ORDER
J.H. Joglekar, Member (T)
1. The appellants were manufacturing tablewares/kitchenwares of plastic materials. The Central Excise Tariff Heading 39.24 read as under :-
“tableware, kitchenware, other house-hold articles and toilet articles, of plastics.
– Cellular:
- Of Polyurethanes 30% 3924.19 - Of other plastics 30% 3924.90 - Other 30%"
2. Intelligence was received that although, the appellants had declared the manufacture of goods falling under sub-heading 3924.10 only, they were also manufacturing articles falling under sub-heading 3924.90. The articles falling under both sub-headings were taken to their duty paid godown where they were made into sets and sold. The goods falling under subheading 3924.90 were cleared without payment of duty and without any entries being made in the statutory registers. Shri D.B. Vora, Deputy Financial Controller in his statement accepted the manufacture and clearance of such goods without payment of duty. These facts were corroborated by the statements of other employees/officers of the appellants. In the absence of declaration as to the price of the goods cleared without payment of duty, the officers took the value of the entire set and arrived at the value of the goods cleared clandestinely by deducting therefrom the declared value of the components on which duty had been paid. Show cause notice was issued invoking the extended period. The stock of goods cleared without payment of duty valued at Rs. 47,13,967/- was alleged to be liable to confiscation. The assessees filed replies and were heard by the Commissioner. He passed orders confirming duty of Rs. 55,03,790.40. He confiscated the offending goods but permitted their redemption on payment of fine of Rs. 10 lakhs. He imposed penalty of Rs. 5 lakhs on M/s. Eagle Flask Pvt. Ltd. He confiscated the land, building, plant, machinery etc. but gave an option for redemption thereof on payment of prescribed fine. The appeal is directed against this order.
3. The case of the appellants was argued by Shri Rohan Shah, ld. Counsel appearing along with Shri Mohan Salian, Advocate. The Revenue was represented by Shri A.K. Jain, ld. D.R.
4. Shri Rohan Shah advanced arguments on limitation. He stated that merely because the disputed products were not declared in the classification list and also because the RG-1 register as well as RT-11 did not mention that suppression could not be alleged. He relied upon two documents. He referred to one letter written in 1989 and the classification list filed in 1992 and claimed that through these documents clear knowledge was obtained by the department. It is on this ground he claims that the charge of suppression cannot survive.
5. We have examined the cited documents. The assessee had written a letter dated 4-4-89 to the jurisdictional Assistant Collector of Customs. This letter is in continuation of earlier letters, which are not on record. The fact of manufacture of dutiable and duty free products and their being put together in sets is mentioned in that letter. The letter states that only two types of set attracted duty and that they were not manufacturing either set. The letter gives the assessees own interpretation of what constitute a set and seeks clarification from the department. As we have observed above, this later in a chain of letters does not disclose any ground on which knowledge of the department can be established. The letter merely contains an assertion of the assessees. We are not aware of what the response of the department was. As regards the classification list filed and approved, we find that the approving officer himself has made a remark thereupon that credit of duty could not be availed of on those goods, which were free of duty. These documents fail to support the plea of limitation.
6. We now turn to the merits of the case.
7. Before us, the fact of manufacture of goods falling under 3924.90 and their clearance without payment of duty has not been contested. The Annexure to the show cause notice which quantifies the duty evaded on these goods also remarks that the credit of duty paid and raw material used in the manufacture of these goods has been availed of by the manufacturers. The reason for this remark being there is not very clear but substantial arguments were advanced on this remarks to which we would come later.
8. It was claimed that the benefit of Notification No. 15/94 was available for this goods. It was claimed that this claim was made before the Commissioner who had not taken account thereof.
9. The aforesaid Notification covers a number of articles.
Sr. No. 21 of the said Notification reads as under :-
39.23
All goods other than –
Nil
(i) of polyurethanes;
“If no credit
of the duty paid on the inputs used in the manufacture of such goods has been
availed of under Rule 57A of the said Central Excise Rules, 1944.”
(ii) insulated ware; and
(iii) bags or sacks made out of fabrics (whether or
not coated, covered
or laminated with any other material) woven from strips
or tapes of plastics; and
fabrics for making such bags or sacks
10. Shri Rohan Shah makes submissions on two counts as to the eligibility of goods to exemption under this entry. He states that credit of duty paid on the inputs had been taken but that it was not “availed of”, in as much as during the entire proceedings credit balance in the Modvat credit account was more than Rs. 10,17,625/- which is their estimate of the duty on the inputs going into the manufacture of such products. It is claimed that about 80% of the raw materials were used for the manufacture of insulated wares on which duty has already been paid.
11. The second ground advanced by Shri Rohan Shah was that even if the credit has been availed of, while reversing the credit, the assessees would become eligible for the benefit of the notification. He cites the Supreme Court judgment in the case of Chandrapur Magnetic Wires v. Collector [1996 (81) E.L.T. 3 (S.C)]. He also relies upon the Allahabad High Court judgment in the case of Super Cassettes Industries Ltd. v. U.O.I. [1997 (94) E.L.T. 302 (All.)] and also Bata India Ltd. v. CCE, Patna [2000 (123) E.L.T. 857 (Tri)].
12. We have examined the judgments. The Allahabad High Court in their judgment held that taking credit was only one step in the proceeding, but that the credit was finalised only when it was, used for payment of duty. The Bata India Ltd., judgment acknowledges the fact that common inputs can go into both dutiable and exempted products and in the case of latter, reversal can be made of the credit taken. The Bata India Ltd., judgment refers to and relies upon the Supreme Court judgment in the case of Chandrapur Magnetic Wires v. CCE [1996 (81) E.L.T. 3 (S.C)].
13. In the Chandrapur Magnetic Wires judgment certain inputs were common in the manufacture of both dutiable and exempted products. The assessee had not kept separate accounts nor had they segregated the inputs differently. The issue was whether the benefit of Notification No. 69/86-C.E. was available which notification prescribed that Modvat credit should not have been taken in the manufacture of final goods. The Hon’ble Supreme Court ruled that where such credit had been taken, and where the credit so taken was later reversed, the benefit of the notification could be availed of.
14. Shri Rohan Shah pleads that at all times the assessee had in their books of account sufficient credit which could have been reversed and that offers to that effect had been made repeatedly by the assessees. The Chandrapur Magnetic Wires decision was also cited before the ld. Commissioner. We have seen the orders of the Commissioner. The Commissioner had not discussed how the decision did not apply to their case when on perusal of the facts we do find that ratio thereof would apply.
15. The Commissioner is also not correct in holding that the benefit of the notification would be available only where a classification list had been filed in their regard. It is now settled law that the benefit would be so available if otherwise due. Even in cases where the assessee have manufactured goods without taking out a Central Excise licence and where dutiable goods have been cleared without payment of duty, the Tribunal and the courts have extended the benefit of the applicable value based notifications.
16. Since the vital point, which goes to the core of the issue in hand, has been scantly treated by the ld. Commissioner, we find that the proceedings have to be remanded. This is because facts as claimed will have to be scrutinised by the original authority. He will have to verify the claim of the assessee that the credit was available at all times which was sufficient to cover the duty allegedly short levied. When the assessee claims in this regard are found to be correct, he may permit the reversal of the credit and thereafter extend the benefit of the relevant cited notification. In quantifying the value for the purpose he will also ensure that the claims and points made by the assessee for determination of the valuation are taken note of and are discussed.
17. The appeal is allowed and the proceedings remanded to the jurisdictional adjudicating authority for adjudication de novo.