Customs, Excise and Gold Tribunal - Calcutta
Patton Ltd. vs Commissioner Of Central Excise, ... on 19 October, 2001
Equivalent citations: 2002(141)ELT97(TRI-KOLKATA)
JUDGMENT
Archana W
1. The appellants are engaged in the manufacture of Plastic Water Storage Tanks upto 300 litre capacity as also of a capacity of more than 300 litres. With effect from 1.3.94, the containers of a capacity exceeding 300 litres became dutiable. Accordingly, the appellants availed the benefit of MODVAT Credit in respect of the inputs used in the manufacture of such Plastic Tanks. However, no duty was paid by them on the Plastic Tanks of a capacity of less than 300 litres, inasmuch as the same were exempted in terms of Notification No. 15/94-CE dated 1.3.94. One of the conditions of the said Notification was that MODVAT Credit has not been availed in respect of the inputs used in the manufacture of the said goods. Accordingly, the appellant firm was reversing back the MODVAT Credit initially availed on the inputs used in the manufacture of the said exempted final product.
1.1. Subsequently, the appellants were issued a show cause notice on 2.6.99 alleging that during the period 10.5.94 to 18.4.96, they had manufactured Plastic Moulding Powder from plastic granules which have further been used in the manufacture of the exempted final products. No duty has been paid in respect of the said Plastic Moulding Powder consumed captively. Accordingly, the notice proposed confirmation of a demand of duty in respect of the said Moulding Powder.
1.2. The appellants' contention before the adjudicating authority was that the said Moulding Powder comes into existence at an intermediate stage and is not a marketable product inasmuch as the same is not ordinarily bought and sold in the market. It is only that as a process of pulverization, granules are converted into powder form before the same are taken for use in the manufacture of storage tank. As against the above contention raised by the appellant firm, the Commissioner has not produced any evidence on record to reflect upon the marketability of the product in question.
1.3. It has also been argued that in any case, they would be entitled to the benefit of duty paid on the granules as MODVAT Credit. The submitted that majority of the demand would be neutralised. On a query from the Bench, it was revealed that only an amount of about six lakh rupees, would remain to be paid.
1.4. The demand has also been challenged on the point of limitation. The show cause notice in question was issued on 2.6.99 for the period from 10.5.94 to 18.4.96. It is the appellants' contention that the entire process of pulverisation of granules into powder was under the knowledge of the Revenue inasmuch as the granules have to be necessarily first grounded to manufacture their final product.
1.5. The Commissioner while adjudicating the case did not accept the appellants' contention and relied upon Chapter Note 6 of Chapter 39, which is to the effect that change of one primary form (plastic granules) to another primary form (Plastic Moulding Powder) in respect of the goods falling under Heading Nos. 39.01 to 39.14, would amount to manufacture. He also rejected the appellants' contention as regards the marketability of the production and the limitation, and confirmed the duty of Rs. 28,86,429.00 (Rupees twenty-eight lakh eighty six thousand for hundred twenty-nine) along with the imposition of personal penalty of an equivalent amount.
2. Shri B.N. Chattopadhyay, learned Consultant for the appellants submitted that though they had raised the plea of non-manufacture before the adjudicating authority, but in view of the law laid down by the Tribunal as reported in 1998(102)ELT-270, he did not press the said argument. However, he submitted that the Moulding Powder coming into existence at the intermediate stage was non-marketable and a plea to that effect, was specifically raised before the Commissioner who has failed to produce any evidence about the marketability and has simply recorded that since all primary forms of plastic falling under Chapter 3901 to 3914 are marketable, no specific proof of marketability is necessary to determine dutiability of Plastic Moulding Powder (PMP).
2.1. Arguing strongly on the point of limitation, Shri Chattopadhyay drew our attention to the letter dated 12.4.94 written to the Assistant Commissioner of Central Excise with the budgetary change intimating that their starting input was granule. He also submitted that it is a well-known fact that granules have to be first converted into Plastic Moulding Powder for manufacture of the tanks and the Revenue cannot be heard saying that they are not aware of the emergence of the Plastic Moulding Powder at the intermediate stage of conversion of granules into Plastic Tanks. He, further, submitted that at the time of taking out licence, they had submitted a blue-print. As such, it cannot be said that the appellants had suppressed any fact from the Revenue with an intent to evade payment of duty. He also submitted that the duty was not being paid because the appellants were under a bona-fide belief that Plastic Moulding Powder coming into existence at the intermediate stage and being a non-marketable commodity, is not excisable. Referring to the various decisions, he prays for setting aside the penalty on the point of limitation.
2.2. Shri Chattopadhyay, learned Consultant also argues that in case of confirmation of the demand on the Plastic Moulding Powder, the appellants become entitled to the MODVAT Credit of Duty paid on the granules which, though initially taken by them, but was reversed subsequently, inasmuch as no duty was being paid on the final products i.e. Tanks. He also submits that this would neutralise the demand to a great extent.
3. We have also heard Shri A.K. Mondal, learned J.D.R. for the Revenue, who reiterates the reasoning of the authorities below.
4. After considering the submissions made from both sides, we find that the appeal can be decided on the point of limitation. The appellants have already conceded to forego their plea of non-manufacture.
4.1. The show cause notice was issued on 2.6.99 raising demand of duty for the period from 10.5.94 to 18.4.96. As such, notice in question is clearly beyond the normal period of limitation of six months as provided under Section 11A of the Central Excise Act, 1944. The Commissioner in his impugned Order as observed - "There being no ambiguity in the law regarding dutiability of the PMP, the plea of limitation cannot be entertained because all the relevant fact viz. emergence of the intermediate goods, dutiability of such intermediate goods, availing of exemption on resultant final product, were known to the assessee but were suppressed with the intent to evade payment of duty." However, the Commissioner nowhere discusses as to in which manner, the factual position as regards the emergence of the Plastic Moulding Powder at the intermediate stage, was suppressed by the appellants. It has been the ratio of various decisions of the Hon'ble Supreme Court that there has to be some positive act on the part of the assessee with an intention to evade payment of duty which would attract the longer period of limitation. In the instant case, we notice that the appellants have clearly intimated the Assistant Commissioner that their starting raw material is granule. It does not require a great deal of knowledge that granules have to be pulverized for further manufacture of the final product. The appellants have also shown the Pulverizing Machine Section in their blue-print submitting to the Revenue. As such, it cannot be said that there was an active role attributable to the appellants to suppress this material fact of emergence of the PMP at the intermediate stage so as to evade payment of duty. Accordingly, we are of view that the notice issued after the normal period of six months, is barred by limitation. Hence we set aside the impugned Order on the point of limitation and allow the appeal with consequential reliefs to the appellants.
(Pronounced)