1. This is an appeal filed against the order of Collector of Central Excise, Calcutta. The point for decision in the appeal is the levy of cess on the jute yarn captively consumed in the appellant's factory for the manufacture of other jute products, namely, Hessian, Sacking, etc.
These products, manufactured out of jute yarn paid cess under the Jute Manufactures Cess Rules 1976 read with Section 9 of the Industries (Development & Regulation) Act, 1951.
2. The plea of the appellants is that the yarn so consumed was an intermediate product and inasmuch as the finished product in which these were used discharged the excess liability, no cess could be demanded in respect of yarn captively consumed. The demands were raised by the issue of 12 show cause notices and confirmed by a single order passed by the original adjudicating authority. The findings of the original adjudicating authority, while confirming the demands are as under: "The assessee again pleaded that if cess is charged on jute yarn and twine which is being used captively in the manufacture of Jute Products, there will be a double taxation which is also bad in law in view of the Section 3 of Central Excise and Salt Act, 1944 read with Rules 9,49 and 173 G(1) of Central Excise Rules, 1944 which are the basis to levy or realisation of cess under the Industries (Development & Regulation) Act, 1951, and rules made thereunder. It is known to all that jute yarn and twine distinctly separated from Jute Manufactures and have different identity in the trade parlance.
As such cess is leviable separately on jute yarn or twine and jute fabrics. Hence levy of cess on jute yarn and twine do not cause double taxation if it is levied on jute manufacturers. Further Notification No. 20/82, dated 20.2.1982 clearly states that use of finished goods for the manufacture of other goods within the factory, would tentamount to removal for the purpose of charging Central Excise duty etc. This Notification has been given a retrospective effect by Clause 51 of Finance Bill of 1982 now enacted into the Finance Act, 1982.
The exemption Notification for Central Excise duty on the captive consumption of jute yarn or twine has no effect on the collection of cess on jute yarn/twine used captively, since collection of cess is governed and regulated by the Jute Manufactures Cess Rules, 1976 issued under Section 9 of the Industries (Development & Regulation) Act, 1951. The position has further been confirmed with the promulgation of C.E. Laws (Amendment & Validation) Ordinance 1982 which subsequently became an Act." 3. The appellants filed an appeal against the order of the adjudicating authority before the Collector of Appeals. The findings of the Collector of Appeals on the pleas made are as under: "In view of the submission that the demands confirmed in the impugned order includes jute yarn removed under Bond to their other unit, I set aside the order of the Assistant Collector and remand the case back to him for fresh decision according to law. While deciding afresh, the jute yarn which were removed to their sister factories under Bond should be excluded and also the jute yarn which is converted into twine/sacking and ultimately removed on payment of cess leviable on the twine/sacking should also be excluded." 4. The learned consultant of the appellants pleaded that some of the demands raised were time-barred while the others were within time. The list of the various demands showing the dates of show cause notices and the period for which demands have been raised indicates that a major portion of the demands raised are after six months. He stated that the issue of time-bar was not raised before the original adjudicating authority and was also not specifically raised before the Collector (Appeals), but the same has been taken as a ground of appeal in the appeal before us. He pleaded that the findings of the Collector (Appeals) are not fully understandable, and he has merely demanded the matter for denovo consideration, and ordered the exclusion of the yarn for the purpose of levy of cess which has been captively consumed. He pleaded that there was no scope for sending the case back to the Assistant Collector for de novo adjudication. He pleaded that no cess is leviable on the yarn captively consumed. He pleaded for the consideration of the time bar also in respect of demands raised.
5. The learned JDR stated that the department has filed cross objections to the appeal and pleaded that the findings of the Collector regarding exclusion of yarn captively consumed for the purposes the levy of cess for other products was not correct in law. He pointed out that these findings are against the decision of the Tribunal in the case of . Mahabir Jute Mills Ltd. 1984 (16) ELT 477. He pleaded that the yarn which is captively consumed was leviable to cess. He pointed out that the point regarding removal of yarn under bond was not taken up before the original adjudication authority and this only finds mention in the order in appeal. He pleaded that the Collector (Appeals) erred in going into this ground. On the question of plea of time bar, he pleaded that he has no objection it be considered being a legal plea, if the matter is ordered to be examined de novo by the Assistant Collector in the light of the pleas of the department.
6. We observe that the question of levy cess in respect of yarn captively consumed was decided by the Tribunal in case of Chitavalasah Jute Mills v. Collector of Central Excise, Guntur and findings of the Tribunal in this regard are as under: "One of the contentions of the appellants is that the third proviso to Central Excise Rule 9 would apply to the present case and would achieve the result of exempting jute manufactures taken into captive consumption for manufacture of other jute manufactures from payment of cess under the Cess Act. We have examined this contention with reference to the provisions of Rule 9. The Rule provides that no excisable goods shall be removed from the place of production inter alia for the manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid in the manner prescribed. The Rule is subject to several provisos. The third proviso inserted by Central Excise Notification No. 187/83, dated 9.7.1983 is relevant for the present purpose. It reads as follows - Provided also that such goods may be removed without payment of duty leviable thereon, if they are consumed or utilised in the place where such goods are produced or manufactured or any premises appurtent thereto so specified under this Sub-rule, either as raw material or as component parts for the manufacture of any other commodity which - (i) is excisable goods specified by the Central Govt. by Notification under Sub-rule (1) of Rule 56A, (ii) falls under the same item number in the First Schedule to the Act as such goods so consumed or utilised fall under, and (iii) is neither exempt from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty.
Several things have to be noted in connection with the applicability or otherwise of Rule 9 read with the third proviso to the facts of the present case. The proviso stipulates 3 conditions. The first is that the finished commodity (this expression is being used by us to connote the final product for the manufacture of which excisable goods are permitted to be used either as raw material or component parts) must be excisable goods specified by the Govt. by notification under Sub-rule (1) of Rule 56A. Jute, twist, yarn, thread, ropes and twine all sorts and jute manufactures (these fall under item Nos. 18D and 22A respectively of the CET) are specified in the list of goods to which Rule 56A applies. The sec6nd condition is that the finished product should fall under the same item number in the CET as the excisable goods consumed or utilised in their manufacture fall. It may be seen that jute twist, yarn, thread, ropes and twine all sorts on the one hand and jute manufactures on the other, fall under different items and not under the same item of the said CET. Insofar as the Schedule to the Cess Act is concerned, jute yarn and twine fall under SI. No. 4 whereas sacking falls under SI. No. 3. Thirdly, the finished product should neither be exempted from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty. This condition may be said to be satisfied in the present case.
In view of the facts that jute yarn on the one hand and sacking manufactured out of such jute yarn captively consumed within the appellant's factory fall under different SI. Nos. or items of the Schedule under the Cess Act, the requirement of the third proviso to Rule 9 that the finished product should fall under the same item number as the excisable goods consumed or utilised in their manufacture fall is not fulfilled. Therefore, the demand for cess on yarn captively consumed by the appellants in their factory for the manufacture of sacking during the period prior to 1.10.1984 was correctly made." 7. We find that the appellants have not distinguished the facts of their case from the facts set out in the above cited orders of the Tribunal. Following with respect the ratio of the decision above, we hold that the yarn which is used in the manufacture of twine which is ultimately cleared on payment of cess from the factory, is not required to pay any cess. However, the yarn which is used captively for the manufacture of other jute products is required to pay the cess.
8. So far as the question of time-bar is concerned we observe that the facts regarding the same have not gone into and also there has been no examination as to whether longer time period could be invoked under Rule 11A(1)[Section 11A(1)], in the facts and circumstances of the case.
9. We observe from the order of the Collector that he has for the first time, taken note that some of the yarn had been cleared under bond. The facts and circumstances in regard to that were not dealt with by the Original authority and no ground has been laid by the Collector (Appeals) in his order in this regard. Even before us, no facts in this regard have been placed. The Collector (Appeals) order in this regard without placing any basis on facts is, therefore, not a proper order and this aspect has also to be gone into afresh by the lower authority.
10. In view of this, we hold that in regard to the above two aspects, the matter is required to be examined afresh by the lower authority.
We, therefore, set aside the order of the Collector (Appeals) and remand the case to the Collector (Appeals) for de novo decision in the light of the above, after giving an opportunity of hearing to the appellants.
11. The Jurisdictional Collector has filed a Cross Objection and has urged as under- "The jute yarn and jute products are specified under Item No. 23 of the Schedule of Industries (Development & Regulation) Act, 1951 but this has no application for classification of the goods under Central Excise Tariff. In fact jute yarn is classified under Tariff Item 18D of the Central Excise Tariff whereas jute products are classified under Tariff Item 22A of the Central Excise Tariff. Thus the contention of the appellant that jute yarn and jute products are classifiable under same tariff item is not correct.
The Collector (Appeals) in his order-in-appeal passed in the instant case failed to appreciate the impact of the orders issued by the Government imposing the levy of cess vis-a-vis the Notification No. 20/82, dated 20.2.1982 amending the Rules 9 and 49 of the Central Excise Rules, 1944. There is nothing contrary to the provisions of the law in the order (original) warranting de novo adjudication. In fact the Collector (Appeals) has admitted in his order-in-appeal No. 176/Cal/84, dated 19.1.1984 passed in an identical case of . Naffar Chandra Jute Mills Ltd. the propriety of levy of cess on the jute yarns captively consumed under the perview of Rule 9 and 49 of the Central Excise Rules, 1944. Therefore, the order-in-appeal passed by him in the instant case is contradictory one".
12. In view of the findings above in para 7, the Cross objection also stands disposed of in the terms as set out in para 7.