Customs, Excise and Gold Tribunal - Delhi
Bhikusa Papers Private Limited vs Collector Of Central Excise on 5 November, 1985
Equivalent citations: 1986(6)ECR673(TRI.-DELHI), 1986(25)ELT264(TRI-DEL)
ORDER Harish Chander, Member (J)
1. M/s. Bhikusa Papers Pvt. Ltd., P.B. No. 68, 53/54 M.G. Road, Nasik-422001 has filed a reference application under Section 35G of the Central Excises & Salt Act, 1944 and has required, this Tribunal to refer certain questions, said to be the questions of law and arising out of order No. 340/85 dated 30th day of April, 1985 vide Appeal No. ED(SB)T/A. No. 66/82-C passed by the Tribunal to the-Hon'ble High Court.
2. Briefly the facts of the case are that M/s. Bhikusa Papers Pvt. Ltd., Nasik are engaged in the manufacture of packing and wrapping paper which, at the relevant time, fell under item No. 17(2) of the First Schedule to the Central Excises and Salt Act, 1944 (CET, for short). The dispute revolves round the eligibility of the said paper to the duty concession contained in Central Excise Notification No. 128/77 dated 18-6-1977. One of the conditions for eligibility is that the pulp, out of which such paper is manufactured, should contain more than 50% by weight of pulp made from bagasse, jute stalks, cereal straw, or waste paper. The classification list filed by the appellants with reference to the said notification was approved by the proper officer on 17-4-1978. Later, on scrutiny of the daily stock reports of raw materials maintained by the appellants, it was found by the authorities that the percentage of the prescribed raw materials was less than 50% by weight of the pulp. The raw materials used by the appellants were waste paper, old gunny bags and rags. Of these, waste paper alone was among the raw materials specified in the notification. Therefore, the paper manufactured by the appellants was held to be not eligible for assessment at the concessional rate of duty in terms of notification No. 128/77. Accordingly, the Supdt. of Central Excise, Nasik issued a notice No. 780/79 dated 2-7-1979 calling upon the appellants to show cause why the differential duty of Rs. 6,55,995.30 as basic excise duty and Rs. 19,067.04 as special excise duty should not be recovered from them for the period 18-6-1977 to 31-12-1978 under Rule 19(1) of the Central Excise Rules, 1944 (hereinafter referred to as 'the Rules'. In due course, the Assistant Collector adjudicated the case by his order F. No. 1/Adm(19)59/AIR 79 dated 20-12-1979. In his order, the Assistant Collector held that, in view of the mis-statement of the appellants, the longer period of 5 years for recovery of the short-levied duty would be available to the department. He further held that there was no evidence to show that the pulp used to manufacture paper contained more than 50% by weight of pulp made from waste paper since, on a visit to the factory, the Assistant Collector found that no record was available to show the weight of each variety of pulp present in the pulp blending tank in which pulp made from different raw materials was mixed. He rejected the contention that gunny bags and jute stalks were one and the same. (This contention was dropped in the course of the pleadings before the Tribunal by the appellant's counsel). In the result, the Assistant Collector confirmed the demand notice.
3. Being aggrieved from the order passed by the learned Assistant Collector of central Excise, the applicant had filed an appeal before the learned Appellate Collector of Central Excise. The learned Appellate Collector came to the conclusion that no differential duty was collectable on the paper manufactured during the months when the consumption of waste paper was more than 50%. Even on the ground of time limit, no duty can be collected in respect of the paper manufactured in these months when waste paper consumed was not less than 50%, as in that case, it would not be said that there was any wilful mis-statement or suppression of facts by the appellants, much less than fraud or collusion. It is only in respect of the remaining months viz., February, 1978 and July, 1978 to December, 1978 that it can perhaps be said that there was mis-statement and longer period of 5 years as prescribed in proviso to Rule 10(1) would be attracted. Therefore, differential duty is demandable in respect of the paper manufactured during these seven months. Jute stalks and Gunny Bags are two different goods and the applicant's contention that Gunny bags also can be deemed as Jute stalks was not acceptable. In the result the Appellate Collector of Central Excise had upheld the demand for differential duty in respect of the months of February, 1978 and July 1978 to December, 1978.
4. Being aggrieved from the aforesaid order, the applicant had filed a Revision application before the Central Government which was transferred to the Tribunal under the provisions of Section 35P of the Central Excises and Salt Act, 1944. The Tribunal had upheld the findings of the learned Appellate Collector of Central Excise and had rejected the appeal. Now the applicant has come for reference to High Court, being aggrieved from the Order No. C-340/85 dated 30th day of April, 1985. In the reference application, the applicant has proposed the following questions of law.
A. Whether in the absence of any allegation or particulars, whatever of fraud, collusion, wit ful mis-statement or suppression of facts, in the show-cause notice, the Collector of Central Excise and/or the Appellate Tribunal were right in holding, that the extended period of five years was available to the Department for demanding the differential duty. This being more particularly so in view of the judgment of this Tribunal in the case of Sriram Pistons & Rings Ltd., Ghaziabad v. The Collector of Central Excise, Meerut, reported in 1983 ELT, 1927.
B. Whether 'intent' is wholly irrelevant for the purpose of concluding "fraud, collusion or any wilful mis-statement or suppression of facts" particularly in view of the use of words such as "wilful" appearing in the proviso under consideration.
C. Whether, in view of the language of Section 11A of the Central Excises and Salt Act, 1944, which substituted the old Rule 10, it could be said that the intention of the Legislature at all times was that 'intent' was an essential ingredient of "fraud, collusion, wilful mis-statement or suppression of facts."
D. Whether fraud, collusion, wilful mis-statement or suppression of facts can be assumed when there is only a distinct probability of an assessee not having complied with the provisions of an exemption notification. That is to say whether the fraud etc. alleged by the Department must be proved to the hilt or whether balance of probabilities would suffice.
E. Whether the expression "Jute Stalks" appearing in the exemption Notification No. 128/77 dated 10.6.1977 would exclude 'gunny bags' simply because commercially or in common parlance they may be regarded as two different items especially when as a raw material both would serve identical purpose. This fact being established by the inclusion of 'gunny bags' as a specified raw material in the subsequent notification issued by the Government of India.
F. Whether in view of the fact that Rule 10 of the Central Excise Rules, 1944 was repealed without a saving clause, the show-cause notice dated 30th June, 1979 issued to the applicant by the Superintendent, Central Excise, Nasik lapsed and no order thereon could be made by the Central Excise Department.
5. Shri P.V. Kapoor, the learned Advocate has appeared on behalf of the applicant and Shri A.S. Sundar Rajan, the learned Junior Departmental Representative has appeared on behalf of the respondent. The Bench had pointed out to the learned Advocate to argue on the preliminary issue whether the reference application was maintainable in terms of Section 35G of the Central Excises and Salt Act, 1944. Shri Kapoor, the learned advocate has pleaded that in the present matter, a reference application lies. He has referred to a judgment of the CEGAT in the case of Collector of Central Excise, Madras v. Chennai Bottling Company, Madras reported in 1985 (19) ELT 129. He has pleaded that the Tribunal has held that the order passed by the Special Bench of the Tribunal does not necessarily relate to the determination of a question having relation to the rate of duty. He has pleaded that in the said judgment, the Tribunal has held that the reference application was "maintainable. He has also referred to a judgment in the case of Bharat Earth Movers Ltd., Bangalore v. Collector of Central Excise, Bangalore in 1983 ELT 867. He has laid special emphasis on para 6 of the said judgment wherein it was held that the excisability of any manufactured goods arises when they are removed from the factory of manufacture in terms of Central Excises Act and the Rules thereunder. Any subsequent manipulation of the goods such as, export, return to the factory etc. does not bring into being a new product which becomes liable to excise duty a second time. Therefore, the excise duty 'at the time of second removal was refundable. He has pleaded that this appeal was decided by the South Regional Bench of the CEGAT and the excisability of the goods was in dispute. He has pleaded that since this appeal was decided by the South Regional Bench, and the reference application lies to the Hon'ble High Court under Section 35G of the Central Excises and Salt Act, 1944, He has also referred to another judgment of the CEGAT in the case of Hyderabad Allwyn Ltd., Hyderabad v. Collector of Central Excise, Hyderabad reported in 1985 (21) ELT 482. Lastly, he has referred to a judgment of the CEGAT in the case of Union Carbide India Ltd., Calcutta v. Collector of Customs, Calcutta reported in 1984 (18) ELT 449 wherein it was held that reference to the High Court is not admissible, if the question for reference relates to the rate of duty or value of goods for purposes of assessment. He has further argued that a reference application under Section 35G of the Central Excises and Salt Act, 1944 is not maintainable where the dominant question pertains to the rate of duty. He has pleaded that in the present reference application before this Bench, there is no dominant question of rate of duty or valuation. He has referred to para Nos. 4 & 9 of the Tribunal's Orders which appear on pages 61 to 65 of the paper book. He has laid special emphasis on para No. 4 "thus the challenge now is limited to the demand for differential duty in respect, of the months of February and July to December, 1978". He has also argued that, in the present matter before the Tribunal, only the criteria for the grant of exemption is in question. He has pleaded that the reference application is maintainable and has requested the Tribunal to make a reference to the Hon'ble High Court in terms of the provisions of Section 35G of the Central Excises & Salt Act, 1944.
6. In reply, Shri A.S. Sundar Rajan, the learned Junior Departmental Representative has pleaded that there is mis-statement on the part of. the Appellant and the longer period of 5 years for recovery of the short-levied duty could be available to the Department. He has argued that no reference application under Section 35G of the Central Excises and Salt Act, 1944 lies. The proper remedy for the appellant is to file an appeal to the Supreme Court in terms of the provisions of Section 35L of the Central Excises and Salt Act, 1944. He has argued that once a statute confers aright of appeal, it cannot be taken away. He has pleaded that in view of the earlier judgments of the CEGAT a reference application could not lie in this account and in particular has referred to the case of Union Carbide India Ltd. v. Collector of Customs, Calcutta reported in 1984 (18) ELT 449. He has pleaded for the rejection of the reference application.
7. In reply, Shri P.V. Kapoor, the learned Advocate has again requested the Tribunal to refer the matter in terms of the provisions of Section 35G of the Central Excises and Salt Act, 1944 to the Hon'ble High Court.
8. After hearing both the sides and going through the facts and circumstances of the matter, we hold this case is clearly covered by the decision of the Tribunal in the case of Union Carbide India Ltd. (Supra). In that order the relevant provisions of the Customs Act (parallel to those of the Central Excises and Salt Act) were fully analysed. It was held that in terms of the provisions under Section 35L of the Central Excises and Salt Act, 1944, an appeal lies to the Supreme Court where the matter relates among other things to the determination of any question having relation to the rate of duty of excise or to the value of goods for purposes of assessment. In such a case a reference application under Section 35G could not lie. The learned Advocate's argument that a reference does not lie only in case where the question relating to the rate of duty is 'predominant' does not find support in the wording of Section 35G and 35L. The Tribunal's Order in the case of Chennai Bottling Co., Madras 1985 (19) ELT 129 referred to a different situation, wherein a matter came to be dealt with by a Special Bench although at the time of hearing the 'reference application it was found in fact the order of the lower authority did not involve a question having relation to the rate of duty. In those circumstances it was held that a reference application did lie. The right to file an appeal or a reference application is conferred by the statute. The same cannot be conferred under Section 35G of the Central Excises and Salt Act, 1944. Where a reference is made to the High Court by the Tribunal, the High Court exercises advisory jurisdiction and the Tribunal decides the matter as a Court of appeal. Under Section 35L of the Central Excises and Salt Act, 1944, an appeal lies to the Supreme Court and the Supreme Court decides the matter as a Court of appeal. The scheme of the Act cannot be disturbed by the conduct or the working of the parties. In this case, however, the position is quite different, because the matter was not merely heard by a Special Bench but clearly involved a question having relation to the rate of duty. Keeping in view the earlier judgment of this Court in the case of Union Carbide India Ltd. v. Collector of Customs, Calcutta reported in 1984 (18) ELT 449, we hold that a reference application is not maintainable and we decline to draw the statement of the case to the Hon'ble High Court. In the result, the reference application is rejected being not maintainable.
Announced in Open Court.