Customs, Excise and Gold Tribunal - Delhi
Mahavir Products vs Collector Of Central Excise on 19 January, 1990
Equivalent citations: 1991(33)ECR764(TRI.-DELHI)
ORDER S.K. Bhatnagar, Member (T)
1. This matter was heard in two parts.
2. At the first the preliminary point that the proceedings before the Collector were without jurisdiction and that the two Show Cause Notices issued to the appellants were null and void was raised.
3. This aspect of the matter was disposed of by the Bench by Misc. order No. 8/89-B-1, dated 24.1.1989. By this order the Beach dismissed the preliminary legal objections.
4. Then the case was heard on merits. During the course of hearing on the merits the learned Counsel staled that:
5. The appellants are engaged, inter alia, in the manufacture of Stove-Burner Parts (hereinafter referred to as 'SB Parts' for the sake of brevity) on job work basis solely for manufacture of Stoves, in their factory at Goregaon, Bombay-63. The said SB Parts had always been classified under the erstwhile Tariff Item 68. The appellants say that they receive orders from the manufacturers of Stove burners specifying the SB Parts required by them solely for use in the manufacture of Stoves. The appellants also receive specifications in respect of the said SB Parts from the said manufacturers including the brand name to be embossed on some such parts. The appellants used to file prescribed declarations claiming full exemption under relevant notifications from time to time without fail every year. The declarations were also duly accepted by the Central Excise authorities concerned without raising any dispute as to the classification of the said parts.
6. The appellants say that after filing such declarations they availed of the exemption during the years from 1980 to 1985. The Central Excise authorities in token of acceptance of these facts allotted a code number to the appellants for the purpose of effecting clearances of the said SB Parts without payment of excise duty under full exemption as prescribed under the relevant notifications.
7. The appellants received a letter bearing No, C. Ex./Mahavir/RT/84. dated 14.3 1985 from the Superintendent of Central Excise, Range T, Division VII, Bombay-II Collectorate, alleging that the appellants were manufacturing 'forgings classifiable under "TI 26A CET" and railed for the details of value of clearance of the said SB Parts made month-wise from August, 1984. Accordingly, the Superintendent concerned was duly informed by the appellants by their letter dated 29.3.1985 that their SB Parts were not forged products classifiable under TI No. 26A (3)(ii) and the said products being Stove-Burner Parts were correctly classifiable under TI No. 68. The appellants did not receive any reply to their said letter.
8. On or about 8.12.1985, the appellants were shocked to receive a Show Cause Notice dated 8.12.1985 from the said Superintendent calling upon the appellants to show cause to the Additional Collector of Central Excise, Bombay-II, why duty amounting to Rs. 1.73.250/- should not be recovered from them in respect of legitimate clearances made under exemption of the said SB Parts during the period from 1.8.1984 to 30.4.1985 The said Show Cause notice was followed by another one dated 21.11.1985 on similar lines demanding so called duty, on exempted goods, amounting to Rs. 1.38.600/- covering the period from 1.5.1985 to 31.10.1985 which was followed by a third Show Cause Notice dated 20.3.1986 demanding duty amounting to Rs. 15,031.17. Thus a total purported duty of Rs. 3,26,881.17 was demanded for the period from 1.8.1984 to 28.2.1986.
9. The appellants filed separate replies to the Show Cause Notices and the matter was adjudicated by the Collector of Central Excise, Bombay-II.
10. Learned Counsel stated that their contentions were that the impugned order does not say as to why the goods should be classified under 26A (3)(ii).
11. The tariff was received from 1.4.1984 and according to tariff advice 46/85 dated 30.10.1985 forgings were classifiable under sub-item 3(ii) provided they answer to the description and definition of sub-item (ii).
12. It was their contention that only those shapes and sections were classifiable as such provided they had not thereby assumed the character of another or product falling under any other item.
13. It was their contention that their goods did assume the character of semi-finished SB Parts falling under item 68 and, therefore, were not classifiable under 26A(3)(ii).
14. They were admittedly meant to be used as parts of burner if holes were drilled into them.
15. It was their contention that the parts in question were not shapes and sections but semi-finished parts or components of stove burners.
16. They were merely required to be fitted into or assembled into along with other parts of the burner.
17. They were standardised items and the tubes were also not standardised items and, therefore, it was necessary to leave the drilling of the hole to suit requirement of the customer.
18. That their contentions have been fully supported by the evidence contained in the affidavits made by Prof. J.N. Hate and their customers.
19. The learned Counsel stated that the first Show Cause Notice is time barred except for 20 days. The second Show Cause Notice is not time barred but it contains no material to show suppression and the third Show Cause Notice has been issued by the Superintendent after amendment of the Act and is, therefore, invalid and he would also like to point out that no penalty has been imposed. He would like to draw attention to the case reported in 1989 (43) ELT Tribunal-152. Attention was also drawn to the following cases:
1983 (32) ELT 15 : 1984 (14) ECR 146 1983 (13) ELT SC (sic)
1982 ELT 467 : 1982 ECR 465 D 1989 (4) ELT SC (sic)
1989 (40) ELT 194 (sic) 1980 ELT 619 (sic)
Order No. 393/89-C, dated
11.8.1989.
20. The learned Counsel further submitted that the Show Cause Notices were not clear. They were hatting and contained shifting charges. Further classification could be changes, if so required, prospectively and not retrospectively.
21. A code number had been allotted to them as stove burner parts and the department had itself total them that they were exempted and their declarations had been accepted year after year.
22. There was no suppression or misstatement of fact and, therefore, the department's case was by and large time barred.
23. The learned DR stated that the preliminary point regarding jurisdiction of the Collector and the validity of the Show Cause Notice have already been conclusively decided by the preceding bench by its order No. Misc. 8/89-B-I, dated 24.1.1989 and should not be re-opened. The case is basically under Rule 9. This rule is of course required to be read with Section 11-A but basically Rule 9 is independent of Section 11 A. The appellants were found to be engaged in the manufacture of forged articles of brass falling under item 26A (3)(ii) without a licence and without payment of duty and without following the procedure. The declarations which were given by the appellants are with reference to the exemption from licensing control and did not help the assessee because as on 1.8.1984 certain changes were introduced in the tariff which made forging classifiable under 2 -A (3)(ii). The situation thus changed and from this date they were liable to pay the duty on the prescribed rates but they did not do so. Their action or rather omission to take licence, pay duty and follow the provisions after this date, therefore, ipso facto attracted 11 -A and relevant provisions mentioned in the Show Cause Notices and Collector's order.
24. Since the goods in question are forged products and are marketed as such, their classification under 26A (3)(ii) was correct.
25. In the form in which they are marketed they could not be considered as burner parts and in fact are not used as such but holes are required to be drilled in them before they can be utilized as burner parts. Hence describing the goods as burner parts amounts to an incorrect description on the part of the appellants.
26. It was his submission that giving a correct description of the goods is the responsibility of the assessee and they have failed to do so. It was also his submission that ISI specification can only act as guidelines and have no binding force. It was also his submission that the goods in question were merely shapes and sections classifiable under 26A (3)(ii).
27. It was also his contention that the affidavit referred to by the learned Counsel need not be taken note of.
28. The affidavit of Prof. Hate merely reflects the opinion of the Prof, which was given at the instance of the appellants and need not be relied upon.
29. The affidavits of the customers are also of no evidential value as they had been merely given at the instance of the appellants and do not show application of mind in as much as exactly the same words have been used in different affidavits and it appears as if words have been put in their mouth. It was also his submission that it would be apparent from the facts of the case and the case law cited by him that the Collector's order was right both on facts and in law and is required to be upheld.
30. The learned Counsel reiterated and recapitulated his submissions briefly and emphasised that the goods as are narrated by him and the case law cited by him would go to show that the Collector's order was incorrect and in any eventuality the demands were time barred for most of the period and the order was required to be set aside.
31. We have gone through the submissions of both the sides.
32. We observe that while the learned Counsel has referred to the declarations filed by the appellants from time to time no copy of the declaration which was in force during the relevant period has been filed by either side. The learned Counsel has inter alia drawn attention to a letter of the Superintendent dated 7th April, 1983 regarding exemption from licensing payment of duty "TI-68 of CE Tariff financial year 1983-84." It is noticed that this letter merely calls for an application and a declaration to be made in case the appellants fulfils the conditions referred to therein.
33. This letter does refer to eligibility from exemption from notification No. 77/83 and from licensing under notification Nos. 111/78 and 2/81 but at the some time it also mentions that this was subject to fulfilment of conditions.
34. This letter by itself, therefore, could not be considered as the order granting exemption from licensing or payment of duty. It has not been made clear as to what application was made and what declaration was filed pursuant to this letter and what order, if any, was passed thereon. No documents had been filed in this connection except a subsequent communication from Assistant Collector (Prev) dated 31st December, 1986 showing the subject as Units exempted from Licensing Control and indicating a code number.
34A. The interesting point to note is that the letter from the Superintendent is of 7th April, 1983 and refers to the financial year 1983-84 only and the letter from the Assistant Collector (Prev.) is of 31 st December 1986 and does not mention the number and date of the order of Divisional Assistant Collector whereas the period in question is from 1.8.1984 to 28.2.1986. These documents are, therefore, not relevant. There is yet another letter of Assistant Collector (Prev.), dated 30.3.1984. Since the tariff changed on 1.8.1984 and the Superintendent's letters are prior to the change and the Assistant Collector (Prev.)'s letters are subsequent to the periods in question, therefore, they are not directly relevant. Again a statistical code number which is given for administrative convenience only could not be utilised as a substitute for an approved classification list.
35. Of the copies of the declaration filed, the undated declaration (showing receipt on 9.7.1985) is alone relevant but there is no knowing as to what orders, if any, were passed thereon. On the other hand issue of these Show Cause Notices, the first on 8 10.1985 could at best lead to the presumption that the declaration was not acceptable. In any eventuality nothing had been produced before us to show that this declaration was accepted, by the department.
36. It is, however, correct that this declaration describes the goods as "Stove Parts etc. out of duty paid brass scrap" and shows tariff item 68 and notification No, 77/85 dated 17.3.1985.
37. It is also correct that the first Show Cause Notice dated 8.10.1985 describes the goods in question as "Parts of stove made of brass" in the process of which forged shapes come into existence at intermediate stage which are classifiable under tariff item 26A (3)(ii).
38. In the second Show Cause Notice dated 20.11.1985 the description of the goods given is "Parts of stove burners made of brass" which being forged products are classifiable under tariff item 26A (3)(ii)
39. In the third Show Cause Notice dated 20.3.1986 the description is "Parts of stove burners made of brass" classifiable under Tariff Item 26A(3).
40. All this shows that the department itself was not clear in its mind as to what was the correct description of the goods and what was exactly the material which was classifiable under Tariff Item 26A (3)(ii). It is undoubtedly true that the responsibility for correct description initially and substantially lies on the assessee but in case the department was not satisfied with the same it was always open to the authorities to verify the facts for themselves and describe the goods correctly. In this context, when we see the order in original we find that under the heading 'brief facts of the case', the Collector describes the goods as forged articles of brass viz. Stove Burner parts falling under 26A (3)(ii).
41. The Collector goes on to repeat that "These burner parts manufactured by forging process were classifiable under T1 26A (3)(ii) and in his finding portion, however, the Collector poses the question for determination as follows:
Main point to be decided in this case is as to whether the product of the assessee in the form and condition in which they are sold by him are classifiable as 'stove burner parts under Tl-68 or as forged products' under item 26A (3)(ii).
The whole debate in between the brief facts and the findings centres mainly round the question as to whether these items had become recognizable parts of burners or had not reached that stage and the arguments advanced by either side in the proceedings before the Collector as well as the Tribunal related to technicalities, legalities and marketability. In this context, we feel that once the tariff item had changed a fresh application or declaration could have been called for in the same way as the Superintendent's letter of 83 calls them for the period 1983-84.
42. The fact as to whether the product was made by forging process and could be considered as a forged shape or not is an aspect which was open to verification. Therefore, if the report of the expert submitted by the appellants was not acceptable to the department, the authorities could have sent their own expert and obtained a report. They could have also summoned the expert (who filed the affidavit) for cross-examination and satisfy themselves but there is no indication thereof in the Order-in-Original.
43. Similarly, the appellants having submitted as to how their customers treated their product and used them if the evidence produced was not considered sufficient it was open to the department to have got a market enquiry conducted and faced the appellants with their own report or at least cross-examine the persons who gave the affidavit.
44. It was also open to the department to have obtained samples and got them examined by experts and to file the expert's report or the report of market enquiry before us but all this was not done and the learned Counsel's efforts to show some samples was also objected to on the ground that these were not the authorised samples and had not been collected in the presence of the departmental officers.
45. There is also no indication that the Collector himself examined the samples or had an expert report or a market enquiry before him.
46. All this shows that the Collector's order is not based on sufficient evidence in so far as it relates to the merits of the case regarding the product land classification thereof
47. As regards the question of allegation of suppression of facts is concerned there is nothing to indicate that there was any change of manufacturing process or in the form of product (semi-finished or otherwise) after the change in tariff. Therefore, even if the product was non-dutiable before the change and became dutiable after the change it would not basically make any difference in so far as description of goods and declaration of facts regarding the same was concerned. In other words, in the situation before and after 1.8.1984 the change was only a legal change; and no change of facts was involved. Therefore, the allegation of suppression of facts was rather far-fetched. It does not carry conviction also because the earlier declarations bad been accepted and; as evident from the letter of Assistant Collector (Prev.), the Divisional Assistant Collector had himself treated the Unit as an exempted Unit and the product as the exempted product. As already aforesaid there is no indication whether after the change any application was called for or a revised declaration was required to be filed in the same way as the Superintendent had done earlier.
48. Furthermore, it appears to be more a case of difference of opinion regarding classification and rate of duty inter se between the appellants and the department and merely because such a difference had arisen it could not be said that a suppression or misstatement of facts was involved. In any eventuality it has not been established beyond doubt that the appellants deliberately and intentionally sought to evade duty and the benefit of doubt goes to the appellants. In view of this position, the demands are obviously time barred to the extent they go beyond the normal period of limitation of six months.
49. Regarding the classification, in view of insufficiency of material before us a specific decision is not possible at this stage and the matter would ' more appropriately call for a remand for re-determination of classification on merits after proper expert examination and market enquiry.
50. In view of the above position, the order of the learned Collector (Appeals) is set aside and the matter is remanded to the Assistant Collector for re-adjudication in the light of the above observations and the law.