Customs, Excise and Gold Tribunal - Mumbai
Ntb International Pvt. Ltd. vs Commissioner Of C. Ex. on 30 June, 2000
Equivalent citations: 2000(121)ELT134(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. All these six applications for stay are filed against the Order-in-Original No. 16/99 Commr. Dated 7-7-1999 where under the Commissioner, Mumbai-VI confirmed duty amount of Rs. 42,07,807/-, imposed a penalty of equivalent amount under Rules 173Q, 209, 9(2) and 52A of the Rules and penalty of Rs. 10,00,000/- on the appellant in Appeal No. E/2934 namely Transcon International as well as Polybelt Technologies in Appeal No. E/2933. He ordered recovery of interest under Section 11AB. He also imposed penalty of Rs. 10,00,000/- on the appellant Kamal K. Kacholia in appeal No. E/2935 and Rs. 5,00,000/- on the appellant Rajan Nawal in appeal No. E/2955 and Rs. 3,00,000/- on the appellant Nirmaljeet Singh Panna in appeal E/3498 under rule 209A. He also imposed a fine of Rs. 5,00,000/-. Today applications for stay are filed under Section 35F of the Central Excise Act. During the course of the argument it was found that the appeals themselves could be disposed of on a short point and the matter is sought to be remanded. Therefore, the appeals themselves mere taken up after waiving pre-deposit and with consent of both sides.
2. The appellant in Appeal No. E/2932 is engaged in the manufacture of industrial power transmission belts. These belts are used for transmission of power. The belts are normally made of (a) nylon leather, or (b) nylon and rubber, or (c) nylon and textile fabric. The appellant filed classification list for nylon leather belt under sub-heading 4201.90; for nylon rubber belt under subheading 4010.90 and for nylon textile fabric under sub-heading 5908. The issue involved in this case is what is classification of the above products? The classification lists were filed and at a particular point of time they have been approved. Later on the products were sent to Deputy Chief Chemist for testing. He in his result has held as follows :-
"The sample is a cut piece of belting. It is composed of an inner polyamide plastic sheet sandwiched between two layers of leather sheets % of polyamide plastic sheet is 24.05 by weight rest being leather sheet. In terms of interpretation rule 3(b) of CETA, 1985 the sample merits consideration as an article of leather."
The test report also mentions results of various other products placed before him and he also opined classification of the products in the test report. The charges against the appellant in terms of show cause notice dated 3.5.1997 inter alia are clandestine removal as well as wrong classification. In deciding the issue of classification adjudicating authority namely the Commissioner at paragraph 87 in his order has followed the opinion of the Deputy Chief Chemist as well as the deposition of the Manager of Excise. He also refers to National Test House findings. In the same paragraph he has held that the assessee had suppressed the facts and misled the department by filing wrong classification list. He also referred to various other submissions raised by the appellant assessee before him and confirmed the demand. Hence the present appeals.
3. Shri V. Sridharan, Advocate, appeared along with Shri R. Nambirajan, Advocate to the appellants. Shri K.M. Patwari, JDR appeared for the department.
4. Shri Sridharan contended that the finding given by the Commissioner is wrong inasmuch as in paragraph 87 thereof he simply quotes the opinion of the Deputy Chief Chemist and follows the same. He states that rule 3(b) of the Rules of Interpretation as provided under the Central Excise Tariff Act has to be judged only by the adjudicating authority. In the course of argument he has also cited two judgments of the Tribunal - CC v. Wash Udyog, Sawanhuadi - 1987 (31) E.L.T. 73 and Precious Industries v. CC - 1989 (44) E.L.T. 47. He emphasizes the fact that the word predominance by weight is irrelevant for consideration of this case. He described the product as belt the purpose of which is power transmission. Nylon is the core and heart of the belt. It has the necessary strength, free from wear and tear, immune to corrosion by oil, acid, etc. It is light, while being strong. It therefore gives the power transmission characteristics to the belt. He also invited our attention to the rulings of the Harmonized System of the World Customs Organization issued in February 1995, Amending Supplement No. 14, where in respect of transmission belts he invited our attention to the said rulings which reads as under :-
"3921.90 or 3926.90 - Transmission or conveyor belts or belting, consisting of a band (composed of one layer, or of a number of super-imposed layers glued together) of plastics, covered on one or both faces with a band of chrome leather serving solely to increase the adhesion."
He also invited our attention to paragraph 5 of the judgment of the Tribunal in the case of Wash Udyog, Sawantwadi -1987 (31) E.L.T. 73 which reads as under:
"Interpretative Rule 3(b), which is the relevant rule applicable in this case, does not lay down the principle of classification on the basis of predominant content but on the basis as to which of the component gives the goods their essential character. Thus, it is not the bulk but the property of giving the essential character which is the criterion applicable to the case before us...".
He, no doubt, invited our attention to the test certificate of National Test House but states fairly that it may not help his case. He also invited our attention to the extracts from the book Engineering Materials and Designs by J.J. Robinson on the topic "The Drive for Efficiency" where it has been stated as follows:
"The materials which have made the new belts possible are super polyamide (Nylon) and polyester (Terylene). In addition to being extremely flexible and very light they are enormously strong, have a high modulus of elasticity, are dimensionally stable and resistant to fatigue and chemical attack. Great strength enables more power per inch of belt width to be transmitted. Near perfect elasticity provides the dual benefits of virtual stretchlessness and the ability to smoothly absorb pulsating and shock loads. Alas, with all their advantages these wonderful materials have one snag - they are notoriously slippery. Before they can be used to transmit power they must be provided with a friction surface. With the classic v-belt the trapezoidal shape is used to compensate for the low coefficient of friction of 0.2 to 0.3 of rubber and canvas driving faces. Whilst the wedging action prevents much slip, the continuous jamming and releasing of the belt from the groove absorbs a great deal of power, further reducing the already depleted performance of its thick heavy section to around 85 per cent.
Many shapes are being used in the effort to overcome the limitations of the v-belt profile. Narrow V or wedge, grooved and toothed shapes are moulded -usually in high hysteresis rubber - to the power transmitting member. However, for all the ingenuity of the researchers and the skill of the designers no one has yet equalled the performance or matched the versatility of the modern flat belt with a chrome leather driving face. Soft, pliable and without any real strength of its own, chrome tanned leather is extraordinarily durable and does not slip. It has three times the frictional grip of rubber and canvas even when oily, dusty or dirty. This high coefficient of friction makes complicated belt profiles quite unnecessary and belts made from nylon or terylene bonded to chrome leather drive at the staggering efficiency of 98 per cent. In other words, belts of this construction are as efficient as the electric power supply itself.
So good is the embrace of chrome leather that the belt will not slip even on drives with a minute are of contact. Velocity ratios of 20:1 with centres so close that pulley rims all but touch are by no means rare. Two-pulley drives have one chrome leather friction face and a light durable textile cover on the other Multi-pulley drives have chrome leather on both driving faces giving a super-efficient, low cost, solution to a complex problem."
We asked a question to Shri Sridharan whether these points were brought to the notice of the Commissioner. He fairly stated that these were not brought to the notice of the Commissioner, but he vehemently argued that even when it is not brought to the Commissioner he ought to have noted the judgment of Tribunal in Wash Udyog, Sawantwadi (supra). He waived on emphasis the fact that the Rules of Interpretation has to be interpreted by the adjudicating authority.
5. The main thrust of the case is the finding given by the adjudicating authority as contained in para 87 of the adjudicating order. In the adjudicating order at paragraph 87 it has been held as follows :
"As regards the allegation regarding misclassification of the product "Nylon Sandwich Blelts" manufactured by M/s. Transcon & Polybelts, I hold that these belts are made up of one or more combination of material such as leather, textile fabrics and coated fabrics wherein nylon sheet was used as core material for reinforcing and the process of lamination was used for laminating the said material over one another. M/s. Transcon and Polybelt claimed the classification of the said product under chapter 3926.00, and full exemption from payment of duty under notification No. 53/88 (Articles of Plastics), whereas similar belts manufactured by M/s. N.T.B. were classified under chapter 42 or chapter 59 depending upon the material used, and duty was being paid on the same. Samples of the said belts were drawn and sent to Dy. Chief Chemist for testing. The Dy. Chief Chemist opined that the belt would merit classification as articles of leather/rubber, depending upon the material used and would fall under chapter 42/40 respectively. Thus, it is clear from the test result that M/s. Transcon and Polybelt had suppressed the facts and misled the deptt. by filing wrong classification lists with an intent to evade the payment of Central Excise duty. Shri Wangarajan, Manager of Excise of M/s. NTB in his statement dated 16-12-96 also admitted that classification of these belts under chapter 3926.00 was not correct as the similar belts manufactured by M/s. NTB had been classified correctly under chapter 40/59 depending upon the materials used. Further, the party questioned the veracity of Dy. C.C.'s report and submitted a copy of test report of the National Test House, Mumbai which was produced by them during the personal hearing which was sent to Dy. Chief Chemist who opined that the NTH test findings on the product under reference were not based on actual analysis of the composite product /finished products but on the basis of individual components purported to have been utilised in the manufacture of the same as is evident from the note appended therein. Dy. Chief Chemist's test findings were based on the actual analysis of the finished product. He has recalculated and confirmed that the test report given by him was correct and factual. It is noteworthy to mention here that the noticees did not challenge the test report of Dy. Chief Chemist on its receipt nor had requested for re-testing of the said sample by Chief Chemist, New Delhi as required under Rule 56(G) of Central Excise Rules, 1944. Therefore, I do not find any force in the test certificate of National Test House furnished by the party. In view of the above discussions, it is obvious that the assessee have suppressed the facts and have misled the deptt. by filing wrong classification list with an intent to evade the payment of Central Excise duty and proviso to Section 11A(1) of Central Excise Act, 1944 is applicable in this case and I hold accordingly."
6. The Commissioner being the adjudicating authority has quoted that the Deputy Chief Chemist has opined that the belt would merit classification as articles of materials used. He states further that it is clear from the test result that the appellants M/s. Transcon in Appeal No. 2934 and Polybelt in Appeal No. 2933 have suppressed the facts and misled the department in filing wrong classification list with an intent to evade duty. It is true that in the said paragraph the Commissioner has taken note of the deposition made by Manager-Excise. But one should make a note of the interesting arguments made by Shri Sridharan on a query made by the bench that supposing the Excise Manager had answered in an opposite way, would the department take the words of the Excise Manager. That is a very interesting point. In our view the classification has to be done by the adjudicating authority but the adjudicating authority may not know what are the contents of a particular product. The product has been examined by an expert called Deputy Chief Chemist. It is true that in this case the appellant has not asked for re-test. The appellant has not challenged the finding given by the Deputy Chief Chemist as to the composition of the product. It is not at all an issue before us in classification. The main question in this case is interpretation of rule 3(b) of the Interpretation Rules, viz. essential characteristics. In the course of arguments Shri Sridharan had handed over to us the opinion of Customs Harmonized System of the Customs Cooperative Council which has been extracted above. Unfortunately this was not brought before the adjudicating authority by the appellants at the time of adjudication. The case of Wash Udyog, Sawantwadi was not brought to the notice of the adjudicating authority. It is true that the adjudicating authority is expected to know the decisions of the Tribunal or the courts but yet it is equally the duty of the assessee who is conducting his case who ought to have brought to the notice of the adjudicating authority in respect of the matters which are in favour of the assessee. If these matters have been brought to the notice of the adjudicating authority, perhaps he would have dealt with it and come to a conclusion. We are therefore of the view that the matter requires redetermination de novo. We therefore set aside the impugned order and remand the matter back to the adjudicating authority for re determination who will do it as expeditiously as possible. Shri Sridharan on behalf of his client stated that the appellant will not use any dilatory tactics. The adjudicating authority shall decide the matter de novo after following the principles of natural justice.
7. Appeals are remanded.