Customs, Excise and Gold Tribunal - Delhi
Bharat Battery Mfg. Co. (P) Ltd. vs Collector Of Central Excise on 30 June, 1987
Equivalent citations: 1987(12)ECR861(TRI.-DELHI)
ORDER D.C. Mandal, Member (T)
1. Appeal No. ED/SB/T/823/80-C arises out of Order-in- Appeal No. 633-B/80 dated 10.11.1980 passed by the Central Board of Excise & Customs, New Delhi and the other two appeals mentioned herein arise out of Orders-in-Appeal No. 113-114/Cal. 1/85 dated 14.4.1985 passed by the Collector of Central Excise (Appeals), Calcutta.
2. Appellants were represented by Shri D.N. Kohli, learned Consultant in all the three appeals and Shri A.K. Rajhans, learned J.D.R. has represented the respondent in all the three appeals. We have heard both of them.
3. Shri Kohli has argued that in Appeal No. 823/80-C, questions of valuation and classification of battery separators used for captive consumption during the period from 1.1.1972 to 31.12.1973 are involved. Show Cause Notice was issued on 14.7.1976 invoking the longer period of time limit. The allegations in the Show Cause Notice were (i) that the appellants manufactured and consumed 31,50,650 pieces of P.V.C. separators in the manufacture of electric storage batteries within their factory during the period from 1.1.1972 to 31.12.1973 without filing proper price list and without payment of appropriate amount of Central Excise duty and thus had evaded duty amounting to Rs. 58,211.04 P. and (ii) that they manufactured and consumed 1,09,458 pieces of P.V.C. separators without accountal in their statutory records and without payment of Central Excise duty due thereon. The first allegation was based on the fact that they were found to have declared lower assessable value in their price lists Nos. 6/71, 1/73 and 5/73 as compared to the price declared by them to the Company Law Board and the cost structure submitted by them to the D.G.S. & D. and the Defence Department for obtaining rate contract for electric storage batteries. It was further stated that when the price lists No. 1/73 and 5/73 were returned to them for re-submission with the certificate from the Chartered Accountant, they submitted certificates showing large reduction in cost, but percentage of profit higher than that shown in the previous price list. The Collector of Central Excise, Calcutta held the charges as established and asked the appellants, under Rules 9(2) and 10 of the Central Excise Rules, to pay duty amounting to Rs. 65,555.79 and also imposed penalty of Rs. 1,00,000/- on the appellants under Rule 173-Q of the said Rules in addition to confiscating their plant, machinery, materials etc., with a redemption fine of Rs. 10,000/- in lieu of confiscation. By the impugned order, the Central Board of Excise and Customs upheld the Collector's order regarding demand of duty, reduced the penalty of Rs. 1,00,000/ - to Rs. 65,000/ - and set aside the confiscation & redemption fine of plant & machinery etc. During the hearing before us, the learned Consultant Shri Kohli filed written submission and also addressed oral arguments, the gists of which are as follows:
(i) There was no clandestine removal of the goods from the factory within the meaning of Supreme Court Decision in the case of N.B. Sanjana.
So, only Rule 10 of Central Excise Rules could apply for recovery of short levy, if any, and in Rule 10 read with Rule 173-J as they existed during the relevant period, i.e., prior to 6.8.1977, there was no provision for raising demand for duty within a period of 5 years. Demand could be raised within a period of one year only. The demand for duty was, therefore, barred by limitation. This is confirmed in Calcutta High Court decision in the case of Inspector of Central Excise v. Bengal Paper Mill Co. 1979 Cen-Cus 15D. As the case is hit by time-bar, it is not necessary to go into the merits as held by this Tribunal in the case of Union Carbide Ltd., reported in 1984 ECR 1922. The impugned order should be set aside on this ground alone without going into the merit of the case.
(ii) The appellants filed 2 price lists, one for the outside sales which had higher price and the other for captive consumption with lower price. For captive consumption second quality separators were used, whereas for outside sale the separators were made from virgin materials and those were first quality separators. About 70% of the second quality separators were made out of scrap materials. The relevant price list disclosed that the goods were for captive consumption. There was no suppression of facts. As the price list was approved by the Assistant Collector, there can be no charge of suppression of facts. Price list was supposed to be approved after making necessary enquiry under Rule 173B(2).
(iii) According to the decision of Delhi High Court in the case of Delhi Cloth and General Mills Co. Ltd. and Anr. v. Joint Secretary, Government of India and Anr. 1978 Cen-Cus 55D, no duty is payable on the goods meant for captive consumption. There is no contrary decision of any other High Court on this point. For this reason, the Government had to amend Rules 9 and 49 of Central Excise Rules to make captive consumption dutiable with retrospective effect.
(iv) The benefit of Notification No. 68/71-CE was allowed in respect of battery separators manufactured by M/s. Willaird Battery Separators Ltd. under orders of the Appellate Collector, Delhi and the said decision was later confirmed by the Government of India in Order-in-Revision No. 275/82 in the case of Mehat Battery. In 1980, the Central Board of Excise & Customs issued a Tariff Advice to the effect that battery separators were not classifiable as rigid plastic sheets attracting duty under Tariff Item 25A(2) because they were in an unstable and non-marketable condition when they came out of the machine. The Board classified these goods under Tariff Item 68. The period covered by the demand for duty in this case related to 1972 and 1973 when Item 68 was not in the Tariff. This Tariff Item was introduced in 1975 and under Notification No. 118/75-CE the goods falling under Tariff Item 68 and used for captive consumption were fully exempted from Central Excise duty. By charging duty from the appellants, the Department has discriminated against them. There was no case for short-levy nor a case for imposing penalty.
(v) Collector did not grant any personal hearing although the appellants requested for personal hearing. He was requested to adjourn the case, but Collector passed an ex-parte order without granting the adjournment. Further, copy of the Chemical Examiners' report was not given to the appellants although the same was relied upon by the lower authority.
4. Arguing in Appeal Nos. E/2029 and 2030/85-C, Shri Kohli has stated that question of classification is involved in these two appeals. He has stated that classification of the product under Item 15-A(2) of the Central Excise Tariff is not disputed, but the dispute is whether the goods are rigid plastic sheets or not. Rigid plastic sheets are chargeable to duty under Tariff Item 15-A(2) read with Notification No. 68/71-CE dated 29.5.1971. The Department has held that the goods in dispute are rigid plastic sheets and hence, they are chargeable to duty under Item 1S-A(2) read with Notification No. 68/71-CE as rigid plastic sheets and included in the said Notification. In the matter of admissibility of exemption from duty, Shri Kohli has advanced same arguments in these two appeals as in Appeal No. 823/80-C. He has also relied on Bombay High Court judgment reported in 1983 ECR 627 D Mechanical Packing Industries Pvt. Ltd. v. C.L. Nagia and Ors.
5. Shri Kohli's further arguments in these two appeals are that the lower authority's decision was based on the Chemical Examiner's report who visited the factory and observed that separators came out in sheets form and therefore, they are not entitled to exemption. Collector (Appeals) has held that sheets manufactured by the appellants are rigid plastic sheets, not entitled to exemption from duty. He did not see the Chemical Examiner's report as the file of the Assistant Collector was not before him as observed in his Order-in-Appeal. Copy of the Chemical Examiner's report was not given to the appellants although it was relied upon by the lower authorities. The lower authorities have passed their orders in gross violation of the principle of natural justice. In the circumstances, the report of the chemical examiner should be ignored and the Order-in-Appeal should be set aside.
6. The learned Consultant has also argued that under Notification No. 70/71-CE abetment is admissible in respect of duty paid on the raw materials out of which P.V.C. sheets were manufactured. This should be allowed to the appellants.
7. In the written submissions dated 24.3.1987 filed by the learned Consultant, it has been stated in para 5 thereof that the appellants approached the Department for copies of the Chemical Examiner's report on 8.10.1985 and the Assistant Collector wrote to the Superintendent on 14.10.1985 to supply the same but nothing has been heard from the Department inspite of further reminders on 30.7.1986 and 6.8.1986.
8. Arguing for the Respondent-Collector, Shri Rajhans has stated that the report of Chemical Examiner relied on in Appeal Nos. 2029 and 2030/85-C was shown to the appellants but the copy was not supplied to them. On merits of the case, he has argued that the goods in dispute are rigid plastic sheets and hence, they are correctly chargeable to duty under Tariff Item 15-A(2). Arguing on the question of violation involved in Appeal No. 823/80-C, the learned J.D.R. has stated that there is no finding of the Collector (Appeals) on the point whether raw materials of inferior quality (Scrap) were used for captive consumption.
9. We have considered the records of the case placed before us and the arguments of both sides. So far as the Appeal No. 823/80-C is concerned, the period covered by the demand for duty relates to 1.1.1972 to 32.12.1973. The Show Cause Notice was issued on 14.7.1976. The period of limitation prescribed in Rule 10 read with Rule 173J of the Central Excise Rules as it existed during the relevant period till the Show Cause Notice was issued on 14.7.1076, was one year only. There was no provision in Rule 10 for invoking longer period of limitation of 5 years during the period under reference. As a result, show cause notice issued on 24.7.1986 was barred by limitation under Rule 10 of the Central Excise Rules, 1944. The orders of the lower authorities for demanding duty for the period 1.1.1972 to 31.12.1973 should, therefore, be set aside on the ground of limitation. We order accordingly. The appellants filed RT-12 Returns. There was, therefore, no clandestine remova of the goods. As regards the allegation regarding misdeclaration of the correct assessable value, the contention of the appellants is that the goods meant for captive consumption were manufactured out of inferior raw materials (Scrap). The Collector (Appeals) has not given any finding in his Order on this contention. The Department has also not controverted the contention of the appellants. As a result, the contention of the appellants should be accepted. We, therefore, find no justification for imposing penalty on the appellants under Rule 173-Q of the Central Excise Rules. The order of penalty in Appeal No. 823/80-C is, therefore, set aside.
10. The classification of the disputed product is based on the report of Chemical Examiner. The same has been relied upon by the Assistant Collector as well as the Collector (Appeals). But the copy of the report of the Chemical Examiner was not forwarded to the appellants although they specificially requested for the same and also pursued their request by issue of reminders. The report of the Chemical Examiner was not seen by the Collector (Appeals) before passing the impugned order. He has gone by the finding of the Assistant Collector. Copy of the report of the Chemical Examiner has not been submitted before us. As a result, we could not see ourselves as to what was the contents of that report which is the main basis for holding the goods to be rigid plastic sheets attracting Central Excise duty under Tariff Item 15-A(2) read with Notification No. 68/71-CE dated 29.5.1971. The appellants have produced copies of the Government of India's order No. 275 of 1982 passed on the Central Excise Revision Application in which it was held that P.V.C. Micro Porous Battery Separators were classifiable under Item 15-A(2) of the Central Excise Tariff and were entitled to benefit of Notification No. 68/71-CE. The appellants relied on the said order of the Government of India before Collector (Appeals), but he did not follow the said decision. In view of this, it is all the more necessary that the Collector (Appeals) should have seen the Chemical Examiner's report and should have supplied the copy of the same to the appellants so that they could put forth their defence. As the Collector (Appeals) has not done this, there has been gross violation of the principle of natural justice and on this ground alone, the impugned Orders No. 113-114} Cal-1/85 dated 14.4.1985 should be set aside and the matters in Appeal Nos. E/2029/85-C and No. E/2030/85-C be remanded to the Collector of Central Excise (Appeals) for de novo examination after furnishing a copy of the Chemical Examiner's report to the appellants and giving them necessary opportunity of personal hearing to defend their case. We, therefore, set aside the impugned order and remand these two matters to the Collector of Central Excise (Appeals), Calcutta for de novo examination keeping in view our above observations. De novo proceedings should be completed within a period of six months from the date of the receipt of this order.
11. The three appeals before us are disposed of in the foregoing terms.