Judgment:
1. This appeal has been filed by the manufacturer of "fibre glass reinforced sheet moulding compound and Dough moulding compounds" which were approved in the classification list concerned and granted benefit of Notification No. 52/86 as amended. This notification granted benefit to goods "other than those impregnated, coated, covered or laminated with plastics". Appellants were clearing goods as per this approved classification list.
2. The Commissioner has filed a review application under Section 35E(2) of the Central Excises and Salt Act, 1944 vide his review order No.46/89 directing that an appeal was required to be filed before the Commissioner of Central Excise (Appeals), Madras within three months of this order as he found that the decision dated 15-3-1989 of AC classifying the subject goods for benefit of the Notification No. 52/86 was not correct on the following reasons :- "3. The concessional rate of 20% is prescribed under Notification No. 52/86, dated 10-2-1986 applicable only to those goods other than goods impregnated, coated, covered or laminated with plastics, since the items described under Sl. No. 67 of the said classification list were to be treated as goods impregnated, coated, covered or laminated with plastics, the concessional rate of duty under Notification No. 53/86 as claimed and approved is not applicable to the said products. The effective rate of duty applicable to the said item is @ 35% ADV. (Tariff rate) with effect from 1-3-1989".
3. The Commissioner (Appeals) after considering the submissions : to the following findings :- "7. I have considered the appeal filed by the Department, submissions made by the respondents both in the memorandum of cross-objections and those made at the time of personal hearing by Shri Venkatasubramniam, Advocate. I cannot accept the contention made by the respondents that the Review order passed by the Collector of Central Excise, Cochin is not in order as the same issue has been decided separately by Assistant Collector of Central Excise, Cannanore. The Review Order is based on the classification list approved by Assistant Collector of Central Excise. Even though the Assistant Collector of Central Excise, Cannanore has confirmed a demand based on the same grounds as mentioned in the Review Order, the order does not specifically provide for modifying the classification list already approved by the same authority. On the other hand, the Review Order is for modifying the classification list Nos. 14/88-89 approved by the Assistant Collector of Central Excise and therefore constitutes separate proceedings initiated by the Collector of Central Excise, on the basis of powers vested in him under Section 35E(2) of the Central Excise and Salt Act.
8. The main issue involved in this case is whether the Fibre Glass Reinforced Sheet Moulding Compound and Dough Moulding Compounds are eligible to the exemption contained in Notification No. 52/86. The said exemption is available to glass fabrics other than fabrics impregnated, coated, covered or laminated with plastics or varnish, I have considered the entire process of manufacture of the said products as narrated in the write-up furnished by the respondents.
At the outset, I must observe that the write up furnished by the respondents after the hearing is not exactly similar to that furnished earlier to the Department by the Technical Manager, R & D in the respondent's plant. The latter had in his write-up clearly mentioned that complete impregnation of the strands of glass rovings with the resin occurs in the squeezing rolls and that the impregnated mat is then rolled on a spool and subject to a maturing cycle before they are used for making mouldings. On the other hand, the respondents have in their write-up furnished after the hearing contended that the glass rovings cannot be impregnated with resin.
The report of the Chemical Examiner also confirms the fact that the glass rovings are not impregnated by the resin solution. However, it is evident from the process of manufacture of the said products that the strands of glass rovings are dropped over the surface of a polyethylene film which is coated with a layer of resin solution and that another polyethylene film with a similar coating of resin system joins the film containing strands of glass rovings and that the glass fibre strands get sandwiched between the resin layers. The glass fibre strands remain bound together even when the polyethylene film is removed at a later stage. It can therefore, be said that the glass fibre strands are coated and covered by plastic which enable them to be firmly bound together. As already stated, the exemption contained in Notification No. 52/86 is not available to glass fabrics which are impregnated, coated, covered or laminated with plastics. The products manufactured by the respondents viz. Fibre Glass Reinforced Sheet Moulding Compound and Dough Moulding Compounds are not eligible for the said exemption as the glass fibres are coated and covered by plastics as is evident from the process of manufacture." (a) the Commissioner has failed to appreciate the fact that conclusions arrived at by him are contrary to the facts of the product being manufactured in their case, (b) the Commissioner should have appreciated that no fresh and new reasons were done by the department and when there was no change in the process of manufacture since approval of classification list, there was no ground to review a classification list approved on 15-3-1989, (c) the Commissioner (Appeals) should have appreciated that disputed goods are classifiable under heading 7014.00 and there was no dispute as to the said classification and subject review order made solely on the ground of an audit objection which had not been upheld by him as change of opinion do not justify a review as held in J.K. Synthetics case reported in 1981 (8) E.L.T. 328 by the Delhi High Court, and (d) the Commissioner has failed to appreciate the Board's letter No. F. No. 132/8/87-CX.4, dated 8-2-1988 and the Trade Notice No. 21/88 C.E., dated 24-2-1988 issued by Bombay-I, Collectorate.
5. We have heard ld. Advocate, Shri J. Narayanaswamy, for the appellants and Shri M. Murugan, ld. DR for the department and after considering the submissions find - (a) The Commissioner (appeals) has recorded the following in his findings: "...The report of the Chemical Examiner also confirms the fact that the glass rovings are not impregnated by the resin solution...." This finding of Commissioner (Appeals) has not been contested by Revenue. Therefore, we do not find any force in the findings arrived at by the Commissioner (Appeals) based on some report of R & D Technical Manager to which appellants were not put to notice by the Commissioner (Appeals).
(b) We also find that review order of the Commissioner which had ordered review of an approved classification list under Section 35E(2) does not give any reasons as to why the goods being manufactured by the present appellants are considered to be "impregnated, coated, covered or laminated with plastics". This review does not rely upon the R & D Manager's technical report obtained by Commissioner (Appeals). It is therefore to be held that Commissioner (Appeals) has traversed beyond the grounds taken in the review order by Commissioner under Section 35E(2) of the Central Excises and Salt Act, 1944 which he could not have done without putting the appellants to a proper notice. The order, therefore, cannot be sustained since there are no reasons given in the Commissioner's original order of review of the classification list.
We are in agreement with the grounds taken in appeal that review of an approved classification list is not called for on a mere change of opinion and the Commissioner was required to come to a conclusion in this case that glass fibres are impregnated, coated, covered with plastics before they are denied benefit of the notification. No such facts or evidence has been brought on record by the Commissioner in his grounds. Therefore, we have no reasons to support the order of Commissioner (Appeals).
6. In view of our findings, we set aside the order of Commissioner (Appeals) and allow the appeal with consequential benefit, if any, as per law.