Custom, Excise & Service Tax Tribunal
M/S.Ultra Fine Fillers (P) Ltd vs C.C.E., Jaipur on 8 March, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-DB
COURT III
Excise Appeal No.E/2900/2005-EX [DB] &
Excise Appeal No.E/2901/2005-EX [DB]
[Arising out of Order-in-Appeal No.277-278(RM)CE/JPR-II/2005 dated 31.05.2005 passed by the Commissioner (Appeals-II), Customs & Central Excise, Jaipur]
For approval and signature:
HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HONBLE MR. R.K. SINGH, MEMBER (TECHNICAL)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s.Ultra Fine Fillers (P) Ltd. Appellants
Mr.Dilip Galundia, Director
Vs.
C.C.E., Jaipur Respondent
Present for the Appellant : Shri. Mayank Garg, Advocate
Present for the Respondent: Shri. Govind Dixit &
Shri R.K. Grover, D.Rs.
Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HONBLE MR. R.K. SINGH, MEMBER (TECHNICAL)
Date of Hearing/Decision: 08.03.2016
FINAL ORDER NO. 51325-51326/2016
PER : R.K. SINGH
Appeal is filed against order in appeal dated 31.05.2005 which upheld the order in Original dated 15.01.2005 in terms of which the Additional Commissioner passed the following order:-
(i) I order confiscation of the seized quantity of 143 MT of calcite powder valued at Rs.5,27,000/- under Rule 173 Q of the erstwhile Central Excise Rules, 1944. However, I give an option to the assessee for release of seized goods on redemption fine of Rs.3,00,000/- (Rs. Three lacs only). The redeemed quantity be recorded in the stock register of the assessee and removed on payment of appropriate Central Excise Duty. This option may be exercised within one month of the date of receipt of this order.
(ii) I confirm the demand of duty of Rs.20,63,149/- (Rs. Twenty lax Sixty Three Thousand One Hundred Forty Nine only) on the clearances of coated calcite powder effected by the assessee during May, 95 to July 99 under Section 11A (I) of Central Excise Act, 1944 and order to recover the same from the assessee.
(iii) I impose penalty equal to the Central Excise duty of Rsw.20,63,149/- (Rs. Twenty Lax Sixty three thousand one hundred forty nine only) on the assessee under Rule 173 Q of the Central Excise Rules, 1944 in respect of clearance made during the period from May, 95 to 27.9.96 to 27.9.96 and under Section 11AC of Central Excise Act, 1944 in respect of clearance made during the period from 28.09.1996 to July, 1999. However, I do not impose separate penalty under Rule 9(2), 52A & 226 of the erstwhile Central Excise Rules, 1944.
(iv) I also order for charging interest under Section 11 AB on the amount of duty of Rs.20,63,149/- (Rs. Twenty lac sixty three thousand one hundred forty nine only).
(v) I impose a penalty of Rs.1,00,000/- (Rs. One lac only) on Shri Dlip Galundia under Rule 209A of the erstwhile Central Excise Rules, 1944. The above order was issued pursuant to CESTAT Order dated 05.02.2004 which remanded the matter for deciding afresh after affording an opportunity of cross-examination of Chemical Examiner.
2. The facts of the case briefly stated are as under:-
3. The appellant is engaged in the manufacture of coated calcite powder and cleared the same without payment of duty. It had not taken any registration also. On a visit to the factory, the Central Excise Officers found 143 M.T. of calcite powder which was placed under seizure on the ground that it was classifiable under C.T.H. 3824.90 leviable Central Excise to duty at the rate of 16% ad-valorem. The Lower Adjudicating Authorities held that the goods were classifiable under 3824 90 and that the appellant indulging in willful misstatement/ the suppression of facts did not pay duty thereon and accordingly confirmed the impugned demand alongwith interest and penalties as above.
4. The appellant has contended as under:-
(i) It was manufacturing calcite power which was classifiable under CTH 25.05 liable to nil rate of duty. It added stearic acid only upto 1% not for the purpose of coating but for the ease of grinding only.
(ii) The initial chemical test reports clearly opined that the goods were classifiable under C.T.H. 25.05 and it was only the last report which opined that the goods were covered under CTH 3824.90.
(iii) It is a classification dispute and even Chemical Examiners reports were of two opinions and therefore suppression/ willful misstatement cannot be alleged.
(iv) It had no coating machine in the factory and C.T.H. 38.24 requires coating of the particles by a special treatment which was not done in this case.
(v) There is no evidence in the show cause notice as to how the allegation of suppression/willful misstatement is sustainable.
5. Ld. D.R. on the other hand stated that Shri Mahendra Barber supervisor of the appellant clearly admitted that 1% fatty acids i.e. stearic acid was added and the powder was further processed through heater mixture machine to remove any impurities and humidities. The ld. D.R. also reiterated the analysis of the reasoning contained in the primary as well as the first appellate authorities orders.
6. We have considered the contentions of both sides. We find that it is second round of litigation inasmuch as, in the earlier round the case was remanded by CESTAT vide order dated 05.02.2004 for denovo adjudication after affording cross-examination of the chemical examiner as the same had not been permitted for the first time.
7. We find that the period involved in this case is February, 1995 to July, 1999. The samples were drawn on 31.07.1999. In its earlier report dated 31.08.1999 the Chemical Examiner essentially stated that the sample under reference is a mineral calcite converted into powder form by grinding only:-
The earlier test report is reproduced below:-
Report The sample is in the form of dull white fine powder. It is essentially composed of calcium carbonate together with small amount of silicious matter. It has the characteristics of mineral calcite.
(S.K. Mittal) Chemical Examiner Dt. 31/08/99 No. 136/CHEM/MISC./J/94.CLJ./MISC.40/11.8.99 Note:- The chapter 25 of C.E.T. covers, in general, mineral products only in the crude state or washed (including washing with chemical substances to eliminate impurities, provided that the structure of the product itself is not changed) crushed, ground, powdered, levigated, sifted, screened or concentrated by floation, magnetic separation or other mechanical or physical processes (not including crystallization) but not product which have been roasted and calcined etc. The sample under reference is a mineral calcite converted into powder form by grinding only.
(S.K. Mittal) Chemical Examiner It is seen that subsequently, the chemical examiner gave further report on 05.05.2000 in respect of 3 varieties of impugned goods, wherein he opined that calcite powder jet filler and cyclone filler was classifiable under Chapter 25 but calcite powder jet & cyclone filler was classifiable under 3824.90. These 3 sample reports are reproduced below:-
136-CHUM/Misc./J/94/CLJ/Misc./147/9-2-2000/5-5-2K Report The sample is in the form of white powder. It is essentially composed of Calcium Carbonate together with small amount of siliceous matter (Silicates of Magnesium and Aluminum).
Content of Calcium Carbonate = 95.9 % by weight The test findings indicate the sample under reference to be calcite powder- a mineral. In view of the specific query put up regarding classification under CETA it is classified that the same finds mention under chapter 25.
Sealed remnant sample returned herewith.
FORWARED to:-
THE INSPECTOR/SUPRINTENDENT CENTRAL EXCISE DIVISION CHEMICAL EXAMINER 5.5.2000 142, B HIRAN MAGRI, SECTOR -11 UDAIPUR 313002 RAJASTHAN
Copy may be forwarded to the concern ASSTT. Commissioner, Central Excise Division 136-CHUM/Misc./J/94/CLJ/Misc./147-A/9-2-2000/5-5-2K Report The sample is in the form of white powder. It is essentially composed of Calcium Carbonate together with small amount of siliceous matter (Silicates of Magnesium and Aluminum).
Content of Calcium Carbonate = 97.9 % by weight The test findings indicate the sample under reference to be calcite powder- a mineral. In view of the specific query put up regarding classification under CETA it is classified that the same finds mention under chapter 25.
Sealed remnant sample returned.
FORWARED to:-
THE INSPECTOR/SUPRINTENDENT CENTRAL EXCISE DIVISION CHEMICAL EXAMINER 5.5.00 142, B HIRAN MAGRI, SECTOR -11 UDAIPUR 313002 RAJASTHAN
Copy may be forwarded to the concern ASSTT. Commissioner, Central Excise Division 136-CHUM/Misc./J/94/CLJ/Misc./147-B/9-2-2000/5-5-2K Report The sample is in the form of white powder. It is essentially composed of Calcium Carbonate together with small amount of siliceous matter (Silicates of Magnesium and Aluminum). It is coated with fatty matter.
Content of Calcium Carbonate = 97.9 % by weight Content of fatty matter = 0.4 % by weight; the rest being siliceous matter The test findings indicate the sample under reference to be coated calcite powder. It has Hydro- phobic characteristics.
In view of the specific query regarding classification under CETA it is classified that such type of treated/coated calcite powder having Hydro-phobic characteristics will be correctly classified under sub Heading 3824.90.
Sealed remnant sample returned.
FORWARED to:-
THE INSPECTOR/SUPRINTENDENT CENTRAL EXCISE DIVISION CHEMICAL EXAMINER 142, B HIRAN MAGRI, SECTOR -11 UDAIPUR 313002 RAJASTHAN
Copy may be forwarded to the concern ASSTT. Commissioner, Central Excise Division
8. From the above chemical Examiners reports, it is obvious that even in the second chemical examination reports in respect of 2 verities of calcite powder, the chemical examiner held them classifiable under Chapter 25. It is also only in respect of calcite Powder jet and cyclone filler that the chemical examiner held it to be classifiable under 3824.90. In this regard it is to state that the manufacturing process of all these 3 types of calcite Powders was essentially the same. This gives credence to the appellants contention that it added upto 1% of steric acid for the purpose of ease of grinding as it decreases the friction effect. We also notice that the percentage of fatty matter required for coated calcite powder is about 2.8 to 3.2% for the purpose of paints and 2 to 3.5 percent in case of the powder used for rubber as per Indian Standard Specifications for calcium carbonate for paints and for rubber industry respectively (Copy right 1978 and 1977 of Bureau of Indian Standards). From the above Chemical reports it is evident that the chemical examiner has not been very consistent with regard to the classification of the impugned goods. The description of C.T.H. 25.05 is reproduced below:-
Heading No. Sub-headding No. Description of goods Rate of duty 25.05 2505.00 Mineral substances not elsewhere specified (including clay, earth colours, natural abrasives, sulphurs, slate and stone), lime; plasters with a basis of clcium sulphate, whether or not coloured, but not including plasters specially prepared for use in dentistry Nil Chapter Note 2 of the Chapter 25 is reads as under:-
Chapter 25 Salt; Sulphur; Clay and Stone; Plastering Materials; Lime and Cement Chapter Note: 2. Except where their context otherwise requires, heading Nos. 25.01, 25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystalisation), but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading or sub-heading. It is evident from Chapter Note 2 that powdered mineral substance are covered under this chapter.
9. We find that Revenue had relied upon HSN Note pertaining to Chapter Heading 38 24 which is reproduced below:-
This category also includes finely ground natural calcium carbonate (Champagne white), each particle being coated, by a special treatment, with a water-repellent film of stearic acid. (Note No.23) It is evident that to get covered under 38.24 each particle is required to be coated by a special treatment with water repellant film of steric acid. The appellant has contended that it did not have any coating machine at all.
At this stage it is pertinent to quote paras 8 & 9 of the impugned order is as follows:-
8 It is evident from Chapter Note 2 to Chapter 25 of the Tariff that only those products are covered which have been washed ( even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization), but not product that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading or sub-heading. (underlining supplied for emphasis). The appellants are not seriously disputing the fact that the manufacturing process of their product involves apart from crushing/grinding other processes as well such as roasting. This in itself is sufficient for taking the product out of the purview of Chapter 25 of the Tariff. This coupled with the fact that the chemical examiners report states that the calcite powder is coated by fatty matter and is hydrophobic in character clinches the issue in favour of the Department. There can be no grounds for interfering with the adjudicating authoritys findings that the goods are classifiable under sub-heading 3824.90 of the Tariff and not under Chapter 25.
9. Coming to the question of penalties, I find that the appellants have manufactured and cleared excisable goods without being registered with the Central Excise Department, without declaring the same to the Department and without payment of duty. This has been done with intent to evade duty payment. In as much as the appellants are correctly liable to penalty in terms of Section 11AC of the Act. The confiscation of 143 MT calcite powder is also accordingly upheld. From the above - quoted paragraphs, it has evident that the Commissioner (Appeals) has noted that the appellant is not seriously disputing the fact that the manufacturing process of their product involved apart from crushing, grinding other process as well such as roasting. The appellant contended that it did not do any roasting at all. The Commissioner (A)s observation does not dispute that the appellant disputed the same though Commissioner (A) did not regard it to have been seriously disputed. So long as the roasting was disputed, the Commissioner (A) was not justified in assuming that there was roasting without corroborative evidence which doesnt exist. Resultantly the impugned order becomes devoid of the adequate basis to sustain the classification under CTH 3824.90.
10. We find that in the show cause notice the willful misstatement/ suppression of facts has been alleged on the basis of the following paragraphs:-
12. From the above facts, it appears that the unit had cleared/ removed calcite power (of various Qualities) without payment of Central Excise duty amounting to Rs.20,63,149.00 ( As detailed in enclosed Annexure-A) & without issue of invoice under rule 52-A as well as without obtaining Central Excise Registration under Rule 174 by suppressing the fact with willful intent to evade payment of duty in contravention of Rule 9 (1), 52-A, 53 173-B, 173-C, 173-F, 173-Q, 174 and 226 of Central Excise Rules 1944. Therefore, the unit appears liable for penal action under Rule 9 (2), 52-A, 173-Q and 226 of Central Excise Rules 1944 and Section 11AC of the Central Excise Act, 1944. The duty amount of Rs.20,63,149.00 on the calcite powder so cleared/removed without payment of duty also appears recoverable from them under proviso to section 11-A(1) of Central Excise Act, 1944 read with Rule 9 (2) of the Central Excise Rules, 1944. Interest thereon also appears recoverable from them under section 11-AB of Central Excise Act, 1944. Further willful misstatement/ suppression of fact has been upheld by the Commissioner (Appeals) essentially on the ground that the appellant did not take registration and clear the goods without payment of duty. In case of CCE vs. Chemphar Drugs Liniments [2002-TIOL-266-SC-CX], the Supreme Court held that something positive other than mere inaction or failure on the assessees part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. In the case of Continental Foundation Joint Venture Vs CCE, Chandigarh-I [2007 (216) ELT 177 (SC)], the Supreme Court went to the extent of saying that any incorrect statement by itself cannot be equated with willful mis-statement. In the light of these judicial pronouncements, we are of the view that the allegation of willful misstatement / suppression of facts is also not sustainable in the present case. Consequently demand pertaining to the period beyond the normal period of one year will also be hit by time bar.
11. In the light of the above analysis, the impugned order is set aside and appeal allowed.
(Operative portion pronounced in the open Court) (R.K. SINGH) (S.K. MOHANTY) MEMBER (TECHNICAL) MEMBER (JUDICIAL) Anita ??
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