Custom, Excise & Service Tax Tribunal
M/S O.K. Play (India) Ltd vs Cce, Delhi-Iii on 1 September, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT No. II APPEAL No. E/283/2007 [Arising out of Order-in-Original No. 12&13/PP/CE/2006 dt. 31.10.2006/07.11.2006 passed by the Commissioner of Central Excise, Delhi-III, Gurgaon.] Date of hearing: 04.07.2017 Date of decision:01.09.2017 For approval and signature: Honble Mr. Devender Singh, Member (Technical) ======================================
M/s O.K. Play (India) Ltd. :
Appellant(s) VS CCE, Delhi-III.
:
Respondent(s) ====================================== Appearance:
Sh. Naveen Bindal, Advocate for the Appellant(s) Sh. Vijay Gupta, AR for the Respondent(s) CORAM:
Honble Mr. Devender Singh, Member (Technical) Final Order No. 61721/2017 Per : Devender Singh The appellants are in appeal against the impugned order.
2. The brief facts of the case are that the appellants are registered with the Central Excise Department for manufacture of plastic toys, storage tanks and other items for use by children. On 24.04.1997, their factory was visited by Central Excise Officers and it was noticed that they had installed injection, moulding, extruding and pulverizing machines operated with electric power to handle plastic inputs and produce moulded shapes for manufacturing toys, water storage tanks, desks, tables etc. Two show cause notices dt. 01.05.1997 demanding duty for the period October, 1996 to March, 1997 and dt. 04.11.1997 for the period May, 1993 to September, 1996 were issued to the appellant calling upon them to show cause as to why the above process was not 4manufacture in view of Note 6(b) to Chapter 39. The matter was adjudicated and by order dt. 18.11.1997 and 29.12.1998, the Commissioner, Central Excise, New Delhi held that conversion of granules into moulding powder constituted manufacture. The adjudicating authority confirmed the show cause notice under Rule 9 read with Section 11A of the Central Excise Act, 1944. By the aforesaid orders, the Commissioner upheld the invocation of extended period of limitation under show cause notice dt. 04.11.1997. The appellants went in appeal before CEGAT against the said order and the Honble Tribunal vide their Final order No. 322-323/2000/C DT. 18.07.2000 confirmed that the activity relating to conversion of granules into powder, amounted to manufacture and extended period was invokable to demand duty on powder, as there was suppression of fact. But the Honble Tribunal inferred that Modvat credit cannot be denied if duty paying documents were available and for that reason remanded the matter for ascertaining the quantum of Modvat eligibility. The appellant filed an appeal against the order of CEGAT in the Honble Supreme Court which was decided vide its order dt. 04.02.2005. In the said order, the Honble Supreme Court ordered as follow:-
For the aforesaid reasons, we hold that the process of pulverization under which granules are converted into moulding powder constitutes manufacture; that the moulding powder produced by the aforestated process was marketable; that the show cause notice dt. 04.11.1997 was beyond limitation; that the Commissioner (Adjudication) will decide the question of valuation under rule 6(b)(ii) of the Central Excise (Valuation ) Rules, 1975, in the light of the Circulars dt. 04.04.1988, 30.10.1996 and 13.02.2003 issued by the Central Board of Excise & Customs and lastly, the Commissioner (Adj.) will also decide the question of limitation for the duty demanded under the show cause notice dt. 01.05.1997 in the light of Circular dt. 19.02.2001, issued by the Central Board of Excise & Customs, as well as in the light of Amending Act 10 of 2000 under which Section 11A(1) stood amended. In compliance of the said order, the Ld. Commissioner has passed the impugned order wherein he has confirmed the duty demand of Rs. 4,37,276/- and imposed a penalty of Rs. 4,37,276/- under Rule 173-Q of the Central Excise Rules, 1944. Aggrieved from the imposition of penalty, the appellants have filed this appeal. The appellants are not contesting the liability of the duty alongwith interest. Their only prayer is to set aside the penalty.
3. The Ld. Advocate for the appellants submits that the direction of Honble Supreme Court in its remand order was only to determine the duty liability of moulding powder and to decide the question of limitation in relation to show cause notice dt. 01.05.1997. Hence, by imposing penalty, the Ld. Commissioner has travelled beyond the remand order. He further argued that since extended period had been dropped no penalty was imposable as has been held by this Tribunal in the case of Marsha Pharma Pvt. Ltd. Vs. CCE, Vadodara 2009 (248) ELT 687 (Tri. Ahmd.). Further contention is that they did not start anything new in the show cause notice, which is based on the same set of facts and everything was in the knowledge of the Department. There was no intention to evade the duty. Ld. Advocate also submitted that moulding powder was not accounted for in RG-1 register as it was not required to because it is not a finished product. He also relied on the following case laws:-
1. O.K. Play (India) Ltd. Vs. CCE, Delhi-III, Gurgaon 2005 (180) ELT 300 (SC).
2. O.K. Play (India) Ltd. Vs. CCE, Delhi-III, Gurgaon 2004 (171) ELT 378 (Tri. Del.).
4. Ld. AR on the other hand argued that they had been purchasing the moulding powder from outside and availing the credit of duty on the same and thus they were fully aware that this product was excisable. He also contended that the contravention has been invoked in the Para 9 of the show cause notice and no entries were made in the RG-1 register.
5. Heard the parties and perused the records.
6. I find that only two issues, namely, whether extended period of limitation is applicable and valuation of the moulding powder were remanded by the Honble Supreme Court to be examined by the adjudicating authority. The adjudicating authority has after examining both the issues has also imposed the penalty on the appellants. The appellants first argument is that the adjudicating authority has gone beyond the remand order of the Honble Supreme Court. In this regard, I find that if as a consequence of examining the issues remanded by the Honble Supreme Court, the question of penalty emanated there from, the adjudicating authority would be required to examine the same. However, in this case that does not appear to be the case as the adjudicating authority has held that the demand is within normal period of limitation. Hence, I find that while imposing penalty, the authority has indeed gone beyond the remand order of the Honble Supreme Court. On that basis the imposition of penalty is unsustainable. On the merits of the penalty, I find that the main reasoning of the authority is that the appellants have been purchasing moulding powder from outside and availing credit of duty paid on the same and were fully aware that this product was excisable and dutiable but did not take registration and did not file the classification list. In this regard, I find that the question of whether the powdering of Low Density Polyethylene (LDPE) and High Density Polyethylene (HDPE) granules into moulding powder would amount to manufacture went for determination right up to before the Honble Supreme Court when it was determined by the Honble Apex Court that as a consequence of new definition of manufacture in terms of Section 2(f), the activity which otherwise do not amount to manufacture, can now be termed as manufacture and thus liable to duty. This was with reference to Chapter Note 6(b) of Chapter 39 of the Central Excise Tariff Act, 1995. I also find force in the contention of the appellant that they did not start any new activity in the show cause notice and the facts were same and everything was in the full knowledge of the Department. The Honble Supreme Court has also made observations to that effect in its remand order for the immediately preceding period of May, 1993 to September, 1996. Besides, the second show cause notice was within six months limit and since there was no application of extended period, the penalty does not appear leviable as has been held by this Tribunal in the case of Marsha Pharma Pvt. Ltd. Vs. CCE, Vadodara (supra). As to the contention of the Revenue that the powder was not accounted for in the RG-1 register, the Ld. Advocate has correctly rebutted that the same arguing that it was not required as it was not their finished product. Hence, on merits also imposition of penalty is not justified.
7. In view of the foregoing findings, I find merit in the contention of the appellants that penalty is not leviable in this case and the order of ld. Commissioner is not sustainable to the extent of imposition of penalty.
8. In the result, the impugned order in so far as demand of duty and interest is concerned is upheld. However, the penalty imposed on the appellants is set aside.
9. The appeal is disposed of in above terms.
(Order pronounced in the Court on 01-09-2017) Devender Singh Member (Technical) NS 6 Appeal No. E/283/2007-CHD