Customs, Excise and Gold Tribunal - Delhi
J.K. Synthetics Ltd. vs Collector Of Central Excise on 18 June, 1990
Equivalent citations: 1991ECR501(TRI.-DELHI), 1990(50)ELT653(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. This appeal is directed against the Order-in-Original No. 22/89 dated 28-12-1989 passed by the Collector of Central Excise, Jaipur.
2. The appellants M/s. J.K. Synthetics Ltd. are engaged in the manufacture of polyester fibre and tops. In the manufacture of fibre, they were using DMT and Mono Ethylene Glycol as principal raw materials. It appears that in the manufacture of polyester fibre, polyester waste is generated at various stages of manufacture. The appellants were mixing this waste alongwith waste purchased from the open market and subjecting the waste to manufacturing process, which they called 'recycling process', whereby they recovered DMT in a plant, which they called 'Waste recovery Plant'. The case of the Department is that such Ethylene glycol recovered as a bye-product during the recovery of DMT from polyester waste in the waste recovery plant, was excisable under Heading No. 2905.90 of the Tariff Schedule and was liable to excise duty on clearance of Ethylene glycol for the period 1-3-1986 to 3-5-1987. Accordingly, Show Cause Notice dated 20-9-1988 was issued for the recovery of duty amounting to Rs. 9,65,567.25 for the said period and penalties were proposed for contravention of the various provisions of Central Excises and Salt Act and Rules. This Show Cause Notice was duly answered by the appellants contending that demand raised by the Department was barred by time as the extended period of limitation under Section 11A was inapplicable to the facts of the case among other points. The Collector of Central Excise and Customs, Jaipur, who adjudicated the proceedings, negatived the contention of the appellants and confirmed the demand on the ground that appellants have contravened various rules relating to filing of classification and other statutory requirements. Penalty of Rs. 2,00,000/- under Rule 173-Q and Rs. 2,000/- under Rule 226 of the Central Excise Rules, 1944 were also imposed. Aggrieved by this order the appellants have come before us by way of this appeal.
3. We have heard Shri A.N. Haksar with Shri Sanjay Grover, learned Advocates for the appellants and Shri S. Chakraborty, learned J.D.R. for the respondent.
4. Shri A.N. Haksar, learned counsel for the appellants, mainly raised two issues in this case, viz., (i) demand was barred by limitation and (ii) value adopted by the Collector was not in accordance with the provisions of the Valuation Rules, 1975. On point of time-barring aspect he urged that extended period of limitation under Section 11-A was inapplicable to the facts and circumstances of the case as the Department was fully aware of the recovery of ethylene glycol in the appellants' waste recovery plant. In this connection he drew our attention to various letters addressed by the appellant company, an earlier adjudication Order dated 22-5-1985 passed by the Assistant Collector in which it was clearly mentioned that appellant was recovering ethylene glycol in its waste recovery plant and R.T.5 form filed by the appellant showed that the appellant was utilising ethylene glycol obtained by it in its waste recovery plant. He said that the appellants' Unit was under the physical control of the Department and Department was kept informed about it at all the stages of the fact that it was utilising ethylene glycol obtained by it in its waste recovery plant. He contended that it is a clear case where the Department slept over the matter and one fine morning it awoke by issuing Show Cause Notice but by that time it was clearly barred by time. He stated that though this point was specifically taken by the appellants as main defence, the Collector erred in not considering this point but confirmed the demand for non-filing of a classification list which is not relevant to the issue. He contended that non-filing of a classification list cannot be considered as a positive action or deliberate withholding of information to invoke larger period under Section 11A when the Department was fully aware of the factual position. He strongly relied upon the decision of the Supreme Court in the case of Collector of Central Excise v. Chemphar Drugs & Liniments [1989 (40) ELT 276 (S.C.)], in support of his contention. On point of valuation, he submitted that Collector has determined the value of ethylene glycol by taking purchase value of virgin mono ethylene glycol from IPCL. He contended that the virgin mono ethylene glycol purchased by the appellants from IPCL cannot be compared with the impure ethylene glycol obtained by the appellants in its waste recovery plant which is contrary to Rule 6-B(l) of the Valuation Rules, 1975.
5. Shri S. Chakraborty, learned JDR for the Revenue, while countering, vehemently argued that demand raised by the Department was not barred by time. He submitted that entire history and background of the case are to be taken into consideration while computing the period of limitation. He said that product in question which was used for captive consumption was exempted from levy under Notification No. 118/75 which was in force upto 28-2-1986. This exemption was rescinded and it was chargeable to duty from 1-3-1986 by Notification No. 138/86. Subsequently, this exemption was restored by another Notification No. 134/87 from 4-5-1987. Accordingly the product was chargeable to duty for the relevant period i.e., 1-3-1986 to 3-5-1987. He said that letters addressed by the appellant either in claiming set off of duty during the period when it was exempted or an earlier adjudication order passed by the Assistant Collector in which it was mentioned about the recovery of ethylene glycol was prior to the period it was dutiable. These documents do not have any bearing for subsequent demand raised in view of cancellation of exemption. He stated that when exemption was withdrawn and in view of changed circumstances it was incumbent on the part of the assessee to file classification list. He contended that it was a clear case of infringement of Central Excise Rules as liability was not discharged by the appellants with an intention to evade duty and extended period of five years under Section 11-A was justified. To a query from the Bench whether Department was aware of the information about the recovery of the product in the appellants' unit or not, he replied that it is not an issue for invoking larger period under Section 11A but he stated that non-filing of classification list is in contravention of excise rules and larger period under Section 11A could be invoked for contravention of any provision with an intention to evade duty. He submitted that non-filing of a declaration or classification list itself amounts to suppression of facts and it should be construed as wilful misstatement of facts for invoking larger period under Section 11A and in support of his contention he cited the following decisions :-
1. V.S.T. Tillers Traders Ltd., Bangalore v. Collector of Central Excise, Bangalore - 1987 (31) ELT 95.
2. Collector of Central Excise & Customs, Cochin v. Fertilisers & Chemicals Travancore Ltd., Udyogmandal -1987 (31) ELT 292.
3. British India Corporation Ltd., Dhariwal v. Collector of Central Excise, Chandigarh -1986 (25) ELT 727.
Further he drew our attention to the decision of the Supreme Court in the case of Jaishree Engineering Co., (P) Ltd. v. Collector of Central Excise, -1989 (40) ELT 214 (S.C.), wherein it was held that penalty was imposable if there was deliberate suppression or wrong statement. He submitted that in view of these decisions the ratio of the decision in the case of Chemphar Drugs is not applicable to the facts of the present case. As regards valuation he submitted that Collector was justified in determining the value of the goods by taking the purchase value of the goods obtained from IPCL as both of them were used for the same purpose and in the same manner.
6. In reply, Shri A.N. Haksar submitted that Departmental Representative referred only to letters addressed to the Department prior to the period of levy but conveniently ignored the letters written during the relevant period. Department had a clear knowledge about the factual position which was not denied by the Departmental Representative. There was no intention to evade duty as can be seen from the facts and circumstances and there was no positive inaction or deliberate withholding of information for invoking larger period as held by the Supreme Court in the case of Chemphar Drugs (Supra). He submitted that penalty cannot be imposed until and unless there is a deliberate and contumacious disregard of law and this is not a case either to invoke larger period or to levy penalty and decision in the case of Jaishree Engineering Co. (P) Ltd., is distinguishable. Further, he said that set off of duty was permissible under Notification No. 225/86 if it was paid for the relevant period and that itself is sufficient proof to show that there was no intention in evading tax.
7. We gave our anxious consideration to the arguments advanced on both the sides and perused the records. It is not the case of the Department that it was not aware of the fact that Ethylene Glycol was generated during the recovery of DMT in the appellants' plant but it has proceeded to raise demand by invoking larger period under Section 11A for not filing classification list, price list etc. It is evident from the records that the factual position was known to the Department apart from letter correspondence and an earlier adjudication order passed by the Assistant Collector, and the appellants have filed statutory R.T.-5 returns in which it was clearly indicated that the product was generated during their production process. Under these circumstances it cannot be said that there was a deliberate suppression of facts by the appellants. We find that the ratio of the Supreme Court's decision in the case of Collector of Central Excise v. Chemphar Drugs & Liniments -1989 (40) ELT 276 (SC) would be squarely applicable to the facts of the case, wherein the Hon'ble Supreme Court held that;
"In order to make the demand for duty sustainable beyond a period of six months and upto a period of 5 years in view of the proviso to sub-section 11A of the Act it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months."
Following the ratio of the decision of the Apex Court, we hold that the demand was clearly barred by time and penalties are not sustainable. In the view we have taken we do not feel it necessary to consider other points raised by both sides.
8. In the result, we set aside the impugned order and accordingly the appeal is allowed.
9. The operative portion of this order was already pronounced in the open court on 4-5-1990 at the conclusion of hearing.