Regal Industries Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. the applicants, m/s. regal industries ltd. filed the application for waiver of pre-deposit of duty demand of rs. 14,88,75, 634.00 and a penalty of rs. 14.89 crore. shri s. s. khurana, managing director of m/s. regal industries ltd., filed the application for waiver of penalty of rs. 1 lakh. in the impugned order, the commissioner of central excise held that coir, matteresses and cushions, manufactured by m/s.regal industries ltd., are not entitled for the exemption under notification 115/75-c.e., dated 30-4-1975 and confirmed duty by invoking extended period of limitation.2. ld. counsel, appearing on behalf of the applicants, submits that the applicants were manufacturing rubberised coir matteress and cushions.he submits that the notification no. 115/75-c.e. grants exemption to the goods, manufactured in the factory of coir industry. he submits that the c.b.e.c. vide its circular no. 13/14/86-cx. 1, dated 25-6-1986 clarified, after taking into consideration the manufacturing process, the composition of the goods of coir industry as provided under the coir industries act, 1953 and after consultation with the coir board that rubberised coir matteresses containing 55% coir are entitled for the benefit of notification 115/75-c.e. ld. counsel submits that the officers of the revenue visited the factory of the applicants and had drawn the samples of the products, in question, and sent to the central revenue laboratory, new delhi and as per the test report, the coir contents, in the goods, in question, were 55.5 per cent. he submits that according to this test report, the applicants are entitled for the benefit of notification 115/75 as per the trade notice of c.b.e.c. he submits that the commissioner of central excise brushed aside this test report without any cogent reason. the report was not relied upon only on the ground that demand is being made for the previous period and the applicants might have changed the manufacturing process. he submits that the commissioner of central excise, in the impugned order, heavily relied upon the opinion given by shri paramjeet singh, a chemical engineer in the department of chemical technology, punjab university.he submits that this opinion is general in nature as shri paramjeet singh, in his cross examination, admitted that he never visited the factory of the applicants and the samplers were never shown to him. he submits that even at the time of personal hearing, the applicants requested for sending the samples, taken into possession at the time of visit, to the department of chemical technology, punjab university, but this request was not acceded to by the adjudicating authority. he, further, submits that the commissioner of central excise also relied upon the papers submitted by the applicants to the bank and to the punjab industries department showing that the applicants were producing the products of rubber industry and not of coir industry. he submits that the documents, filed by the applicants, before the authorities other than the revenue authority, cannot be relied upon for raising the demand as held by the tribunal in the case of rishab refractories pvt.ltd. v. c.c.e. reported in 1996 (87) e.l.t. 93 (tribunal). he submits that the presence of machinery, dealing with the rubber products, is essential as the applicants are also using the rubber in the manufacture of the goods, in question. he, therefore, submits that mere presence of machinery, dealing with rubber products, cannot be made basis to come to the conclusion that the applicants were manufacturing the rubber products.3. he, further, submits that the extended period of limitation cannot be invoked as the applicants, at the time of start of their production, informed the revenue department in respect of their product vide letters dated 10-4-1991 and 6-4-1992.4. he, further, submits that now presently, the revenue department is not objecting to their claim under the notification 115/75 in respect of the product, in question. he, therefore, prays that the applicants be allowed. he also pleaded financial hardship and submits that the unit is under losses. for this, he relied upon the audit report of the applicant.5. ld. sdr, appearing on behalf of the revenue, submits that as per the opinion given by shri paramjeet singh and as per the documents submitted by the applicants with the industries department as well as with the bank, the production, in question, cannot be said to be product of coir industry. he, further, relied upon the definition of coir industry as given in the kothari's industrial directory of india 1992 (38th edition) and the wealth of india, a dictionary of indian raw materials and industrial products, delhi 1951. he submits that as per the definition of the coir industry in these books, the product in question, cannot be considered as a product of coir industry. he submits that the applicants were duly registered under the rubber act, 1947. therefore, they were manufacturing the goods relating to the rubber industry and not to the coir industry. he submits that the sample was drawn on 8-9-1995 from the goods seized at that time whereas the demand is made for the period prior to taking of the sample, therefore, the test report of chemical examiner is of no help to the applicants to show that the product, in question, prior to taking of the samples, were also containing the contents more than 55 per cent.he, further, relied upon the figures in respect of raw-material consumed in the manufacture of the goods, in question, as shown in the balance-sheet of the applicant. he submits that these figures show that the applicants used more rubber than the coir during the relevant period. he, further, submits that as the applicants were claiming the benefit of notification, it is for them to show that they were entitled for the exemption. for this, he relied upon the decisions in the case of c.c.e. v. parle exports (p) ltd. reported in 1988 (38) e.l.t. 741 (s.c.) and rajasthan spg. & wvg. mills ltd. reported in 1995 (77) e.l.t. 474 (s.c).6. he, further, submits that the contention of the applicants that they had informed the revenue department for their products through registered letters. he submits that there is a specific finding in the impugned order that no such letter were ever received by the revenue.he, further, points out that no proof of despatch of such letters was produced before the adjudicating authority. therefore, this plea is after thought. he, therefore, submits that as the applicants never informed the revenue department for manufacture of their product, the extended period of limitation is invokable in the matter. regarding financial hardship, he submits that there is sufficient income from sale of the goods. hence, the applicants cannot be claim financial hardship. he, therefore, prays that the applicants be dismissed.8. in this case, the issue is whether the rubberised coir matteresses and cushion, manufactured by the applicants are eligible for the benefit of notification no. 115/75-ce. the notification provides exemption to the goods manufactured by the coir industry. no definition of coir industry is provided under the notification or under the central excise act or rules. the c.b.e.c. issued a circular no.13/14/86 cx. 1, dated 25-6-1986 whereby the board clarified that rubberised coir mattresses, containing 55 per cent coir, 35 per cent latex and 10 per cent other chemicals, are entitled for the benefit of notification 115/75 as products of coir industry. this clarification was issued after consultation with the coir board. in the present case, at the time of visit by the revenue officers, the goods were seized and samples were drawn and as per the test report of samples by the chemical examiner, the contents of the coir was more than 55 per cent and the contents of latex were 33.8 per cent. the revenue is heavily relying upon the opinion given by shri paramjeet singh, chemical engineer. in his cross examination, shri paramjeet singh admitted that he never visited the factory of applicants and his opinion is given on the information supplied by the revenue department. no sample from the seized goods was ever shown to shri paramjeet singh, though it was requested by the applicants at the time of personal hearing. the report of chemical examiner was not relied upon by the revenue on the ground that demand is for the prior period and the applicants may have changed their manufacturing process. there is no evidence in support of this finding in respect of change in the manufacturing process. in view of the test report of chemical examiner and as per the board's circular (supra), we find that balance of convenience is in favour of the applicants. therefore, the applications are allowed unconditionally.the deposit of the duty and penalties is waived and recovery of the same is stayed during the pendency of the appeal. the appeals will come up in due course.

Judgment:
1. The applicants, M/s. Regal Industries Ltd. filed the application for waiver of pre-deposit of duty demand of Rs. 14,88,75, 634.00 and a penalty of Rs. 14.89 crore. Shri S. S. Khurana, Managing Director of M/s. Regal Industries Ltd., filed the application for waiver of penalty of Rs. 1 lakh. In the impugned order, the Commissioner of Central Excise held that coir, matteresses and cushions, manufactured by M/s.

Regal Industries Ltd., are not entitled for the exemption under notification 115/75-C.E., dated 30-4-1975 and confirmed duty by invoking extended period of limitation.

2. Ld. Counsel, appearing on behalf of the applicants, submits that the applicants were manufacturing rubberised coir matteress and cushions.

He submits that the Notification No. 115/75-C.E. grants exemption to the goods, manufactured in the factory of Coir Industry. He submits that the C.B.E.C. vide its Circular No. 13/14/86-CX. 1, dated 25-6-1986 clarified, after taking into consideration the manufacturing process, the composition of the goods of coir industry as provided under the Coir Industries Act, 1953 and after consultation with the Coir Board that rubberised coir matteresses containing 55% coir are entitled for the benefit of Notification 115/75-C.E. ld. Counsel submits that the officers of the Revenue visited the factory of the applicants and had drawn the samples of the products, in question, and sent to the Central Revenue Laboratory, New Delhi and as per the test report, the coir contents, in the goods, in question, were 55.5 per cent. He submits that according to this test report, the applicants are entitled for the benefit of Notification 115/75 as per the Trade Notice of C.B.E.C. He submits that the Commissioner of Central Excise brushed aside this test report without any cogent reason. The report was not relied upon only on the ground that demand is being made for the previous period and the applicants might have changed the manufacturing process. He submits that the Commissioner of Central Excise, in the impugned order, heavily relied upon the opinion given by Shri Paramjeet Singh, a chemical engineer in the department of Chemical Technology, Punjab University.

He submits that this opinion is general in nature as Shri Paramjeet Singh, in his cross examination, admitted that he never visited the factory of the applicants and the samplers were never shown to him. He submits that even at the time of personal hearing, the applicants requested for sending the samples, taken into possession at the time of visit, to the Department of Chemical Technology, Punjab University, but this request was not acceded to by the adjudicating authority. He, further, submits that the Commissioner of Central Excise also relied upon the papers submitted by the applicants to the Bank and to the Punjab Industries Department showing that the applicants were producing the products of rubber industry and not of coir industry. He submits that the documents, filed by the applicants, before the authorities other than the Revenue authority, cannot be relied upon for raising the demand as held by the Tribunal in the case of Rishab Refractories Pvt.

Ltd. v. C.C.E. reported in 1996 (87) E.L.T. 93 (Tribunal). He submits that the presence of machinery, dealing with the rubber products, is essential as the applicants are also using the rubber in the manufacture of the goods, in question. He, therefore, submits that mere presence of machinery, dealing with rubber products, cannot be made basis to come to the conclusion that the applicants were manufacturing the rubber products.

3. He, further, submits that the extended period of limitation cannot be invoked as the applicants, at the time of start of their production, informed the Revenue Department in respect of their product vide letters dated 10-4-1991 and 6-4-1992.

4. He, further, submits that now presently, the Revenue Department is not objecting to their claim under the Notification 115/75 in respect of the product, in question. He, therefore, prays that the applicants be allowed. He also pleaded financial hardship and submits that the unit is under losses. For this, he relied upon the audit report of the applicant.

5. Ld. SDR, appearing on behalf of the Revenue, submits that as per the opinion given by Shri Paramjeet Singh and as per the documents submitted by the applicants with the Industries Department as well as with the Bank, the production, in question, cannot be said to be product of coir industry. He, further, relied upon the definition of coir industry as given in the Kothari's Industrial Directory of India 1992 (38th Edition) and The Wealth of India, a dictionary of Indian Raw Materials and Industrial Products, Delhi 1951. He submits that as per the definition of the coir industry in these books, the product in question, cannot be considered as a product of coir industry. He submits that the applicants were duly registered under the Rubber Act, 1947. Therefore, they were manufacturing the goods relating to the rubber industry and not to the coir industry. He submits that the sample was drawn on 8-9-1995 from the goods seized at that time whereas the demand is made for the period prior to taking of the sample, therefore, the test report of Chemical Examiner is of no help to the applicants to show that the product, in question, prior to taking of the samples, were also containing the contents more than 55 per cent.

He, further, relied upon the figures in respect of raw-material consumed in the manufacture of the goods, in question, as shown in the balance-sheet of the applicant. He submits that these figures show that the applicants used more rubber than the coir during the relevant period. He, further, submits that as the applicants were claiming the benefit of notification, it is for them to show that they were entitled for the exemption. For this, he relied upon the decisions in the case of C.C.E. v. Parle Exports (P) Ltd. reported in 1988 (38) E.L.T. 741 (S.C.) and Rajasthan Spg. & Wvg. Mills Ltd. reported in 1995 (77) E.L.T. 474 (S.C).

6. He, further, submits that the contention of the applicants that they had informed the Revenue Department for their products through registered letters. He submits that there is a specific finding in the impugned order that no such letter were ever received by the Revenue.

He, further, points out that no proof of despatch of such letters was produced before the adjudicating authority. Therefore, this plea is after thought. He, therefore, submits that as the applicants never informed the Revenue Department for manufacture of their product, the extended period of limitation is invokable in the matter. Regarding financial hardship, he submits that there is sufficient income from sale of the goods. Hence, the applicants cannot be claim financial hardship. He, therefore, prays that the applicants be dismissed.

8. In this case, the issue is whether the rubberised coir matteresses and cushion, manufactured by the applicants are eligible for the benefit of Notification No. 115/75-CE. The notification provides exemption to the goods manufactured by the coir industry. No definition of coir industry is provided under the notification or under the Central Excise Act or Rules. The C.B.E.C. issued a Circular No.13/14/86 CX. 1, dated 25-6-1986 whereby the Board clarified that rubberised coir mattresses, containing 55 per cent coir, 35 per cent latex and 10 per cent other chemicals, are entitled for the benefit of Notification 115/75 as products of coir industry. This clarification was issued after consultation with the Coir Board. In the present case, at the time of visit by the Revenue officers, the goods were seized and samples were drawn and as per the test report of samples by the Chemical Examiner, the contents of the coir was more than 55 per cent and the contents of latex were 33.8 per cent. The Revenue is heavily relying upon the opinion given by Shri Paramjeet Singh, Chemical Engineer. In his cross examination, Shri Paramjeet Singh admitted that he never visited the factory of applicants and his opinion is given on the information supplied by the Revenue department. No sample from the seized goods was ever shown to Shri Paramjeet Singh, though it was requested by the applicants at the time of personal hearing. The report of chemical examiner was not relied upon by the Revenue on the ground that demand is for the prior period and the applicants may have changed their manufacturing process. There is no evidence in support of this finding in respect of change in the manufacturing process. In view of the test report of Chemical Examiner and as per the Board's circular (supra), we find that balance of convenience is in favour of the applicants. Therefore, the applications are allowed unconditionally.

The deposit of the duty and penalties is waived and recovery of the same is stayed during the pendency of the appeal. The appeals will come up in due course.