Customs, Excise and Gold Tribunal - Delhi
Bhansali Engineering Polymers Ltd. vs Commr. Of C. Ex. on 7 September, 1999
Equivalent citations: 2000(67)ECC253, 2000ECR87(TRI.-DELHI), 2000(118)ELT524(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. Briefly stated, the facts of the case are that the appellant is a manufacturer of ABS Polymers (Acrylo-nitrile Butadiene-Styrene-Terpolymers) falling under CET sub-heading 3906.30. During the process of manufacture, ABS waste is generated which is reprocessed to manufacture granules known as reprocessed granules. They had been filing classification lists/declarations under Rule 173B of the Central Excise Rules wherein they had classified reprocessed granules under CET subheading 3903.30. However, in Declaration No. 18/95-96 w.e.f. 9-5-1995, they classified the item under CET sub-heading 3915.20 attracting duty at the rate of 25% ad valorem. Subsequently, in the Declaration No. 21/95-96 w.e.f. 19-5-1995, they classified reprocessed granules under CET sub-heading 3903.30 and claimed nil rate of duty under Notification No. 111/95-C.E., dated 6-9-1995. In these two declarations, they classified ABS waste under CET sub-heading 3915.20 and claimed nil rate of duty under Notification No. 67/95.
2. A show cause notice dated 14-2-1996 was issued to the appellants charging them with changing classification of the reprocessed granules in violation of Rule 173B wrongly claiming nil rate of duty under Notification No. 111/95 and wrongly claiming benefit of captive consumption under Notification No. 67/95 for ABS waste, as it was captively used for manufacturing reprocessed granules on which they claimed nil rate of duty. They were asked to show cause as to why goods removed under Declaration No. 21/95-96 should not be treated as removal without payment of duty and the notice proposed recovery of duty and imposition of penalty. The goods in question were ordered to be provisionally assessed under order dated 10-4-1996. In addition to the notice dated 14-2-1996, the following six show cause cum demand notices were issued:
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Sl. Show cause notice No./Date Period Demand of No. duty
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1. CEX-20/1/SCN/SAU/95/745/20.2.96 Sept 95 3,90,625
2. " 804/4.3.96 Oct 95 7,50,000
3. " 991/25.3.96 Dec 95 6,25,000
4. " 1097/3.4.96 Jan 96 3,75,000
5. " 1637/10.6.96 Feb 96 2,56,250
6. " 1679/10.6.96 Mar 96 9,37,500
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Rs. 33,34,375/-
3. These six show cause notices were adjudicated by the Assistant Commissioner who accepted the classification claimed made in the Declaration No. 21/95-96 under GET sub-heading 3903.30 and extended the benefit of exemption under Notification No. 111/95 which inter alia exempted goods falling under Chapter Headings 39.01 to 39.14 provided that they are reprocessed or produced in India out of scrap or waste of goods falling under Chapters 39, 54, 55 or 59. However, he confirmed a duty demand on ABS waste on the ground that it was used in the manufacture of reprocessed granules which were not exempt from the whole of the duty of excise in terms of Notification No. 111/95 and hence waste did not satisfy the condition of Notification No. 67/95 which is available to specified inputs manufactured in a factory and used within the factory of production in or in relation to manufacture of specified final products, provided that those final products are not exempt from the whole of duty of excise or are not chargeable to nil rate of duty. As a result of denial of benefit of Notification No. 67/95, the Assistant Commissioner held that the assessees were liable to pay duty on the entire quantity of waste/scrap used in the manufacture of reprocessed granules which were cleared at nil rate of duty and confirmed a duty demand of Rs. 27,55,500/- on 551.1 M.T. of ABS waste used to manufacture quantity of 501 MTs of reprocessed granules cleared under Notification No. 111/95-CE. during September, 1995 to March, 1996. He modified the declarations filed by the assessees in the light of the above findings, finalised the assessment provisionally made under Rule 9B of the Central Excise Rules and also imposed a penalty of Rs. 25,000/- under Rule 173Q of the Rules.
4. The appellants preferred an appeal to the Commissioner (Appeals) contending that they are not as manufacturing ABS waste as it is generated in the course of manufacture of final product and it is eligible for exemption under Notification 67/95 as the waste is not covered under the category of captive consumption. This contention was rejected holding that waste is a separately identifiable product covered within the definition of manufactured goods and also specified in a separate heading/separate heading of the Tariff. Hence these appeals before the Tribunal.
5. The appellants have already filed a Misc. application for raising an additional ground namely "that the show cause notices issued to the appellants covering the period from September, 1995 to March, 1996 have all demanded duty on reprocessed ABS granules. However, the duty has been demanded and confirmed by the impugned orders of the Assistant Commissioner No. 10, CC/97, dated 28-2-1997 and Commissioner (Appeals) No. 35/CE/BRL/98, dated 5-2-1998 on waste of ABS polymers. This is impermissible and unsustainable in law".
6. The submission is opposed by the learned DR on the ground that this is a new plea and cannot be allowed at the second appeal stage. However, since it is a legal ground and since it was raised in the stay application and stay application was allowed on this basis, we permit the appellants to raise the additional ground and allow the Misc. Application.
7. We have heard Shri G. Shiv Dass, learned Counsel who contends that the demand on ABS waste is unsustainable since no demand of duty on this item was raised in the case of the show cause notices. He cites the decision of the Tribunal in the case of Indian Oil Corpn. v. Commissioner of Central Excise reported in 1991 (54) E.L.T. 110 and the Apex Court decision in Civil Appeal Nos. 1127-28/86 and others in the case of Hindustan Polymers Ltd. v. C.C.E., Guntur, in support of his contention that a case cannot be made out on the basis that is altogether different from that of the demand made upon an assessee. He further contends that the order confirms duty demand on waste by denying the benefit of Notification 67/95 on the ground that the waste is used to manufacture processed granules which have been claimed to be exempt from duty under Notification No. 111/95 while the show cause notices (Notice dated 3/4, 6/5 and 10-6-1996) proposed denial of exemption to ABS waste on a different ground. He therefore, contends that the order has travelled beyond the scope of the notice which is not legally permissible. Lastly he submits that the demand confirmation is bad in law since duty on ABS waste was not quantified in the demand cum show cause notices and in support of this argument, he relies upon the Tribunal's decision in the case of Commissioner of Central Excise, Madras v. Best & Crompton Engg. Ltd. (Final Order No. 314/97-D, dated 27-3-1997). He therefore, prays that the impugned order may be set aside and the appeals allowed.
8. Opposing the prayer, the learned DR, Shri Satnam Singh submits that vide order dated 10-4-1996, the Assistant Commissioner had ordered provisional assessment of reprocessed granules, ABS waste and scrap without extending the benefit of Notification No. 111/95 and No. 67/95 respectively and accordingly assessees/appellants were informed that the matter was under dispute and therefore, they were well aware that in case granules were exempt, duty was liable to be paid on waste and scrap. He contends that the assessments were provisional under Rule 9B of the Central Excise Rules and the Assistant Commissioner was empowered to determine the final liability of the assessee on finalisation of assessment which has been done in the adjudication order dated 28-2-1997 which has been confirmed by the present impugned order. He therefore, submits that the impugned order does not suffer from any legal infirmity and is required to be upheld.
9. We have carefully considered the submissions of both the sides. We find that both prior to and subsequent to provisional assessment order dated 10-4-1996, show cause notices were issued to the appellants. The first three notices namely notices dated 28-2-1996,4-3-1996 and 25-3-1996 proposed denial of benefit of Notification No. 111/95 to reprocessed granules on the ground that the product was classifiable under CET sub-heading 3915.20 attracting duty at the rate of 25% ad valorem and not under CET sub-heading 3903.30 which the department alleged was being claimed only to avail of the benefit of nil rate of duty under Notification which inter alia exempted goods falling within Chapter Headings 3901 to 3914. The Department therefore, proposed recovery of duty only on reprocessed granules. The quantity of reprocessed granules on which demand was raised was 50 MTs in the first show cause notice, 100 MTs in the second and third notices. In the notices dated 3-4-1996, 6-5-1996 and 10-6-1996, the allegation is that reprocessed granules are not entitled to exemption under Notification No. 111/95 and the further allegation is that the benefit of captive consumption under Notification 67/95 is not available to those inputs used in or in relation to manufacture of final products which are exempt from the whole of duty of excise leviable thereon or chargeable to nil rate of duty and that the exemption is also not available to those inputs which are used for reprocessed materials. In these three notices, the demand is also only on certain quantities of reprocessed granules. Therefore, the appellants are correct in their contention that none of the notices specifically raised any demand on ABS waste. However, since during the entire period, the assessments were provisional under Rule 9B of the Central Excise Rules, the Assistant Commissioner was empowered to determine the final liability of the assessee, on finalisation and the assessments have been finalised vide the adjudication order which is the subject matter of the present impugned order. Under the provisional assessment order dated 10th April 1996, the reprocessed granules and the ABS waste were assessed to duty without extending the benefit of the two notifications above mentioned and therefore, it is not open to the assessee to contend that they were never put on notice that duty was required to be paid by them on ABS waste. Therefore, the contention that the show cause notices proposed to deny exemption to waste on a ground different from the ground of confirmation of demand on ABS waste is also incorrect the show cause notices proposed denial of Notification No. 67/95 to waste on the ground that the assessees had claimed that reprocessed granules manufactured out of ABS waste, were exempt from duty in terms of Notification No. 111/95 and demands on waste have been confirmed for the same reason, after accepting the assessees claim that reprocessed granules were eligible to exemption under Notification 111/95.
9. The argument of the appellant that exact amount of duty on ABS waste was not quantified in the show cause notices thereby rendering confirmation order bad in law, looses significance in the present case which relates to finalisation of assessment, wherein no separate demand notices were required to be issued under Section 11A of the Central Excise Act.
10. The decision of the Tribunal in the case of Indian Oil Corporation v. Commissioner of Central Excise cited by the appellants is distinguishable as it relates to a case where the proper assessment proceedings had been initiated by the Department. The judgment of the Apex Court in the case of Hindustan Polymers (supra) (CA No. 343-344 of 1987, dated 24-12-1996) relied upon by the appellants also does not relate to a case of provisional assessment which is the situation in the present batch of appeals. The Tribunal's order in the case of Best & Crompton Engg. Ltd. (Order No. 314/97-D, dated 27-3-1997) cited by the appellants also does not relate to a case of provisional assessment.
11. In the light of the above discussion, we hold that the lower authorities were empowered to demand duty on ABS waste on finalisation of assessment. There is no dispute about the amount confirmed. In these circumstances, we uphold the impugned order and reject the appeals.