Customs, Excise and Gold Tribunal - Delhi
Orissa Plastics vs Collector Of C. Ex. And Customs on 14 August, 1995
Equivalent citations: 1996(81)ELT491(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. This is an appeal filed by M/s. Orissa Plastics, being aggrieved with the order-in-original dated 15-3-1989, passed by the Collector of Central Excise & Customs, Bhubaneswar.
2. The appellants were engaged in the manufacture of plastic polythene bags (hereinafter referred to as the 'said bags'). It was alleged in the show cause notice dated 24-11-1982 issued by the Superintendent of Central Excise, Balasore (answerable to Assistant Collector of Central Excise, Cuttack) that during the period 1980-1981 and 1981-82 (upto 12/81), they cleared the said bags classifiable under the then Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Old Tariff'), without payment of central excise duty and without a valid gate pass in form GP1. The show cause notice was made answerable to the Assistant Collector of C.E., Cuttack. The central excise duty evaded was calculated as Rs. 5,25,943.89. In view of the amendment to Section 11A(1) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act'), the case was transferred to the Collector of Central Excise, Bhubaneswar for adjudication vide notice dated 2-6-1988. The Collector of Central Excise, Bhubaneswar under his order dated 15-3-1989 after extending small scale exemption, confirmed the duty liability on the said bags under Item No. 68 of the Old Tariff for Rs. 2,77,488.55.
3. The matter was posted for hearing on 28-4-1995 when Shri N.C. Sogani, Consultant appeared for the appellant. Shri Prabhat Kumar, SDR represented the respondent.
4. Shri N.C. Sogani, the learned Consultant stated that the department was well aware of their activities and the goods manufactured by them; samples had been drawn on 30th July, 1976 of the various products manufactured by them, by the Inspector of Central Excise, Balasore, and in this connection, referred to their declaration at page-42 of the paper book. The learned Advocate pleaded that on the issue of time bar alone the impugned order deserves to be vacated. On merits also, the learned Consultant submitted that the Tribunal in a number of decisions had ruled in favour of the classification as canvassed by the appellant. He referred to the Tribunal's decision in the case of Shellya Industries, Bangalore v. Collector of Central Excise, Bangalore, 1983 (14) E.L.T. 1827 (Tri.), wherein the scope of Item No. 15A(2) of the Old Tariff had been discussed, and it has been held that high density polyethylene (HDPE) woven sacks are articles of plastic and hence covered under Item No. 15A(2), and not Item No. 68 of the Old Tariff. Reference was also made to the Tribunal's decision in the case of Lamtuf Plastics v. Collector of Central Ex., 1992 (60) E.L.T. 603 (Tribunal). It was also mentioned that the notice issued by the Collector of Central Excise was in the nature of a new show cause notice. He had taken new ground of suppression which was not in the original show cause notice.
5. Shri Prabhat Kumar, the learned SDR referred to the Collector's findings at page 107 of the paper book and stated that the order passed by the Collector of Central Excise, Bhubaneswar was a reasoned order. The learned SDR submitted that on limitation also the appellant had no case.
6. We have carefully considered the matter. In the original show cause notice dated 24-11-1982 issued by the Superintendent of Central Excise, Balasore, and answerable to the Assistant Collector of Central Excise, Cuttack, the central excise duty was demanded under Rule 9 read with Rule 10(2) of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'), for the period 1980-81 and 1981-82 (upto 12/81). The grounds on which the central excise duty was proposed to be recovered were stated as under :-
"Clearing excisable goods (polythene bags) without payment of excise duty and also clearing goods without a valid GP 1".
There were no details as regards any suppression. There was no mention as how the goods were to be classified. As the differential excise duty had been calculated at the rate of 8% ad valorem, it is presumed that the goods were sought to be classified under Item No. 68 of the Old Tariff. It appears from the subsequent correspondence that the show cause notice was issued in pursuance of some audit objection. With reference to the above show cause notice dated 24-11-1982, the Collector of Central Excise, Bhubaneswar issued another show cause notice dated 2-6-1988 in which 'wilful suppression of facts and contraventions of the provisions of Rules 9(1), 43, 52A, 173B, 173C, 173F and 173G of the Rules, with intent to evade payment of duty" were alleged for the first time. The duty was sought to be recovered under Section 11A of the Act read with Rule 9(2) of the Rules. Penal provisions under Rules 9(2), 52A(5), 173Q and 210 of the Rules were also invoked. In the original show cause notice dated 24-11-1982, no penal provisions had been invoked. In this notice dated 2-6-1988, also, which was issued even beyond the period of 5 years, there were no details with regard to the alleged suppression and contraventions. It is seen that on 30-7-1976, representative samples of, among others, polythene bags were drawn by the Inspector of Central Excise, Balasore (refer page 42 of the paper book). As per report dated 13-9-1976 of the Chemical Examiner, Central Excise, Custom House, Calcutta at page 46 of the paper book, the samples were found to be in the form of transparent bag entirely composed of polyethylene moulding powder. Further, it is seen from the letter No. C. No. NES-20/OP/80-81/1507, dated 14-9-1981 from the Superintendent, Central Excise, Balasore (at page 74 of the paper book) that the department had classified the LDP bags of different sizes made out of lay flat tubing of different thickness under Item No. 15A(2) of the Old Tariff.
7. In the facts and circumstances of the case, we consider that the demand was hit by time bar.
8. On merits of the case also, the demand of duty under Item No. 68 does not appear to be justified. The bags manufactured by the appellant were low density polythene (LDP) bags whose basic raw material was duty paid LDP granules/powder. The LDP granules/powder were fed into the extrusion machine and flexible polyethylene tubular film was drawn through extrusion process. By heating, the polyethylene tubular film was cut and flexible polyethylene bag was manufactured by sealing, in the bag making machine.
9. Prior to 1982 budget, "articles made of plastics, all sorts" including the items specified therein were classifiable under sub-item (2) of Item No. 15A of the Tariff. The specified items were tubes, rods, sheets, foils, sticks, other rectangular or profile shapes, whether laminated or not, or whether rigid or flexible, including lay flat tubings and polyvinyl chloride sheets, not otherwise specified. This description was wide enough to include polyethylene bags -transparent - entirely composed of polyethylene moulding powder (refer test report at page 46 of the paper book). The description of Item No. 15A(2) was changed in the 1982 Budget as "articles of materials described in sub-item (1), the following namely - boards, sheeting, sheets and films whether lacquered or metallized or laminated or not, lay flat tubings not containing any textile material". We are presently not concerned with the revised definition of Item No. 15A(2). It may, however be noted that under Notification No. 182/82-C.E., dated 11-5-1982 articles made of plastics falling under Item No. 68, produced out of duty paid artificial resins/plastic materials/cellulose esters and ethers in any form falling under Item No. 15A(1) were exempted from the whole of the duty of excise leviable thereon.
10. The scope of Item No. 15A(2) came for consideration by the Tribunal in the case of Shellya Industries, Bangalore v. Collector of Central Excise, Bangalore, 1983 (14) E.L.T. 1827 (T). The period involved in that case was from 1-3-1975 to 30-6-1975. The goods involved were high density polyethylene (HDPE) granules and HDPE woven fabric. Para 5 from that decision is extracted below :-
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11. As regards exemption under Notification No. 68/71-C.E., dated 29-5-1971, it is seen that articles made of plastics all sorts (except certain specified products) produced out of duty paid artificial resins/plastic materials/cellulose esters and ethers in any form, falling under Item No. 15A(1), were exempted from the whole duty of excise leviable thereon. The interpretation of this notification came before the Tribunal in the case of Bradma of India Ltd. v. Collector of C.E., 1990 (50) E.L.T. 533 (Tribunal). The Tribunal held that "the emergence of an intermediate product, namely the plastic sheet out of artificial resin, does not preclude the appellants from claiming the benefit of the exemption of the abovenoted notification" (refer para 10 of the decision). In that case before the Tribunal the product model plastic cards falling under Item No. 15A(2) were manufactured by the appellant from the rigid plastic sheets -which were produced out of artificial resins and plastic materials under Item No. 15A(1). The duty paid rigid plastic sheets were purchased by the appellant from outside. In the case before us the appellant had described the process of manufacture in their letter dated 28-7-1981 as under :-
"We are manufacturing the following items in our factory :-
(1) High Density Polyethylene pipes. (2) Low Density Polyethylene pipes. (3) Low Density polythene bags. (4) High Density & Low Density pipe fittings.
In this connection, we mention here that [with regard to] manufacture of HD & LD pipes the raw material that is HD & LD Polyethylene granules are [fed] direct into the extrusion machine and the end-product obtained through extrusion process. The LD Polythene bags are also manufacture in extrusion machine and flexible Polyethylene tubular films are drawn at the first stage. The Polythene tubular films are subsequently converted to flexible Polythene bags in the bag making machine. The Polythene tubular films manufacture by us are in the nature of flexible film which has a modulous or elasticity either in flexture or in tension of less than 700 Kg. per square centimeter at 23 and 50 per cent relative lumanity tested in accordance with the method of test [for stiffness] of plastics etc. These flexible bags are made out of low density polythene granules. The low density polythene granules purchased from M /s. Indian Petrochemicals Corpn., who are the manufacturers inside the country, High Density Polythene granules are purchased from M/s. Hoechst Dyes & Chemicals Ltd., Distributor of M/s. Polyolefin Ind. Ltd., Bombay only manufacturer of the item inside the country. On the bill of M/s. I.C.I., it is stamped that the price is inclusive of excise duty; on others' bill there are no such....
During process of manufacture of LD & HD pipe the scrap generated are cut into smaller bits and it is reused along with the virgin granules as per I.S. Specification subject to a maximum quantity of 10%. We have got the extruder machine with equipments for manufacture [of] above items. We do not manufacture rigid sheets neither we are having machines or equipments for manufacturing the same."
12. The Board's Tariff Advice No. 11/82, dated 16-2-1982 as appearing at page T 46 of 1982 (9) E.L.T. relates to the "bags made from lay flat tubings as such or from the sheets /films (obtained by slitting open the tube) whether subjected to printing or not, by stitching". The learned Collector had not discussed whether the bags in question were stitched, and how the goods under consideration were covered by the above description, particularly in the light of process of manufacture as given above.
13. Taking all the relevant considerations into account, we set aside the impugned order and accept the appeal.