Collector of Central Excise Vs. Nellimerla Jute Mills Co. Ltd. - Court Judgment

Excerpt:
1. appeal under section 35b of the central excises and salt act, 1944 praying that in the circumstances slated therein, the tribunal will be pleased to set aside the order of the appellate collector of central excise and allow the demand payment-of cess of rs. 7,713.53 from the respondent.2. this appeal coming up for orders upon perusing the records and upon hearing the arguments of shri s.k. choudhury, senior departmental representative for the appellants and upon hearing the arguments of shri g. prabakar sastry, advocate, for the respondent, the tribunal makes the following: 3. this is an appeal preferred by the collector of central excise, guntur, against the order of the appellate collector of central excise, madras, dated 9.8.1982 made in c. no. v/22a/57/82. the respondents, m/s......

Judgment:
1. Appeal under Section 35B of the Central Excises and Salt Act, 1944 praying that in the circumstances slated therein, the Tribunal will be pleased to set aside the order of the Appellate Collector of Central Excise and allow the demand payment-of cess of Rs. 7,713.53 from the respondent.

2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri S.K. Choudhury, Senior Departmental Representative for the appellants and upon hearing the arguments of Shri G. Prabakar Sastry, Advocate, for the respondent, the Tribunal makes the following: 3. This is an appeal preferred by the Collector of Central Excise, Guntur, against the order of the Appellate Collector of Central Excise, Madras, dated 9.8.1982 made in C. No. V/22A/57/82. The respondents, M/s. Nellimerla Jute Mills Limited, are manufacturers of jute yarn, twine and sackings falling under 18-D and 22-A of Central Excise Tariff". As per the Jute Manufacturers Cess Rules 1976, as amended, cess has to be paid on jute yarn, twine and sackings. The respondent Mills paid cess in terms of Section 9(1) of the Industries (Development and Regulation) Act. 1961 only on removals of jute twine, yarn and sackings as such from their factory during the period 1.3.1976 to 31,7.1981. They have not paid cess on the twine utilised internally in the stitching and homming of the jute bags, prepared out of sacking cloth and no account would appear to have been maintained in Form R.G.1 by the respondent in respect of twine captively consumed for stitching and hemming purposes in the. factory during the said period.

It is only in the above context the Assistant Collector of Central Excise, Division II, Visakhapatnam, by his Order C. No. V/4/1/41/81T. 3 (P.F.I) dated 6.3.1982 demanded a cess of Rs. 7,73.53 at the rate of Rs. 3.75 per MT on a captive consumption of twine of 2,C56.94 Mts. for the period 1.3.1976 to 31.7.1981. (2% of 1,02,846.873 MTs of bags manufactured.

4. The respondent Mills preferred an appeal before (he Appellate Collector of Central Excise, Madras and contended primarily that the demand of the Assistant Collector was time barred in view of the fact that even assuming that the respondent was liable to pay the demanded cess, there was no suppression of facts. The respondent would also appear to have contended before the Appellate Collector that cess can be levied only on the value of the goods as per Section 9(1) of the Industries (Development and Regulation) Act, J 951 and cess calculated on the basis of weight is legally untenab'e. The Appellate Collector, having considered all aspects of the matter, upheld the action of the Asstt. Collector in demanding the cess but modified the original order restricting the demand to a period of six months immediately preceding the date of receipt of show cause notice on the basis that there was no suppression of facts, inasmuch as the respondent Mills was subject to periodic visits of the Central Excise authorities and their control and, therefore, the extended period of limitation of 5 years prescribed in Section 11-A cannot be invoked. It is against this finding of the Appellate Collector, the Collector of Central Excise, Guntur, has preferred this appeal.

5. The learned Senior Departmental Representative contended before me that, the respondent is under a statutory obligation as per Rule 53 of the Central Excise Rules to include the production of quantity of twine which the respondent captively consumed in R.G.I account. He further contended that the circumstances would clearly indicate that the respondent has suppressed the very fact of production of twine itself.

Inasmuch as twine loses its identity once it is used in the gunny bag for stitching, what is eventually assessed to cess is only gunny bag and not twine as such. Apart from it, it was also contended on behalf of the appellant that twine continues to be excisable under Tariff Item 18D of the Central Excise Tariff though the quantum captively consumed is exempted from payment of duty in terms of Notification No. 56/72-CE.dated 17.3.72. Nevertheless, the respondent would be under a statutory obligation to maintain an account of production in accordance with Rule 53 read with 173-G of the Central Excise Rules, 1944. which the respondent has not done in the base and as such, the respondent should be deemed to have suppressed the fact of production of twine as well as its captive consumption. Finally, it was submitted by the appellant that even the twine captively consumed by the respondent was neither shown nor included in their classification list filed in respect of other items produced in the respondent's unit.

6. The learned Counsel appearing for the respondent submitted that the respondent, as per Rule 44 of the Central Excise Rules, has given details of the various machinery and besides that, the Respondent has also in a nutshell indicated the manufacturing process and the twine required for the same. It was also further contended on behalf of the respondent that no duty or cess is payable for the twine since the twine content of the bag has already suffered duty at the bag stage, i.e., after making bags.

7. Having considered the various points raised by the parties, I am of the opinion that the order of the Appellate Collector referred to supra is not legally sustainable. In my opinion, the learned Appellate Collector has erred in holding that inasmuch as the respondent Mills is subject to the jurisdictional control of the Central Excise authorities who would have occasion to frequently visit the same for official purposes, the Central Excise authorities must be presumed to be aware of the manufacturing activities of the respondent. I find from the materials on record that there is a suppression of fact, of the use of twine for stitching and, therefore, the extended period of limitation as contemplated under Section 11-A of the Act for demanding, the cess due on the jute twine used in the stitching and hemming of jute bags of the respondent unit from 1.3.1976 to 31.7.1981 is clearly maintainable in law. Rule 44 relied upon by the respondent has no relevance at all for the question under consideration. The claim that the goods would be exempt under Notification 56/72-CE. would be hit by provisions of Section 11-B of the Act. 1 In the above circumstances, I set aside the order of the Appellate Collector, appealed against and restore the order of the Assistant Collector of Central Excise, Division II, Visakhapatnam dated 8.3.82 made in C. No. V/4/1/41/81 T. 3 (P.F I.) and allow the appeal.