| SooperKanoon Citation | sooperkanoon.com/33560 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu |
| Decided On | Dec-23-2003 |
| Judge | Author: 3 Mccardie |
| Reported in | (2004)(93)ECC297 |
| Appellant | Sri Ayyappan Silicate and |
| Respondent | Cce |
They purchased duty paid raw materials like Sodium Silicate, Caustic Soda Lye and non-edible oil for the manufacture of soap without the aid of power. The appellant M/s. ACI, Pollachi had sent to M/s. Sri Ayyappan Silicate & Chemicals Products (P) Ltd. (ASCPL, for short) solid sodium silicate for job work purposes to convert the same into liquid sodium silicate. M/s. ASCPL had addressed a letter dated 7-12-1993 to Collector of Central Excise, Coimbatore seeking clarification from the department regarding excisability and dutiability of liquid sodium silicate manufactured out of duty paid sodium silicate and the Superintendent of Central Excise, Pollachi-I Range vide his letter O.C. No. 15/94, dated 4-1-1994 had clarified that the process of dissolving the Solid Form of Sodium Silicate in water would not amount to manufacture and such units would not come under the purview of the Central Excise Licensing Control. Therefore, they surrendered the Registration Certificate dated 17-10-1994 and had filed a declaration on 21-10-1994, thereafter did not file any declaration after the introduction of Note 10 to Chapter 28 of Central Excise Tariff which was introduced w.e.f. 1-3-1997 to the effect that :- "In relation to products of this Chapter, labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture".
2. It is alleged that solid sodium silicate is duty paid item which was received by M/s. ASCPL from M/s. ACI for conversion to liquid sodium silicate on job work basis. The same being converted to liquid sodium silicate amounted to production of new goods which was marketable and hence M/s. ASCPL were liable to pay duty and since they have cleared without payment of duty, they were liable to invocation of larger period and for penal action.
3. The appellants had taken the ground that this process of conversion from solid to liquid sodium silicate did not bring into existence any goods which were marketable in nature and that they were clearing the same in tankers and not repacking from bulk packs to retail packs. It was their contention that no new goods had come into existence which was marketable to the consumers. It should be repacked from bulk packs to retail packs only then the goods can be said to be marketable. They, further, took the ground that as the department had itself taken a view that process of converting into liquid sodium silicate did not result into a excisable commodity and hence they surrendered the licence, therefore, they held a bonafide belief that as the goods were not marketable, they were not liable to file any declaration under Note 10 to Chapter 28 of its introduction w.e.f. 1-3-1997. It is the contention of the appellants that since they held a bonafide belief, the larger period was not invocable. They also took up the contention that even if the item is said to be marketable, they were entitled for the benefit of Modvat credit in terms of the Tribunal judgment rendered in the case of Chamundi Steel Rerolling Mills v. CCE, Bangalore, 1996 (81) E.L.T.563 and that of Supreme Courts judgment rendered in Formica India Division v. CCE, 1995 (77) E.L.T. 511 (S.C.). They also submitted that duty was cum-duty and they were entitled for claim of deductions under Section 4(4)(d)(ii) and relied on the judgment rendered in the case of Srichakra Tyres, 1999 (108) E.L.T. 361. However, all these pleas were rejected by the Commissioner (Appeals) and the Additional Commissioner in his Order-in-Original. It was pointed out that the Additional Commissioner in the Order-in-original in Para 22 had clearly recorded as under :- "........... Even though both liquid sodium silicate and solid sodium silicate are falling under the same chapter heading of CET, the liquid sodium silicate is different from that of solid sodium silicate. The solid sodium silicate cannot be used directly in the manufacture of soap. It undergoes lot of processes to become liquid sodium silicate, as admitted by them in the "process of manufacture" furnished to the department. Further, with regard to their argument as to "marketability", I would like to mention here that because of the fact the liquid sodium silicate could not be stored for a long time, only solid sodium silicate is marketed as such. In order to get liquid sodium silicate, it is not a simple process as to adding water to the solid sodium silicate, but it undergoes various processes as explained by them. Therefore, I hold that the process involved in bringing out the liquid sodium silicate amounts to "manufacture" and the same is rightly coming under the purview of Section Note 10 of Chapter 28 of CET".
It was pointed out that the Addl. Commissioner had clearly recorded that the item could not be stored for long and only solid sodium silicate was marketable as such and this itself was sufficient to hold that these were not goods to be used by the consumer under Note 10 of Chapter 28 and should have dropped the proceedings. However, the Commissioner in the impugned order did not appreciate these submissions and has held that they are goods and liable to be charged to duty. He also held that the larger period was invocable as they had not declared the goods after the introduction of Note 10 to Chapter 28. The appellant's arguments was that they were sending it into the factory of other appellant who is the supplier of the raw material of solid sodium silicate and that they are not "consumer". In terms of Note 10 to Chapter 28, the item has to become a product "marketable to the consumer". The consumer is the general consumer and not the factory who used the same for further processing in the manufacture of soap.
However, this ground was also not accepted. Hence this appeal.
4. We have heard ld. Advocate Shri B.V. Kumar and ld. SDR Smt. R.Bhagya Devi.
5. Ld. Counsel reiterated his submissions as raised before the lower authorities and relied on large number of judgments to state that process of conversion of solid sodium silicate into liquid sodium silicate did not bring into existence of any goods in marketable stage as a commodity to be used by the consumer and that the first appellant M/s. Sri Ayyappan Silicate & Chemicals Products (P) Ltd. is not a consumer in the definition of the term "consumer" as appearing in the "Black's Law Dictionary", "Words & Phrases of Excise & Customs" - 2nd Edition by S.B. Sarkar and Oxford English Dictionary. He also submitted that all the criteria laid down under Note 10 to Chapter 28 are required to be fulfilled as the appellants were repacking from bulk to retail packs. The items cannot be said to have satisfied the criteria laid down in Note 10 to Chapter 28. With reference to the term "Consumer", he referred to the Black's Law Dictionary which defined the term "Consumer" as "One who consumes, individuals, who purchase, use, maintain and dispose of products and services - Users of the product".
With regard to the term "Consumer goods", the said dictionary defines as under :- "Goods which are used or bought for use primarily for personal, family or household purposes. U.C.C. 9-109 (I). Such goods are intended for resale of further use in the production of other products. Contrasted with capital goods." The said term has also been defined in the Second Edition of Words & Phrases of Excise & Customs by S.B. Sarkar as "Consumer" means use of an article (opp. Producer), Purchaser of goods or services. Consumer goods, means those used directly (especially domestically), not in manufacturing etc. (page 366) 6. With regard to the definition of said term, the reliance was placed on the following citations :- (2) CCE, Indore v. Pure Pharma Ltd. - 2002 (143) E.L.T. 386 (T) = 2002 (51) RLT 156 (T) (3) Ammonia Supply Co. v. CCE, New Delhi - 2001 (131) E.L.T. 626 (T) = 2001 (45) RLT 271 (T)Ram Kishore Chemicals Co. Pvt. Ltd. v. CCE - 2002 (145) E.L.T. 106 (T) He submitted that in the following citations the term "Consumer" and "Consumer goods" were discussed :-Jayanti Food Processing Pvt. Ltd. v. CCE - 2002 (141) E.L.T. 162 (T) = 2002 (49) RLT 133.
He also submitted that principles of Interpretation of Statutes viz, 'Ejusdemgeneris' would also apply to the all the terms in Note 10 to Chapter 28 and is required to be understood as to whether the goods were marketable to the consumer and also whether they were repacked from bulk to retail packs. In this regard, the following judgments were relied :- (1) S.S. Magnild (Owners) v. Macintyre Bros, and Co. - 1920 (3) KB 321 McCardie J.Siddeshwari Cotton Mills (P) Ltd. v. UOI and Anr. - 1989 (39) E.L.T. 498 (S.C.) 7. He also submitted that the goods being not marketable, therefore, appellants held a bona fide belief in terms of earlier clarification given by the department that they are not required to declare their activity after introduction under Note 10 to Chapter 28 and this plea is sufficient to hold that the larger period was not invocable. He also argued at great length that the item was not in a marketable stage and in this regard relied on the following judgments :- (1) UOI v. Delhi Cloth & General Mills -1977 (1) E.L.T. (J199) (S.C.)CCE v. Mahavir Spinning Mills Ltd. (5) UOI v. DCM Ltd. - [1977 (1) E.L.T. (J199) (S.C.) = AIR 1963 (SC) 791]Allied Bitumen Complex (India) Ltd. v. CCE -1997 (90) E.L.T. 374 (T) (7) Kunal Precision P. Ltd. v. CCE, Chandigarh - 2001 (133) E.L.T. 653 (T) = 2001 (44) RLT 14 (T)S.R. Tissues Pvt. Ltd. v. CCE, New Delhi - 2001 (136) E.L.T. 367 (T) = 2001 (42) RLT 282National Tar Products v. CCE, Vadodara - 2001 (135) E.L.T. 1388 (T).
8. Ld. Counsel further, submitted that ratio of following judgments on the aspect of non-invocation of larger period would apply to this case also :-Tamil Nadu Rousing Board v. CCE, Madras -1994 (74) E.L.T. 9 (S.C.)Lubri-Chem Industries Ltd. v. CCE, Bombay - 1994 (73) E.L.T. 257 (S.C.) 9. With regard non-applicability of Section 11AC of the Central Excise Act for imposing penalty, he relied on the following judgments :-Apollo Tyres Ltd. v. CCE, Pune - 2001 (134) E.L.T. 679 = 2001 (47) RLT 1 (T)Flex Engg. Ltd. v. CCE, Meerut 10. He also submitted that maximum penalty cannot be imposed under Section 11AC which would depend upon the totality of facts and circumstances of the case. In this regard, he relied on the Apex Court judgment rendered in the case of State of M.P. v. Bharat Heavy Electricals 11. Ld. Counsel, further, submitted that Department did (sic) [not] take any samples for chemical test and also did not place any evidence of the item being marketable and hence they have not discharged their burden and on this ground also he relied on large number of citations cited supra.
12. He also submitted that Rule 209A of the Central Excise Rules is not invocable and in this regard also, relied on large number of judgments.
Some of which are noted herein below :-Standard Surfactants Ltd. v. CCE, Kanpur -1998 (103) E.L.T. 675 (T)Cipta Coated Steels v. CCE 13. Ld. SDR defended the order and submitted that after the introduction of Note 10 to Chapter 28, the said process has resulted in arising of goods which are marketable to the consumer and hence they liable to be levied with duty. She submitted that in a similar facts and circumstances, after the introduction of Note 10 to Chapter 28, the process of purification of chemicals was held to have brought into existence of goods as held in the case of Suprajith Chemicals Pvt. Ltd. v. CCE, Bangalore - 2003 (156) E.L.T. 712. She also submitted that in the case of Bata India Ltd. v. Commissioner - 2002 (148) E.L.T. 978 (T), the Tribunal likewise held that double texture fabric/unvulcanised sandwiched fabric having shelf life of 10 days to 4 weeks were marketable and learned SDR submitted that this judgment has been affirmed by Hon'ble Apex Court as noticed from 2003 (152) E.L.T. A86 (S.C.). She submitted that as the appellants had not filed declaration and paid duty after introduction of Note 10 to Chapter 28 they would be liable to pay duty. She also relied on the judgment of the Tribunal rendered by the North Regional Bench at Delhi in the case of W.G.Maurya Sheraton Hotel & Towers v. CCE, Delhi-1 - 2002 (146) E.L.T. 550 (Tri. - Del.) wherein in a similar circumstances the Note 3 to Chapter 18 was invoked to hold that conversion of bulk chocolates and chocolate bars into smaller pieces is the process which renders the chocolates marketable to consumer and shall amount to process of manufacture. In view of these judgments, ld. SDR prayed for dismissal of the appeals by sustaining the order of the Commissioner.
14. On a careful consideration of the submissions, we notice that the Department had itself in the initial stage clarified to the appellants that this process of converting solid sodium silicate into liquid sodium silicate did not amount to a process of manufacture and the item liquid sodium silicate are not goods. The appellants were clarified in the matter not to pay duty. This is an admitted fact. After the introduction of Note 10 to Chapter 28, it has to be seen as to whether the said process has brought into existence a product marketable to the consumers. The term "Consumer" has already been extracted from the Dictionaries above. The item has to be in a marketable stage to be used by the consumer who are the ultimate users of the goods. In the present case, the solid sodium silicate was converted into liquid sodium silicate by addition of water and pumped into the boiler with a mixture of 60 Kgs of Sodium Hypochloride solution (Liquid Bleach) which helps in coloring and bleaching the final products i.e. Sodium Silicate. The finished product is manufactured by Steam boiler to a pressure of approx. 50 Kgs./cm. sq. equivalent 45 Celsius. The supplier of the solid sodium silicate is not the ultimate consumer in the light of the definition of the term "Consumer". The Addl. Commissioner in the impugned order has clearly noted in Para 22 which is extracted supra that liquid sodium silicate could not be stored for a long time and only solid sodium silicate is marketed as such. The Department has not drawn any sample for chemical test and taken any expert opinion about the shelf life of the item and as to whether it can be used directly by the consumer. There is no evidence of marketability produced by the department to discharge the burden that liquid sodium silicate after several processes become a new product, which can be marketed and used by the consumer. Due to fatal mistake on the part of department and in view of clear admission made by the Addl. Commissioner in the order-in-original to hold that only solid sodium silicate is marketed and liquid sodium silicate could not be stored for a long time, a belief that these goods were not marketed to be used by the consumer is required to be accepted. The Department has not discharged their burden that the item has become marketable and used by the consumer.
Furthermore, the item is not packed in retail packs. By this fact itself it cannot be said that the item has not become marketable, however, the fact that Revenue has not discharged their burden that the item is marketed and used by the consumer itself shows that the items are not goods. In the case of W.G. Maurya Sheraton Hotel & Towers v.CCE, Delhi (supra) the chocolates which were cut into smaller pieces were held to be marketable and therefore repacking in terms of Note 3 to Chapter 18 was held to be invocable. Likewise in the case of Suprajith Chemicals Pvt. Ltd. v. CCE (supra) process of purifying the chemicals was held to be process of manufacture and in terms of the decision of the Apex Court in the case of S.D. Fine Chemicals v.Collector -1995 (77) E.L.T. 49 (S.C.). Therefore, after the introduction of Note 11 to Chapter 29 the process brought into existence new goods. These judgments are distinguishable. Likewise in the case of Bata India Ltd. (supra) the item was having a shelf life of 10 days to 4 weeks which was held to be marketable. This is not applicable to the facts of this case. Further, judgment rendered by this Bench in the case of CCE, Coimbatore v. Kayes Agro Industries - 2001 (132) E.L.T. 701 also shows that the goods namely pesticides had already come into existence and therefore process of dilution of technical material in concentrate form into formulation was held to be a process of manufacture as new goods had arisen. In the present case, no new goods had arisen and therefore, this citation relied by the appellants would have applicability in this case also. We notice that even if the plea is taken that new goods had arisen, it is noticed that the goods after the process are not consumed by the ultimate user as the resultant product is not in stable condition. We notice that department itself in the initial stage had held that they are not goods. The appellants were carrying on a belief that they are not goods as liquid sodium silicate was not stable and not marketable and as used by the consumer. Therefore, the bona fide belief harboured by the appellants is justified. In such circumstances, the larger period is not invocable. The judgment cited by them would apply to the facts of this case. We also notice that even at the extreme stage if the demands were to be confirmed on the appellants, they were entitled for deductions under Section 4(4)(d)(ii) in terms of the judgment cited and also for claiming Modvat credit. They were also not liable to penalty in over all facts and circumstances of the case and in the light of judgments cited and in view of Department not having proved and discharged their burden and the Addl. Commissioner having held that liquid sodium silicate is not stable and only solid sodium silicate is marketed, therefore, the order impugned is erroneous and requires to be set aside. The appellants succeed in the appeals. The impugned orders are set aside and appeals allowed with consequential relief, if any, as per law.