| SooperKanoon Citation | sooperkanoon.com/8765 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu |
| Decided On | Sep-29-1995 |
| Reported in | (1996)(81)ELT657Tri(Chennai) |
| Appellant | White and Co. |
| Respondent | Collector of Central Excise |
2. Shri K. Narayanan, the learned Counsel for the petitioner submitted that the issue relates to classification and the petitioner /appellant has been manufacturing parts of machineries such as Bobbings, Ring tubes, spools, prin boxes etc. These items are used solely and principally in textile machineries. The petitioner chose to classify the goods under Heading 8448 of the CET whereas the department chose to classify the same under Heading 8483. The learned counsel submitted that the impugned order is violative of the principles of natural justice and is liable to be set aside. It was further urged that the petitioner is not guilty of suppression and therefore, longer period of limitation in terms of proviso to Section 11A of the Central Excises & Salt Act, 1944 is not invokable prima facie and the impugned order is unsustainable on that score also. It was further urged that even on the question of classification, the view taken by the Department is erroneous as the goods which are parts of textile machineries are used exclusively only in textile machineries and the department has not stated or established that the goods are capable of general use. It was further urged that in any event the petitioner would be eligible to take Modvat credit if the goods are held dutiable and the ratio of the Special Bench ruling reported in 1994 (71) E.L.T. 1049 in the case of Sapphire Steels v. C.C.E., is squarely applicable to the facts of this case. On the above lines, the learned Counsel contended that the petitioner would be entitled to grant of pre-deposit of duty and penalty and further urged that if the plea that the impugned order is violative of the principles of natural justice is upheld, the matter in the interests of justice will have to be remanded for reconsideration.
In elaborating the plea of violation of the principles of natural justice, the learned Counsel contended that initially the adjudication was conducted by the Collector of Central Excise and personal hearing took place on 23-2-1993 and thereafter after a period of 1-1/2 years no order was passed and thereafter another adjudicating authority i.e. the Collector of Central Excise gave a notice to the petitioner on 15-7-1994 asking the petitioner to reply within two days whether the petitioner wanted a personal hearing and the petitioner by his communication, dated 20-7-1994 sent a reply seeking personal hearing.
The learned Collector would appear to have fixed the date for the personal hearing on 18-8-1994 and sent the notice to the petitioner's factory at Pondicherry and no notice was sent to the petitioner's administrative office at Madras nor to the petitioner's Consultant who was handling the case before the predecessor of the present adjudicating authority. When the first adjudicating authority had not passed any order even after a period of 1-1/2 years after the personal hearing on 23-2-1993, and the second adjudicating authority chose to give only two days time to the petitioner asking the petitioner whether the petitioner wanted a personal hearing, and when the petitioner sought a personal hearing the notice as per the practice and principles of fairplay should have been sent to the petitioner's Consultant. As a matter of fact, the petitioner's consultant had argued the matter before the predecessor adjudicating authority on 23-2-1993 and therefore the notice should have been sent to the petitioner's Consultant and also to the petitioner to the office address of the petitioner at Coimbatore. The Pondicherry factory which received the notice transmitted the same to the petitioner but it has not reached the petitioner. Therefore, when the notice was not received by the petitioner, in the interests of justice, the petitioner may be given an opportunity to represent in the case before the adjudicating authority on grounds of violation of principles of natural justice. Further, expert opinion has been produced to the effect that the goods in question are parts of textile machineries which are not capable of any other use. This evidence though referred to in the impugned order has not been considered and a finding given and the impugned order is not sustainable in law on this ground also. The learned Counsel contended that on the admitted evidence available on record, the petitioner/appellant cannot be said to be guilty of laches or suppression since notice itself states that the goods in question were exempted under Notification 132/86, dated 1-3-1986 as amended and subsequently by Notification 53/88, dated 1-3-1988 and Notification 14/92, dated 1-3-1992. The petitioner was therefore bonafide under the impression that the goods were not liable to excise duty and in the absence of any deliberate intention on the part of the petitioner to evade payment of duty, mere failure on the part of the petitioner in not paying the duty would not justify the Department to invoke the longer period of limitation in terms of proviso to Section 11A of the Act.
The learned Counsel in this context placed reliance on the ruling of the the Supreme Court in the case of Tamil Nadu Housing Board v.Collector of Central Excise reported in 1994 (74) E.L.T. 9 (S.C.). The learned Counsel finally pleaded financial difficulty stating that the petitioner is a SSI Unit and has made only a meagre profit of Rs. 3 lacs and the turnover was only Rs. 69 lacs during the year ending 31-3-1992.
3. Shri J.M. Jeyaseelan, the learned DR submitted that it is the responsibility of the petitioner to pay duty and not having filed declaration and the department not having any knowledge about the clearance of the goods which are excisable, the petitioner would be liable to be proceeded against in terms of the proviso to Section 11A of the Act. In respect of the personal hearing, notice has been sent to the petitioner's factory and therefore, there is no violation of principles of natural justice. The learned DR further urged that classification issue is an arguable point and that can be considered at the time of final disposal of the appeal. The petitioner cannot take Modvat credit in the absence of any declaration.
4. We have carefully considered the pleas made before us. We first take up the plea in regard to violation of principles of natural justice. We note that the first adjudicating authority held the personal hearing on 23.2.1993 and thereafter for l-1/2 years, no order was passed. We are not able to understand as to why no order was passed for a period of 1-1/2 years after the conclusion of the personal hearing by the adjudicating authority. The learned DR is also not able to offer any explanation for the inordinate delay and for not passing the order. Be that as it may, the adjudicating authority issued the notice on 15-7-1994 which was received by the petitioner on 19-7-1994 directing the petitioner to state within two days whether the petitioner wanted a personal hearing and the petitioner sent the reply on the very next day of the receipt of the notice expressing a desire to have a personal hearing. Unfortunately the personal hearing notice was not sent to the petittioner's Madras address nor to the petitioner's consultant who argued the case before the predecessor adjudicating authority. It was submitted that the communication received at the Petitioner's Pondicherry factory address which was sent to the petitioner's office was not received. Though it could be technically contended that issue of notice to the petitioner's factory at Pondicherry would suffice, it would be seen that the adjudicating authority did not pass any orders for 1 1/2 years. When the second adjudicating authority gave only two days time to the petitioner to exercise an option in regard to the personal hearing which option the petitioner did exercise without loss of time and when before the predecessor adjudicating authority, the petitioner was represented by his consultant we are of the view that notice for personal hearing in the above facts and circumstances could have been sent to the consultant of the petitioner or to the petitioner's office address at Madras. We therefore, feel that since the order has been passed by the adjudicating authority without hearing the petitioner or the petitioner's consultant, in the interests of justice and fairplay one more chance could be given to the petitioner.
In this view of the matter we grant waiver of pre-deposit of duty and penalty to the petitioner and take up the appeal itself since we are inclined to think that the impugned order is liable to be set aside and the matter should be remanded for reconsideration.
5. In the facts and circumstances of the case, without expressing any opinion on the merits of the issue and since the impugned order was passed ex parte as it were though on merits, we set aside the impugned order and remand the matter to the original authority for reconsideraion of the issue in accordance with law in the terms indicated above. It would be open to the petitioner/appellant to put forth all the pleas set out above, before the adjudicating authority.
Ordered accordingly.
6. I have perused the order recorded by my learned brother and I am not able to agree with him that the matter should be remanded by setting aside the impugned order and waiver of pre-deposit should be granted, for the reason that notice of hearing should have been sent to the Consultant at the address at their Head office, Coim-batore, in the interest of fairplay and one more opportunity should be given to the appellants. Various other pleas have been urged by the learned Counsel for the appellants while pleading for dispensation of pre-deposit of duty and penalty levied in terms of the impugned order and which have not been traversed by the learned brother. The learned Counsel for the appellants urged the following points: (i) Order has been passed in violation of the principles of natural justice; (ii) The appellants cannot be said to have suppressed any fact and therefore, longer period of limitation under Section 11A could not be invoked; (iii) Even on merits on classification, the appellants have a good case.
7. The learned counsel for the appellants fairly conceded that the authority who adjudicated the case had fixed date for personal hearing and that the appellants had received the letter fixing the personal hearing. His only plea is that this letter of intimation for personal hearing was addressed to the appellants at their factory address and the same had been transmitted to their Head Office for arranging a consultant to appear in the case and the communication was not received by the Head Office. The learned Counsel pleaded that the notice could have been sent to the Consultant who earlier appeared when the matter was taken up by the predecessor of the present adjudicating authority.
In this context it was pointed out to the learned counsel that all the correspondence and communication from the authorities including the show cause notice were sent to the appellants at their factory address and the replies to the show cause notice and also to other communications have all been emanated from the factory address of the appellants and that the assessee before the authorities is the licensee i.e. the factory.
8. The learned DR for the department in this context pleaded that admittedly the notice had been sent to the appellants fixing the personal hearing and it was for the appellants to arrange for any representation if the appellants had desired so. He pleaded that in this background it cannot be said that there had been denial of principles of natural justice. He also pleaded that the learned predecessor adjudicating authority had already heard the appellants and the learned DR referred to the mention of personal hearing in the impugned order, by the predecessor adjudicating authority who had taken up the matter for adjudication but did not conclude the adjudication.
9. It is seen from the records that the grievance of the learned Counsel for the appellants is that the predecessor adjudicating authority who had earlier taken up the matter for adjudication gave personal hearing and the matter remained pending for over 1 1/2 years and the present adjudicating authority after he took up the matter for adjudication gave two days to the appellants for giving representation in the matter and thereafter fixed the personal hearing as above. I observe that the issue before the Tribunal is not in the context of what had transpired before the present adjudicating authority who took up the matter for adjudication. No doubt, there is inordinate delay in the adjudication of the matter after personal hearing had been granted by the predecessor adjudicating authority. But the question of denial of principles of natural justice has to be considered in the light of the action taken in the matter for giving reasonable opportunity to the appellants by the present adjudicating authority. The present adjudicating authority who adjudicated the case, vide his letter, dated 15-7-1994 asked the appellants to inform his office whether the appellants wished to be heard in person and sought for their rep]y within two days and the appellants in reply to this letter, dated 20-7-1994 stated that they wished to be heard in person again. They did not make any grievance that they had been asked to give the reply within two days in the matter. The learned lower authority on 25-7-1994 fixed the personal hearing for 8-8-1994 and thus gave a clear 24 days time for the purpose. The service of this notice of hearing has been accepted by the appellants. The only plea is that the notice should have been sent to their Head office at Coimbatore for bringing to the notice of their consultant for appearance. In regard to the plea that this letter was not received in their HO, two affidavits have been filed; one by Shri Muthuswamy, Accountant of the appellants at their factory at Pondicherry wherein he has stated that notice of hearing was promptly made over to their HO in Coimbatore to bring it to the notice of their consultant, and the other affidavit is by their Manager Shri Meenakshi Sundaram at their Coimbatore office who has stated that the notice had not been received in that office. The question in this context is whether the service of the notice to the factory of the appellants was adequate and whether despatch of the notice to their consultant was required under the law and whether the learned lower authority was obliged to send the notice to their consultant. As seen from the records, notice was sent to the appellants' factory address and the reply to the notice also emanated from the factory address. As mentioned above, the show cause notice, earlier communication of the personal hearing when the personal hearing was fixed by the predecessor adjudicating authority were also addressed to the appellants' factory address and replies to all these have emanated from the appellants' factory address. Further a clarification filed by the appellants from the South India Textile Research Association in respect of their machinery for the purpose of classification has also been addressed to the factory address by the association. In this background, therefore, the plea of the appellants that the communication of the personal hearing should have been sent to their Head office at Coimbatore is not understandable. The authorities had all along been dealing with the appellants at their known address at Pondicherry factory. Further, there is nothing in the correspondence to show that notice of hearing was at any time requested to be sent to the consultant. The appellants have acted upon the notice of hearing earlier sent to their factory address at Pondicherry by the predecessor adjudicating authority and made arrangement for the personal hearing before him. When the present adjudicating authority asked the appellants whether they wish to be heard in person, the appellants merely stated that they wished to be heard in person and there was no indication from them to say that the notice of hearing should be sent to the consultant of the appellants.
The contention of the appellants would be acceptable, if it was the consultant of the appellants who had been corresponding with the authorities on their behalf for all practical purposes of the proceedings before the lower authority. Whereas here all the correspondence filed before the lower authority had been signed by the appellants themselves from their Pondicherry factory address.
Therefore, it was neither called for nor incumbent on the lower authority to have sent the communication regarding personal hearing to the consultant of the appellants. As mentioned earlier, the appellants had been given a clear period of 24 days for the purpose of personal hearing and the Accountant of the appellants' factory has clearly stated in his affidavit that the communication regarding personal hearing had been received. It was for them to monitor, whether arrangements for being present at the personal hearing had been made.
Further, an important communication like this, should have been followed up for necessary action and it was expected that this communication would be sent by registered post or by courier to ensure its delivery. No evidence has been produced before us that the communication had been lost in transit when it was sent from the factory to the Head Office. Affidavits filed in the absence of evidence cannot be given credence. In view of above, I hold that there was no denial of principles of natural justice inasmuch as adequate opportunity was afforded to the appellants, and no further opportunity is required to be given to the appellants in the facts and circumstances of this case.
10. The next plea of the appellants is that the appellants were under the bona fide belief that the goods are classifiable under Chapter 39 as articles of plastics and the plea in respect of two items out of the five items is as below : "Pulleys and cups which were assessable under Tariff Heading 8448 and would be exempt from duty and not under Tariff Heading 8483 as held by the Department" The lower authority has dealt with merits of the classification and has held as under: It is not disputed that these items are made out of plastics.
However, that fact by itself is not the sole criterion to claim that they are classifiable under Chapter 39. The items under dispute are identifiable parts/components of goods falling under Chapter 84/85 which come under section XVI of the Central Excise Tariff. Chapter Note 2(n) of Chapter 39 specifically excludes articles of Section XVI from the purview of Chapter 39. The classification of the items under Chapter 39 will arise only if it can be proved that the disputed items are not covered by Section XVI. In this case a mere reading of the headings of Chapter 84 and 85 will clearly indicate that the disputed items are clearly covered by the headings of Chapter 84 and 85. Therefore classification of the items under dispute under Chapter 39 has to be ruled out.
In regard to the two items classification which was specifically disputed before the lower authority, he has held as under : "Regarding classification of products under Chapters 84 and 85 the assesee's defence lays particular emphasis only on pulleys and cups which according to them will fall under Heading No.84.48 and not under Heading No. 84.83. Heading Nos. 84.48. and 84.83.of the Central Excise Tariff read as follows :- Rule 3(a) of the Interpretative Rules on Classifications states that specific description is to be preferred to the one which is general in nature. In other words, if the goods answers to the description in one or more of the headings of the Tariff, the one which is more specific has to be preferred. In the present case, Heading No. 84.83 clearly refers to pulleys including pulley blocks. Besides as per Note 2(a) of Section XVI, parts which are goods included in any of the heading under Chapters 84 & 85 are in all cases to be classified in their respective headings. Only if Note 2(a) is not satisfied, resort has to be made to Note 2(b) which classifies the products according to the sole use in a particular machinery. In the present case, the pulleys and cups will be covered by Note 2(a) and Heading No. 84.83 being more specific, pulleys and cups will merit classification under this heading." 11. The learned Counsel for the appellants has not pleaded in the light of the findings extracted above, how the findings of the lower authority can be taken to be wrong or perverse. The only plea made in that the goods are specifically and exclusively used for textile machinery and the same are covered by Notification 53/88. It is observed that the learned lower authority has analysed the position in terms of Rule 3(a) of the interpretative rules and prima facie there is no infirmity in the order of the learned lower authority.
12. The next question to be considered is whether in view of the nature of the goods and the specific entry in the tariff can it be said that the appellants were bonafide under the impression that there was no deliberate suppression in the matter of non-payment of duty. It is observed that the appellants themselves have stated that they were under the impression that the goods were falling under Chapter 39 and in any case two of the 5 items can be considered as textile machine parts exempted by Notification 53/88. In this context it has to be noted that the appellants would have gone through the scope of Chapter Note 2(n) under Chapter 39. Under this articles of Section XVI are specifically excluded from the purview of Chapter 39 and since the disputed goods are falling under Chapters 84 and 85 the question of classification of the goods under Chapter 39 prima facie not arise.
There is no plea from the appellants that the goods were not intended for machineries falling under Chapters 84 and 85. In this background therefore, non-filing of the classification list is not understandable and prima facie the only conclusion that can be reached is that the appellants deliberately did not come on record as to the nature of the goods being manufactured by them with a view to evade payment of duty.
There is nothing on record to show that the appellants were guided by any ambiguity under chapter notes. In the above view of the matter, the lower authority's order invoking the longer period of limitation prima facie therefore is maintainable the law.
13. With regard to their financial position, the learned Counsel submitted that they have made a meagre profit of Rs. 3.00 lacs and that they are a small scale unit and their sales were of the order of Rs. 77.00 lacs and the amount outstanding from sundry debtors is to the tune of Rs. 67.00 lacs and their sundry creditors is over Rs. 77.00 lacs as on 31-3-1992. The latest balance sheet has not been filed before us. The learned DR has no instructions in regard to the financial position of the appellants. Taking into consideration therefore, the facts and circumstances of the case and the the pleas made, I order that on the appellants pre-depositing a sum of Rs. 2.00 lacs, pre-deposit of the balance of duty and the entire penalty shall stand dispensed with pending appeal. I am not suggesting any date by which the pre-deposit should be made as this would depend upon the outcome of the order after hearing by the 3rd Member.
Whether in the facts and circumstances of the case, the order of the lower authority should be set aside for the reason of denial of principles of natural justice, pre-deposit of duty and penalty should be waived and the matter remanded for reconsideration of the lower authority for the reasons recorded by learned Vice President.
Whether in the facts and circumstances of the case, there is prima facie no infirmity in the order of the lower authority for reasons of denial of principles of natural justice and even on merits and the appellants should be directed to make pre-deposit of Rs. 2.00 lakhs as held by Member (T), for the reasons recorded by him.
Sd/- Sd/- 14. The following point of difference has been referred to me for resolution :- "Whether in the facts and circumstances of the case, the order of the lower authority should be set aside for the reason of denial of principles of natural justice, pre-deposit of duty and penalty should be waived and the matter remanded for reconsideration of the lower authority for the reasons recorded by learned Vice President.
Whether in the facts and circumstances of the case, there is prima facie no infirmity in the order of the lower authority for reasons of denial of principles of natural justice and even on merits and the appellants should be directed to make pre deposit of Rs. 2.00 lakhs as held by Member (T), for the reasons recorded by him." 15. Sh. K. Narayanan, the learned Counsel, submits that though there is no dispute that there had all along been correspondence between the office of the adjudicating authority and the Pondicherry factory of the applicants, this was prior to the Consultant coming into the picture on behalf of the applicants. The applicants were always expressing their willingness to proceed in the matter and this is manifest from the fact that they replied within the very short period of two days given to them by the adjudicating authority to decide whether a personal hearing was required by them. The date of hearing was fixed as 18-8-1994 and the notice was sent to the Pondicherry factory but the factory at Coimbatore namely, head office did not receive the notice of personal hearing and this fact is supported by an affidavit sworned to by Sh.
Meenakshi Sundaram, the Manager of the Company, Pondicherry. The learned Counsel submits that once the applicants had engaged a Consultant to appear for them, he is the person who is authorised to represent them before the adjudicating authority and hence, notice to the Consultant was required in the eye of law in the facts and circumstances of this particular case, when the original adjudicating authority did not pass any order even though personal hearing had been held before him, and it is only after a long delay of the 1 1/2 years that the adjudicating authority who passed the impugned order took up the matter for decision. He supports the order passed by the learned Member (J) VP who has accepted the contentions of the applicants that there was gross denial of principles of natural justice. On the question of merits which have been gone into by the learned Member (T), the learned Counsel initially submits that there is no difference of opinion on this point between two Members of the original Bench, as the learned Member (T) has not expressed any opinion, let alone any different opinion. However, without prejudice to this contention, he makes his submissions on the merits of the matter by stating that Heading 84.48 would more appropriately cover the disputed goods, namely pulleys and cups as they are admittedly intended for use in textile machineries and would not be covered under Heading 84.83 where the department seeks to classify them. He submits that the applicants bona fide belief that no classification list was required- to be field in respect of these pulleys and cups was based upon Notification No.111/88 which granted exemption to parts of textile machineries which were also made out of the plastic like pulleys and cups. Hence, the extended period of limitation cannot be invoked against the applicants.
He cites the decision of the Supreme Court reported in 1994 (74) E.L.T 9 (S.C.) to submit that in this case the burden of establishing fraud or guilt on the part of the assessees has not been discharged by the department and therefore, if at all there is any demand it can only be prospective. He hence urges that the view expressed by the learned Member (J) VP should be accepted at this stage.
16. Sh. Murugandi, the learned DR, states that it is not as if no notice was sent for personal hearing. In fact notice was sent to the Pondicherry factory and it was the responsibility of the Pondicherry factory to have taken up the matter with their Coimbatore office and their Consultant and failure to send notice of personal hearing to the Consultant has in no way resulted in the denial of principles of natural justice, as the applicants had reasonable opportunity in the form of notice issued to the Pondicherry factory. He supports the order recorded by the learned Member (T) on the merits of classification and in particular draws my attention to the findings of the learned Member (T) at page 15 of the original order that pulleys and cups will be covered by Note 2(a) of Section XVI and also paragraph 12 in which the learned Member (T) has opined that the longer period of limitation is available to the department as the applicants prima facie deliberately did not come on record as to the nature of the goods being manufactured by them, with a view to evade payment of duty. He hence urges acceptance of the order recorded by the learned Member (T) who has directed pre-deposit of a sum of Rs. 2.00 lakhs.
17. I have carefully considered the submissions of both sides. While it is true that the notice of personal hearing was sent to the Pondicherry factory, there is nothing to controvert the affidavit filed by the Sh.
Sundaram that he did not receive the notice of the hearing which was forwarded to him by the Manager of Pondicherry factory. The learned Member (J) VP has considered this aspect of the matter in para 4 of his order and has held that in the interests of justice and fair play one more chance should be given to the applicants. Since the non-following up of the issue of personal hearing by the Pondicherry factory has not been shown to be wilful, and considering the totality of the facts and circumstances of the case, I am in agreement with the order proposed by the learned Member (J) VP that without expressing any opinion on the merits of the issue, the impugned order should be set aside and remanded to the original authority for reconsideration in accordance with law.
18. The case file is returned to the regular Bench to pass an appropriate order.
In view of the majority decision, the matter is remanded to the original authority for reconsideration of the issue in accordance with law.