Spl Industries Ltd., Shri H.R. Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. the issues involved in these four appeals are whether the central excise duty was payable by m/s. spl industries ltd. under section 3a of the central excise act as claimed by them or under section 3 of the act as confirmed by the commissioner under the impugned order and whether penalties under section 11ac of the act read with rules 9 (2) and 173q of the central excise rules on the appellant company and under rule 209a on the other appellants are imposable.2. shri m. charidrashekharan, learned senior advocate, submitted that the appellant company is engaged in the processing of cotton and man made fabrics; that with effect from 16.12.1998, they started paying duty under the "compounded levy scheme" under notification no. 36/98-ce dated 10.12.1999 at the rate of rs. 7.5 lakhs per month; that by notification no. 2/99-ce (nt) dated 13.1.1999 the independent processors having proprietary interest in the spinning of yarn or weaving or knitting of fabrics were excluded from the purview of the compounded levy scheme; that a show cause notice dated 9.7.1999 was issued for demanding duty and imposition of penalties in respect of fabrics removed during the period from 13.1.1999 to 31.1.1999 on the ground that they were not entitled for compounded levy scheme; that the commissioner under order-in-original no. 8/2000 dated 14.12.2000 confirmed the demand of duty amounting to rs. 47,00,437 and imposed a penalty of rs. 2 lakhs on the appellant company but did not impose any penalty on the directors; that the appellant tribunal, vide final order no. a/651/2001-nb (db) dated 3.3.2001 had remanded the matter to the commissioner for fresh adjudication to determine the date from which notification no. 2/99 dated 13.1.99 would be applicable to the case of the appellants when they had already discharged their duty for the month of january before the issuance of the notification, in the light of the judgment of the supreme court in the case of superintendent warangal v. deluxe bar, 2001 (43) rlt 131 (sc).2.2 he further, mentioned that the commissioner, on remand under the impugned order, has confirmed the demands of duty, imposed penalty of equivalent amount on the appellant company and also imposed penalty of rs. 2 lakhs each on the three directors holding that by notification no. 2/99-ce dated 13.1.1999 clause (aa) was inserted in notification no. 36/98-ce providing that duty at ad valoram rate will be applicable to the textile fabrics manufactured or produced prior to 13.1.99 and cleared on or after that date.3. the learned senior counsel submitted that the duty has been demanded from the appellants in respect of man made fabrics and cotton fabrics, whereas clause (aa) for para 6 of notification no. 2/99-ce dated 13.1.99 applies to processed textile fabrics of cotton or man-made fibres, failing under heading nos. 58.01, 58.02, 60.01 or 60.02 of the schedule to the central excise tariff act; that their products are not falling under any of the headings mentioned in the said clause; that this is evident from the tr 6 challan wherein the products manufactured by them and tariff heading nos. 55.14 and 52.07 are mentioned. he also referred to rt 12 return filed by them for the month of january 1999 where the products have been shown falling under headings 5514 & 5207.he finally submitted that the commissioner could not enhance the amount of penalty in the remand proceedings as his jurisdiction is limited to the extent the matter is remanded; that for the same reason, no penalty can be imposed on the directors as in the original proceedings, the commissioner had not imposed any penalty on either of them; that moreover the appeal filed by the revenue against earlier adjudication order no. 8/2000 has been rejected by the tribunal vide final order no.200/2002-d dated 10.7.2002 as there was delay in filing the appeal which was not condoned by the tribunal in view of the law laid down by the larger bench of the tribunal in the case of commissioner of central excise mumbai v. azo dye chem, 4. countering the arguments, ms. charu barnwal. learned senior departmental representative, reiterated the findings as contained in the impugned order and emphasized that charge of suppression of facts with an intent to evade payment of duty has been established as the appellants never intimated to the department that they were having another unit engaged in knitting of fabrics, even after the issue of notification no. 2/99 dated 13.1.99 nor they filed any classification declaration after the issue of said notification.5.1 we have considered the submissions of both the sides. it is not in dispute that the appellants were discharging their duty liability under the compounded levy scheme under section 3a of the act read with notification no. 36/98-ce being independent processors manufacturing goods falling under the specified headings of the tariff which had been notified by the central government under notification no. 41/98-ce (nt) dated 10.12.98 to which the provisions of section 3a of the central excise act would apply. as per para 2 of explanation ii of this notification, independent processor was defined as under: explanation ii: for the purposes of this notification, an "independent processor" means a manufacturer who is engaged exclusively in the processing of fabrics with the aid of power and who also has the facility in his factory (including plant and equipment) for carrying out heat setting with the aid of power or steam in a hot-air stenter, and who has no proprietary interest in any factory engaged in the spinning of yarn or weaving of fabrics." 5.2 thus independent processor should not have any proprietary interest in any factory engaged in the spinning of yearn or weaving of fabrics.notification no. 2/99-ce (nt) dated 13.1.99 amended explanation ii as under: "(c) in explanation ii, for the words "spinning of yarn or weaving of fabrics", the words" spinning of yarn or weaving or knitting of fabrics" shall be substituted- the effect of this amendment was that an independent processor having proprietary interest in spinning of yarn or weaving or knitting of fabrics will not be covered by compounded levy scheme. admittedly the appellants were having proprietary interest in knitting fabrics and they were no more working under the compounded levy scheme.6. the appellants cleared the goods manufactured by them prior to 13,1.99 after the said date without payment of duty under section 3 of the act. the tribunal has remanded the matter to the commissioner vide final order no. a/65/2001-nb dated 3.8.2001 to examine the date from which notification dated 13.1.99 would be applicable as they had already discharged their duty liability for the month of january 1999 before the issue of the notification in the light of supreme court judgment in the case of deluxe bar. it has been contended by the appellants that under compounded levy scheme, they had discharged the duty liability on 4.1.99 and no further duty liability remained to be paid by them and the decision in the case of deluxe bar applies squarely in the present matter. in the said judgment, the licence fee of various licences under the andhra pradesh foreign liquor/indian liquor rules, 1970 had been enhanced by a government order dated 3.3.90 and the enhancement was to come into effect from 1.4.90. the supreme court has held that the enhanced licence fee would only be effective from commencement of next excise year as there was no clear language in the amended provisions that the enhancement would affect the existing licences. under the central excise act, central excise duty is leviable on goods produced or manufactured in india in the manner as may be prescribed. the time and manner of payment of duty has been provided under rule 9 of the central excise rules, 1944. it has not been disputed by the revenue that as per the provisions. the appellant had discharged the duty liability for the entire manufacture of january 1999 by depositing the lump sum amount of rs. 7.5 lakhs under rule 96 zq which required at the relevant time, that the amount of duty would be paid by the 5th of each calendar month. after discharging the duty liability as per the rules in existence, it cannot be claimed by the revenue that the goods removed by them during the material period were not duty paid as the appellant had already discharged the duty liability on the goods for the entire month of january 1999. the amendments carried out by notification no. 2/99-ce (nt) dated 13.1.99 in notification no. 41/98-ce (nt) which made the application of provisions of section 3a of the act inapplicable to independent processors, having proprietary interest in spinning of yarn or weaving or knitting of fabrics did not contain any provisions that the independent processor who were working under compounded levy scheme and who had discharged the duty liability would be liable to discharge the duty liability again for the remaining period of january 1999. we also observe that by notification no. 2/99 (nt) products falling under some of the specific heading of chapter 58 and chapter 60 were brought within the purview of compounded levy scheme. similarly, the notification no. 36/98-ce was also amended by notification no. 2/99-ce providing rate of duty for the new products brought under the scheme.in that context para (aa) was inserted in para 6 of notification no.36/98 to provide that the goods falling under this specific heading of chapters 68 and 60 produced before 13.1.99 and cleared on or after that date will not be covered by notification no. 36/98 that is by compounded levy scheme. this clause (aa), in our opinion, does not provide any retrospective effect to notification no. 2/99. accordingly, we hold that no differential duty is chargeable from the appellant company. as no differential duty is chargeable, the question of imposing any penalty on any of the appellant does not arise. however , we would also like to mention here that it is settled law that in remand proceedings the adjudicating authority cannot enhance the amount of duty or penalty unless specifically provided in the remand order. in the present matter the remand was made by the tribunal only to examine the applicability of supreme court judgment in deluxe bar case and date from which notification no. 2/99 (nt) would be applicable. the question of imposing any penalty on the three directors was therefore completely outside the remand order. on this count also, the appeals filed by all the directors are to be allowed.7. accordingly the impugned order is set aside and the appeals are allowed.

Judgment:
1. The issues involved in these four appeals are whether the Central Excise duty was payable by M/s. SPL Industries Ltd. Under Section 3A of the Central Excise Act as claimed by them or under Section 3 of the Act as confirmed by the Commissioner under the impugned Order and whether penalties under Section 11AC of the Act read with Rules 9 (2) and 173Q of the Central Excise Rules on the Appellant Company and under Rule 209A on the other Appellants are imposable.

2. Shri M. Charidrashekharan, learned Senior Advocate, submitted that the Appellant company is engaged in the processing of cotton and man made fabrics; that with effect from 16.12.1998, they started paying duty under the "Compounded Levy Scheme" under Notification No. 36/98-CE dated 10.12.1999 at the rate of Rs. 7.5 lakhs per month; that by Notification No. 2/99-CE (NT) dated 13.1.1999 the Independent processors having proprietary interest in the spinning of yarn or weaving or knitting of fabrics were excluded from the purview of the Compounded Levy Scheme; that a show cause notice dated 9.7.1999 was issued for demanding duty and imposition of penalties in respect of fabrics removed during the period from 13.1.1999 to 31.1.1999 on the ground that they were not entitled for Compounded Levy Scheme; that the Commissioner under Order-in-Original No. 8/2000 dated 14.12.2000 confirmed the demand of duty amounting to Rs. 47,00,437 and imposed a penalty of Rs. 2 lakhs on the Appellant Company but did not impose any penalty on the Directors; that the Appellant Tribunal, vide Final Order No. A/651/2001-NB (DB) dated 3.3.2001 had remanded the matter to the Commissioner for fresh adjudication to determine the date from which Notification No. 2/99 dated 13.1.99 would be applicable to the case of the Appellants when they had already discharged their duty for the month of January before the issuance of the Notification, in the light of the judgment of the Supreme Court in the case of Superintendent Warangal v. Deluxe Bar, 2001 (43) RLT 131 (SC).

2.2 He further, mentioned that the Commissioner, on remand under the impugned Order, has confirmed the demands of duty, imposed penalty of equivalent amount on the Appellant Company and also imposed penalty of Rs. 2 lakhs each on the three Directors holding that by Notification No. 2/99-CE dated 13.1.1999 Clause (aa) was inserted in Notification No. 36/98-CE providing that duty at ad valoram rate will be applicable to the textile fabrics manufactured or produced prior to 13.1.99 and cleared on or after that date.

3. The learned Senior Counsel submitted that the duty has been demanded from the appellants in respect of man made fabrics and cotton fabrics, whereas Clause (aa) for Para 6 of Notification No. 2/99-CE dated 13.1.99 applies to processed textile fabrics of cotton or man-made fibres, failing under Heading Nos. 58.01, 58.02, 60.01 or 60.02 of the Schedule to the Central Excise Tariff Act; that their products are not falling under any of the Headings mentioned in the said clause; that this is evident from the TR 6 Challan wherein the products manufactured by them and Tariff Heading Nos. 55.14 and 52.07 are mentioned. He also referred to RT 12 return filed by them for the month of January 1999 where the products have been shown falling under Headings 5514 & 5207.

He finally submitted that the Commissioner could not enhance the amount of penalty in the remand proceedings as his jurisdiction is limited to the extent the matter is remanded; that for the same reason, no penalty can be imposed on the Directors as in the original proceedings, the Commissioner had not imposed any penalty on either of them; that moreover the Appeal filed by the Revenue against earlier Adjudication Order No. 8/2000 has been rejected by the Tribunal vide Final Order No.200/2002-D dated 10.7.2002 as there was delay in filing the Appeal which was not condoned by the Tribunal in view of the law laid down by the Larger Bench of the Tribunal in the case of Commissioner of Central Excise Mumbai v. Azo Dye Chem, 4. Countering the arguments, Ms. Charu Barnwal. Learned Senior Departmental Representative, reiterated the findings as contained in the impugned Order and emphasized that charge of suppression of facts with an intent to evade payment of duty has been established as the Appellants never intimated to the Department that they were having another unit engaged in knitting of fabrics, even after the issue of Notification No. 2/99 dated 13.1.99 nor they filed any classification declaration after the issue of said Notification.

5.1 We have considered the submissions of both the sides. It is not in dispute that the Appellants were discharging their duty liability under the Compounded Levy Scheme under Section 3A of the Act read with Notification No. 36/98-CE being independent Processors manufacturing goods falling under the specified Headings of the Tariff which had been notified by the Central Government under Notification No. 41/98-CE (NT) dated 10.12.98 to which the provisions of Section 3A of the Central Excise Act would apply. As per Para 2 of Explanation II of this Notification, Independent Processor was defined as under: Explanation II: For the purposes of this notification, an "independent processor" means a manufacturer who is engaged exclusively in the processing of fabrics with the aid of power and who also has the facility in his factory (including plant and equipment) for carrying out heat setting with the aid of power or steam in a hot-air stenter, and who has no proprietary interest in any factory engaged in the spinning of yarn or weaving of fabrics." 5.2 Thus Independent Processor should not have any proprietary interest in any factory engaged in the spinning of yearn or weaving of fabrics.

Notification No. 2/99-CE (NT) dated 13.1.99 amended Explanation II as under: "(c) In Explanation II, for the words "spinning of yarn or weaving of fabrics", the words" spinning of yarn or weaving or knitting of fabrics" shall be substituted- The effect of this amendment was that an independent processor having proprietary interest in spinning of yarn or weaving or knitting of fabrics will not be covered by Compounded Levy Scheme. Admittedly the Appellants were having proprietary interest in knitting fabrics and they were no more working under the Compounded Levy Scheme.

6. The Appellants cleared the goods manufactured by them prior to 13,1.99 after the said date without payment of duty under Section 3 of the Act. The Tribunal has remanded the matter to the Commissioner vide Final Order No. A/65/2001-NB dated 3.8.2001 to examine the date from which Notification dated 13.1.99 would be applicable as they had already discharged their duty liability for the month of January 1999 before the issue of the Notification in the light of Supreme Court judgment in the case of Deluxe Bar. It has been contended by the Appellants that under Compounded Levy Scheme, they had discharged the duty liability on 4.1.99 and no further duty liability remained to be paid by them and the decision in the case of Deluxe Bar applies squarely in the present matter. In the said judgment, the licence fee of various licences under the Andhra Pradesh Foreign Liquor/Indian Liquor Rules, 1970 had been enhanced by a Government Order dated 3.3.90 and the enhancement was to come into effect from 1.4.90. The Supreme Court has held that the enhanced licence fee would only be effective from commencement of next excise year as there was no clear language in the amended provisions that the enhancement would affect the existing licences. Under the Central Excise Act, Central Excise duty is leviable on goods produced or manufactured in India in the manner as may be prescribed. The time and manner of payment of duty has been provided under Rule 9 of the Central Excise Rules, 1944. It has not been disputed by the Revenue that as per the provisions. The Appellant had discharged the duty liability for the entire manufacture of January 1999 by depositing the lump sum amount of Rs. 7.5 lakhs under Rule 96 ZQ which required at the relevant time, that the amount of duty would be paid by the 5th of each calendar month. After discharging the duty liability as per the Rules in existence, it cannot be claimed by the Revenue that the goods removed by them during the material period were not duty paid as the Appellant had already discharged the duty liability on the goods for the entire month of January 1999. The amendments carried out by Notification No. 2/99-CE (NT) dated 13.1.99 in Notification No. 41/98-CE (NT) which made the application of provisions of Section 3A of the Act inapplicable to independent processors, having proprietary interest in spinning of yarn or weaving or knitting of fabrics did not contain any provisions that the independent processor who were working under Compounded Levy Scheme and who had discharged the duty liability would be liable to discharge the duty liability again for the remaining period of January 1999. We also observe that by Notification No. 2/99 (NT) products falling under some of the specific Heading of Chapter 58 and Chapter 60 were brought within the purview of Compounded Levy Scheme. Similarly, the Notification No. 36/98-CE was also amended by Notification No. 2/99-CE providing rate of duty for the new products brought under the Scheme.

In that context Para (aa) was inserted in Para 6 of Notification No.36/98 to provide that the goods falling under this specific Heading of Chapters 68 and 60 produced before 13.1.99 and cleared on or after that date will not be covered by Notification No. 36/98 that is by Compounded Levy Scheme. This Clause (aa), in our opinion, does not provide any retrospective effect to Notification No. 2/99. Accordingly, we hold that no differential duty is chargeable from the Appellant Company. As no differential duty is chargeable, the question of imposing any penalty on any of the Appellant does not arise. However , we would also like to mention here that it is settled law that in remand proceedings the Adjudicating Authority cannot enhance the amount of duty or penalty unless specifically provided in the remand Order. In the present matter the remand was made by the Tribunal only to examine the applicability of Supreme Court judgment in Deluxe Bar case and date from which Notification No. 2/99 (NT) would be applicable. The question of imposing any penalty on the three Directors was therefore completely outside the remand Order. On this count also, the Appeals filed by all the Directors are to be allowed.

7. Accordingly the impugned Order is set aside and the appeals are allowed.