M/S. Bhor Industries Ltd vs Commissioner Of Central Excise, ...

[Arising out of Order-in- Original No. 47/ASR/2004-ADJ dtd. 22/12/2004 passed by the Commissioner, Central Excise, Pune-III]

For approval and signature:

Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial)

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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?

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M/s. Bhor Industries Ltd. : Appellants

VS

Commissioner of Central Excise, Pune-III : Respondent

Appearance

Shri. Mayur Shroff, Advocate for the Appellants Shri. Ashutosh Nath, Asst. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 4/3/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

The appeal is directed against Order-in- Original No. 47/ASR/2004-ADJ dtd. 22/12/2004 passed by the Commissioner, Central Excise, Pune-III wherein in denovo adjudication Ld. Commissioner confirmed demand of Excise duty amounting Rs. 32,52,451/- and imposed penalty of Rs. 10 lakhs under Rule 173Q(1) of the Central Excise, Rules, 1944. The fact of the case is that the appellant M/s. Bhor Industries Ltd are engaged in the manufacture of goods falling under Chapter 59 of the Schedule to the Central Excise Tariff Act, 1985. They are also manufacturing PVC coated/laminated cotton fabrics falling under C.S.H. 5903.19 of the Central Excise Tariff. On the said product they are availing consessional rate of duty as per the Notification No. 141/86 CE dated 1/3/1986. (Sr. No 8 of the table) and Notification No. 63/86 dated 1/3/1987 (Sr. No. 2 of the table). As per the said notifications concessional rate was Rs. 6.50 per sq. mtr. plus the duty for the time being leviable on the base fabrics under Chapter 52. if not already paid. However as per the Tariff rate, rate of duty was 30% Adv. plus Rs. 7 per sq. mtr. plus the duty for the time being leviable on the base fabrics, if not already paid.

The fabric in question (i.e. PVC coated/laminated) were manufactured by appellant using cotton hosiery(knitted cloth) falling under Chapter 60 of the Central Excise Tariff as base fabrics. Since the knitted cloth(base fabric) was classifiable under Chapter 60 and not under Chapter 52 as found out from the suppliers documents like consignment note, it was contended that in the show cause notice that the appellant is not entitled to the concessional rate of duty prescribed in the above said notification. On this observations show cause notice proposed demand of differential duty of Rs. 1,17,52,675.40 for the period from 1/3/86 to 31/1/89. The demand is on account of differential duty between concessional rate as claimed by the appellant and the Tariff rate on the product falling under chapter heading 5903.19. In the classification filed by the appellant effective from 1/3/86, 1/3/87 and 1/3/88 under the column for rate of duty, the appellant declared the rate of duty applicable under exemption notification and plus the duty for the time being leviable on the base fabrics under the chapter 52, if not already paid.

In the show cause notice the main contention of the Revenue is that since the product on which appellant claimed the exemption notification, the base fabric used is falling under chapter 60 and not under chapter 52 as prescribed under the notification. In the first round of adjudication the then Commissioner vide order No. 35/CEX/1991 dated 28/9/1991 confirmed the demand of Rs. 1,17,52,675.40 and penalty of Rs. 25 lakhs was imposed and on account of confiscation of land, building, plant machinery etc. redemption fine of Rs. 5 lakhs also imposed. Aggrieved by the said adjudication order dated 28/9/1991, appellant filed appeal before CEGAT. CEGAT vide its order No. 157& 158/95-D dated 28/2/1995 remanded back the matter to the original authorities for denovo adjudication. In the said remand order the Tribunal mainly observed that in the notification there is residuary entry at different Serial Number which neither canvassed nor suggested in the proceedings before the Commissioner. In the denovo adjudication the impugned order was passed wherein Ld. Commissioner considering the observations of the CEGAT held that classification of the product in question is correctly under 5903.99 which covered under exemption Notification No. 141/86 CE dated 1/3/1986.

(Sr. No 10 of the table) and Notification No. 63/86 dated 1/3/1987 (Sr. No. 5 of the table). As the said exemption was extended to the appellant by the Ld. Commissioner the demand of Rs. 1,17,52,675.40 proposed initially in the show cause notice, stood reduced to 32,52,451/- which was confirmed and penalty of Rs. 10 Lakhs was also imposed under Rule 173Q(1) of the Central Excise Rules, 1944. Aggrieved by the said order the appellant is before us.

2. Shri. Mayur Shroff, Ld. Counsel for the appellant submits that in the show cause notice the basic issue was denial of exemption to the product falling under chapter 5903.19 on the ground that in the rate column it is mentioned that base fabric should be under chapter 52. He submits that subsequently in the judgment in the case of Natson Laminates Vs Collector of Central Excise, Bombay[2000(115) ELT 444(Tribunal)] and the Larger Bench judgment of this Tribunal in the case of CCE Vs. Entremonde Polyecoaters Ltd.[2000(122) ELT 700(Tribunal LB)] it has been held that even though the base fabric is falling under chapter other than chapter 52 exemption can be allowed. Therefore the issue with the aforesaid judgment attained finality and the appellant is entitled for exemption of Notification No. 141/86 CE dated 1/3/1986. and Notification No. 63/86 dated 1/3/1987 even though the base fabric used is falling under chapter 60. In this regard he placed reliance on case of Commissioner of C. Ex. Mumbai-I Vs. Asian Leather Cloth Mfg. Co. [2001(127) ELT 738(Tri. Mum)]. On the issue of limitation he submits that appellant has filed the classification list from time to time wherein they claimed exemption under aforesaid notification and the said classification list is approved therefore there is no suppression of facts or any mis-declaration on the part of the appellant, therefore demand is time barred. He further submits that show cause notice for extended period i.e. 1/3/86 to 31/1/1989 was issued on 26/2/1991 whereas the show cause notice for the period Feb 89 to 11/6/89 was issued on 18/7/1989. It is his submission that one of the show cause notice dated 18/7/1989 was issued for the normal period, thereafter issuance of show cause notice for the period 1/3/1986 to 31/1/1989 on 26/2/1991 is clearly time bar. He submits that as regard the goods manufactured by the appellant which is subject matter of the case the fact was known to the department. He also submits that at the time of new tariff coming into force the Superintendent verified the stock physically therefore for this reason also suppression of fact or misdeclaration does not exist and therefore the demand for the period 1/3/1986 to 31/1/1989 is clearly time barred.

3. On the other hand, Shri. Ashutosh Nath, Ld. Asst. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that the impugned order was passed in denovo adjudication as per this Tribunal order No. 157& 158/95-D dated 28/2/1995 (Bhor Industries Ltd. Vs. Collector of Central Excise, Pune [199 5(78) ELT 455(Tri)]. In this remand order the Tribunal mainly observed that in the product manufactured by the appellant, base fabric is classifiable under Chapter 60 therefore exemption provided under Serial Number 10 of Notification 141/86 is applicable., since this alternate exemption neither discussed nor considered in the first adjudication and matter was remanded. He submits that Ld. Commissioner after taking into consideration the observations of the remand order correctly held that product of the appellant is classifiable under sub heading No. 5903.99 and accordingly exemption available to such sub heading as provided under Notification NO. 141/86 CE and 63/87 CE was extended to the appellant. accordingly the demand was reduced from Rs. 1,17,52,675.40 to 32,52,451/- therefore Ld. Commissioners order is legal and correct which deserve to be upheld.

4. We have considered the submissions made by both the sides and perused the records.

5. We find that in the first round of proceedings this Tribunal in the remand order categorically observed that since the product of the appellant is manufactured out of the base fabric falling under Chapter 60 and not under chapter 52 therefore it merits classification under subheading 5903.99 and if that is so the same is covered under exemption Notification No. 141/86 CE dated 1/3/1986. (Sr. No 10 of the table) and Notification No. 63/86 dated 1/3/1987 (Sr. No. 5 of the table). Following said observations in the denovo adjudication the Ld. Commissioner passed the order giving following findings:

11.1 It is seen from the records of the case that M/s BIL were engaged in the manufacture of PVC coated/laminated and the said fabrics were manufactured by using cotton hosiery cloth (knitted cloth) falling under chapter 60 of the Central Excise Tariff as base fabrics. M/s BIL were however, availing of the benefit of concessional rate of duty as per Notification No. 141/86 is alleged in the SCN that as per serial Nos. 8 and 2 of the table below the Not.141/86 dated 1.3.86 and 63/87 dated 1.3.87 respectively, the concessional rate under the said Notifications was not applicable to the goods made of base fabrics falling under any Chapter other than 52 of Central Excise Tariff and, hence, instead of the concessional rate of duty. M/s BIL were liable to pay duty on the said goods at the tariff rate specified for sub-heading No. 5903. 19.

11.2 The demand relates to the period from 1.3.1986 to 31.1.1989 with the enactment of the Central Excise Tariff Act, 1985 and its enforcement with effect from 1.3.1986, Notification No. 141/86  CE dated 1.3.1986 was also issued. For the sake of easy reference, the text of Heading No. 59.03 is reproduced below:-

Heading No. Sub- Heading Description Rate of duty

Basic Additional 5903

Textile fabrics, impregnated with plastics other than those of heading No. 59.02

-Of base fabrics of cotton(Chapter 52)

5903.11

--Coated or laminated with preparation of low-density polytheylene Nil Nil

5903.19

--Other 30% plus Rs. 6 per square metre plus the duty for the time being levialbe on the base fabrics under Chapter 52, if not Already paid 5% plus Rs. 2 per square metre.

-of base fabrics of man made taxtile materials(Chapter 54 or Chapter 55) Nil Nil

5903.21

-Coated or laminated with preparations of low- density polyethylene Nil Nil

5903.29

--Other 30% plus Rs. 7.50 per square metre plus the duty for the time being levialbe on the base fabrics under Chapter 54, or Chapter 55, as the case may be, if not Already paid 5% plus Rs. 2.50 per square metre.

--Other

5903.91

--Coated or laminated with preparations of low- density polyethylene Nil Nil

5903.99 Other 30% plus Rs. 8 per square metre

11.3 From the above, it seen that the textile fabrics, impregnated, coated, covered or laminated with plastic falling under Tariff heading No. 59.03 are brought under three categories, namely, (a) made out of base fabrics of cotton (Chapter 52); (b) made out of base fabrics of man made textile materials (Chapter 54 or 55); and (c) others. In the table attached to exemption Not. No. 141/86  CE dated 1.3.1986 also, the same three categories are reproduced as follows:-

Sr. No. Heading No. or Sub-heading No. Description of goods Rate of duty Condition 8 5903.19 Textile fabrics, impregnated, coated, covered or laminated with plastics Rs. 6 per square metre plus the duty for the time being levialbe on the base fabrics under Chapter 52, if not Already paid

9.

5903.29 Textile fabrics, impregnated, coated, covered or laminated with plastics Rs. 7.50 per square metre plus the duty for the time being levialbe on the base fabrics under Chapter 54, or Chapter 55, as the case may be, if not Already paid

10 5903.99 Textile fabrics, impregnated, coated, covered or laminated with plastics Rs. 8 per square metre

11.4 From the Tariff description of Chapter Heading 59.03, as reproduced above and the text of the exemption Not. No. 141/86  CE dated 1.3.1986, the following facts come to light:-

(a) Textile fabrics, impregnated, coated, covered or laminated with plastics, get classified under tariff sub-heading 5903. 11 and 5903. 19 only if such goods are manufactured by using cotton fabrics falling under chapter 52 as the base fabrics. Similarly, such fabrics get classified under tariff sub-heading 5903.21 and 5903.29 only if such goods are manufactured by using man made textile materials falling under chapter 54 or 55 as the base fabrics. If such fabrics are manufactured by using any textile materials, other than cotton fabrics (Chapter 54 and 55), as base fabrics, they get classified under tariff sub-heading 5903.91 or 5903.99.

(b) All coated fabrics get classified under the heading 59.03 and depending upon the base fabrics used, they get classified under the sub-heading 5903.19, 5903.29 or 5903.99.

(c) There is no dispute on the fact that the goods in question, namely, coated fabrics manufactured by M/s BIL were manufactured by using cotton hosiery cloth (knitted fabrics) classifiable under chapter 60 of the Central Excise Tariff as base fabrics. Since the base fabrics used is other than cotton fabrics falling under chapter 52 or man made textile materials falling under chapter 54 or 55, the resultant coated fabrics manufactured by M/s BIL cannot be classified under 5903.19 or 5903.29 of the Central Excise Tariff. That means, the correct classification of the coated fabrics in question manufactured by M/s BIL is tariff sub-heading 5903.99 of the Central Excise Tariff.

(d) Notification No. 141/86  CE dated 1.3.1986 covers all coated fabrics falling under heading 59.03 i.e. , Sl. No. 8 of the Table covers the coated fabrics classifiable under 5903.19; Sl. No. 9 covers the coated fabrics classifiable under 5903.29 and Sl. No. 10 covers the coated fabrics classifiable under 5903.99.

(e) When the coated fabrics in question manufactured by M/s BIL is classifiable under tariff sub-heading 5903.99, the said goods automatically get covered under Sl. No. 10 of the table attached to Not. No. 141/86  CE dated 1.3.1986. Hence, the proposal in the SCN to deny the benefit of Not. No. 141/86  CE dated 1.3.1986 to the goods in question and to apply the tariff rate of duty is incorrect. The same finding are applicable in respect of Not. No. 63/87  CE 1.3.87 also as the text of both the notifications are identical.

12.1 The demand covered by the Show Cause Notice in question relates to the period from 1.3.1986 to 31.1.1989. The rates of duty applicable to the goods in question, namely, coated fabrics manufactured by using cotton hosiery cloth (knitted fabrics) as base fabrics and classifiable under Chapter Sub-heading 5903.99 of the Central Excise Tariff when read with Not. No. 141/86  CE dated 1.3.1986 which was subsequently replaced by exemption Not. No. 63/87  CE dated 1.3.87 were as follows:-

Period Exemption Not No. and date Sl. No. of the Table annexed to the Notification Effective date of duty 1.3.86 to 28.2.87 141/86-CE dated 1.3.1986 10 Rs. 8/- per sq. Metre 1.3.87 to 28.2.88 63/87- CE dated 1/3/1987 5 Rs. 9/- per sq. Metre 1.3.88 to 31.1.89 63/87-CE dated 1.3.1987 amended by 81/88-CE dated 1.3.1988 5 Rs. 8.50/- per sq. Metre

12.2 When the effective rates of duty as indicated in para 12.1 are applied to the goods in question manufactured and cleared by M/s BIL, the actual amount of duty payable by them would out as follows:-

Period Quantity cleared in Sq. Metres Effective date of duty Actual amount of duty payable -Rs. 1.3.86 to 28.2.87 676304 Rs. 8/- per sq. Metre 54,10,432 1.3.87 to 28.2.88 573414 Rs. 9/- per sq. Metre 51,60,726 1.3.88 to 31.1.89 356955 Rs. 8.50/- per sq. Metre 30,34,117(BED) 1,51,706(SED)

12.3 From the above, the amount of duty short paid by M/s BIL can be worked out as follows:-

Period Actual amount of duty payable -Rs.

Amount of duty paid Rs.

Amount of duty short paid-Rs.

1.3.86 to 28.2.87 54,10,432 40,57,824 13,52, 608.00 1.3.87 to 28.2.88 51,60,726 40,13,898 11,46,828.00 1.3.88 to 31.1.89 30,34,117(BED) 1,51,706(SED) 23,16,960(BED) 1,15,848(SED) 7,17,157(BED) 35,858(SED) Total 1,37,56,981 1,05,04,530 Rs. 32,52,451.00

12.4 I, therefore, hold that M/s BIL are liable to pay the amount of Central Excise duty short paid as indicated above i.e. , Rs.32,16,593.00 (BED) + Rs.35,858.00 (SED) = Rs.32,52,451.00

We find that in the product i.e. PVC coated and laminated fabric manufactured, the appellant use the base fabric cotton Hoseiry Cloth(Knitted cloth) falling under chapter 60 as base fabric. From the Tariff entry it is very clear that under chapter heading 5903 the coated fabric of base fabric of cotton of chapter 52 is classifiable under 5903.11 or 5903.19. Coated fabric made of base fabric by Chapter 54 or Chapter 55 are classifiable under chapter sub heading 5903.21 or 5903.25 and other coated fabric are classifiable under Chapter sub heading 5903.91 or 5903.99. In the present case since the coated fabric manufactured by the appellant is not made of base fabric of chapter 52, 54 or 55 therefore is not classifiable either under chapter sub heading 5903.19 or 5903.29. In view of this undisputed fact the product in question is correctly classifiable under chapter 5903.99 and therefore correctly extended the benefit of Notification No. 141/86 CE dated 1/3/1986. under Sr. No 10 of the table and Notification No. 63/86 dated 1/3/1987 under Sr. No. 5 of the table appended thereto. As regard the judgment of Natson Laminates(supra)., Asian Leather Cloth MFG.

Co. (supra). and CCE Vs. Entremonde Polyecoaters Ltd(supra). It is observed that in all these judgment the issue involved was that if the base fabric falls under Chapter 60 whether exemption Notification No. 141/86 CE dated 1/3/1986. and Notification No. 63/86 dated 1/3/1987 can be allowed wherein under column of rate of duty, chapter heading of base fabric is mentioned as 52, 54 or 55. In the present case since in the remand matter this Tribunal has observed that on the basis of base fabric of Chapter 60 used the products correct classification is under 5903.99 and following the same the Ld. Commissioner has correctly come to the conclusion that exemption provided to the goods of Chapter 5903.99 is admissible therefore the judgments cited by the Ld. Counsel are distinguished on this ground. As regard the submission of the Ld. Counsel that the show cause notice issued for the period 1/3/86 to 31/1/89 is time barred as appellant had been filing their classification list from time to time and same were approved, hence, there was no suppression of facts and mis-declaration. We observed that in the classification list the appellant admittedly mentioned rate 6 per sq. mtr. plus the duty for the time being leviable on the base fabrics under Chapter 52, if not already paid.

From this mention it is clear that department is under belief that base fabric used by the appellant is falling under chapter 52 whereas the appellant used the base fabric which is falling under Chapter 60, therefore this is a clear mis-declaration of the fact. As regard submission of Ld. Counsel that stock was verified physically by the departmental officer, we are of the view that though the stock of the goods was verified but from the stock verification officer cannot ascertain whether the base fabric used in the product is falling under Chapter 52 or Chapter 60. Therefore we do not agree with the submission of the Ld. Counsel on this count. We therefore of the view that there is clear suppression of facts and mis-declaration on the part of the appellant therefore extended period was rightly invoked. As regard submission of the Ld. Counsel that show cause notice issued is time barred also on the ground that show cause notice for the extended period i.e. 1/3/86 to 31/1/1989 was issued on 26/2/1991 subsequent to the show cause notice of normal period i.e. 18/7/1989. On this, We are of the view that during the period 1/3/86 to 31/1/89 the appellant has suppressed and mis-declared facts therefore show cause notice for the said period can be issued up to five years.

Only because show cause notice for the extended period was issued subsequently, nature of suppression and misdeclaration does not get extinguished. We therefore do not agree with this submission of the Ld. Counsel. In view of our above discussion, we are of the considered view that impugned order passed by the Ld. Commissioner is sustainable. The appeal is dismissed.

(Order pronounced in the court on___________ )

P.K. Jain Member (Technical) Ramesh Nair Member (Judicial)

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