Customs, Excise and Gold Tribunal - Delhi
The Nizam Sugar Factory Ltd. vs Collector Of Central Excise on 1 January, 1800
Equivalent citations: 1998(60)ECC406
ORDER Jyoti Balasundaram, Member (J)
1. The above appeal relates to the issue of classification of impure gases emanating as a bye-product during the process of fermentation of molasses. According to the appellants, it is not goods within the meaning of Excise law as it is not marketable, while according to the Department, the item is excisable goods falling for classification under TI 14H of the Schedule to the erstwhile Central Excise Tariff upto 28.2.1986 and under sub-heading 2811.10 of the Schedule to the Central Excise Tariff Act, 1985 after 1.3.86.
2. The brief facts necessary for understanding the scope of the controversy are that M/s Andhra Pradesh Government Power Alcohol Factory processes molasses received from M/s Nizam Sugar Factory Ltd. for the purpose of manufacture of rectified spirit. During this process, a mixture of gases including impure Carbon-di-oxide gas is also produced and under an agreement, M/s Andhra Pradesh Government Power Alcohol Factory supply the gas to M/s Nizam Sugar Factory who leased the carbon-di-oxide gas to M/s Siraj Trading Company under an agreement and M/s A.P.G.P.A.F. received royalty from M/s Nizam Sugar Factory for the supply of this gas.
3. The Department issued show cause notice on 16.7.87 alleging that the impure carbon-di-oxide gas was classifiable under TI 14H of the Schedule to the erstwhile Central Excise Tariff upto 28.2.86 and thereafter under Chapter 28 of the Schedule to the Central Excise Tariff Act, 1985. The notice was adjudicated rejecting the claim of the appellants that the impure gas was not an excisable commodity and upholding the classification under the respective Tariff headings mentioned above. In addition, penalty has also been imposed on the appellants. Hence this appeal.
4. Arguing on behalf of the assessees, Shri J.V. Suryanarayana, learned Counsel submits that the composition of gases clearly shows that Carbon Mono-oxide is present to the extent of 3 per cent and therefore, this is sufficient to establish the case of the appellants that the impure gas is not goods known to the market, because the presence of the carbon-mono-oxide to the extent of 3% would make the goods non-marketable. He submits that the impure gas cannot be considered to be goods falling for classification under any heading of the Tariff and therefore, demand requires to be set aside along with the penalty.
5. On the other hand, the learned DR draws our attention to the order of the Tribunal in the case of Mangalore Chemicals & Fertilizers Ltd. in which the Bench has held that carbon-di-oxide in impure form is classifiable under TI 1411 of the Schedule to the erstwhile Central Excise Tariff irrespective of the percentage of purity. He submits that this decision of the Tribunal covers the issue of classification of the disputed items upto the advent of the new Tariff and after 1.3.86, the item undisputedly falls for classification under Chapter 28 Sub-heading 2811.10. He seeks to distinguish the decision of the Hon'ble Supreme Court in the case of Poulose & Mathen v. Collector of Central Excise relied upon by the learned Counsel, by submitting that the decision of the Supreme Court was not in the context of classification of goods in dispute in the present case but in the context of the particular notice issued on the basis of CBEC Tariff Advice and therefore, submits that decision on the classification, as referred to in the Mangalore Chemicals and Fertilizers case, requires to be followed in these cases also.
6. We have carefully considered the rival submissions. We find that there is great force in the contention of the learned DR. In the case of Mangalore Chemicals and Fertilizers (supra), the issue before the Tribunal was the classification of carbon-di-oxide in impure form which was sold to another party. The Tribunal has held that semifinished carbon-di-oxide is separate goods on which duty is chargeable under TI 14H of the Schedule to the erstwhile Tariff. The Tribunal has held that the carbon-di-oxide was classifiable under that heading irrespective of the percentage of purity. On the other hand, the judgement of the Hon'ble Supreme Court proceeds on the basis that the Tribunal should not have ignored the Trade Notice issued in September, 1981 to the effect that C02 not conforming to marketable grade as per ISI specification, is classifiable under TI 68 of the erstwhile Central Excise Tariff and not under TI 14H. The Supreme Court took the view that the Tribunal should not have ignored the Trade Notice of 1981 (No. 83/81) and the Supreme Court has held that the Tribunal also failed to notice that the earlier tariff advice was in force at the time when the proceeding was pending before the Assistant Commissioner and also when the Appellate Collector set aside the order of the Assistant Collector and gave relief to the assessees. The Supreme Court has therefore, set aside the Tribunal's order and restored the order of the Collector (Appeals) based upon the Trade Notice No. 220/81. Para 15 of the Hon'ble Supreme Court which is relevant is reproduced below:
One aspect deserves to be noticed in this context. The earlier tariff advice No. 83/81 on the basis of which trade notice No 220/ 81 was issued by the Collector of Central Excise and Customs is binding on the department. It should be given effect to. There is no material on record to show that this has been rescinded or departed from, and even so, to what extent. Even assuming that the later tariff advice No. 6/85 has taken a different view--about which there is no positive material--the facts point out that the concerned department itself was having considerable doubts about the matter. The position was not free from doubt. It was far from clear. In such a case, where two opinions are possible, the assessee should be given the benefit of doubt and that opinion which is in its favour should be given effect to. In the light of the above, it is unnecessary to adjudicate the other points involved in the appeal on merits.
7. From the above, we are of the view that the decision of the Tribunal in the case of Mangalore Chemicals case which is squarely on the issue of classification of impure gas, is directly applicable to the present case and therefore, following the ratio thereof, we hold that the item in question is classifiable under TI 14H for the period upto 28.2.86. For the period subsequent to 1.3.86, on a query from the Bench, the learned Counsel stated that if the view is taken that the impure gas is excisable, then it would be covered by Tariff heading 2811.10 of the Schedule to the Central Excise Tariff Advice 1985 which covers Carbon-di-oxide
8. We therefore, see no infirmity in the order of the Collector on the classification of the product.
9. Let us now deal with the argument of the learned Counsel that the demand is barred by limitation. The period in dispute ranges from 1982-83 to 1986-87 and the show cause notice is dated 16.7.87. We find from the impugned order that neither M/s A.P.G.P.A.F nor the appellants herein took out a licence inspite of being directed to do so, nor they did furnish any details of the manufacturing activities and hence the finding of the Collector that the appellants are guilty of suppression with intent to evade payment of duty, cannot be faulted. The argument of the learned Counsel is that as far back as in 1984, a show cause notice was issued proposing recovery of duty on impure Carbon-di-oxide gas and a reply was filed to the notice and submissions were also made during the personal hearing but no orders were passed thereon; since everything was in the knowledge of the department from 1984 onwards, there can be no question of suppression and a show cause notice ought to have been issued within six months from the date of knowledge by the department. We find that there are conflicting views on the point as to whether the date of knowledge by the department is relevant according to the provisions of Section 11A and whether the notice issued beyond the period of six months from the date of knowledge, should be held to be barred by limitation. In the case of M/s Pure Drinks Pvt. Ltd. v. Collector of Central Excise, New Delhi reported in 1996 (17) RLT 375, it was held that time limit of five years will run from the date of alleged removal and same cannot be curtailed, as the date of knowledge on the part of the department about alleged removal without payment of duty was not envisaged by Section 11A as one of the relevant dates for the purpose of computing limitation. To the same effect, is the decision of the Calcutta Bench of the Tribunal in the case of Indian Oxygen Ltd. v. Collector of Central Excise, Bhubaneswar reported in 1996 (16) RLT 867 wherein the invoking of the extended period of limitation was held to be valid even though a show cause notice was issued after a period of six months from the date of knowledge of assessees, activities which had been suppressed. In the case of Needle Industries India Ltd. v. Collector of Central Excise reported in 1996 (16) RLT 903, Southern Bench of the Tribunal has held that the show cause notice issued to cover the period prior to department acquiring knowledge about assessees activities is not barred by limitation even though the notice is issued beyond a period of six months from the date of such knowledge. The common line of approach in these orders is that the date of acquisition of knowledge about the alleged suppressed activities of an asseessee is not relevant within the meaning of Section 11A and even if the show cause notice is issued beyond the period of six months from the date of such knowledge, it would not be vitiated as long as it is issued within the period of five years from the relevant date defined under the provisions of Section 11A. The other point of view of the Tribunal is reflected in the case of Varanasi Bottling Company Put. Ltd. v. Collector of Central Excise, Allahabad reported in 1997 (19) RLT 668 holding that the show cause notice is required to be issued within a period of six months from the date of knowledge on the part of the department of any clandestine removal, etc. To the same effect is Tribunal's order in the case of Rqjshi Foam Therm & Pack v. Collector of Central Excise, Allahabad reported in 1997 (20) RLT 161. We also find that the issue as to whether the date of knowledge on the part of department of the alleged suppressed activities of the assessees is a relevant date under the provisions of Section 11A, has been referred to the Hon'ble Orissa High Court by the Tribunal in the case of Oriclean Pvt. Ltd. v. Collector of Central Excise reported in 1998 (25) RLT 70.
10. In view of the conflicting decisions, we place this issue before the Hon'ble President of the Tribunal for reference to a larger Bench.