Precision Stationery Pvt. Ltd. vs Collector Of Central Excise, Indore>1997(07)LCX0153

1997(07)LCX0153

IN THE CEGAT, COURT NO. III, NEW DELHI

Shri S.K. Bhatnagar, Vice President and Ms. Jyoti Balasundaram,

Member (J)

PRECISION STATIONERY (P) LTD.

Versus

COLLECTOR OF CENTRAL EXCISE, INDORE

Final Order No. 361/97-C, dated 3-7-1997 in Appeal No. E/63/92-C

REPRESENTED BY : None for the Appellant.

Shri J.M. Sharma, JDR, for the Respondents.

[Order per : S.K. Bhatnagar, Vice President]. This is an appeal against the order of Additional Collector, Indore, dated 23-9-1991/1-10-1991.

2. The appellants have sent a letter dated 15-12-1996 to decide the matter on merits in their absence.

3. We have perused the records and heard learned DR.

4. Learned DR stated that in this case, the main issue involved is the determination of the classification of the appellants’ product. They purchase paper from the market and subject it to processing and converting it into continuous computer stationery, which was considered by the Department initially as classifiable under Heading 4823.90. However, the Board had occasion to examine the matter and issue a Circular No. 11/91-Cx.4, dated 15-10-1991 by which the issue regarding the dispute regarding classification has since been resolved. The rival entries were 48.20 and 48.23 and the Board has held it to be classifiable under 48.20 and eligible for exemption under Notification 43/86.

5. Therefore, in so far as the classification dispute is concerned, it stands settled; however, a question survives as to whether the appellant was liable to imposition of penalty.

6. It was his submission that although the appellant has taken a plea before the Departmental authorities that he was not manufacturing computer stationery, but merely purchasing paper from the market and punching holes and printing logo and otherwise making it ready for use in the computers as per the customers’ specifications, it was the Dept.’s contention that these very acts or activity or converting the plain paper into different commodity viz. continuous computer stationery. Therefore, the appellant should have in any case filed a declaration or taken out a licence and followed the prescribed Central Excise procedure irrespective of the dispute on classification and eligibility to exemption or otherwise.

7. We have considered the above submissions. We observe that the appellant has in the memorandum of appeal merely pleaded that they were engaged in printing computer stationery like manifold business forms, interleaved carbon sets, etc., falling under Chapter 48.20 and these items were exempt from payment of excise duty attracting nil rate in the tariff itself. A letter was issued by the Superintendent asking them to take out a Licence. They had thereupon replied stating that they were not engaged in any manufacturing activity, but were simply purchasing duty paid paper and printing the same. This was done on 24-7-1990. Thereafter nothing was communicated to the appellants.

8. Thereafter, the Nagpur Collectorate issued a Circular No. 1/C-H/48/8-1/88-C.Ex., dated 21-11-1990 stating that the computer stationery would not be covered under Heading 48.20 but more appropriately classifiable under 48.23. On seeing the above, the appellants applied for Licence in the month of December, 1990. But surprisingly, a squad of Preventive Officers visited the office premises and obtained the figures and also obtained statements and subsequently a show cause notice was issued. They replied to the show cause notice to the Additional Collector who while decided the case was satisfied that the Department as well as all the printers had doubt with regard to the classification and, therefore, limited the confirmation of demand for a period of six months only. As regards the claim for Modvat, he has held that it would be looked into by the jurisdictional Assistant Collector.

He has further held that in the instant case, though there is no mens rea, but penalty is imposable and imposed a penalty accordingly. It was their contention that after the Additional Collector has passed the above order, the Board had withdrawn the earlier Circular No. 39/90-Cx-4, dated 15-10-1991 and issued a new Circular No. 61/32/91-Cx-4 and confirmed the classification of the interleaved carbon sets, and continuous stationery for computer under Chapter Heading No. 48.20. Thus it will be seen that a confusion was caused by the Board and the Board itself has withdrawn the aforesaid Circular and in the new Circular clarified the position and therefore, their contention stands fortified and the classification under Heading 4823.90 was basically wrong. It was also their contention that once the Additional Collector accepted that there was a doubt in the minds of both i.e. manufacturers as well as the Department regarding classification and there was no mens rea, imposition of penalty was bad in law and was not maintainable. The impugned order was even otherwise bad in law.

9. They have pleaded that since there was no obligation on their part to pay duty, no penalty could be imposed and for imposing any penalty, mens rea and intention to evade payment of duty must be proved and since there is no mens rea, therefore, the order of penalty deserves to be set aside.

10. We have considered the above submissions. We observe that while the appellants had intially questioned the excisability before the Department, they appear to have given it up at the appeal stage as evident from the contents of the appeal memorandum, and the main dispute related to the classification of the product and even this dispute regarding 48.20 vs. 48.23 now stands resolved between the parties in view of the Ministry’s Circular 11/91-CX. 4, dated 15-10-1991 which has been referred to by the learned DR on the basis of the Assistant Collector’s communication to him and filed before us.

11. We also observe that Heading 48.20 covers inter alia, interleaved carbon sets and other articles of stationery, the Department has also very fairly accepted that while the product was classifiable under 48.20 it was exempt under Notification 43/86. Therefore, no further orders are required on these aspects and the only issue which arises for our consideration is as to whether in these circumstances, the penalty was justified.

12. In this respect, we find that the appellants’ submission have strong force and the Additional Collector himself has accepted that this was a period in which both sides entertained doubt and that there was no mens rea on the part of the appellants; and we feel that once this position is accepted, no penalty was warranted. We, therefore, set aside the Collector’s order, uphold the classification under 48.20 and extend the benefit of Notification 43/86 taking into consideration, inter alia, the Board’s own Circular. We set aside both the demand as well as penalty. The appeal is accepted accordingly.

Equivalent 1997 (94) ELT 389 (Tribunal)