Customs, Excise and Gold Tribunal - Delhi
M/S. Pee Jay Apparels (P) Ltd. vs Cce, Chandigarh on 27 April, 2001
Equivalent citations: 2001(135)ELT842(TRI-DEL)
ORDER
G.R. Sharma:
1. In the impugned order Ld. Commissioner (Appeals) held I have further observed that the alternate remedy available to the appellants by virtue of Notification No.67/95-CE dt.16.3.95 as amended, is subject to condition laid down in proviso which envisages that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products, which are exempt from the who of duty of excise leviable thereon or are chargeable to 'Nil' rate of duty. Since the appellants have manufactured woollen hosiery products chargeable to Nil rate of duty benefits of exemption notification referred above cannot be extended to them. In view of the above discussions and legal aspect on the issues involved I find that the impugned order does not suffer from any legal infirmity and merits to be sustained. Accordingly, I uphold the same".
Being aggrieved by this order, the appellants have filed the captioned appeal.
2. The facts of the case briefly stated are that the appellants are engaged in the manufacture of woollen hosiery goods. The appellant receives woollen yarn in plain (straight) reel hanks form. Yarn in the form of hanks cannot be used in the manufacture of hosiery goods, therefore, the yarn in hanks is converted into cones. The Department alleged that the process of conversion of any one or more product into another form amounts to manufacture in terms of Chapter Note 3 of Chapter 51 w.e.f. 26.5.95. It was alleged that since the yarn purchased by the appellant was in plain straight r eel hanks and was converted into cones yarn, therefore, this change in form of the yarn amounted to manufacture and the appellants were directed to pay duty on the yarn in the form of cones. The authorities below decided the issue against the assessee, Shri K.K. Anand, Ld. Counsel appears for the appellant whereas Shri S.Narayan Singh, Ld. DR appears for the Revenue. It was contended that though there is a decision of this Tribunal on this issue, however, that decision is debatable as there was no detailed examination of the facts in the case. He referred to the decision of this Tribunal in the case of Nahar Spinning Mills Ltd. vs CCE, Chandigarh reported in 2000(121) ELT.400. In this case the Tribunal in para 10 held "10. The very purpose of providing exemption to hand yarn was to help the handloom sector which provides employment to large number of people from the weaker section of society. Hank yarn is not usable a such by the powerlooms. By providing a definition for "Manufacture" in such a way that the conversion of hank yarn into cone yarn attracted the duty liability, it was ensured that the benefit meant for handlooms was not (SIC)unsurped by the powerlooms who were by and large not paying Cental Excise Duty at the weaving stage. It was only at the yarn stage that the yarn used by powerlooms was made dutiable and thus duty differential between handlooms and power looms was maintained. The intention of the Legislature was clear and unambiguous and any mis-interpretation in this regard will have serious repercussions to the handloom sector."
Ld. Counsel, therefore, submitted that the facts in the two cases are different and distinguishable.
3. Ld. DR for Revenue submits that he specific issue of conversion of yarn in reel hanks to the form of cone yarn amounts to manufacture. He submits that this decision of the Tribunal clearly covers the facts of the present case and is squarely applicable to the facts for the present case.
4. We have considered this submission of both the sides. We have also perused the facts in the present case as well as the facts in the case of Nahar Spining Mills Ltd. We not that the facts of the case are similar. In the circumstances, we hold that the ratio of this decision of this Tribunal in the case of Nahar Spinning mills Ltd. squarely covers the present case. We, therefore hold that on merits the appellants do not have a case. On merits revenue succeeds.
5. The second point agitated before us at length was on limitation. It was contended that the appellants had the bonafide belief that no duty was payable on change in the form of yarn form plain reel hanks into cone yarn Ld. Counsel for the appellants submits that the appellants had been manufacturing woollen hosiery products for a long life. The woollen hosiery products were exempted, they were neither submitting any declaration or any classification list. He submits that no intimation was required to be sent. Ld. Counsel also submitted that a number of units were issued Show Cause Notices in 1994 alleging that the units were required to pay duty as yarn fully manufactured at off the spindle stage. Ld. Counsel submits that the issue was examined by the Ld. Commissioner and by his order dt. 17.8.95 he dropped the proceedings against all the parties holding that the issue of accountal of the woollen yarn in the RG-I at off the spindle stage and consequent charging of duty came up for discussion in the IVth conference of the Collectors of Central Excise, it was held that the question of charging duty on yarn at single yarn stage would not be arised as the issue of single yarn or its conversion into hanks within the factory would not amount to removal in terms of Rule 9 of the Central Excise Rules. Ld. Counsel, therefore, submitted that the appellants had the bonafide belief that no duty was chargeable in the process of change in form of the yarn from hanks into cones. He submitted that the Apex Court in the case of CCE vs chemphar Drugs & Liniments reported in 1989(40)ELT.276 held that extended period of five years is applicable only when something positive other than mere inaction or failure on the part of manufacturer is proved. He submits that in their case since no declaration intimation was required to be filed nor was any classification list was required to be filed, there was no suppression, mis-statement, collusion or fraud with intention to evade payment of duty and therefore, the extended period was not applicable to the facts of the present case. Ld. Counsel submits that the period of demand ink the instant case in from 1995 to 1996 and a SCN was issued on 12.4.99. He submits that the entire demand is beyond six months and therefore barred by limitation.
Ld. Counsel also submits that in the case of Padmini Products vs CCE reported in 1989(43)ELT.195, the Hon'ble Supreme Court held that extended period of five years is inapplicable for remere failure or negligence of the manufacturer to take out licence or pay duty when there was scope for doubt that goods were not dutiable. The dutiability of goods was in doubt because of Trade Notice. Ld. Counsel, therefore, submitted that in their case the position was still similar in-as-much as the final product. i.e. hosiery goods in which the yarn was used.
6. Ld. Counsel also referred to the decision of the Apex Court in the case of CCE, Jaipur vs Banswara Syntex Ltd. reported in 1996(88)ELT.645 and submitted that in that case the Hon'ble Supreme Court has held that yarn at the spindle stage after it has been spun is a fully manufactured product and hence liable to Excise Duty at that stage. Subsequent doubling or multifolding of he single yarn does not bring into existence a new excisable product, hence no duty is leviable at that stage. Ld. Counsel submits that this decision clearly supports the contention of the appellant that the appellants had bonafide belief that change inform of the yarn from plain reel hanks to cones does not amount to manufacture and therefore, extended period cannot be invoked. Ld. Counsel also referred to the decision of the Apex Court in the case of Cosmic Dye Chemical vs CCE, Bombay reported in 1995(75)ELT.721 in which the Apex Court held that intent to evade duty must be proved for invoking provision to Section 11A(1) of Central Excise & Salt Act 44 for extended period of limitation. He submits that there was no intention to evade payment of duty, therefore the extended period was not invocable in their case. Ld. Counsel also referred to the latest decision of this Tribunal in the case of Raj Rayon Ltd. vs CCE reported in 2001(127)ELT.261 in which this Tribunal held that doubt existing prior to amendment of Note 3 to chapter 54 of Centra Excise Tariff Act, 85 in 1999 as to whether intermingling of yarns amount to manufacture that suppression or mis-statement by assessee was to established and therefore, extended period of limitation was snot available. He submitted that in their case, there was no suppression, mis-statement etc. to evade payment of duty and therefore, extended period of limitation cannot be invoked.
It was also submitted by the Ld. Counsel that this Tribunal in the case of Bihar Foundry & Engg. Works vs CCE, Patna reported in 1999(107)ELT.779 held that the appellant was under a bona fide belief is not taking out a Central Excise Licence in view of a long standing practice of classification of such goods as casting under Tariff Item 25 of erstwhile central Excise Tariff, extended period of limitation was not invocable. It was also submitted that the Tribunal in the case of Jaiswal Chemical Pvt. Ltd. reported in 1997(94)ELT.558 held that the appellants were under bona fide belief that bearing plates and brake block are classifiable as iron castings that in view of the long-standing practice of classification of castings did not amount to non-declaration or suppression and therefore, limitation under proviso to Section 11A of Central Excise Act was not invocable. He also submitted that in the case of CCE vs Rishabh Velveleen(P) Ltd. reported in 1999(114)ELT.839 this tribunal held that bona-fide belief held b the appellant led them to belief that flocks for captive consumption were not dutiable and therefore, the extended period beyond six months was not invocable.
7. Ld. Counsel submitted that in view of the above case law, the entire demand is time barred.
8. Ld DR submitted that the case law cited by the appellant is on subject other than the subject involved in the present case. He submitted that there is a catena of judgment of this Tribunal in which it has been held that if there was suppressing and non declaration in the case therefore , the extended period beyond six months was invocable.
9. Ld. DR submits that this Tribunal in the case of V.S.T. Tillers Tractors Ltd. reported in 1997(31)ELT.95 held that extended period of five years was applicable for failure to file classification list, that merely vague and uncertain letter will not disprove the suppressing of facts. Ld. DR submits that in the instant case, no declaration was filed by the appellants about the use of cone yarn in the manufacture of hosiery products after conversion from plain reel hanks.
Ld. DR. referred further to decision of this Tribunal in the case of Vishwakarma Steel Industries vs CCE reported in 1986(26) ELT.169 in which this Tribunal held that neither Central Excise licence was obtained nor classification list filed, extended time was applicable. He submits that the facts of the case squarely covers the facts of the present case. Ld. DR also referred to the decision of this Tribunal in the case of Tube Investment of India Ltd. vs CCE reported in 1989(42)ELT.484 in which this Tribunal held that the appellants are admittedly manufacturers of others goods and it is far fetched to suggest that they were not aware of the excitability of the laminations. They have described the goods as protective device to the rotor and stator component of the dynamo. If the appellant had any doubt in the matter, they should have ascertained the position from the concerned authorities. Having regard to these circumstances, the demand can be made for the extended period of limitation. Ld. DR also referred to the judgment of this Tribunal in the case of Central India Machinery reported in 1989(39)ELT.306 in which the Tribunal held that non-levy arising due to suppression of fact, extended period of five years is applicable and not a period of six months. Ld. Dr also refers to the judgment of this Tribunal in the case of Paxma Axle & Springs P.Ltd. vs CCE reported in 1990(47)ELT.639 in which it was held that mere letter addressing the Department not sufficient when no response was received from the Department, extended period for five years was applicable. It was also contended by the Ld. DR that the Apex Court in the case of Novopan India Ltd. vs CCE reported in 1994(73)ELT.769 held that i case of doubt or ambiguity,benefit of it must go to the state. He submits that if the appellant i.e. the assessee had any doubt about payment of duty of change in form the benefit of doubt should go to the state. Ld. DR also referred to the decision of this Tribunal in case of Radha Industries reported in 1991 (36)ECR.462 in which the Tribunal held that since the appellants had not taken a licence for manufacture of these excisable goods and had not therefore independently complied with the provisions of Central Excise Rules, the demand for duty for the longer period of limitation is justified. He submits that in the instant case, the appellants had not applied for Central Excise Licence and therefore, extended period was invokable.
10. In rejoinder Ld. Counsel for the appellant submitted that except one or two decisions, most of the decisions cited and relied upon by the respondent were old decisions and the position has since changed in view of the latest decision of the Hon'ble Supreme Court in the cases decided on the issue of limitation and therefore, the judgement cited having different facts and being old were applicable to the facts in view of the latest decision of the Tribunal.
11. On careful consideration of the submissions made and the case law cited by both the sided, we find that for purpose of invoking the extended period of time for demanding Central Excise Duty, fraud, collusion, wilful mis-statement or suppression of facts with intent to evade payment of duty are required to proved. Examining the present case, we find that the appellant was manufacturing woollen hosiery products,, over a period of time woollen hosiery products were exempt. The appellant was not required either to file intimation under Rule 174 of Central Excise Rules or a classification list under Rule 173(b) of Central Excise Rules. Woollen hosiery products have upto the year 2000 remained exempted. It was thus a long standing practice which resulted in the bonafide belief that no duty was payable on the intermediate product yarn in cones. There cannot be any suppression or mis-statement as no classification list or intimation was required to be filed by the appellant as the product manufactured by them i.e. woollen hosiery products were exempt. Fraud and collusion have not been proved by the respondent. There is no evidence placed on record to show that duty was not paid with the intimation to evade payment of duty. Having regard to the decisions of the Suprement Court on the issue of bona-fide belief long standing process and having regard to the fact that none of ingredients required for extending the time beyond six months is present in the case. We hold that the demand is time barred.
12. Another point that was raised by the appellant was that penalty was not imposable under Section 11AC. It was submitted by him that the period of demand is much before the introduction of Section 11AC and therefore, no penalty under Section 11A was imposable. Ld. DR fairly concedes to this position taken by the appellant.
13. On careful consideration of the fact that the demand is for the period to the introduction of Section 11AC, we hold that penalty is not imposable under Section 11AC. This view is supported by the decision of the Apex Court in the case of Commissioner vs Elgi Equipment reported in 2001 (128) ELT.52. The questions of paying interest does not arise.
14. The appeal is disposed of the above terms. Consequential relief, if any, shall be admissible to the appellant in accordance with law.