Customs, Excise and Gold Tribunal - Mumbai
Mattel Toys Ltd. vs Commissioner Of Central Excise & ... on 26 March, 2003
Equivalent citations: 2003(154)ELT752(TRI-MUMBAI)
JUDGMENT
Gowri Shankar, Member(T)
1. The appeal was listed for out of turn hearing by orders of the Tribunal dated 19.10.2000. The matter has been subsequently adjourned either on the request of the appellant or the department on 25.7.01, 21.3.02, 7.8.2002, 11.9./2002, 30.10.2002 and 16.1.2003 and came up for hearing on 4.3.2003. Each of the departmental representatives present in the Court stated that they were not handling this matter, stating that counsel for the Government was to appear. Nobody appeared for the department, nor was any request for adjournment made by the department. We therefore proceeded to hear the counsel to hear the counsel for the appellant and thereafter reserved the matter for our consideration. On the next day Mr. Mishra, advocate appeared and stated that the counsel for the department could not appear because the department had not been in touch with him and requested for relisting the matter for hearing. He was informed that this was not sufficient ground for rehearing the matter.
2. Mattel Toys (India) Ltd, manufactures toys in its factory at Nagpur. In the manufacture of certain toys commodity which we refer to "plastisol" is required. It is stated that the ingredients to this plastisol consist of polyvinyl chloride resin, blending resin, plasticiser, stabiliser, mould release agent, colour. The plastisol material which is obtained by mixing together is used to mould the toys to the required shape. Notice dated 5.6.1997 issued to the appellant noted that the appellant has not paid duty on these goods and proposed to recover the duty payable on the items consumed from 1.4.1992 to 30.11.1996. The notice invoked the extended period of limitation contained in the provision under Section 11A (1) of the Act on the ground that the appellant had suppressed from the department the fact of manufacture of this commodity and its liability to duty. Consequent notice was issued dated 4.7.1997 demanded duty for the same commodity cleared between December 1996 and March 1997. Corrigendum issued to both notices on 16.2.1998 made changes in the value of the goods on which duty was demanded and duty payable. Five other notices were also issued subsequently demanding duty fall within the normal period of limitation. The assessee contended in reply that the product was not really plastisol because it lacked of viscosity depressant and that in the absence of this substance, the product could not be kept for longer than a day or two beyond that period it hardens and cannot be moulded and thus put to use in the manufacture of toys. It is also contended that it was not marketable, since no one produced, bought or sold this product. Documents were produced in support.
3. The Commissioner passed common order disposing of these notices. In that order, he did not accept this submission. He noted that the report of test of the product by the Deputy Chief Chemist and the report of the Director, Central Revenue Control Laboratory, indicated the product to be plastisol and stable at normal temperature. The Commissioner also had the material tested on 26.8.1996 by Laxminarayan Institute of Technology, Nagpur University. This report says that the products have shelf life i properly kept in a sealed container and any aged material could be used with proper addition of the plasticising material and the product could be used by any person manufacturing polyvinyl chloride items having facility of banking and cooling. Based mainly upon these reports, the Commissioner has concluded that the product is marketable and hence is liable to duty. While a request had been made to him during hearing by the assessee for cross examination of the Deputy Chief Chemist and the Director of Central Revenue Control Laboratory whose report the department relied upon, he held that this was not necessary. The Commissioner also justified the invocation of the extended period of limitation alleged in the first notice on the ground that the assessee had not furnished the declaration of the manufacturing process of the goods under Rule 173B as he was required to do had not said as was required in the normal course the confirmation of the departmental officers as to its view that the product was not liable to duty. This amounted to evasion.
4. The arguments of the counsel for the appellant as to the merits of the issue are as follows. The product in question is not plastisol but can only be loosely referred to as such. It is basically polyvinyl chloride resin to which some plasticiser has been added to it so is capable of being moulded into a particular shape. Colouring agents have been added as required and heat stabiliser and mould release agent have also been added. in the absence of viscosity depressant, as an ingredient it forms a hard cake or lump after a day or two. The product is then no longer usable. In view of its extremely short shelf life it cannot be marketed. It is well settled that the burden is upon the department to establish that a particular product is marketable, and this burden has not been fulfilled. Cross examination which was sought of the Deputy Chief Chemist and the Director of Central Revenue Laboratory has been refused without reason and therefore their report cannot be relied upon. Technical evidence and affidavits produced in support of the claim that the product was not marketable have not been considered.
5. We will now consider the technical evidence that the appellant had submitted to the Commissioner in support of its claim an affidavit filed by Dr. M.A. Shenoy, Reader in Polymer Technology, University of Mumbai, Department of Chemical Technology. This affidavit lists the ingredients of the product, which we referred to earlier and says that since no additives are added to impart storage stability. It refers to a test conducted at the Central Institute of Plastic Engineering Technology, Ahmedabad (CIPET) which showed constant rise in the viscosity of the product and within a short span of time it becomes thick lump incapable of being used for moulding operation. It says "The role of viscosity depressant is extremely important because that will stabilise the viscosity and consequently storage stability and will not let the viscosity rise to a level that the product becomes a solid lumpy mass. In the absence of viscosity depressant, it cannot be regarded as a marketable product." Although it does not give any reason for his opinion that the addition of viscosity depressant is contra indicative of the product toys, the counsel for the appellant says that it is because of the high toxicity of this product, these are added, result in the damage to the health of children who tent to lick these toys or put them in their mouths. The test result dated 10.9.1998 of the CIPET addressed to the appellant relating to samples of plastisols says that compares to another sample and indicates after the final figures of 216 hours that "in mattel plastisol further test is not possible due to lump formation." Report dated 30.2.1998 Chemplast Sanmar Ltd, apparently the manufacturer of chemicals states that "viscosity build after 24 hours is very high and thus it is recommended that the plastisol be used before 24 hours after manufacture." These materials were submitted to the Commissioner by the appellant in its reply to the notice.
6. The Commissioner has not dealt with these at all. He has relied upon entirely upon the report of the Chemical Examiner and the confirmation of it by Director, Central Revenue Control Laboratory. In his report, the directory says that "The sample is in the form of pink coloured viscouse liquid. It is stable, pourable dispersion of synthetic resin (polyvinyl chloride) phthalate plasticiser along with colouring matter and small amount of additives (silicone based). The sample has the composition and essential character of plastisol. It is stable at normal temperature and pressure having limited self life." In this background of conflict between the opinion of Dr. Shenoy CEPET and Champlast Sanmar Ltd on the one hand, and the opinion of the Deputy Chief Chemist and the Chief Chemist on the other, that the request made by the appellant, for cross examination of these persons was fully justified. The CIPET, which is part of the Ministry of Chemical and Fertiliser of the Government of India and the qualification listed by Dr. Shenoy impel us to take the view that he is an export in the matter of chemical technology. In our view, the request made by the appellant for cross examination of the Chief Chemist and the Director of Central Revenue Control Laboratory was fully justified. The basis advanced by the Commissioner for rejecting the request is specious. He says that the assessee has not "contested the test report as such and that the request for cross examination of the director and the analysis of the Laxminarayan Institute of Technology is only to show that the products are not marketable. If, as claimed by the appellant, the product, because of formation of lumps in it, cannot be used to mould toys after a day or two, and there is no other use for them, a framework is led that the product is not marketable. "The sample of the product was drawn on 31.8.1997, as indicated by the test memo drawn up by the jurisdictional Superintendent. The test report of the Chemical Examiner dated 9.10.1997. It would appear that it was the remnant of samples which were forwarded to the Director for test and submitted test of 9.10.1997. In any event, it is clear that the sample was sent to him by Deputy Commissioner of Customs, Mumbai by his letter 12.2.1999. In either events a considerable period would have lapsed between the drawing of the samples and the test. Hence if it is correct, the Chief Chemists's report would demolishes the claim of the assessee that the product was stable after a couple of days or so. Hence all the more reason for cross examination.
7. We are concerned with the product that the appellant makes and not with the product that results by an addition of some other material. The opinion of the Laxminarayan Institute of Technology that by proper addition of plasticising material before the product could be used therefore is not a satisfactory answer and does not offer support to the department.
8. The Commissioner has also not considered the contention raised by the appellant that the extended period of limitation would not be available for the reason that it had communicated to the jurisdictional officers the fact of manufacture of the product. It was claimed that in the ground plan of the factory that was supplied along with the letter dated 7.1.1991, a portion has been marked showing it to be used for plastisols mix. The officers would have been aware from this that there was manufacture of plastisols. In the statement submitted to the jurisdictional officer in 1995, the appellant also indicated the process of manufacture of substance in question. It therefore contended that the department was aware of the manufacture and extended period of limitation will not only. The Commissioner has not answered this contention in his order, merely emphasising that the assessee has failed to furnish the manufacturing process in terms of Rule 173B. If, in fact, from the information that the assessee made available to the department, its officers could have known that the substance in question was manufactured by it, it would then follow that the assessee had made information available to the officers from which they could reasonably conclude that this commodity will be manufactured. In that event, the fact that the assessee may have failed to follow the statutory procedure will not make any difference to the fact that the necessary information required by the officers to levy the goods to duty would have been made available, we think that the Commissioner should examine this aspect now.
9. Another point that was argued before us was that the Commissioner has classified the goods in a different heading of the tariff (3904.22) than was proposed in the notice (3911.10). The ratio of the judgment of the Supreme Court in Warner Hindustan Ltd. v. CCE 1999 (113) ELT 24 has relied upon to say that the Commissioner cannot in his order make a new case that is not made in the show cause notice. We do not think the ratio of the decision would apply to the facts of this case. The assessee had never raised any plea before the Commissioner relating to classification of the goods. Its entire reply on merits were focused on the fact that the goods were not plastisol and had very short shelf life and hence not marketable for this reason and that the department had not discharged the burden cast upon it of establishing their marketability of the goods. It had not any time entered plea as to the classification of the goods. The Commissioner has also not advanced any particular reason regarding the classification and does not indicate why he chooses the classification different from the one proposed in the notice. In any event, since the Commissioner's order is being set aside, we think that when the Commissioner decide the issues afresh, if he finds that the goods are marketable, and liable to duty, he should also decide upon the classification in accordance with law, after granting an opportunity to the appellant of being heard, and if he propose so revise the classification, give the appellant an opportunity of being heard on the revised classification.
10. The appeal is according allowed and the impugned order set aside.