ORDER
G.R. Sharma, Member (T)
1. This appeal is directed against the order of the Collector of Central Excise, Allahabad. The Collector in his order had confirmed the demand of Rs. 1,38/99,178.64 and also imposed a personal penalty of Rs. 35,00,000.00.
2. The facts in brief as set out in the adjudication order are that the appellants are engaged in the manufacture of aluminium and products thereof. The product wire rod manufactured by them was classified under Chapter Heading 7604.10. However during the course of inspection of the records by the Central Excise Officers it was noticed that the appellants had been clearing aluminium/properzi rods as ‘wire rods’ classified under Heading 7604.10. On further examination it was noticed by the Officers that said properzi rods were manufactured in the shape of coils. The scrutiny of the gate passes and the relevant invoices also revealed that the said wire rods were described to be in coil form. One representative of the appellants who was interrogated also confirmed that the said properzi rods were produced by continuous casting and rolling process in running length which remained in coil form and sold as such. On observation of this fact the Officers referred to Central Excise Tariff Act, 1985 and found that Chapter Note (a) of Chapter 76 defines ‘Bars & Rods’ as rolled, extruded or drawn products not in coils. It was further alleged that the appellants had evaded payment of Central Excise duty amounting to Rs. 1,38,99,178.64 during the period 1-3-88 to 19-5-88 when the effective rate of duty on aluminium wire was 20% ad valorem whereas the appellants had paid duty 13% ad valorem under Notification 150/86 dated 1-3-86. A show cause notice was issued to the appellants asking them to show cause as to why the Central Excise duty amounting to Rs. 1,38,99,178.64 should not be demanded from them under proviso to Section 11A of the Central Excises & Salt Act, 1944 and why penalty should not be imposed on them under Rule 173Q.
3. Heard Shri V. Sridharan and Shri R. Nambirajan, learned Advocates for the appellants and Shri K.K. Jha, learned SDR, for the respondent.
4. The appellants pleaded that they had been selling properzi rods as ‘wire rods’ only; the product in question is known as ‘wire rods’ in the market; even Hon’ble Supreme Court in the case of Indian Aluminium Cables Limited v. Union of India reported in 1985 (21) E.L.T. 3 (S.C.) had held that aluminium wire rods were manufactured by the properzi process known as properzi rods are covered by the term wire rod. It was therefore submitted by the appellants that applying theory of common trade parlance the product in question is ‘wire rods’. They referred to “Indian Standard Glossary of Terms” relating to aluminium and aluminium alloys (IS) 5047-1986 and pleaded that wire rods manufactured by properzi process are known as redraw rods or wire rods. It was also argued by the appellants that the expression wire rod is not defined under the statute that Chapter l(a) defines only Bars and Rods whereas Chapter l(c) defines aluminium wire. It was therefore argued by them that there is no chapter Note statutorily defining the expression ‘Wire Rod’.
5. The appellants also argued that classification lists filed by them in respect of this product have been consistently approved by the Department classifying the product as ‘wire rod’ even during the relevant period i.e. 1-3-88 to 19-5-88 under Chapter Heading 76.04. It was also submitted that even in the subsequent classification lists filed in the years 1989, 1990, 1991 and 1992, the Department accepted the classification of Wire Rods under Chapter Heading 76.04 and not under Heading 76.05.
6. The Hon’ble Tribunal in the final Order Nos. E/54-55/93-B1, dated 18-3-93 in the case of M/s. Ess Ess Metal & Alloys had held that Tariff changes brought in by the Finance Bill of 1988 to Chapter 79 would not be effective from 13-5-88 when the Finance Bill was enacted as Finance Act of 1988. It was therefore urged that the ratio of this decision would apply to the present case also and thus amendment sought to be effected by Clause 81 of the Finance Bill 1988 to Chapter 76 would become effective only from 13-5-88.
7. It was argued by the appellants that the allegation of suppression of facts in the show cause notice is incorrect since the relevant gate passes during the period in question clearly mentioned that the goods were in coil form only. The gate passes as well as the relevant challans were filed by the appellants along with the regular R.T. 12 returns. It was also pleaded by the appellants that the demand is hit by limitation. The appellants referred to the Board’s Circular No. F. 141/12/90/CX. 4, dated 18-9-92 wherein it was mentioned “it would appear that an abstract question was raised before the Central Board of Excise & Customs as to whether wire rod in coil form can be covered by definition of ‘bars and rods’ given in chapter l(a) or as wire given in Chapter Note l(c). The CBEC in the Circular took the view that by definition ‘bars and rods’ is defined as ‘other than in coils’ and hence wire rod in coils were classified by the Board to be aluminium wire under Heading 76.05.” The appellants submitted that this Board’s Circular was not at all concerned with the effective rate of duty leviable under the notification. It was argued by the appellants if Revenue’s contention that the duty already paid on the statutory supply of wire rod at the rate of 13% under Serial No. 4 of the Notification No. 150/86 is not enough and the appellants have to pay further differential duty of 7% applicable to aluminium wire under Serial No. 8 of Notification No. 101/88; that there is no case for demanding of differential duty of 7% in view of the fact that Serial No. 4 of Notification No. 150/86 exempt wire rods conforming to specifications in ISI-5484-1978; that on ISI the Revenue have always been accepting the position that the appellants supply were of wire rods conforming to ISI-5484-1978 and therefore the duty applicable for the product would only be under Serial No. 4 of Notification No. 150/86; that for coming under the purview of Serial No. 4 the question to be asked is whether the product is a wire rod conforming to ISI-5484-1978 and this item should fall under Chapter Heading 76. It was also argued that undisputably both these conditions are satisfied in the present case and therefore as for as statutory supplies are concerned even if wire rod is treated as aluminium wire falling under Heading 76.05 no duty is demandable over and above 13% duty already paid by the appellants. It has also pointed out by the learned Counsel that Notification No. 150/86 was amended by Notification 204/88, dated 20-5-88 adding the word “whether or not in coils after the wire rod.” It was also argued that for non-statutory supply under Serial No. 4 of Notification No. 101/88 shall apply. In view of the fact that classification list was approved by the Assistant Collector on 18-7-88 classifying the product under sub-heading 7604.10 and modifying the rate of duty as 18%, the appellants had paid differential duty for the period 1-3-88 to 19-5-88. It was also argued that even it is assumed that the product should be described as aluminium wire classifiable under Chapter Heading 76.05 the benefit of Serial No. 4 of Notification No. 101/88 cannot be denied to the appellants.
5. Further on the question that the entire demand is hit by limitation the appellants submitted that the Department knew well that wire rods in question are in coil form. The learned Counsel concluded his arguments by saying that no penalty whatsoever is imposable on the appellants as there was no mala fide intention to evade payment of duty.
6. Countering the arguments Shri K.K. Jha, learned SDR submitted that Tariff entry relevant to aluminium wire and articles thereof has been changing over the years; that under the old tariff aluminium wire and articles thereof were classifiable under Tariff Item 27 which was replaced by new Tariff Item 27 with effect from 1-8-89; that the new Central Excise Tariff was introduced with effect from 1-3-86 and the same definition of aluminium wire and rods including wire rods as under the earlier tariff was continued. Again under Clause 81 of the Finance Bill of 1988 Chapter Note to Chapter Note 76 was introduced in order to allign the Central Excise Tariff with HSN. By this amendment separate definition for Bars and Rods, profiles, Wires, Plates, Sheets and Strips and foils of Aluminium were introduced; Chapter Note 1(a), to Chapter 76 defined Bars and Rods. The perusal of the two definitions shows that both bars and rods as well as wire are rolled, extruded or drawn products but the main distinguishing feature between them is that Bars and Rods are not in coils whereas wire is stated to be in coils; it would thus be seen that distinction between Bars and Rods and wire was introduced for the first time on 1-3-88. The learned SDR therefore submitted that in view of this definition given in the tariff itself the question of going into common parlance or trade understanding of the product does not arise; that common parlance or trade understanding or reference to ISI specifications are required to be considered only when the product is not defined or specified in the Tariff; that there was specific mention in the Tariff that Bars and Rods are not in coils whereas Wire is stated to be in coils. The learned SDR therefore submitted that this was a definition and should be accepted as such.
7. On the question of limitation the learned SDR submitted that the position came to the knowledge of the Officers only on 18-11-92 that the product properzi rod was actually in coil shape that in their classification the appellants did not make any disclosure about the product properzi rod that it was in coil shape and since this declaration was not made in the classification list therefore suppression of facts as alleged in the show cause notice is established. On the question of appellants’ reliance on the decision of Apex Court in the Case of Indian Aluminium Cables Limited the learned SDR submitted that this decision pertains to old tariff and therefore was not applicable to the new tariff as new tariff was restructured fully. On the question of applicability of change in classification the learned SDR submitted that in terms of provisions of Section 3 of the Provisional Collection of Taxes Act, 1931 tariff changes brought about in Chapter 76 by the Finance Bill would be effective from 1-3-88. In view of Section 3 of the Provisional Collection of Taxes Act which reads :-
“Where a bill to be introduced in Parliament on behalf of Government provides for imposition or increase of duty of Customs or Excise, the Central Government may cause to be inserted in the Bill, a declaration that it is expedient in the Public interest that any provision in the Bill relating to such imposition or increase of duty shall be with immediate effect under this Act.”
8. The Hon’ble CEGAT in the case of Collector of Central Excise, Pune v. Peico Electronics and Electricals Ltd. reported in 1987 (30) E.L.T. 608 held that the provisions of Provisional Collection of Taxes Act, 1931 are inapplicable to change of Tariff entry not resulting in increase of duty, While referring to the earlier case of M/s. Parmaly Wallace the Hon’ble CEGAT had held that whatever had been manufactured and had attracted the charge of duty in terms of Section 3 of the Central Excises & Salt Act would not be effected by the change in classification. The Tribunal did not accept this contention and held that the change had immediate effect and the goods though manufactured prior to 28-2-82 were classifiable under Tariff Item 16B when they were cleared.
9. On the question of applicability of rates specified in the Notification No. 150/86 in respect of statutory supply and the rate under Notification No. 101/88 for non-statutory supply, the learned SDR submitted that when once the classification of the goods is done as aluminium wire classification under Chapter sub-heading 7605.00 the question of applicability of the rate of duty mentioned against Serial No. 4 of the Notification No. 150/86 for statutory supply does not arise. He submitted that so also can be said in respect of non-statutory supply under Serial No. 4 of Notification No. 101/88.
10. The appellants and the respondents cited a lot of case law which are as under:
(1) Swaroop Fibre Industries Ltd. v. Collector of Central Excise, 1990 (48) E.L.T. 118 (Tribunal). (2) Collector of Customs v. O.E.N. India Ltd., 1989 (42) E.L.T. 235 (Tribunal) (3) Bajrang Alloys Ltd. v. Collector of Central Excise, Raipur, 1994 (70) E.L.T. 624 (Tribunal). (4) Vivek Re-Rolling Mills v. Collector of Central Excise, Chandigarh. (5) Reliance Industries Limited v. Collector Central Excise, Bombay-III, 1988 (34) E.L.T. 126 (Tribunal). (6) Sharpmax Engineers v. Collector of Central Excise, Rajkot, 1994 (73) E.L.T. 134 (Tribunal). (7) Koron Business Systems Ltd. v. Union of India, 1991 (51) E.L.T. 212 (Bombay). (8) Vishal Malleable Limited v. Collector of Central Excise, Baroda, 1995 (76) E.L.T. 590 (Tribunal). (9) Garden Silk Mills Ltd. v. Collector of Central Excise, Baroda, 1995 (78) E.L.T. 580 (Tribunal).
11. On careful consideration of the submissions made before us and the perusal of the ratio of the various case law cited and relied upon by the appellants and the respondents we find that the following issues arise for our consideration, (a) What is the classification of the goods in question namely whether they are wire rods/properzi rods or aluminium wire, (b) whether the benefit of Notification No. 150/86 shall be available to the appellants for statutory supply and of Notification No. 101/88 for non-statutory supply and (c) whether the demand is hit by limitation.
12. On the question of classification a lot of arguments were adduced by both sides and arguments centered round the trade parlance, ISI specifications, long standing practice and approval of classification lists. We find that Chapter Note l(a) of Chapter 76 was introduced by the Finance Bill of 1988 wherein the term ‘Bars and Rods’ and wire were defined. We also observe that rolled, extruded, drawn products in coils were defined to be wire. This definition was clear. As the definition of wire was given in the Schedule of Central Excise Tariff Act, 1985 and was specific, it will prevail over various aspects namely trade understanding, common parlance, ISI specifications and the long practice and approval of classification lists. Having regard to this fact we hold that the product described as wire rod or properzi rod in coil shall be classifiable as aluminium wire under Chapter Heading 76.05. We find that with this change in the definition of the product, net effect was on increase of duty. As there was increase of duty therefore in terms of Section 3 of Provisional Collection of Taxes Act, 1931 it shall take effect from the date of introduction of the change in the Finance Bill i.e. from 1-3-88 and not from the date on which the Bill become an Act.
13. On the question of limitation main argument of the Department was that the appellants did not declare that the product described by them as wire rod/properzi rod was in coil form. However as against this the appellants submitted that in their gate pass they were showing the product as in coils. From the facts of the case also we also observe that the admitted position in the show cause notice indicated in para 6 that on scrutiny of the gate passes and relevant invoices it was revealed that the said wire rods were cleared as in coil form. We also observe that gate passes as duty paying documents are always enclosed with the RT 12 returns, therefore, the Department cannot say that they were not aware that the item was in coil form. Simply because the appellants had not disclosed this thing in their classification list does not amount to suppression or misstatement. As gate passes/invoices described the goods in coil form therefore the allegation of suppression or misstatement is not proved and hence the demand is hit by limitation.
14. On the question of applicability of rates indicated in Notification No. 150/86 and No. 101/88 we find that items to which rates become applicable were described differently therein as we have held that the product described as wire/properzi rod is in fact aluminium wire and is classifiable under Chapter Heading 76.05. Therefore, only rates applicable to aluminium wire, if any, indicated in the aforesaid two notifications shall be applicable.
15. On the question of penalty we find that Chapter Note was introduced with effect from 1-3-88 the appellants were manufacturing a product described as wire rod. Wire rod in terms of changed definition was nothing but Aluminium wire. As there was a change in the classification of the product manufactured by the appellants therefore it was essential for them to submit the classification list stating the position. Specially in view of the fact that Chapter Note brought out the difference in regard to physical shape of the goods namely whether in coil or not in coil admittedly the product manufactured by the appellants was in coil and therefore the amended definition was fully applicable to the appellants. Having regard to these facts we hold that penalty is imposable. Looking to the facts and circumstances of the case we find that the penalty is harsh, therefore, it is reduced from Rs. 35,00,000/- to Rs. 10,00,000/-.
16. Subject to the above modifications the impugned order is uphled and the appeal is disposed of accordingly.