| SooperKanoon Citation | sooperkanoon.com/10990 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu |
| Decided On | Mar-31-1997 |
| Reported in | (1998)(102)ELT677Tri(Chennai) |
| Appellant | Collector of Central Excise |
| Respondent | K.L.J. Plastics Ltd. |
The issue in the appeal filed by the revenue relates to the demand of duty which has been held by the learned lower authority as barred by limitation. The brief facts of the case are that the appellants manufactured HDPE Bags in the factory by use of circular looms at the anterior stage of the manufacture of bags. The fabric in a circular form is manufactured at the circular looms and the same, thereafter was stitched into bags without the use of power as seen from the records.
The respondents paid duty in respect of the same until 31-5-1987.
However, subsequently, they filed another classification list on 3-6-1987 wherein they claimed the benefit of Notification 65/87 under which the goods manufactured without the aid of power are exempt from payment of duty. This Classification list was approved by the authorities. Subsequently, the appellants filed another classification list on 3-7-1987 showing the same to be effective from 7-1-1987 and in which they claimed benefit of Notification 223/86. This classification filed became a subject matter of dispute between the assessee and the Department inasmuch as the appellant's claim for benefit of Notification 223/86 was not allowed. The denial of this concession became a subject matter of appeal before the Collector (Appeals), who confirmed the denial and the issue is now pending before the Tribunal in another proceedings. While the issue was so pending, another show cause notice came to be issued by the Collector dated 15-3-1989 under which it has been stated that the appellants were required to pay duty for the period 1-6-1987 to 1-7-1988, and the goods had been cleared without payment of duty despite the denial of the benefit of Notification 223/86, suppression has been alleged against the respondents. The learned Collector took note of the various proceedings which had gone on before the authorities below and dropped the proceedings for the reasons that no suppression could be alleged against the appellants and the demands, therefore, were barred by limitation.
2. The learned JDR for the Department has pleaded that the respondents had been denied the benefit of Notification 223/86 and, therefore, the respondents were duty bound to pay duty after the classification list for the benefit of Notification was not approved and inasmuch as the respondents removed the goods without payment of duty against the direction of the Department, the respondents can be said to have suppressed the facts and that they had been actuated by mala fide in clearing the goods without payment of duty.
(a) The Collector has dropped the proceedings. While doing so he has stated that two different proceedings are pending, one before the Tribunal and the other before the Assistant Collector. The reasons advanced by the Collector do not appear to be correct. If the matter was pending before the Tribunal, he should have awaited the outcome instead of dropping the proceedings.
(b) Further as could be seen from the Show Cause Notice the same was issued in continuation of the Order of Collector (Appeals). The Board had directed the Collector that the cases covering under Rule 9(2) shall also be adjudicated by the Collector. Proviso to Section 11A stated that the same could be invoked in the event of "contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty". In spite of the approval of the classification list the party had not paid the duty. Assessment in RT 12 return was also completed after approval of the classification list. The Collector (Appeals) in the first instant has upheld the classification.
(c) The de novo proceedings were for a specific finding i.e. whether or not the assessments were provisional. The instant Order-in-Original is silent about this.
(d) The demand having been raised by the Range Superintendent while completing the assessment memorandum on the RT 12's under Rule 173-I ibid, the demand was not time barred under Section 11A of the Act, as decided by the Bombay High Court in the matter of M/s. Swan Mills Ltd. v. UOI 1989 (44) E.L.T. 601 (Bombay) as under: "Section 11A comes into picture for assessing duties only in situation mentioned therein and is independent of the provisions of Rule 173-I when the assessment orders are passed under Rule 173-I, they are done so after holding an inquiry. These orders are appealable under Chapter VI A of the Act. If the said orders are not appealed against or having been appealed against, have became final, the amount due under them has to be recovered under the provisions of Section 11 of the Act, which contain provisions for executing the orders. Section 11A is not the executing section. In fact the assessment orders passed under Section 11A (which are independent of orders passed under Rule 173-I) have also to be executed ultimately under the provisions of Section 11 of the Act".
4. The learned JDR for the Department has pleaded that inasmuch as the question of classification was still pending before the Tribunal and in another proceedings the matter had been remanded to the Original Authority to ascertain the status of the assessments for the purpose of determining whether the goods had been cleared under provisional duty assessment procedure or otherwise for the purpose of duty demand. He had pleaded that in such a situation the Collector should not have issued a separate show cause notice for demanding duty and no order therefore should have been passed. He has pleaded that the Department's interest should be protected in case this order is allowed to stand.
5. The learned advocate for the respondents has pleaded that while the issue before the authorities in regard to the benefit of Notification 223/86 was still pending determination, the appellants had filed a classification list on 3-6-1987 in which in respect of the very same goods the appellants had claimed the benefit of Notification 65/87 which exempted the goods which were manufactured without the aid of power from payment of duty. He has pleaded that this classification list filed by them was approved by the jurisdictional Assistant Collector and the appellants, therefore, proceeded to clear the goods without payment of duty in the relevant period. He has pleaded that the appellants filed the necessary RT 12 Returns and, therefore, the question of any suppression on their part in this regard does not arise. In this connection, he has also referred to the various clarifications which were issued by the Departmental authorities in regard to the availability of benefit of Notification No. 65/87 in a case where the fabric was manufactured on the circular looms with the aid of power, while the bags were subsequently manufactured out of this fabric without the aid of power. He has referred us to the letter addressed by the Assistant Collector (Technical) of the Hyderabad Collectorate dated 7-4-1987 vide C. No. V/63/30/1/87-MP addressed to All India Flat Tape Manufacturers' Association, Secunderabad. The relevant portion of this letter has been reproduced below for convenience : "If power is used in the processes like cutting of fabric, stiching or printing on the fabric/sack, whether in the same factory of manufacture of sacks or outside, then exemption under Notification 65/87 will not be available. However, if power is utilised in the manufacture of fabrics required for manufacture of the HDPE Sacks then on account of such use of power the exemption cannot be denied unless power is used in some processes or other during courses of manufacture of sacks, within the factory of manufacture or outside".
6. He has pleaded that at the relevant time, the view held by the assessees as well as the authorities was that so long as the bags were manufactured without the aid of power, notwithstanding the fact that the circular fabric out of which the same were manufactured was produced by use of power, the benefit of Notification 65/87 was available. In this background, he had pleaded that the appellants filed the classification list and also effected their clearances. He has pleaded that in the show cause notice the learned Collector has taken note of the fact of the benefit of Notification 65/87 which had been claimed by them, but he has not drawn any adverse inference against the appellants for having availed the benefit of Notification 65/87. The relevant portion of the show cause notice in this regard is reproduced below :- Since stitching is done manually without the aid of power, the assessees claimed the sacks as products manufactured without the aid of power, and hence to be assessed at nil rate of duty as per Notification No. 65/87-C.E., dated 1-3-1987. This issue was examined further as to whether or not any power is used in the factory producing HDPE woven sacks, in one or more processes, in the course of manufacture of HDPE sacks entitling them to the exemption under Notification No. 65/87. The processes such as stitching into sacks and printing them are continuous and the actual production of sacks takes place on circular looms. In view of the proviso to Notification No. 223/86 as amended by Notification No. 453/86-C.E., dated 20-11-1986 the assessees are not eligible for any exemption.
They cannot also claim for exemption in terms of Notification No. 65/87-C.E, dated 1-3-1987 claiming that stitching or printing are the processes continuous, carried on, without the aid of power.
7. He has, therefore, pleaded the longer period of limitation would not have been invoked against the appellants for whatever reasons.
8. We have considered the pleas made by both the sides. The short point that falls for consideration is whether there was any intention on the part of the respondents to suppress or hold back any information with the intention to evade payment of duty. We observe that the respondents had been clearing the goods on payment of duty with effect from 31-5-1987. Having become wiser, they wanted to claim the benefit of Notification 223/86 and filed a classification list subsequently on 3-7-1987 for claiming the benefit of the Notification with effect from 7-1-1987. This benefit apparently was not allowed to the respondents.
The matter in regard to the same is still pending for final decision.
However, in the mean time, the respondents filed another classification list and claimed the benefit of Notification 65/87 on 3-6-1987 and they started clearing the goods without payment of any duty during the period 1-6-1987 to 29-2-1988, the relevant period of the demand in this case. The copy of the classification list filed by the respondents has been perused by the JDR and us and we find that the competent authority has accorded approval to the appellants for clearing of the HDPE Sacks without payment of duty under exemption Notification 65/87. The learned JDR for the Department does not dispute this position. This approval granted has not been upset by any subsequent proceedings and we have specifically asked the learned JDR in this regard. He has not been able to show us that in any subsequent proceedings. This has been set aside or has been challenged by the Department in any way. The respondents, therefore, cleared their goods without payment of duty apparently based on this approval granted. There is no averment from the revenue that the appellants had not filed their RT12 Returns showing the basis of the clearance and it is to be presumed that the RT 12 Returns had been filed by the respondents from time to time. The Department, therefore, in this background can be taken to have been aware all along about the clearance of the goods by the respondents in the exemption notification.
9. As it is, even otherwise the proceedings drawn in the context of Notification 223/86 were within the purview of the authorities and in case the respondents were clearing the goods without payment of duty, the same could not have escaped their notice and their RT 12 Returns would reflect them. Even in the show cause notice, the learned Collector has merely referred to the fact of the claim of the respondents for the benefit of Notification 65/87. There is nothing to show that this approval which had been granted to the appellants for the benefit of Notification 65/87 was in any way obtained fraudulently or by suppression of any facts. All that has been stated is that the respondents' claimed the benefit of this notification and also that the same would not be available to them. Just because an authority postulates a view that the benefit is not available, that by itself cannot be construed as an allegation in any way that the respondents had done anything fraudulent or had suppressed any facts. In the above view of the matter, we are of the view that the Department has failed to make out any case of suppression of facts with the intention to evade payment of duty and, therefore, the lower authorities order in this regard has to be upheld. The next point of the appellant Collector is that the matter was still pending in the context of the benefit of Notification 223/87 and for that reasons, therefore, the Collector could not have drawn another proceedings, We observe, by reasons of drawing these proceedings, the other proceedings cannot get vitiated and we make it clear that those proceedings will be decided on their own merits and this order of the Collector will not in any way impinge on the decision that will be arrived at those proceedings in the context of Notification No. 223/86. With these observations, we dismiss the appeal of the revenue.