Customs, Excise and Gold Tribunal - Delhi
Primela Sanitary Products vs Collector Of C. Ex. on 11 May, 1999
Equivalent citations: 2000ECR179(TRI.-DELHI), 1999(112)ELT411(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. These are two appeals filed by M/s. Primela Sanitary Products (Pvt.) Ltd. and M/s. Christine Hoden (India) Pvt. Ltd. against two orders dated 27-12-1993 and 23-12-1993 respectively involving common issue as to whether the extended period of time limit was available to the Revenue for raising the demand of Central Excise Duty. As the issue involved in both the appeals is same, these are being disposed of by one common order.
2. Briefly stated the facts are that both the appellants manufacture sanitary napkins which were classified by them under sub-heading 5601.00 of the Schedule to the Central Excise Tariff Act. A show cause notice dated 11-11-1992 was issued to the first appellants, namely, M/s. Primela Sanitary Products (Pvt.) Ltd. for demanding differential duty for the period from April, 1988 to March, 1991 as it was felt that the sanitary napkins manufactured by them were classifiable under sub-heading 4818.00 of CETA. Similarly a show cause notice dated 17-9-1992 was issued to second appellants, M/s. Christine Hoden (I) Pvt. Ltd. for demanding differential duty for the period from September, 1987 to March, 1991. Further, a number of notices were issued to both the appellants for demanding differential duty within the period of 6 months specified in Section 11A (1) of the Central Excise Act. The Collector, Central Excise, Goa, under both the impugned orders, had confirmed the demand of duty and imposed penalty holding that the appellants had misdeclared their product and failed to disclose the full facts about the composition of the raw materials used in the manufacture of sanitary napkins; that they suppressed the information about the raw material by failing to disclose that the predominant raw material was wood pulp.
3. Shri K.K. Anand, learned Advocate, did not press the issue of classification in view of the decision of the Appellate Tribunal in the case of Patson Hygiene Industries Pvt. Ltd.. v. C.C.E. -1991 (56) E.L.T. 461 (Tribunal). In fact the appeals filed by both the Appellants challenging the classification were rejected by the Appellate Tribunal on 21-4-1999 in Appeal Nos. E/3316/93-C and E/3314/93-C.
4. The learned Counsel submitted that before 1991 their products were classified under Heading 56.01 only and R.T. 12 returns were assessed; that the dispute arose in 1991 only when the approved classification list was reviewed by the Collector under Section 35E (2) of the Act; that the declaration was filed by them giving the process of manufacture from time to time and no objection was raised by the Department; that alongwith the classification lists also they had filed the process of manufacture; that the classification lists were duly approved under Heading 56.01 right from 1986; that as such the notice issued beyond the period of six months is liable to be set aside. He further submitted that approval of Classification list is an important part of the assessment and the Assistant Collector is required to be very careful and is expected to apply his mind before according approval; that the Assistant Collector should make enquiries and call for information before according the approval to the classification list. Relying on the decision in the case of C.C.E. v. Muzzaffar Nagar Steels -1989 (44) E.L.T. 552 (T), the learned Counsel submitted that in such a situation provisions of proviso to Section 11A(1) of the Central Excise Act are not attracted and the demand raised beyond the period of six months is time barred. He also mentioned that the Collector has confirmed the demand on the ground that the final product was made from Rayon grade pulp; that the Department, in its appeal, before the Collector (Appeals) challenging the classification of sanitary napkins, had relied upon Note 1(g) to Section XI and Note 1(a) to Chapter 56 according to which, Section XI does not cover products and articles of Chapter 48 (e.g. Cellulose Wadding) and Chapter 56 does not cover Wadding, felt or non-woven, impregnated, coated or covered with substances or preparations where the textile material is present merely as a carrying medium; that the Revenue has not alleged that they had not used the raw material mentioned in the process of manufacture and if the Department felt that the final product was not classifiable under Heading 56.01, it was open to them to get the sample tested; that the Department had challenged the classification of the final product on the basis of interpretation only and in such circumstances it cannot be held that the appellants had suppressed any facts or misdeclared the same. Further, there was no concious and deliberate attempt by them to misdeclare as they bonafidely believed that their product was classifiable under Heading 56.01. They had filed the process of manufacture alongwith the classification lists and as such it can't be said that they had suppressed the facts; that further Tribunal has held in the case of C.C.E., Meerut v. Modi Yarn Mills -1998 (29) RLT 262 (T) that extended time limit is not invokable on the ground that process of manufacture was not disclosed as an Excise Officer cannot pretend ignorance of the process of manufacture when the entire factory is accessible to him. He also relied upon the decision in the case of Wockhardt Ltd. v. C.C.E. Vadodara - 1999 (30) RLT 792 in which it was held that claim for a classification under a heading different from the one considered appropriate by the Department does not amount to suppression or mis-statement with intent to evade duty. Finally he submitted that Shri K.A. Tandale, Manager, in his statement dated 24-1-1992 had described the process of manufacture as given alongwith the classification lists and the Department had not alleged that his statement was wrong; that he had also stated that the product sanitary napkins was correctly classified by them.
5. The learned Counsel, while submitting arguments on behalf of the second appellants also submitted that Collector had observed that description was vague. He contended that if the description of raw material was vague, the Assistant Collector should have got it examined thoroughly. Though, the Collector had held that the appellants had suppressed the vital information, he had not mentioned as to what was that vital information which was suppressed. He, therefore, contended that the demand beyond 6 months is not enforceable as it is time barred.
6. Countering the arguments, Shri Sumit K. Das, learned DR submitted that the process of manufacture given by the appellants clearly indicate that the sanitary napkins were manufactured by them out of textile material whereas the fact is otherwise. He referred to the findings of the Collector wherein he had mentioned that the process of manufacture did not give any indication about the exact composition of the raw material used in the manufacture of sanitary napkins; that the description of the raw material given in the declaration is quite vague and misleading; that the appellants had suppressed the information that the predominant raw material was wood pulp. The learned DR also pointed out that in his statement dated 24-1-1992, Shri K.A. Tandale refused to say whether the wadding of their sanitary napkin was of textile material and if so whether textile material was predominant or was present merely as a carrying medium.
7. We have considered the submissions of both the sides. The learned counsel, appearing for both the appellants had challenged only the demand of central excise duty for a period beyond six months. In view of this fact, any demand of duty within the specified period of six months prior to issue of show cause notice is not under dispute and stands confirmed unchallenged. Both Headings 56.01 and 48.18 of CETA are extracted below :-
4818.00 Toilet paper, handkerchief, cleaning tissues, towels, table clothes, serviettes napkins for babies, lampoons, bedsheets and similar household, sanitary or hospital articles, articles of apparel and clothing accessories, of paper pulp, paper, cellulose wadding or webs of cellulose fibre.
5601.00 Wadding of textile materials and articles thereof (for example, sanitary towels and lampoons); textile fibres, not exceeding 5 mm in length (flock), textile dust and millnips.
8. As per Explanatory notes of H.S.N. the Wadding referred to in Heading 56.01 is made by super-imposing several layers of carded or air-laid textile fibres one on the other, and then compressing them in order to increase the cohesion of the fibres; it is generally made of cotton fibres or of artificial staple fibres. The process of manufacture as given by the first appellant clearly mentions that the inner core with polyfilm gets wrapped into a non-woven fabric which goes to show that the product manufactured by them was a non-woven fabric, falling under Chapter 56 of the Schedule to the Central Excise Tariff Act. The Collector was justified in his finding that the appellants had not disclosed the information about the raw material present in the sanitary napkins was wood pulp. Similarly the process of manufacture given by the second appellants (Christline Hoden) does not disclose the composition of raw materials used by them in the manufacture of sanitary products. We find that Collector was justified in observing that since the appellants claimed the product under Heading 56.01, there was no reason for approving authority to suspect that the raw material other than those declared by than had been used. We are not convinced of the contention of the learned Counsel that the Collector did not mention as to what vital information was suppressed by the appellants. The Collector had clearly mentioned that "In fact the relative weight of the various raw materials used and the fact that rayon grade pulp constitutes the predominant raw material used in the manufacture of sanitary products, has come out only in the statement of Shri A.A. Tandale, Manager...which was recorded on 24-1-1992." The learned Advocate has emphasized that as both the appellants had filed classification lists from time to time alongwith process of manufacture, the extended period of time under Section 11A(1) of the Act cannot be invoked and the Assistant Collector should have called for necessary information or caused necessary enquiry before approving the classification lists. The said contention will be available to the appellants if there is no misdeclaration in the classification list or in process of manufacture furnished by them. The Appellate Tribunal has held in C.C.E., Indore v. Orient Paper Mills -1997 (20) RLT 169 (T) that the extended time limit was applicable as the manufacture had declared wrapping paper under Heading 48.05 whereas the wrapper paper made by sulphate process was specifically classifiable under Heading 48.04, the officer approving the classification list would have no means of knowing that the wrapper paper declared to be falling under Heading 48.05 was in fact krap classifiable under Heading 48.04. The Tribunal held the act of the assessee of classifying the product under Heading 48.05 to be an act designed to evade payment of duty. Similarly in these present matter the product made of wood pulp was classifiable under Heading No. 48.18 and the appellants classified the product under Heading 56.01 and did not disclose the raw material correctly. Accordingly the extended time limit as provided in proviso to Section 11A (1) of the Central Excise Act is invokable in the present matters. In Wockhardt Ltd. case, supra, relied upon by the learned Advocate, the Tribunal held the extended time not applicable as the Department did not dispute the process of manufacture and absence of the finding of suppression or deliberate misdeclaration about the nature of the product which is not so in the present matters. Taking into consideration the facts and circumstances of the case and the amount of duty confirmed, we do not find the amount of penalty imposed to be on the higher side at all. Accordingly, we reject both the appeals filed by both the appellants.