Customs, Excise and Gold Tribunal - Delhi
Goa Bottling Co. Pvt. Ltd. vs Collector Of Central Excise on 11 January, 1993
Equivalent citations: 1993ECR552(TRI.-DELHI), 1993(67)ELT721(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The issue for determination in the above appeal is the eligibility of aerated waters manufactured by the appellants to the benefit of exemption in terms of Notification 175/86 dated 1-3-1986.
2. The appellants are the manufacturers of aerated waters namely soda and flavour sweetened drinks falling under Heading Nos. 22.01 and 22.02 respectively of the Central Excise Tariff Act, 1985. The Government of India issued Notification No. 175/86-CE on 1-3-1986 (hereinafter referred to as "the said notification") giving certain exemptions to small scale industry based on value of their clearances and the aerated waters were covered under the said exemption. The appellant company was originally registered as a small scale unit with the Director of Industries and Mines, Government of Goa, Daman & Diu vide Registration No. DI/Goa/491/70 dated 19-1-1970. As per this registration, the value of plant and machinery as per the norms fixed by the Directorate of Industries and Mines was not to exceed Rs. 7.5 lakhs. Subsequently, this limit of Rs. 7.5 lakhs was increased to Rs. 10 lakhs in 1975 and to Rs. 20 lakhs in 1980. When the value limit of plant and machinery of the appellant company exceeded the prescribed value limit of Rs. 20 lakhs, the appellant company applied to DGTD for registration as a medium scale unit. This registration was given to the appellant company on 19-1-1984. Some time in March 1985, the value limit for plant and machinery for SSI units was raised from Rs. 20 lakhs to Rs. 35 lakhs. Although the plant and machinery of the appellant company fell within the value limit of Rs. 35 lakhs in March 1985, the appellant company did not feel it necessary to apply for cancellation as medium scale unit and re-registration to the Directorate of Industries and Mines as SSI Unit, as no additional benefit accrued to the company on this account. Consequent on issue of Notification 175/86-C.E., dated 1-3-1986 a condition was laid down in the said notification as per para 4 thereof that the exemption contained in this notification shall be applicable only to a factory which is an undertaking registered with the Director of Industries. Therefore, in order to avail the benefit of this notification, it became necessary for the appellant company to get their registration with DGTD cancelled and to apply for re-registration with the Director of Industries and Mines, Goa. Accordingly, the appellant company requested the DGTD to cancel their registration as medium scale unit, as per their letter No. GB/53/1261 dated 10-3-1986. Simultaneously, a copy of this letter was endorsed to the Directorate of Industries and Mines, Goa stating that in view of this cancellation, the appellants' original registration vide No. DI/Goa/491/70 dated 19-1-1970 stands valid. When the appellant company approached the Directorate of Industries and Mines, Goa for re-registration as small scale industry unit, they were informed that their original registration dated 19-1-1970 had not been cancelled and still stands valid. Subsequently, the appellants received a communication No. Food/2 (221)/83/1722 dated 12-9-1986 cancelling the registration as medium scale unit. Thereafter, after verification, the Directorate of Industries and Mines, Goa issued Registration Certificate No. D1/REG/491 /PMT/SSI dated 5-11-1986, effective from 19-1-1970.
3. Soon after the 1985-86 budget, the appellants filed a classification list No. C-40/85-86 effective from 1-3-1986 in view of the changes in the tariff classification and changes in the 1986 budget, under the provisions of Rule 173B of the Central Excise Rules 1944. In this classification list the appellant company did not claim the benefit of exemption Notification No. 175/86-C.E., dated 1-3-1986 as the appellants had already crossed a turnover of Rs. 75 lakhs during 1985-86 upto 28th February 1986. However, since the appellants were entitled to exemption under the said notification with effect from 1-4-1986 as small scale industry unit, they, therefore, filed a revised classification list No. CL-16/86-87 effective from 1-4-1986 as per their letter No. GB/54/1333 dated 31-3-1986. In view of the Provisional Collection of Taxes Act, 1931 (16 of 1931), the appellant company started availing of the concession with effect from 1-4-1986.
4. On 28-2-1987, the appellants received a show cause notice dated 27-2-1987 wherein it was alleged that:
(i) the value of plant and machinery of the appellant company exceeded Rs. 35 lakhs. Therefore, they cannot be classified as a SSI Unit.
(ii) their value of clearances during the preceding financial year 1985-86 exceeded Rs. 1.5 crores. Therefore, they are not entitled to exemption as a SSI Unit, under the provision of Notification No. 175/86-C.E., dated 1-3-1986.
The appellant company, therefore, was required to show cause why the classification list filed by them on 31-3-1986 and 24-4-1986 should not be approved by disallowing the exemption under the said notification and duty amounting to Rs. 15,08,442.06 should not be recovered from them under Rule 9B(5) of the Central Excise Rules 1944, since they have provisionally availed the said exemption pending approval of the said classification. It was further alleged in the aforesaid show cause notice that since the classification list in question was not approved the assessee could not have cleared the goods without resorting to the procedure prescribed under Rule 9B of the Central Excise Rules, 1944 read with Rule 173B(2A) of the said Rules, and have, therefore, contravened the provisions ofthe said Rule 173B during the period 1-4-1986 to 25-9-1986. It was further alleged that the appellant company by clearing the products manufactured by them without payment of appropriate amount of central excise duty and by failing to declare correct aggregate value under Section 4 of the Central Excises and Salt Act have violated the provisions of the said Section 4 and Rules 9(1) read with Rule 49, 173B, 173F, of the Central Excise Rules, 1944 and have rendered themselves liable to penal action under the provisions of the Rules 9(2) and 173Q of the Central Excise Rules, 1944. They were, therefore, asked to show cause why penal action should not be taken against them under the said Rules.
5. The appellants submitted detailed replies to the show cause notices on 29-7-1987 and 1-10-1987 denying all the allegations and claiming the benefit of Notification 175/86. Upon adjudication, the Collector of Central Excise, Goa passed the impugned order holding that:
(a) the value of plant and machinery of the appellant company at the relevant time was Rs. 36,80,119.79, hence, they were not eligible to be classified as a Small Scale Industry.
(b) the value of clearances of the appellant company during the preceding financial year exceeded Rs. 1.5 crores, and hence they were not eligible for exemption under Notification No. 175/86-C.E., dated 1-3-1986.
(c) the appellant company has wrongly declared that they are registered as SSI Unit and also their value of clearances for the year 1985-86 is less than Rs. 1.5 crores. They have availed of exemption under the said notification without approval of the classification list - thereby contravening the provisions of Section 4 of the Central Excises and Salt Act, 1944 and Rule 9(1) read with Rules 49,173B, 173F of the Central Excise Rules, 1944, thus attracting the penal provisions under Rule 9(2) and 173Q ibid.
In view of the aforesaid the learned Collector confirmed the demand of Rs. 15,08,442.06 under Section 11A of the CESA, 1944. In addition, the learned Collector imposed a penalty of Rs. 3 lakhs under the provisions of Rules 9(2) and 173Q of the said Rules. Hence, this appeal.
6. We have heard Shri S. Ganesh, learned Counsel and Shri J.N. Nair, learned DR and carefully considered their submissions.
7. Finding Regarding Registration with the Director of Industries The appellant company's unit was first registered as a Small Scale Industries on 19-1-1970 at which point of time, the limit of the value of plant and machinery for registration as Small Scale Industries was Rs. 7.5 lakhs. Subsequently, the limit was extended to Rs. 10 lakhs in 1975 and Rs. 20 lakhs in 1980. The appellant company applied to DGTD for registration as a medium scale unit as the value of its plant and machinery exceeded the figure of Rs. 20 lakhs and the registration was granted on 19-1-1984. The appellant company again became entitled to registration as a small scale unit in March 1985 when the value limit was raised to Rs. 35 lakhs; however, the appellant did not immediately re-register as a SSI as it was not felt necessary. Thereafter with the issue of Notification 175/86, which stipulated as a condition for grant of exemption, registration of the unit with the Director of Industries, the appellant applied to DGTD on 10-3-1986 for cancellation of its registration as a medium scale unit and also to the Director of Industries for registration as a small scale unit (page 29 of the paper book) on 12-9-1986. The DGTD cancelled the registration as a medium scale unit (page 33 of the paper book) on 5-11-1986. The office of the Director of Industries registered the appellant company as a small scale unit and reactivated the appellant's earlier registration dated 19-1-1970 as a Small Scale Industries. Reproduced below is the Registration Certificate :
No. DI/REG/491/PMT/SSI Government of Goa, Daman and Diu, Directorate of Industries and Mines, Udyog Bhavan, Panaji-Goa Dated : 5-11-1986 REGISTRATION CERTIFICATE This is to certify that M/s. Goa Bottling Co. Pvt. Ltd. situated at Fatorda Margao is registered with this office as a Small Scale Industry, under No. DI/Goa/491/70 dated 19-1-1970 for the manufacture of soft drinks.
Sd/-
(S.R. Borkar) Project Manager (R) To M/s. Goa Bottling Co. Pvt. Ltd.
Fatorda Margao, Goa
8. During the course of the hearing of the appeal, learned Counsel undertook to produce, on a query from the Bench, the following :
(a) entire correspondence exchanged between the appellants and the Director of Industries and
(b) Rules/regulations governing issue of registration certificate by the Directorate of Industries and in particular when a Unit goes beyond the limits of SSI registration and comes back within the limit, (vide notesheet order dated 5-3-19921).
9. The relevant correspondence is reproduced below :
(a) Letter No. GB/53/1343 dated 29-3-1986 from Goa Bottling Co. Pvt. Ltd. to Development Officer, Govt. of India, DGTD (Food & Fermentation Division), Udyog Bhavan, New Delhi.
Sub : Cancellation of Medium Scale Unit Registration Ref: Our letter No. GB/53/1261 of 10-3-1986 We would like to draw your kind attention to our above-referred letter.
As per the Directorate of Industries, Udyog Bhawan, Panaji, Goa, they are awaiting your intimation to them about the cancellation of the Medium Scale Unit Registration so that we may be placed in Small Scale Unit in their records.
We, therefore, request you to kindly do the needful at the earliest in order that we may get some benefits from the Goa Directorate in April 86.
(b) Letter No. 2/49/MSI/DIM/4343 dated 17-4-1986 from Government of Goa, Daman and Diu, Dte. of Industries and Mines, Udyog Bhavan, Panaji, Goa to the Development Officer, DGTD (Food and Fermentation Division), New Delhi.
Sub : Cancellation of DGTD Registration No. DGTD/HR/B/S-35/R-12539/C-26(I)ND/89 dated 19-1-1984 granted to M/s. Goa Bottling Co. Pvt. Ltd. Arelim, Salcete, Goa option regarding.
I am to refer to the letter No. GB/53/1261 dated 10-3-1986 from M/s. Goa Bottling Co. Pvt. Ltd., Arlem, Salcete, Goa addressed to you and copy sent to this office regarding cancellation of DGTD Registration No. DGTD/HB/B/S-35/R-12539/C-26(i)ND/89 dated 19-1-1984.
Kindly intimate to this office action taken by you on the matter so that the concerned unit may not get any dual benefit of incentives and concessions.
(c) Letter No. GB/53/1571 dated 12-5-1986 from Goa Bottling Co. Pvt. Ltd., Arlem PO Raja, Salcete, Goa to the Development Officer, Govt. of India, Dte. General of Technical Development, (Food & Fermentation Div.), Udyog Bhavan, New Delhi.
Ref : Ours No. GB/53/1261 dated 10-3-1986, Letter No. 2/49/8 MSI/DIM/4343 dated 17-4-1986 from Dir. of Industries, Goa The Dte. of Industries and Mines, Panjim, Goa have informed us that vide our above letter they have written to you by their above-referred letter asking for your confirmation for reverting our industry back to the small scale unit.
Your early confirmation to them would be greatly helpful to us and we would be highly obliged if you could do that at the earliest.
(d) Letter No. Food/2(221)/83 dated 10th June 86 from DGTD (Food & Fermentation Dte.), Udyog Bhavan, New Delhi-11 to M/s. Goa Bottling Co. Pvt. Ltd., Goa Sub : Cancellation of DGTD Registration Certificate No. DGTD/ HB/B/S-35/R-12539/C-26(i)ND/89 dated 19th January, 84 In order to enable this office to take necessary action regarding cancellation of above-quoted DGTD registration certificate, you may kindly forward immediately the registration certificate issued by this office.
(e) Ref. No. GB/53/1682 dated 13th June 1986 from Goa Bottling Co. Pvt. Ltd., Arlem, PO Raja, Salcete, Goa to the Asstt. Development Officer, DGTD, Udyog Bhavan, New Delhi -110011.
Sub : Cancellation of DGTD Registration Certificate No. DGTD/HR/S- 35/R-12539/C-26(l)84 of 19-1-1984 Ref: Your letter No. Food/2(221)/83/903 dated 10-1-1986 With reference to the above, we are herewith enclosing our DGTD registration certificate for cancellation.
(f) Letter No. Food/2(221)/83-1722 dated 12th September 1986 from Govt. of India, DGTD, Udyog Bhavan, New Delhi -110011 to M/s. Goa Bottling Co. Pvt. Ltd., Goa Sub : Cancellation of DGTD Regn. No. DGTD/HR/B/S/35/R-12539/C-26(i)ND/84 dated 19-1-1984 issued for the manufacture of 24 million bottles per annum of Soft Drinks at Arlem, Goa Ref : Your letter No. GB/8/1682 dated 13th June 1986 In view of your statement that the existing investment in plant and machinery in respect of your soft drinks project covered by above quoted DGTD Registration No. is only Rs. 25.13 lakhs, the registration letter issued to you vide this office letter No. Food/2(221)/83/680 dated 19th January, 1984 is hereby cancelled.
You may approach Director of Industries for registration as a small scale unit.
(g) Letter No. AD/13/5074 dated 16th April 1992 from Goa Bottling Co. Pvt. Ltd. to the Director of Industries and Mines, Udyog Bhavan, Panaji, Goa Ref : Our letter No. GB/53/1261 dated 10-3-1986 We would like to draw your kind attention to our above-referred letter addressed to DGTD, a copy of which was endorsed to you. In response to the above, you were kind enough to write to DGTD by your letter No. 2/49/BMSI/DIM/4343 dated 17-4-1986 reminding them of our request and asking them for confirmation of the cancellation of the DGTD registration. The DGTD by their letter of 10-6-1986 asked us to send to them the original registration certificate and they confirmed to us by their letter No. Food/2(221)/83/1722 dated 12-9-1986 that the concerned certificate is cancelled.
You had then issued us a certificate dated 5-11-1986 that we are registered with your office as a SSI under No. Dl/Goa/491/70 dated 19-1-1970. As we were holding Medium Scale Unit registration of DGTD till 13-3-1986, we would be highly obliged if you could regularise for the period from 14-3-1986 (when we asked for cancellation of DGTD registration) till 4-11-1986 and issue us a certificate that we were under SSI during this period also. This certificate is required to regularise our records for benefit of Central Excise scheme. The relative correspondence is attached herewith.
Your early action in the matter would be highly appreciated.
(h) No. DI/Goa/491/70/6030 dated 18-5-1992 from Government of Goa, Dte. of Industries and Mines, Udyog Bhavan, Panaji, Goa to M/s. Goa Bottling Co. Pvt. Ltd., Goa Subject: Regularisation of gap period from 14-3-1986 to 5-11-1986 With reference to your letter No. AD/13/5074 dated 16-4-1992 on the subject cited above, it is informed that pursuant to your application dated 10-3-1986, received in this office on 14-3-1986, to Govt. of India for cancellation of your registration with DGTD and consequent upon re-allocation of SSI registration status to your unit under this office letter No. DI/Reg/491/PMT/SSI dated 5-11-1986 on cancellation of DGTD registration by Govt. of India vide letter No. Food/2(221)/83/1722 dated 12-9-1986, the gap period from 14-3-1986 to 5-11-1986 may be treated as a period validly covered under SSI registration No. DI/Goa/491/70 dated 19-1-1970 allotted to your unit which will not entitle you to any benefit of sales-tax exemption.
(i) Letter No. AD/13/5332 dated 15th June 1992 from Goa Bottling Co. P. Ltd. to the Director of Industries & Mines, Govt. of Goa, Udyog Bhavan, Goa Sub : Request for certain information/clarification regarding our registration as a Small Scale Industry We have to request you to give us the following information/clarifications regarding our registration as a small scale industry :
(a) What are the rules/regulations/circulars governing the registration de-registration of a small scale industry?
(b) What happens in general to the registration of a small scale industry when it becomes a medium scale industry or large scale industry and then after some time becomes a small scale industry again?
(c) Was our registration as a small scale industry under No. DI/GOA/491/70 dated 19-1-1970 cancelled or nullified in January 1984 when we became a medium scale industry?
(d) What was the application on the basis of which our registration as a small scale industry was reactivated on 5-11-1986?
(e) What was the date with effect from which our SSI registration became operative again?
(f) Is there any covering letter or order regarding the certificate dated 5-11-1986 issued by your office?
We would be grateful if you could give us an early reply to the above queries, as we require the same for our Central Excise appeal which is pending before the Special Bench of the Appellate Tribunal at Delhi.
Thanking you.
(j) Letter No. DI/Reg/7053 dated 26-6-1992 from Government of Goa, Dte. of Industries and Mines, Udyog Bhavan, Goa to M/s. Goa Bottling Co. Ltd., Goa Sub : Request for certain information/clarification regarding our registration as a Small Scale Industries.
Ref: Your letter No. AD/13/5332 dated 15-6-1992 Please refer to your letter cited above. The parawise clarification on the points raised by you is as follows :
(a) The Govt. of India have laid down procedures/guidelines for the registration as well as deregistration of SSI units. In this connection you may please refer to the "Manual on Procedures of Small Scale Industries" issued by D.C., SSI, New Delhi.
(b) When a SSI unit switches over to medium/large scale sector on account of increase in investment in plant and machinery and get itself registered with DGTD or other appropriate authorities of Govt. of India, it has the option to apply back for SSI status. This option has to be exercised within a period of 6 months from the date of issue of notification by Govt. of India, raising the ceiling limit of investment in plant and machinery. The unit continues to enjoy the benefits during the option period through the DGTD.
(c) Since the unit was granted DGTD registration in consultation with this Deptt. the SSI registration automatically becomes nullified without requiring to be cancelled and which could be reactivated in future if so needed.
(d) The same was done on the basis of your application dated 10-3-1986 consequent upon cancellation of DGTD registration vide their letter dated 12-9-1986.
(e) In this connection please refer to your letter No. DI/Goa/491/70/6030 dated 18-5-1992.
(f) There was no covering letter to our certificate dated 5-11-1986.
10. From the above, it is clear that grant of registration as SSI relates to the date of the appellants' application for registration i.e. 10-3-1986. We agree with the contention of the appellants that the appellant company was duly registered in the eye of law as a small scale industry w.e.f. 10-3-1986 and that the registration of the appellant company as a small scale unit in January 70 was never cancelled but merely kept in a state of suspended animation during the period when the appellant company was a medium scale unit. It has been held by the Tribunal in the case of Sahuwala Cylinders Ltd. v. Collector of Central Excise, Guntur reported in 1991 (54) E.L.T. 135 (Tri.) that the benefit of Notification 175/86 cannot be denied when the authority issuing the SSI certificate has declared that the unit obtained its SSI status from a particular date, even if the certificate was issued at a later date. We, therefore, hold that the appellant company has fulfilled the condition set out in Notification 175/86 of registration with the Director of Industries.
11. Finding re : Value of Plant and Machinery Notification 175/86 does not lay down any conditions with regard to the limit of capital investment of plant and machinery and, therefore, the excise authorities cannot deny exemption on the ground that the capital investment exceeded Rs. 35 lakhs. However, even on an analysis of the value of plant and machinery, we find that the value falls below Rs. 35 lakhs :
Total value of the plant and machinery as per excise Rs. 38,68,491
department (see order-in-original at page 76)
Less : Installation and other expenses allowed as Rs. 1,86,659
deduction by the Collector himself _______________
Rs. 36,81,832
Less : value of the Carbon Dioxide Plant which was Rs. 1,88,291
scrapped in June 1984, with an intimation to
the excise department (see page 117) _______________
Rs. 34,93,541
which is less than Rs. 35 lakhs.
The value of Carbon Dioxide Plant has to be excluded
because it was scrapped and not in use during the
relevant period of dispute i.e. 1-4-1986 to 25-9-1986.
The annual report of the Development Commissioner also provides that the value of gas producer plant should be excluded. Once the value of the storage tank is excluded, the value of plant and machinery is found to be below Rs. 35 lakhs. We, therefore, set aside the finding of the Collector that the value of plant and machinery of the appellant company during the relevant period exceeded Rs. 35 lakhs so as to disqualify the appellant from being classified as a SSI.
12. Finding Re : Value of Clearance The gross value of the clearance is Rs. 2,11,43,744/-, which includes a total amount of freight and transport expenses of Rs. 64,36,185/- which the appellant has claimed as a deduction from the gross value of clearance. Out of these freight and transportation expense of Rs. 64.36 lakhs, the Collector has disallowed the amount of Rs. 15.70 lakhs and only the balance amount of Rs. 48,64,491/- has been considered by the Collector. Out of these transportation expenses of Rs. 48.64 lakhs which were considered by the Collector, only 50% thereof, that is Rs. 24.32 lakhs have been allowed as a deduction from the gross value of the clearance, on the grounds that the remaining half of the transportation expenses have been incurred on transport payable from the customer's places to the factory which is not allowable as a deduction (see order-in-original at page 75 of the appeal paper book). Disallowance of 50% of Rs. 48,64,491/- is directly contrary to the following decisions :
(i) Indian Oxygen v. CCE -1988 (36) E.L.T. 723, para 5
(ii) Indus Ganges (Bihar) v. CCE -1987 (29) E.L.T. page 749 Therefore, the appellant company is entitled to the deduction of full amount of freight and transportation amount of Rs. 48.64 lakhs, and not merely 50% thereof. Further the Collector in paragraph 12 of his impugned order (page 51, read with page 75), disallowed the appellant company's claim for bottle breakage of Rs. 28.59 lakhs. This disallowance of bottle breakages is directly contrary to the decision of CEGAT in the case of Real Drinks reported in 1991 (54) E.L.T. 436. Bottle breakage constitutes an integral part of the costs of maintenance of durable and returnable containers and, therefore, the same is an allowable deduction. The position which then emerges is as under :
Gross value of clearances Rs. 2,11,43,744
Less : Amount of freight and transportation ex- Rs. 48,64,49]
penses _________________
Rs. 1,62,79,253
Less : Bottles breakages Rs. 28,59,000
_________________
Rs. 1,34,20,253
The value of clearance would, therefore, be clearly below Rs. 1.50 crores. We, therefore, do not consider it necessary to go into the disallowance of freight and transportation of Rs. 15.70 lakhs.
13. In the light of the above discussion we hold that:
(a) the value of plant and machinery of the appellant company during the relevant period was below Rs. 35 lakhs and, therefore, they were eligible for registration as a small scale industry.
(b) the value of clearances of the appellant company during the preceding financial year did not exceed Rs. 1.5 crores and, therefore, they were eligible for exemption under Notification 175/86 dated 1-3-1986.
(c) the appellant company has fulfilled the condition stipulated in Notification 175/86 of registration with the Director of Industries during the relevant period.
14. In the result we set aside the impugned order and allow the appeal with consequential relief, if any, due to the appellants.