Custom, Excise & Service Tax Tribunal
M/S. 20 Microns Ltd vs Cce & St, Chennai on 4 January, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/731/2007 (Arising out of Order-in-Original No. 3/2007 dated 28.06.2007 passed by the Commissioner of Central Excise (Adjudication), Chennai). M/s. 20 Microns Ltd. : Applicant Vs. CCE & ST, Chennai : Respondent
Appearance Shri J.C. Patil, Adv., For the applicant Ms. Indira Sisupal, AC (AR) For the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member Date of Hearing/Decision: 04.01.2016 FINAL ORDER No. 40047 / 2016 Per: R. Perisasami The present appeal is arising out of the OIO dated 28.06.2007 passed by the Commissioner in denovo proceedings.
2. The brief facts of the case are that the appellants are registered with central excise for production and clearance of pulverized minerals of different mesh, specifications and grades and classified under 25.05 of CETA, 1985. They process minerals like lime stone, talc, dolomite, barites, china clay and whiting etc. and clear both coated and un-coated minerals and classified them under Chapter 25.05 of CETA. In addition the have also cleared red-oxide, classified under 25.05 of CETA. DGCEI after investigation issued SCN and classified the chemically coated micronized minerals under Chapter sub-heading 3824.90 and Red-oxide power under Chapter Sub-heading 2821.10 of CETA, 1985 and on adjudication the adjudicating authority confirmed the demand of duty of Rs.1,40,14,482/- being the duty not paid on clearance of chemically coated micronized minerals during the period 01.11.96 to 01.08.99 and confirmed the demand of duty of Rs. 10,51,098/- being the duty not paid on clearance f red oxide during the period 01.01.97 to 12.10.99 and also imposed penalty of Rs. 15,00,000/- under Rule 9(2), 52(A) read with Rule 173Q and a penalty of Rs. 1,50,65,580/- under Section 11AC of CEA, 1944 and also confiscated the land and building with an option to redeem the same on payment of redemption fine of Rs.10,00,000/- and also imposed a personal penalty of Rs.1,00,000/- on Shri Rajiv Parikh, GM of the appellant company. On appeal, Tribunal vide Final Order No. A/1429 1430/WZB/2005/G-II dated 09.06.2005, remanded the case to the adjudicating authority. The adjudicating authority in the impugned denovo order classified the chemically coated micronized minerals under Chapter sub-heading 3824.90 and confirmed the demand of Rs. 2,02,204/- for normal period (July, 99) and dropped the demand for the extended period. He classified the Red-oxide power under Chapter Sub-heading 2821.10 of CETA, 1985 and confirmed the demand of Rs.1,97,723/- and also demanded duty of Rs. 1,25,078/- on the seized goods and imposed redemption fine of Rs. 1,25,000 and imposed a penalty of Rs. 2,50,000/- under Rule 9(2) and appropriated Rs. 5,25,005/- out of the total deposit of Rs.7,00,000/- made by the appellants. Hence, the present appeal.
3. The Ld. Advocate submits that the goods are rightly classifiable under Chapter 25.05 and submits that the adjudicating authority has already dropped the demand for the extended period and confirmed the demand only for six months period and also imposed fine and penalty. The department classified all these minerals under 3824.90. He also submits that these products are coated and he drew attention to the process of manufacture given at page 117 and also he drew attention to the flow chart enclosed at page 185 and also drew attention to the expert opinion in annexure-6 at page 367 and submits that adding a coating agent of 0.1% to 0.5% which is steric acid and titanium coupling does not alter the basic nature of the mineral and the goods continue to remain as minerals classifiable under Chapter 25. He relied on the decision of the Honble Supreme Court in the case of Deepak Agro Solution Ltd. Vs. CC, Maharashtra reported in 2008 (227) ELT 52 (S.C.) and this Tribunals Ahmedabad Bench decision in the case of Sulphar Mills Ltd. Vs. CCE, Surat, reported in 2012 (285) ELT 375 (Tri.- Ahmd.) and also relied on the decisions in their own case reported in 2013 (288) ELT 120, 2009 (237) ELT 321, 2009 (161) ELT 748 and Final Order No. C-III/1220 to 1222/WZB/2003 dated 02.09.03.
4. As regards Red oxide, the Ld. Counsel submits that it is rightly classifiable under chapter 25.05, as there is no manufacturing activity involved. Whereas, the department has classified the same under 2821.10 and submits that the demand is limited only to six months and they have already filed the classification declaration and it is only a question of classification dispute and therefore, no penalty is warranted and no order of confiscation is required and redemption fine imposable on them. He relied the decisions of the Tribunal in their own case in 2009 (237) ELT 321.
5. On the other hand, Ld. AR, Ms. Indira Sisupal, AC, reiterated the findings and also the SCN and drew attention of the Bench to Chapter Note 2 of Chapter 25 and submits that chapter 25.05 covers only products which have been washed (for eliminating the impurities without changing the structure of the product) but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that is mentioned in each heading or sub-heading. She drew attention to page 106 at para 10.1 of OIO and submits that coated products are rightly classifiable under Chapter 3824.90 and red oxide powder is also rightly classifiable under chapter 2821.10, which is more specific heading than under Chapter 25. She further submits that penalties have been rightly imposed on them.
6. After hearing both sides, we find that the short issue involved in this present case is limited to classification of the goods ie., chemically coated micronized minerals whether classifiable under 3824.90 as per Revenue or under 25.05 as claimed by the appellants and whether red oxide powder is classifiable under chapter 2821.10 or under 25.05 as claimed by the appellants and whether confiscation and penalty are imposable or otherwise. We find that the appellants are the manufacturers of both un-coated and coated products of various natural minerals like lime stone, talc, dolomite, barites, china clay and whiting etc. The present dispute is only on the classification of coated minerals. On perusal of the proceedings and findings and details of the flow chart, manufacturing process which has been explained in the impugned order as well as in the SCN, the adjudicating authority in his denovo order has clearly discussed the issue and the directions given by the Tribunal in the order dated 09.06.2005 and also re-examined the expert opinions relied on by the appellants. There is no dispute on the fact that the appellants were processing raw materials (lumps) by crushing, washing, pulverizing, filtering etc and finally the micronized minerals are coated with coating agents ie., Steric Acid and Titanium mixed chemicals. It is relevant to see Chapter note 2 of Chapter 25 of CETA, which is reproduced as under:-
Note 2 Except where their context otherwise requires, heading Ns. 25.01, 25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products that have been roated, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading or sub-heading. As seen from the above, the Chapter note specifically covers products which are in the primary form which are crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation) and the chapter note specifically excludes products which are roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading or sub-heading. It is evident from the above that the products which are covered under Chapter 25 are the only products which has not undergone any further processing beyond washing, grounded, powdered and concentrated. In the present case, the product micronized minerals which has undergone the process beyond the processes mentioned in Chapter note 2 of Chapter 25. Therefore, by virtue of chapter note, the micronized minerals are chemically coated products which has undergone the process beyond the process mentioned in Section note 2 or chapter 25 of CETA. Therefore, the goods are rightly excluded from Chapter 25. The appellants relying on the Supreme Court judgment in the case of Deepak Agro Solution Ltd. (supra) relates to composition of mixture of Sulphur and Bentonite in respect of import of fertilizers, where the Honble Supreme Court stated that the % of sulphur is 90% and accordingly, held goods should be classifiable as Sulphur. The said case law is not applicable to the facts of the present case for the reasons that the appellant is a manufacturer of chemically coated micronized minerals and in addition to uncoated products it is not the case of mixture of two products. By virtue of Chapter Note (2) of Chapter 25 chemically coated micronized minerals are rightly excluded from Chapter 25 therefore, the ratio of the citation relied on by the appellant is not applicable to the present case. Further, we also find that the appellants are regular manufacturers of both uncoated and coated micronized minerals and cleared them under Chapter 3824.90. In the appellants own case, not disputed the classification of the coated products and in their own case reported in 2013 (288) ELT 120, 2009 (237) ELT 321, 2009 (161) ELT 748 and Final Order No. C-III/1220 to 1222/WZB/2003 dated 02.09.03. In the above cases the appellants were before the Tribunal and agitated only for the extended period and pleaded for confiscation and penalty. In the present case we find that the appellaint voluntarily paid the excise duty and the same was appropriated in the OIO. Therefore, we do not find any justification on the appellants arguments seeking classification under Chapter 25.05. Therefore, we hold that chemically coated micronized minerals are rightly classifiable under Chapter 3824.90 and not under Chapter 25.05.
7. As regards classification of red oxide the appellant classified it under Chapter 25.05 and the department re-classified it under chapter 2821.10. The red oxide which is otherwise known as iron oxide and earth colour are specifically classifiable under Chapter 2821.10 as iron oxide and red oxide. Therefore, we do not find any merit in the appellants claim of classification under general category under Chapter 25. The appellants only contention is that the products does not amount to manufacture is not justified as the process involved and also marketed clearly confirms that they are rightly classifiable under 2821.10.
8. As regards confiscation of seized goods and imposition of penalty, we find that the issue is of only classification dispute and the adjudicating authority has already dropped the demand for the extended period and also penalty under Section 11 AC, and this clearly confirms that there is no malafide intention to evade payment of duty. Accordingly, the goods are not liable for confiscation. Further, we find this Tribunal in the appellants own case (supra) already set aside the confiscation and penalty and accordingly, both the penalties are set aside. The confiscation is liable to be set aside and consequently imposition of redemption fine is also liable to be set aside. Accordingly, imposition of penalty under Rule 9(2), 52(A) read with Section 11A of the CEA, 1944.
9. In view of the forgoing discussions, the classification of the chemically coated micronized minerals under chapter 3824.90 and classification of red-oxide under Chapter 2821.10 is upheld and confirmation of demands are upheld. Confiscation, fine and penalties are set aside. Accordingly, the appeal is partly allowed with consequential relief if any.
(Dictated and pronounced in open court)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
BB
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