Customs, Excise and Gold Tribunal - Delhi
Shri Krishna Keshav Laboratories Ltd. vs C.C.E. on 9 October, 1998
Equivalent citations: 1999ECR108(TRI.-DELHI), 1999(105)ELT117(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Both these appeals are being disposed of by a common order because the impugned order is also common and the issues involved are common.
2.1 Appellants are engaged in the manufacture of evacuated containers for which they filed a classification list (Cl) under sub-heading 9617.00 chargeable to nil rate of duty which was duly approved. Consequent to the budgetary changes of 1990 they filed a revised Cl No. 1/90-91 under Heading 96.17 claiming full exemption under Notification No. 83/90-C.E., dated 20-3-1990.
2.2 A show cause notice dated 19-6-1990 was, however, issued to them proposing modification. The Assistant Collector vide his order-in-original dated 16-4-1991 has held that the process carried out by the appellants amounts to manufacture and the product is appropriately classifiable under sub-heading 7012.90 described as "laboratory, hygienic or pharmaceutical glassware, whether or not graduated or calibrated". In the meantime, three show cause notices dated 4-5-1990, 1-11-1990 and 31-12-1990 were issued for demanding differential duty totalling Rs. 1,57,139.00 for the periods October 1989 to April 1990, May to June 1990 and July to November 1990 respectively to the appellants on the ground that the product was appropriately classifiable under Heading 70.12 and not under Heading 96.17. The Assistant Collector vide his order-in-original dated 11-6-1991 confirmed the aforesaid demand of duty. Hence these appeals before the Tribunal.
2.3 The appellants thereafter filed appeals to the Collector (Appeals). The said Collector vide the impugned order has classified the goods under Tariff sub-heading 7007.90 which includes, inter alia, bottles instead of under Tariff sub-heading 7012.90, as ordered by the Assistant Collector in his order-in-original and proposed in the show cause notice dated 19-6-1990. The Collector (Appeals) has also confirmed the demand of duty for a period within six months preceding the date 19-6-1990 and the original authority has been directed to recalculate the duty liability of the appellants accordingly. Hence these appeals before the Tribunal.
3.1 Learned Advocate, Shri R.S. Dinkar has submitted that the appellants purchased duty paid glass bottles from the market. They merely evacuate them and the product still remains a glass bottle. The process of evacuation and sterilisation of the bottles is carried because these are meant for storing blood plasma. His contention, therefore, is that no manufacture has taken place by the process undertaken by the appellants. Therefore, no further duty liability arises on the appellants.
3.2 Learned JDR, Shri A.M. Tilak for the Revenue, however, reiterates the findings of the lower authorities on this aspect.
4.1 We have carefully considered this plea of the learned Advocate for the appellants. The process undertaken by the appellants is set out is paras 8 & 9 of the impugned order which for the sake of better appreciation, we reproduce below :-
"8. The manufacturing process involved in this case, as desired in the appeal petitions and as explained to me during the personal hearing, is as under :-
'Outer body empty bottles are loaded in bottle washers and jet rinsed with warm water. The bottles are then soaked in Alkali Tank of bottle washer which are later jet and shower rinsed using soft water. Finally, the bottles are washed with micro filtered dionized water. The bottles were then dried and siliconized by silicone oil solution in such a way that the inner side of the bottle is coated by silicone so as to make the inner surface of the bottles smooth. The siliconised bottles are again washed in bottle washer using detergent instead of Alkali as done earlier. Then the filling and sealing of the bottles is undertaken. A drop of sodium chloride is added and a bottle stopper with plastic tube is placed. Then the bottle is evacuated to remove air from the bottle through evacuating and stoppering machine. Finally, aluminium seals are placed and the bottles are sealed through sealing machine. The sterilization of the above processed bottles/evacuated containers is undertaken in the Steam Sterilizer. Sterilized bottles after inspection, are labelled through labelling machine and then the hanger is placed on the neck of the above product. These hangered bottles are then packed in the boxes. The label pasted on the product states in bold letters - 'EMPTY EVACUATED CONTAINERS'. It further states - 'for 500 ml. of plasma STERILE, NON PYROGENIC. The label also has the following observation - 'Single-dose container. Destroy after use'. The label also states the expiration date'.
9. On the basis of the manufacturing process, it is quite evident that the product, empty evacuated container, is quite distinct and different from the empty glass bottle used by the appellant as their input, inasmuch as, after cleaning, washing and drying, it is siliconized, evacuated, sealed and sterilized. It also contains a drop of 13.4% of Sodium Chloride in distilled water. Its mouth is sealed with a rubber stopper, on which is placed an aluminium seal. In addition, a plastic tube is fitted inside the bottle to the stopper, which runs into the bottom. Moreover, this product is not sold in the market as an ordinary glass bottle. Instead, it is marketed as 'Evacuated Sterile Non Pyrogenic Siliconized Bottle' for storage of plasma, and it is commercially so known in the market. Thus, the processes carried out by the appellant results in goods, which have a distinct name, character and use, quite distinct and different from the input, namely, plain glass bottles."
In our view the finding of the lower authority is correct that a different product as known to the market other than a plain glass bottle which was taken as an input has been brought into existence, although its main component is still a bottle for storing blood plasma. It is known in the market as "evacuated sterile non-pyrogenic siliconized bottle". Therefore, this contention of the learned Advocate does not find favour with us. Having brought into existence a new product, the product is liable to duty.
4.2 On the question of classification, learned Advocate had stressed that the Tariff Heading will not undergo a change even after undertaking the process of manufacture as described above. It will remain under Tariff Heading 96.17. This plea was not accepted by the lower authority. The said authority in coming to its conclusion has placed reliance on the HSN Explanatory Notes of Heading 96.17 and of 70.07. We are in agreement with the conclusions of the lower appellate authority. He, however, raised the point regarding the demand of duty being barred by time. He submits that the show cause notice issued to the appellants was only with regard to the classification proposed under Tariff Heading 70.12. A new case has now been made by the lower appellate authority for its classification under Tariff Heading 70.07. The demand of duty issued under various show cause notices or with reference to show cause notice dated 19-6-1990 proposing a revised classification under Tariff Heading 70.12 does not any longer survive. This classification has been proposed for the first time with the passing of the impugned order dated 27th August, 1992. The appellants having no notice for classification under Tariff Heading 70.07 for demands of duty for prior periods, the said demand would no longer be sustainable for six months preceding 19-6-1990, as held by the lower appellate authority. Notice for change in classification having been given on 27th August, 1992 by passing of the impugned order; the demand of duty sustained for six months preceding 19-6-1990 would also not be sustainable in view of this notice being given for the first time to appellants on the passing of the said impugned order. Strictly speaking, the Collector (Appeals) instead of sustaining the demands for six months preceding 19-6-1990 should have remanded the matter to the original authority for demand of duty, if any, agaisnt the new classification. Learned Advocate, however, submits that the remand at this stage would only be a mere futility inasmuch as six months period have already expired for issuing any show cause. New case has now been made by the lower appellate authority for its classification under Tariff Heading 70.07. The demand of duty issued under various show cause notices or with reference to show cause notice dated 19-6-1990 proposing a revised classification under Tariff Heading 70.12 does not any longer survive. This classification has been proposed for the first time with the passing of the impugned order dated 27th August, 1992. The appellants having no notice for classification under Tariff Heading 70.07 for demands of duty for prior periods, the said demand would no longer be sustainable for six months preceding 19-6-1990, as held by the lower appellate authority. Notice for change in classification having been given on 27th August, 1992 by passing of the impugned order; the demand of duty sustained for six months preceding 19-6-1990 would also not be sustainable in view of this notice being given for the first time to appellants on the passing of the said impugned order. Strictly speaking, the Collector (Appeals) instead of sustaining the demands for six months preceding 19-6-1990 should have remanded the matter to the original authority for demand of duty, if any, against the new classification. Learned Advocate, however, submits that the remand at this stage would only be a mere futility inasmuch as six months period have already expired for issuing any show cause notice. Consequently, he prays or setting aside the demand of duty sustained by the lower appellate authority. For this proposition learned Advocate relies upon-
(1) C.C.E. v. Bright Brothers -1991 (52) E.L.T. 385.
(2) IOC v. C.C.E. -1991 (54) E.L.T. 110.
(3) Jyoti Laboratories v. C.C.E., Cochin -1994 (72) E.L.T. 669 (Tribunal).
5.1 Learned JDR, on the other hand, reiterates the findings of the lower appellate authority. Since the show cause notice for revision of Tariff classification had been issued on 19-6-1990, a mere change in classification from the one proposed in the show cause notice to the one sustained by the lower appellate authority should not have any effect on the demand of duty, submits the learned JDR. In any case the appellants had been put to notice regarding the original classification under Tariff Heading 96.17 being wrong and therefore, no prejudice can be said to have been caused by the appellants for change in classification by the lower appellate authority form the one proposed in the show cause notice.
6.1 We have carefully considered the pleas advanced from both sides. We are of the view that the issue is not longer res Integra in view of the various citations (supra) given by the learned Advocate for the appellants, as rightly pointed out by the learned Advocate show cause notice is for change of classification from Tariff Heading 70.12 but ultimately sustained by the lower appellate authority as 70.07 without any prior notice to the appellants. It cannot, therefore, be contended by the Revenue that the appellants have not been prejudiced. A new case for classification was made out by the Collector (Appeals) and therefore, any demand based on that case can arise only from the date of making the said new case. If the date of passing of the impugned order is taken as a notice for the new classification to the appellants, the demand of duty for the period preceding six months from 19-6-1990 would be clearly barred by time. Hence, we set aside the demand of duty against the appellants. Further questions raised by the learned Advocate, in case he failed on the above plea of demand of duty, regarding availability of Modvat credit in respect of duty paid by the appellants on purchase of glass bottles is no longer necessary to be gone into in view of our finding of setting aside the demand of duty, as above.
7.1 In the facts and circumstances of this case, there is no justification for imposing any penalty of Rs. 5,000/-, as has been done by the original authority, even though the impugned order does not at all mention about the imposition of penalty. Therefore, penalty of Rs. 5,000/- is also set aside.
8.1 Appeals disposed of in the above manner.