Amrut Bhagini Mandal (Trading Unit) vs Cce Pune Ii

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. I

APPEAL NO. E/673/05  Mum

Arising out of Order-in-Appeal No. P II/BKS/527/2004 dated 12.11.04 passed by the Commissioner of Central Excise (Appeals), Pune II.

For approval and signature:

Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri P.K. Jain, Member (Technical)

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

Amrut Bhagini Mandal (Trading Unit) : Appellant

Versus

CCE Pune II

Respondent

Appearance

Shri V.B. Gaikwad, Advocate for appellant Shri Ashutosh Nath, Asst.Comm(A.R.) For Respondent

CORAM:

Shri M.V. Ravindran, Member (Judicial) Shri P.K. Jain, Member (Technical)

Date of Hearing :18.12.2014 Date of Decision :..

ORDER NO.

Per P.K. Jain Brief facts of the case are that the appellants are receiving duty paid PVC sleeves in the form of flatten PVC tubes, either whole or cut into pieces of specific sizes. The sleeves are cut into horizontal pieces of required width which are then mounted on moulds of specific shape and dimensions (as per the packing container of the user of such sleeves) and such cut sleeves heated upto a specified temperature to get particular shape and so formed sleeves are thereafter used to seal the caps of plastic containers. Revenues case is that the above process amounts to manufacture and therefore appellant is liable to pay excise duty. Appellant on the other hand contends that no new commodity has come into existence and therefore the process undertaken by them will not amount to manufacture and therefore no excise duty is liable to be paid. After investigation which included testing of the goods in the Central Excise Laboratory and recording of statement etc., a demand notice was issued which was adjudicated. The adjudicating authority confirmed the demand, interest and penalty under Section 11AC of the Central Excise Act, 1944. Appellant filed an appeal before the first appellate authority who confirmed the contention of the original authority. However, the first appellate authority granted benefit of cum-duty thereby reducing the duty liability, interest and penalty under Section 11AC. Not satisfied with the said order the appellant is before this Tribunal.

2. Learned Counsels main argument was that the process of forming is a simple process wherein the shape of the PVC sleeves received by them is changed or formed and these sleeves are thereafter sold by them to their customers who uses the said sleeves for sealing their plastic containers. Learned Advocate contended that no new commodity has come into existence from the said the process. The goods continued to be PVC sleeves only and it is only the shape that has changed. Learned Counsels second argument was that the goods before forming and as also after the forming continues to be classified under the same heading and therefore the process will not amount to manufacture. Another argument of the learned Counsel was that the department knew about the process in 2000 itself and show-cause notice has been issued in 2003 invoking extended period of limitation and since the whole thing was in the knowledge of the department, extended period of limitation cannot be invoked. Another contention raised by the learned Advocate was that the inputs received were duty paid and therefore they would be entitled to get CENVAT Credit on inputs. This plea was taken by them before the original authority and the first appellate authority but no findings have been given by both the authorities on the said contention. If benefit of CENVAT Credit is given, the demand itself will get reduced substantially. Learned Counsel quoted the following judgements in support of various contentions:-

1. CCE v. Dhariyal Chemicals  2014 (309) ELT 727 (Tri.)

2. CCE v. Nagad Narayan Food Products  2012 (284) ELT 628 (Tri.)

3. CCE v. GTC Industries Ltd., - 2011 (266) ELT 160 (Bom.)

4. PSL v. CCE  2009 (16) STR 247 (Tri.)

5. True Forge Pvt. Ltd. v. CCE  2003 (159) ELT 1175 (Tri.)

6. XI Telecom Ltd. v. CCE  1999 (105) ELT 263 (A.P.)

7. Neptune Equipment Pvt. Ltd. v. CCE  2013 (291) ELT 385 (Tri.).

8. Rukmani Pakkwell Traders v. CCE  2008 (225) ELT 149 (Tri. Chennai).

9. CCE & Cus. Gujarat v. Pan Pipes Resplendents Ltd.  2006 (193) ELT 129 (S.C.)

3. Learned A.R. on the other hand contended that it is not a simple process, what is being received is flatten PVC rolls and sometime horizontally cut PVC sleeves. PVC rolls can be used for normal packing of any goods. However, the goods so received are horizontally cut in the required width and thereafter put on the moulds. The moulds are heated to a required temperature and the sleeves are kept on the moulds for specific time wherein the shape of the PVC sleeves gets formed and gets converted into shape required for sealing. Thus the tube is a sealant sleeves while the input is normal PVC sleeves. It was further submitted that the inputs are bi-axially oriented plain sleeves and on formation these gets to fully oriented blown/formed sleeve for the purpose of shrink wrap as is evident from the report of the Chemical Examiner. Thus even the characteristics of the goods changes so also the use changes. Once the sleeves are so formed these cannot be converted into original shape by any process and has to be used only as sealing sleeve on the plastic container. In view of this position a new product with different name, characteristic and use has emerged and the process therefore amounts to manufacture. Learned A.R. also stated that extended period of limitation is correctly invoked as the investigation though started in 2000 continued due to various representations etc by the appellant and could be finally concluded in 2003. He also quoted the judgement of the Honble Gujarat High Court in the case of CCE Surat v. Neminath Fabrics Pvt Ltd.  2011-TIOL-10-HC-AHM-CX to argue that the knowledge of the department is not relevant for invoking proviso to Section 11A. Learned A.R. also quoted the case before the Authority for Advance Rulings, New Delhi in the case of ELG India Pvt. Ltd.  2014 (303) ELT 283 (A.A.R.) to argue that even the segregation of scrap of different grades amounts to manufacture. Further the learned A.R. also quoted the judgement of the Honble Supreme Court in the case of Flex Engineering Ltd. V. CCE  2012 (276) ELT 153 (S.C.) to argue that the process amounts to manufacture.

4. We have considered the rival submissions. We have also seen the samples of inputs (PVC sleeves) as also final product (formed sleeves).

5. This is not in dispute the appellants are getting PVC tubes in the flatten form sometime in running length and sometime cut into pieces of specific length. We have also seen the sample of the same. The flatten PVC tube can be used for packing and other purposes. However, after cutting and forming, the said sleeves cannot be used for packing purpose but can be used only for sealing a plastic container of specific dimensions. We have also gone through the report of the Chemical Examiner wherein it has been clarified that the inputs are bi-axially oriented plain sleeves while the tube/final product is fully oriented blown/formed sleeve for the purpose of shrink wrap. It is clear from the sample once the sleeves is formed as above, these cannot be used for any purpose other than sealing plastic container. Honble Supreme Court in the famous case of DCM Ltd. vs. Union of India has held that for any process to be considered as amounting to manufacture, a new commodity with different name, character and use should emerge. In the present case the name, use and character of input and final product are different. The inputs are plain sleeves which can be used for wide variety of purpose and can be used as shrink wrap. The formed sleeves can be used for only sealing the plastic containers. Inputs are biaxially oriented whole output is fully oriented blown/formed. Thus in our view all the three conditions are satisfied and the process would therefore amount to manufacture.

5.1 We have carefully gone through the various case laws quoted by the learned Counsel. We find that the facts in those cases particularly commodity, process and use are very different and are distinguishable from the facts in the present case. We do not consider it necessary to discuss each of these cases.

5.2 The next issue raised by the appellant is that extended period is not invokable. We find that the argument of the appellant is that the department knew about it from 2000 onwards while the show-cause notice has been issued in 2003. We find that the said letter was written in pursuance of the investigation initiated by the Revenue. Thereafter the appellant has made representation etc at different levels and investigation continued. The samples were tested in 2003 and after completion of the investigation the show-cause notice has been issued. We agree with the learned A.R. that the knowledge of the department is not relevant for determining whether extended period of limitation can be invoked or not. However in the present case, there is no evidence to indicate that there was willful intention to evade duty. In fact, appellant has also represented their case to high authorities explaining in detail the process and why in their view it does not amount to manufacture. Keeping in view, over all facts and circumstances of the case, we are of the view that the ingredients for invoking the provisio to Section 11A are not satisfied and therefore extended period of limitation cannot be invoked.

5.2 Another contention of the learned Advocate was that the inputs were duty paid and therefore they were entitled to take CENVAT Credit (in the event it is held the process amounts to manufacture and hence they are required to pay duty). Learned Advocate also stated that they have taken this point before the original authority as also with the first appellate authority but no findings have been given by both the authorities. We find strength in the argument. We have seen the reply to the show-cause notice as also copy of the appeal filed before the first appellate authority. In both, the appellant has raised this issue however, no findings have been given on the same. We also note that if the appellant was eligible for getting the benefit of CENVAT Credit the actual demand will come down substantially. We therefore remand the matter to first adjudicating authority to examine the claim of the appellant in respect of CENVAT Credit on inputs. In case they are eligible for the same, recompute the duty liability and accordingly, re-determine the interest. Keeping in view the nature of dispute, as also facts and circumstances, in our view, no penalty is warranted

5.4 The appeal is disposed of in the above terms.

(Pronounced in Court on..)

(M.V. Ravindran Member (Judicial) (P.K. Jain) Member (Technical)

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