Hindustan Polymers Co. Ltd. vs Collector of Central Excise, Guntur>1996(12)LCX0163

1996(12)LCX0163

IN THE SUPREME COURT OF INDIA

S.P. Bharucha and S.C. Sen, JJ.

HINDUSTAN POLYMERS CO. LTD.

Versus

COLLECTOR OF C. EX., GUNTUR

Civil Appeal Nos. 3431-34 of 1987 with C.A. Nos. 1127-28 of 1986, 5503-04 of 1990 and 10633 of 1995, decided on 19-12-1996

[Judgment]. - In Civil Appeal Nos. 1127-28 of 1986 : The appellants manufacture polystyrene. It is of a natural colour. Some of this natural colour polystyrene is given different colours by the appellants.

2. The appellants were issued show cause notices by the Assistant Collector of Central Excise which stated that both natural colour polystyrene and the corresponding coloured grain had been classified under Tariff Item 15A(1)(ii). The show cause notice added that “it is evident that coloured polystyrene compounds which were modified forms of polystyrene are outside the scope of the Tariff Item No. 15A(1)(ii). It is now proposed to classify them under the residuary Tariff Item No. 68 after 17-6-1977 under Rule 173B of the Central Excise Rules, 1944 and demand duty at the appropriate rate under the said Tariff Item 68 for the period from 11-8-1980 to 31-12-1980 under Rule 9 of the Central Excise Rules, 1944 read with Section 11A of Central Excises and Salt Act, 1944".

3. The demand was contested until the stage of the Tribunal. It was noted in the judgment and order of the Tribunal, which is under appeal, that the appellants had filed voluminous documents to substantiate their contention that uncoloured polystyrene and coloured polystyrene were the same product and, by colouring polystyrene, no new goods emerged. The allied contention in the Tribunal’s words was that polystyrene, even after being coloured, continued to fall under Tariff Item 15A(1)(ii). On behalf of the Revenue, the learned Senior Departmental Representative stated to the Tribunal that he had no comments to make on the appellants’ contention that polystyrene, which was a polymer, would continue after colouring to fall under Tariff Item 15A(1)(ii) and not under Tariff Item 68. He stated that the appellants were paying Excise Duty on the uncoloured polystyrene which was cleared from their factory. The dispute was only in regard to the uncoloured polystyrene which was captively consumed by the appellants in their colouring plant within the factory. The question now was whether excise duty should be chargeable at the coloured stage when it was cleard from the factory after colouring or at the uncoloured stage, as it was captively consumed in the factory in their colouring plant. The duty in such a case was chargeable on the value of the coloured polystyrene which was cleared from the factory and not at the uncoloured stage. The Tribunal was competent to mould the relief as the circumstances of the case demanded and the Revenue would have no objection if the Tribunal directed that the demand from the appellants should not exceed the demand which would have been leviable under Tariff Item 68. The Tribunal agreed and held that the demand that coloured polystyrene be classified under Tariff Item 68 could not be sustained. It “moulded the relief” and ordered :-

“(i). Duty demand for the period within limitation would be quantified under Tariff Item 68;

(ii). Demands or duty for the goods would then be worked out under Tariff Item 15A(1)(ii).

Demand raised against the appellants for the periods within limitation, as set out above, would not, in any case, exceed the duty demand that the appellants would have been liable to pay for the period under limitation if the goods were classifiable under Tariff Item 68.

To be more explicit, duty demands would be restricted to the period within limitation and the amount that would have been quantifiable under Tariff Item 68 though they have to be worked out on the basis of Tariff Item 15A(1)(ii) of the Central Excise Tariff as it stood at the material time. Rest of the demand is set aside."

4. Learned Counsel for the appellants assailed the order of the Tribunal and submitted that once the Tribunal had come to the conclusion that the coloured polystyrene could not be classified under Tariff Item 68, the demand ought to have been quashed. He submitted that the order of the Tribunal proceeded upon the basis that there was a process of manufacture of coloured polystyrene from uncoloured polystyrene, which was contrary to what the Tribunal had found.

5. The order of the Tribunal was supported by learned Counsel for the Revenue. It was submitted that it was the appellants’ own case that the coloured polystyrene was covered by Tariff Item 15A(1)(ii) and, therefore, the Tribunal was right in holding that the appellants should pay excise duty as at the coloured stage, but limiting the quantum thereof to that which would have been paid had the demand under Tariff Item 68 been sustained.

6. While we appreciate the Tribunal’s desire to do complete justice and mould the relief in that direction, we think that, in the circumstances, the Tribunal should not, in this case, have passed an order which proceeded upon a basis that is altogether different from that of the demand made upon the appellants. That is not “moulding” relief. The demand that was made upon the appellants was under Tariff Item 68 and it proceeded upon the basis that there was a process of manufacture of coloured polystyrene from uncoloured polystyrene. Having come to a conclusion against the Revenue on these counts, the appropriate order for the Tribunal to have passed was to have set aside the demand and left it open to the Revenue to proceed against the appellants, as permissible under the law. The appellants would then have had the opportunity of meeting the precise case made out by the Revenue.

7. In the result, the appeals are allowed and the judgments and orders of the Tribunal are set aside. It shall be open to the Revenue to proceed against the appellants, as permitted by the law, upon the basis set down in the judgment and order of the Tribunal. No order as to costs.

In Civil Appeal Nos. 3431-34 of 1987 & 10633 of 1995 :

8. In view of our judgment in Civil Appeal Nos. 1127/1128 of 1986, these appeals are allowed. No order as to costs.

In Civil Appeal Nos. 5503/5504 of 1990 :

9. These are cross-appeals by the Revenue against the findings of the Tribunal on the aspect of limitation. Nothing survives in these cross-appeals in view of the orders that we have passed on the appeals of the assessee, i.e., Civil Appeal Nos. 1127/1128 of 1986. These appeals are, accordingly, dismissed. No order as to costs.

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Equivalent 1999 (106) ELT 12 (S.C.)