1993(12)LCX0056
BEFORE THE CEGAT, SPECIAL BENCH ‘B1’, NEW DELHI
S/Shri P.C. Jain, Member (T), S.L. Peeran, Member (J) and S.D. Mohile, Member (T)
COLLECTOR OF CENTRAL EX., CHANDIGARH
Versus
DENSONS PULTROTEKNIK
Order No. E/446-451/93-B1, dated 27-12-1993 in A. Nos. E/1662-1665/91-B1, E/1653/87-B1 and E/3405/89-B
Cases Quoted
Kinjal Electricals (P) Ltd. v. Collector — 1987(09)LCX0053 Eq 1989 (043) ELT 0327 (Tribunal) [Paras 8, 24]
Collector v. Denson Engineers — 1990(11)LCX0072 Eq 1991 (052) ELT 0296 (Tribunal) [Para 17]
Partap Rajasthan Copper Foils & Laminates Ltd. v. Collector — 1989(08)LCX0073 Eq 1989 (044) ELT 0775 (Tribunal) [Para 17]
X.L. Telecom (Pvt.) Ltd. v. UOI — 1993 (047) ECR 0171 (Bom.) [Para 20]
Bawa Potteries v. UOI — 1980(09)LCX0008 Eq 1981 (008) ELT 0114 (Del.) [Para 25]
Advocated By : Shri J.S. Agarwal, Advocate, for the Appellants.
Shri S.K. Sharma, JDR, for the Respondents.
[Order per : S.D. Mohile, Member (T)]. - The issues involved in all these six appeals are interlinked and hence these were heard together and are being decided by a common order.
2. Out of six appeals, the first five appeals have been filed by the Department against various Orders-in-Appeal mentioned therein and the last one has been filed by M/s. Densons Pultroteknik.
3. The history of the matter and the issues involved in these appeals as brought out in the Paper Book filed by the learned Advocate for the respondent in the first five appeals and the appellant in the sixth appeal are as follows :
“Unit M/s. Densons Engineers started in 1987. Started manufacture of Epoxy Cast Components like Crotch Belly, Bushing and declared under 3926.90 as other Articles of Plastics claiming exemption under Notification No. 132/86 and amended by Notification No. 53/88.
Classification Lists effective 9-10-1987, 1-3-1988, 13-7-1988 and 16-8-1988 approved under 3926.90 by the Asstt. Collector.
Classification was on the basis of Order-in-Appeal No. 60-DLH/87 dated 27-2-1987 passed by the Collector of Central Excise (Appeal), Delhi who classified these products under the then 3922.90 as Articles of Plastics (Deptt. Appeal E/1653/87-B.1) in the case of M/s. Densons Engineers. 3926.90 is equivalent to the earlier 3922.90.
Asstt. Collector by Order-in-Original No. 4/AC/CL/89 dated 20-6-1989 decided Classification List retrospectively under 8547.00.
In the meantime Addl. Collector issued Show Cause Notice on 30-9-1988 for period 1986-87 and 1987-88. Charges were 2-
(i) Extended period - Misclassification.
(ii) Clubbing of 2 units viz. M/s. Densons Engineers and M/s. Densons Pultroteknik.
Order-in-Original dated 13-6-1989 confirmed demand of Rs. 1,79,921.79 and penalty of Rs. 20,000 for 1986-87 and 1987-88. We are in appeal before CEGAT bearing No. E/3405/89-C (It was earlier in C Bench but now transferred to B.1 vide Misc. Order No. 207/92-C, dated 27-10-1992.
Asstt. Collector in 2 CLS effective 1-3-1989 and 1-4-1989 on the basis of his Order No. 4AC/CL/89 dated 20-6-1989 classified under 8547.00 and on the basis of Additional Collector order dated 13-6-1989 clubbed clearances of 2 units at Jagadhri and Paonta Sahib viz. M/s. Densons Engineers and M/s. Densons Pultroteknik.
We went in Appeal before Collector (Appeals), Chandigarh against orders on classification lists dated 1-3-1989 and 1-4-1989 who vide her orders in Appeal No. 100-101/CHD/91, dated 21-1-1991, decided in our favour. Basis was :
(i) C. Lists to be changed prospectively and not retrospectively.
(ii) Exempted articles - value not to be taken for purpose of Notification 175/86 dated 1-3-1986.
Department has come in an Appeal against both the Orders-in- Appeal No. 100-101/CHD/91 which bear Appeal Nos. 1662/91-B.1 and 1663/91-B.1.
Against Asstt. Collector, Chandigarh Order No. 4AC/CL/89 dated. 20-6-1989 about classification whether under 3926.90 or 8547.00, we filed an appeal before Collector (Appeals), Chandigarh which was decided in our favour vide Order-in-Appeal 176-CE/CHD/90 dated 28-12-1990. Deptt. Appeal No. E/1665/91-B1.
In the meantime Superintendent raised demands on RT 12s for months of 3/89 to 7/89 on 15-2-1990 duty Rs. 1,11,473.65.
Went in an Appeal before Collector (Appeals), Chandigarh Order-in-Appeal 175/CE/CHD/90 dated 28-12-1990 in our favour.
Deptt. Appeal No. E./1664/91-B1.
ISSUES ARE:
(1) Can Asstt. Collector Review?
(2) Can Cls. be changed retrospectively?
(3) Whether products are classifiable under 8547.00 or 3926.90?
(4) Can clearances of 2 units be clubbed?
(5) Is demand on RT 12s maintainable?
(6) Exact value of clearances even if clubbed.
4. Appeal Nos. 1662-1663/91-B1 have been filed against Order-in-Appeal Nos. 100-101 /CE/CHD/91 dated 21-6-1991. These two Orders-in-Appeal are against the observations made by the Asstt. Collector on two Classifications lists dated 1-3-1989 and 1-4-1989 denying the exemption under Notification No. 175/86-C.E. dated 1-3-1986 by clubbing the clearances of the two units, namely, M/s. Densons Pultroteknik located at Paonta Sahib and M/s. Densons Engineers located at Jagadhari. Both of which are owned by M/s. Yamuna Glass and Chemicals Ltd. at 103, Industrial Area, Paonta Sahib (H.P); and including the value of Epoxy cast components which were held as dutiable under Heading 85.47 vide Asstt. Collector’s Order No. 4/AC/CL/89 dated 20-6-1989, w.e.f. 13-1-1989 that is, the date of the show cause notice.
5. In the Orders-in-Appeal it has been held (i) That the value of the Epoxy cast components is not includible for the purpose of determining the availability of the exemption w.e.f. 1-3-1989 and 1-4-1989 as these products have been held dutiable only w.e.f. 13-1-1989; and (ii) The value of clearances of two units was not to be clubbed as decided vide Order-in-Appeal No. 175-176/CE/CHD/90 dated 28-12-1990 (which are the subject matters of the Department’s Appeal Nos. 1664-1665/91-B).
6. In view of these findings, the exemption under Notification No. 175/86-C.E. dated 1-3-1986 has been extended to the two units as the value of the clearances has been held to be less than Rs. 1.5 crores/2 crores respectively.
7. Appeal Nos. 1664-1665/91-B1 have been filed by the Deptt. against Orders-in-Appeal Nos. 175-176/CE/CHD/90 dated 28-12-1990 allowing two appeals filed by the M/s. Densons Pultroteknik, Paonta Sahib unit against Order-in-Original No. 4/AC/CL/89 dated 20-6-1989 passed by the Asstt. Collector holding Epoxy cast components as classifiable under Heading 85.47; and against observations dated 15-2-1990 by the Supdt. on the RT.12 for March to July ‘89 demanding the differential duty.
8. In the Order-in-Appeal it is held that:
(i) The Asstt. Collector has no powers to review the classification list;
(ii) The demand on the RT. 12 is time barred, as the demand according to the Order-in-Appeal for the period March to July ‘89 ought to have been raised by September ‘89; and
(iii) The clubbing of the two units was not justified relying upon the Tribunal decision in the case of Kinjal Electricals (P) Ltd. v. CCE -reported at 1987(09)LCX0053 Eq 1989 (043) ELT 0327 (T) which according to the Order-in-Appeal cover the present case in favour of the assessee.
9. The Appeal No. 1653/87-B1 has been filed by the Department against Order-in-Appeal No. 60-CE/DLA/87 dated 27-2-1987, inter alia, setting aside the classification of Epoxy casting components under heading 85.47 on the ground that such components were not made exclusively of Epoxy Resins which constituted 95% of the composition, the rest being fillers, plasticisers etc.
10. As regards the other two products, the classification was dealt with by the said Order, namely, general purpose compound which has been held classifiable under Heading 32.14 and cable jointing compound whose classification has been remanded for de novo consideration, the same has not been disputed by either side in the present appeal.
11. The Appeal No. 3405/89-B has been filed by M/s. Densons Pultroteknik, Paonta Sahib unit against the order of the Additional Collector No. 18-CE/ADC/89 dated 13-6-1989 denying the exemption under Notification No. 175/86-C.E. to the Paonta Sahib unit as the second unit was availing Modvat and also because the combined clearances of the two units had exceeded Rs. 30 lacs.
12. The first issue to be decided in these appeals is, thus the dutiability of the Epoxy Cast Components. The main ground urged on behalf of the respondent in the first five appeals and upheld by the Collector (Appeals) in the Order involved in Appeal No. 1653/87-B1 is that the Epoxy Cast Components are not made entirely of Epoxy Resins as allegedly required by the Heading 85.47. The relevant heading reads as under :
“Insulating fittings for electrical machines, appliances or equipment, being fittings wholly of insulating material apart from any minor components of metal.”
13. It is not disputed that the impugned goods are insulating fittings for electrical machines but what is claimed is that these are not made wholly of insulating material since it is claimed that only the Epoxy Resins is the insulating material and to which plasticisers, fillers etc. have been added allegedly for the purpose of bringing down the cast. This argument is not tenable because as seen from Kirk-Othmer Encyclopaedia of Chemical Technology under heading ‘Insulation’ (Electric):
“Although the function of an insulator is to restrain current flow from a conductor to ground or to a lower potential, insulations often must provide mechanical support, protect the environmental degradation and transfer heat to the surrounding environment.”
In this behalf it is seen under the heading ‘Thermal Conductivity’, ibid.
“The addition of fillers (qv) to resins improves their thermal conductivity. Metallic fillers are best but detract from the electrical properties. Inorganic fillers whose particles are rodlike or leaflike improve the thermal conductivity more than spherical particles because of the improved contact area from particle to particle. High filler contents must be reached for significant effect since the relationship between filler content and thermal conductivity is not linear. Consideration must be given to the viscosity of the resin as fillers are added since this property is also filler dependent. Fillers having optimum particle-size distribution can substantially improve thermal properties with minimal influence on viscosity.”
From this it is seen that the fillers are also insulating materials in their own right.
14. The finding of the Order-in-Appeal that as the Epoxy Cast Components are not made of entirely Epoxy Resin and are not, therefore, classifiable under Heading 85.47 is thus not correct in the light of the wording of the Heading 85.47.
15. The learned Advocate had also referred to Note-A under heading 85.47 of the Explanatory Notes to HSN in support of his contentions that only the insulating fittings wholly made of Epoxy Resins would be classifiable under Heading 85.47.
16. This point is taken care of by the above discussion.
17. The assessees had also referred to the decision of the Tribunal in the case of CCE v. M/s. Denson Engineers - reported at 1990(11)LCX0072 Eq 1991 (052) ELT 0296 (Tri.) = 1991 (034) ECR 0097 (T). The ratio of the said decision is that mixing duty paid Epoxy Resin with fillers does not bring out any chemical change or new commercial product having a different name, character or use and hence, it does not amount to manufacture and; since it only makes (it Epoxy Resin) more usable, duty cannot be levied for a second time. They also cited the decision of the Tribunal in the case of Partap Rajasthan Copper Foils and Laminates Ltd. v. CCE - reported at 1989(08)LCX0073 Eq 1989 (044) ELT 0775 (T). The ratio of this case is that “insulating fittings are distinct from insulators”.
18. Both these rulings do not apply squarely to the facts of the present case which does not involve the question of levy of duty on the Epoxy Resin mixed with fillers but on the Cast Components made from such Epoxy Resin mixed with fillers etc. Secondly, it is not the Department’s case that ‘Insulating fittings” are to be assessed as “Insulators”.
19. According to the Ld. Adv. for the assessees in the first five appeals and the Department in the sixth appeal the product is a “Cable Jointing Kit” and that there were separate Indian Standards for insulating fittings and for cable jointing kits.
20. Ld. JDR pointed out that classification of ‘Cable Jointing Kit" made of insulating material has been decided by the Bombay High Court under Heading 85.47 in the case of X.L. Telecom Pvt. Ltd. v. UOI - reported at 1993 (047) ECR 0171 (Bombay).
21. In view of the said Bombay High court decision and for the reasons given above, the Epoxy Cast Components are rightly classifiable under Heading 85.47.
22. The second issue required to be decided is whether the clearance of the two units are to be clubbed for the purpose of eligibility to exemption under Notification No. 175/86-C.E. dated 1-3-1986. As seen from the Notification No. 175/86-C.E. the exemption is for excisable goods of the description specified in the Annexure to the Notification cleared “by a manufacturer from one or more factories”.
23. Vide clause a(i) a separate rate is prescribed where “manufacturer” avails of the Modvat Credit.
24. As the two units are admittedly owned by M/s. Yamuna Gases Ltd.; this is a case of clearances of excisable goods from one or more factories by or on behalf of the same manufacturer M/s. Yamuna Gases Ltd. Hence, the Tribunal decision in the case of M/s. Kinjal Electricals (P) Ltd. relied upon by the Ld. Adv. for the assessees in the five appeals and the Department in the sixth appeal will not apply to the facts of the present case.
25. The third point raised on behalf of the assessee in all these appeals is that the Asstt. Collector could not review his own Order as held by the Collector (Appeals) in the Orders which are subject matter of appeal in Appeal Nos. 1664-1665/91. As pointed out by Ld. JDR this point has been settled by various decisions including that of Delhi High Court in the case of Bawa Potteries v. UOI and Another - reported at 1980(09)LCX0008 Eq 1981 (008) ELT 0114 (Del.).
26. The last question to be considered is the date of effect of the changed classification. It has been claimed that as the classification of the Epoxy Cast Components under Heading 85.47 has been decided w.e.f. 13-1-1989, the value of clearances of such components prior to this date will not be includible as these were treated as exempted. In terms of the exemption II to Notification 175/86 only the clearances of excisable goods which are chargeable to nil rate of duty or are exempted from whole of the duty under any Notification are only to be excluded. If these goods were wrongly held as exempted, in the past, though the recovery of duty short levied may be affected due to the provisions of Section 11 A, their value can not be excluded, as in view of the Bombay High Court decision (supra) such goods were clearly dutiable.
27. The next point urged by the assessees in these appeals is that the demand in the RT. 12 is time barred as held by the Collector (Appeals) as there was no suppression etc. This point has been dealt with by the Additional Collector by his order in the sixth appeal No. E/3405/89-B. As pointed out by him that the assessee had never declared that the “Epoxy Cast Components” were in fact ‘insulating fittings’ and hence the longer period is rightly invoked.
28. Though the demands on the RT-12 as such may not be valid, as these are also covered by the show cause notice dated 13-9-1988 (which is the subject matter of the order passed by the Additional Collector and which is being dealt with in the sixth appeal) and as the show cause notice dated 13-9-1988 has been raised within five years, the same is within time.
29. The last issue is whether the availing of Modvat by one unit will disentitle the second unit from availing of the exemption under Notification No. 175/86-C.E. dated 1-3-1986. As pointed out for the purpose of clubbing of the clearances of two units, the Modvat facility and the availing of exemption are both with reference to clearances of the excisable goods from one or more factories by or on behalf of the Manufacturer. In view of this if one of the units belonging to a manufacturer avails of the Modvat facility, the second unit belonging to the same manufacturer viz Yamuna Gases, cannot avail of exemption under Notification No. 175/86-C.E. for the same goods particularly, if the combined clearances of the two units exceed the maximum prescribed unit, says Rs. 30 lacs in the present appeals.
32. In view of the foregoing, the various issues are decided as follows :
Epoxy Cast Components are classifiable under Heading 85.47 and the value of clearances of such components will be includible in the combined value of clearances of the two units for the purpose of Notification No. 175/86-C.E. and the units will not be eligible for the benefit of Notification No. 175/ 86-C.E. as their combined value of clearances including, inter alia, that of Epoxy Cast Components had exceeded Rs. 1.5 crores/2 crores respectively in the two financial years; and also because one of the two units had availed of MODVAT.
33. Hence, the first five appeals filed by the Department are allowed and the sixth appeal filed by the assessee is rejected. All the six appeals are disposed of accordingly.
Equivalent 1994 (70) ELT 628 (Tribunal)