supra) wherein the department has raised demands on plaster of paris manufactured and captively used in the manufacture of plaster of paris held that the first proviso to the notification would come into operation only if plaster of paris are said to be cleared from the factory as final product and then again only if they are exempted from duty in terms of Notification in force. The Tribunal held that in terms of Notification No. 221/86 plaster of paris used in the factory of their production for manufacture of ceramic products are exempted from excise duty and further one to say as the same had been produced in the appellants' factory and used in the manufacture of ceramic products, they would be entitled to the benefit of Notification in question. The facts of the case are similar and we have to hold that plaster of paris having been utilised within the factory are entitled to the benefit of Notification. However, the Collector has held that the input had been omitted from the table of specified inputs annexed to Notification No. 221/86 vide Notification No. 89/87-C.E., dated 1-3-1987 and on that ground has confirmed the demands. The appellants have claimed the Modvat credit which has also been rejected by the Collector on the ground that they are inputs used in the manufacture of final products. As the Tribunal has taken a view that they have to be treated as input for the manufacture of sanitaryware, it follows that the benefit of Modvat credit cannot be denied in terms of the judgment rendered by the Tribunal in the case of Hindustan Sanitanryware & Industries Ltd.
12. The learned DR relied on the judgment rendered in the case of W.S. Industries (India) Ltd. (supra), wherein it has been held that plaster of paris moulds used in the manufacture of ceramic insulators have been held to be tools or appliances for bringing about a change in clay and not an inputs and the benefit of Modvat credit has been denied. As can be seen the item plaster of paris moulds has been used in the manufacture of ceramic, which are different from the sanitaryware. As the Tribunal in the case of Hindustan Sanitaryware & Industries Ltd. has held the item in question to be inputs in respect of sanitary-wares, therefore, the judgment of Hindustan Sanitaryware & Industries Ltd. will apply to the facts of the present case, for considering the prayer for grant of Modvat credit. However, this aspect of the matter is required to be reconsidered by the Collector for the normal period of 6 months prior to the date of show cause notice and for that purpose the matter is remanded for de novo consideration, in the light of the observations made in this order. The demand raised for larger period and penalty in this case is set aside. Thus, the appeal is allowed by remand for de novo consideration.