2000(04)LCX0257
IN THE CEGAT, SOUTH ZONAL BENCH, CHENNAI
S/Shri S.L. Peeran, Member (J) and V.K. Asthana, Member (T)
COMMISSIONER OF C. EX., HYDERABAD-I
Final Order Nos. 514-516/2000, dated 19-4-2000 in Appeal Nos. E/342-344/98
CASES CITED
Collector v. K. Mohan & Company Exports 1989(09)LCX0088 Eq 1989 (043) ELT 0811 (S.C.) Referred...... [Para 6]
Collector v. Wood Polymers Ltd. 1997(12)LCX0034 Eq 1998 (097) ELT 0193 (S.C.) Referred................ [Paras 5, 10]
Commissioner v. Bakelite Hylam Ltd. 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (S.C.) Referred................. [Para 5]
Commissioner v. Lamtuff Plastics 1996(12)LCX0114 Eq 1997 (092) ELT 0674 (Tribunal) Referred . [Paras 3, 5, 10]
Commissioner v. Lamtuff Plastics 1990(10)LCX0085 Eq 1998 (100) ELT A173 (S.C.) Referred........ [Paras 3, 10]
Formica India Division v. Commissioner 1997(10)LCX0021 Eq 1997 (096) ELT 0279 (Tribunal) Referred [Paras 5, 12]
Inarco Ltd. v. Collector 1996(09)LCX0003 Eq 1996 (087) ELT 0003 (S.C.) Referred........................................... [Para 6]
Pushpa Pharmaceuticals v. Collector 1995(03)LCX0088 Eq 1995 (078) ELT 0401 (S.C.) Referred................. [Para 6]
Wood Polymers Ltd. v. Collector 1990(03)LCX0091 Eq 1990 (047) ELT 0595 (Tribunal) Referred................ [Para 5]
Advocated By : Shri V. Sridharan, Shankaranarayana & Ms. Srimati, Advocates, for the Appellant.
Shri S. Kannan, DR, for the Respondents.
[Order per : V.K. Asthana, Member (T)]. - In these appeals against Order-in-Original No. 28/97 dated 28-11-1997, the two issues under dispute for period from 1-4-1995 to 31-12-1996 are as follows :-
(a) Whether the Prepegs manufactured by the appellants company is classifiable under heading 39.20 or under 39.26 of the Central Excise Tariff Act 1985 &
(b) Whether the demand of duty of Rs. 53,60,952/- as well as of Rs. 7,05,778/- imposed and confirmed vide the Order impugned invoking the extended period under proviso to Section 11A(1) is legally correct or whether the extended period cannot be invoked in the facts and circumstances of this case?
2. Heard Shri V. Sridharan, Ld. Advocate for the appellants and Shri S. Kannan, Ld. DR.
3. Ld. Advocate took us through the history of this matter breifly. He submits that the grey cotton fabrics procured from market are impregnated with Phenol Formaldehyde resin to obtain prepegs which are in roll form. Later, these are then laminated, i.e. a number of layers of prepegs are joined together under heat and pressure to form laminates. He stresses that while the prepegs is in rolls, the laminates in cut pieces or sheets. He submits that laminates were manufactured by them were classified by them under heading 39.26 carrying nil rate of duty. The jurisdictional Assistant Commissioner re-classified under 39.20, which was opposed by the Collector (Appeals) in their favour, who reverted the classification to that claimed namely 39.26. The Tribunal, thereafter, endorsed the classification of the laminates under 39.26 under 1997 (092) ELT 674-Trib. Revenue's appeal in the matter is now admitted by Hon'ble Apex Court [reported in 1990(10)LCX0085 Eq 1998 (100) ELT A173], but no stay is granted.
4. Ld. Advocate submits that it is the contention of the department that the intermediate stage prepegs are dutiable under 39.20 because the final products namely laminates are exempted under 39.26. He submits that the order impugned holds that when the end final products carries nil rate of duty, the duty exemption under Notification No. 67/95-C.E. for goods used in captive consumption shall not apply.
5. Ld. Advocate submits that the question of classification of both laminates as well as prepegs were considered by the Tribunal in the case of Formica India Division v. CCE as in 1997(10)LCX0021 Eq 1997 (096) ELT 0279 (Trib.). Wherein the latter were clearly classified under 3926.90 and not 3920.37 as now claimed by the department. He further submits that the said decision of Formica India Division followed an earlier decision of the Tribunal in the case of CCE v. Lamtuff Plastics as in 1996(12)LCX0114 Eq 1997 (092) ELT 0674 (Trib.), which in turn had followed the decision of the Tribunal in Wood Polymers Ltd. v. CCE as in 1990(03)LCX0091 Eq 1990 (047) ELT 0595 (Trib.). The Tribunal in Formica India division supra had distinguished the judgment of the Hon'ble Apex Court in CCE v. Bakelite Hylam Ltd. as in 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (S.C.) on the ground that it did not relate to cotton fabrics based laminate. Ld. Advocate further submits that the Apex Court has since overruled the decision in the case of Wood Ploymers Ltd. in 1997(12)LCX0034 Eq 1998 (097) ELT 0193 (S.C.) by preferring to follow Bakelite Hylam Ltd. supra. In this connection, Ld. Advocate summarises as follows :-
(a) Except for the decision of the Tribunal in the case of Formica India supra, no other decisions/judgments are on Pre-Pegs based on cotton fabrics under the new tariff but are only on laminates;
(b) That since in the case of Bakelite Hylam Ltd., the laminate considered were paper based and not cotton fabrics based, therefore the same is not totally pari materia with the present case. As against that, in Wood Polymers Ltd., the cotton fabrics laminates have been considered.
6. After tracing this history, Ld. Advocate submits that it is their contention that since Prepegs at the stage at which duty is demanded is in continuous length in roll form of 50 metres rolls and is not cut to product size of specific length, therefore, it is a sheeting and not sheet. Heading 39.20 covers sheets and not sheeting and therefore they would not fall under heading 39.20. The said distinction between a sheet and sheeting has been spelt out by the Apex Court in 1989 (043) ELT 811 in CCE v. K. Mohan & Company Exports wherein the Apex Court had held that film rolls of indefinite length can be more appropriately described as "sheetings" rather than sheet. Even the ISI also defines as sheets as a piece of plastic sheeting produced as an individual piece rather than in a continuous length, etc. He further submits that a similar view was taken by the Hon'ble Apex Court in 1996 (087) ELT 3 in the case of Inarco Ltd. v. CCE wherein piping and tubings were distinguished from cut pieces as it referred to lengths of pipes and tubes and not cut pieces. Therefore, on merits Ld. Advocate concluded that in view of heading 39.20 specifically covering only sheets and not sheeting, it would not be applicable to the facts of this case.
7. Ld. Advocate, thereafter proceeded to submit on the non applicability of the extended period under Proviso to Section 11A(1) as sought to be imposed in the order impugned. He submits as follows :-
(a) Each classification list filed during the disputed period indicated the process of manufacture and clearly recorded the emergence of Pre-Pegs as an intermediate product;
(b) In classification list dated 1-4-1995, 10-4-1995 & 1-5-1995 as well as in classification list dated 25-5-1995 which are all available in the Paperbook. It has been clearly declared that Prepegs emerged as an intermediate product in a continuous manufacturing process of laminates. The claimed classification in these classification list has been under 39.20 but have claimed exemption because of their use in captive consumption under Notification noted supra. Therefore, the fact of use in captive consumption for a continuous process of manufacture of final product namely laminates has also been clearly indicated in the classification list, and in particular, a linkage has been established between the intermediate Prepegs and the final products namely laminates.
(c) The Jurisdictional Range Superintendent had visited the appellant's factory to study the process of manufacture and a detailed process of manufacture pursuant to this visit was also supplied to him which gives the same details.
(d) Even in the Modvat declaration dated 10-10-1999, Prepegs were shown as intermediate products.
(e) In addition to this, the same process was disclosed to the department repeatedly vide letters dated 1-1-1988, 11-3-1988, 1-4-1989 and 30-6-1989.
8. Ld. Advocate submits that the sum total of the above facts which are not disputed and are on record shows that there was no partial disclosure of facts or that whatever was to be disclosed in relation to a position of classification claimed was not disclosed in these documents. Ld. Advocate further follows his arguments by saying that mere non-disclosure by itself would also not invoke the extended period. It is now well settled case law that the information not disclosed should be such as would have been positively required to have been disclosed for a consideration of the classification, etc. He further submits, therefore, what actually accrued was that while the appellants claimed exemption on the basis of captive consumption on the Prepegs, the department also erred in allowing the said exemption by approving the classification list when all along the department was aware that the final product was exempted. In such a situation where errors have been made by both sides, the question of suppression with wilful intent just cannot arise. He cites the judgment of the Hon'ble Apex Court in the case of Pushpa Pharmaceuticals as in 1995 (078) ELT 401 in this behalf.
9. With respect to the second demand of Rs. 7,05,778/- Ld. Advocate submits that the demand is on prepegs and not on the laminates which were finally emerging out of it in the premises of M/s. Finetech which was enjoying SSI exemption under Notification No. 1/93. He submits that after the laminates emerged from the heat press, no further finishing activity thereon was done by the appellants and they were cleared in such a semi finished form to Finetech Enterprises, who varnished the same and cut and trim the same to the required specifications as per market demand. Therefore, it cannot be said that no substantial manufacturing process was carried on at their end or that the goods which were sent after job work by the present appellants were in fully finished condition. Since the entire activity was subject to declaration of M/s. Finetech Enterprises as per Notification No. 1/93 wherein they had given the nature of further operations carried out by them and also because of the appellants' own letter to the Range Superintendent dated 26th Dec. 95 informing of the job work done by them, therefore there is no suppression involved in this case also.
10. Ld. D.R. submits that the question of classification of prepegs as well as of laminates are sub-judice with the Honble Apex Court as the Revenue has filed an appeal against 1996(12)LCX0114 Eq 1997 (092) ELT 0674 (Trib.), which has been admitted by the Hon'ble Apex Court. He further submits that the Hon'ble Supreme Court in the case of CCE v. Wood Polymers Ltd. as in 1997(12)LCX0034 Eq 1998 (097) ELT 0193 (S.C.) has held that cotton fabrics based laminates from 1-3-1988 are classificable under 3920.37 and has thus set aside the present dispute under classification lists. He submits that these submissions are based on letter dated 2-3-1998 received by his Office from CCE, Hyderabad-I. Ld. DR further refers to para 17 of the order impugned wherein the extended period has been invoked and reiterates the same. He also refers to para 21 of the show cause notice in this respect. He also reiterates the contents of para 14 of the order impugned wherein it has been found by the Ld. Commissioner that there is no evidence to support the assessee's plea that Prepegs for captive consumption is different from prepegs which is cleared for home consumption.
11. We have carefully considered these submissions and records of the case. We find that the present appeal is on slightly different grounds than what was submitted by the present appellants as reply to the show cause notice before the Ld. Commissioner. The present appellants had not pleaded as a ground that there was any difference between Prepegs manufactured for captive consumption as against those for clearance for home consumption. Therefore, this issue is not before us for consideration.
12. We also find that except for the Tribunal decision in the case of Formica India Division supra, there is no other judgment of any other higher Court including Apex Court which concerns the classification of Pre-pegs under the new Tariff. Therefore, the decision cited may only help to clarify the picture in historical perspective but no judicial precedence is available to us.
13. In such a scenario we find that present contention of the appellants before us that Prepegs would not fall under heading 3920 ibid because they are sheeting but not sheet, is a contention which was not before the original authority. Any adjudication on this contention requires verification of certain facts of manufacturing process because it has been contended that the stage at which duty is demanded on the prepegs in question it is in continuous roll length of 50 metres and not in sheets. Since this contention was not before the lower authorities, the record before us is also silent to the correctness of this position claimed. Under the circumstances, due to lack of information on facts in this behalf, the Tribunal is not in a position to consider clearly the contention raised. Necessarily, therefore, the matter on merits needs to be remanded to the original authority with the direction that he shall consider the submissions of the assessee on this ground on a de novo basis after ascertaining the factual accuracy of the fact of continuous length roll being claimed by the appellants and being subject matter of the appeal. While doing so, no doubt the Ld. Commissioner shall also be required to consider the two citations of judgments of the Hon'ble Apex Court noted above in this connection.
14. While the facts with respect to the determination of the merits of the case may not be on record, it is not so as far as the question of limitation is concerned. We have already noted the various communications sent by the appellants to the departmental officers which clearly showed that the following information was available with the assessing officers in regard to the assessment to duty of Prepegs :-
(a) That Prepegs were emerging as an intermediate product in the manufacture of the final product namely laminates ;
(b) That in each of the classification list, the said final product, i.e. laminates, had been classified under 39.26 and claimed nil rate of duty; &
(c) That the Prepegs which emerged as an intermediate product was also claimed to be classified under 39.20 but an exemption was claimed on the basis of its use for captive consumption.
15. It is our considered view that the above information before the assessing authority was sufficient to decide the issue of classification of both Prepegs and laminates as per law. Since the linkage between intermediate product namely Prepegs and the final product namely laminates were before the department and also since both the claimed classifications claiming Nil rate of duty effectively were also before the department, it is our considered view that if sufficient alertness had been shown by the assessing officers, it would have come to light that the two exemptions claimed in these classification lists for captive consumption of intermediate products and for exemption from duty of the final products could not be simultaneously approved. However, unfortunately, all these classifications were so approved. The factual position therefore which can be summarised from this is that while on the one hand, the assessee wrongly claimed exemption for captive consumption on the prepegs under the said notification, the department, on the other hand, also in its turn, wrongly approved the said classification lists while they were in possession of facts which clearly indicated that the Prepegs could not be given the duty exemption under captive consumption under that Notification. This scenario cannot, by any stretch of imagination, be held to be one in which there was a wilful suppression of information with intent to evade duty. Therefore, we are of the view that the extended period is not invokable in this case and hence we direct the Ld. Commissioner to whom the matter is being remanded, to restrict the demand for the 6 months period available under Section 11A(1) only, provided he comes to a conclusion that on merits the demand survives. Thus, the demands on prepegs cleared by the appellants from their factory beyond 6 months does not survive being barred by limitation.
16. The only other issue requiring our consideration is the demand for Rs. 7,05,778/- on Prepegs manufactured on job work basis by the appellants and removed to M/s. Finetech Enterprises. We find that since the demand is on prepegs and for the consideration on merits thereof the matter has already been remanded above to the Ld. Commissioner, therefore for consideration on merits, this part of the matter also is to be remanded to the Commissioner. As far as the question of applicability of the extended period is concerned in this case, the same reason as indicated above apply in this case and the extended period would not be applicable.
17. In view of the aforesaid analyses and findings, the order impugned is set aside including the imposition of penalties. Instead, the matter is remanded for de novo consideration by the Ld. Jurisdictional Commissioner of Central Excise in terms of the above noted directions for deciding the classification of Pre-pegs on merits as well as for computing the amount of duty which may be demandable for a period of 6 months. The Ld. Commissioner shall give opportunity of hearing and then shall proceed to issue a speaking order in the matter. The appeals are allowed by way of remand accordingly.
Equivalent
2000 (125) ELT 1032 (Tribunal)