ORDER
K.S. Venkatramani, Member (T)
1. These Stay Applications arising out of the above common order of the Commissioner of Central Excise Mumbai III, are for waiver of total duty amount Rs. 7,30,49,940.67 and of a total penalty Rs. 2,86,85,730.36 Under Section 11AC of the Central Excises & Salt Act, 1944 and a further penalty of Rs. 4.00 crores under Rule 173Q of Central Excise Rules.
2. The ld. Sr. Counsel Shri A. Hidayatullah appeared for the applicants with Shri M.P. Baxi the ld. Advocate. It was submitted that the Department seeks to classify the adhesive product manufacture by the applicants which are sold in sets under sub-heading 3909.60 of the Central Excise Tariff Act, as Polyurethene. Whereas according to the applicants the goods are classifiable as prepared glues and other prepared adhesive, not elsewhere specified or included under sub-heading 3506.00. The ld. Counsel submitted that the appellants’ products were nothing but adhesive and, in terms of Section Notes, 2 of Section VI of the Tariff Act, the same were classifiable under Heading 3506. They had filed classification list accordingly from time to time which were duly approved by the Department with however the remark “subject to Chemical test.” They were also submitting monthly RT-12 Returns which were assessed finally without any objection. In 1992, the appellants started export of the products and in this connection filed classification list according to Chemical composition of the individual components of the product. The jurisdictional Assistant Collector however issued a Show Cause Notice on 6-11-1992 calling upon the applicants to show cause why the product should not be classified under sub-heading 3909.60 CETA. Meanwhile the applicants represented to the Central Board of Excise and Customs, and the Board, on testing the sample of their product, issued a clarification on 3-6-1994 that the applicants’ products presented together and intended to be used as adhesives would be classifiable under Heading 35.06 of the Tariff Act. By an order dated 11-11-1994, the Assistant Collector held that the Applicants’ products are classifiable under Heading 35.06 following the clarification by the Board. The Commissioner issued a Show Cause Notice on 4-8-1993, for demanding short levy duty to Rs. 2,86,85,730.36 Under Section HA of the Central Excise Act. The Appellants’ also received on 22-10-1996 corrigendum to the Show Cause Notice calling upon them to show cause why penalty should not be imposed on them Under Section 11AC and as to why interest should not be demanded from them Under Section 11AB and on considering their reply the Commissioner passed the impugned order, in which he also disposed off in addition to the Show Cause Notice dated 4-8-1993,9 other Show Cause Notices issued between 26-11-1992 and 29-6-1995 issued by the Assistant Commissioner and for a total demand of over Rs. 7.00 crores as stated above. The ld. Sr. Counsel contended that the Commissioner was unjustified invoking the longer period for demanding the duty; the period involved is between July, 1988 and April, 1992, in which the Show Cause Notice had been issued only on 4-8-1993. As has been brought out the applicants had from time to time been submitting their classification lists which had been duly approved. They had furnished monthly RT-12 Returns which had all been finally assessed. They had taken up the matter of classification of the goods offered for their Customers in sets before the Central Board of Excise & Customs. The Board also clarified the matter regarding classification of the products after duly examining the samples of the product by the Chief Chemist of the Department. The Board had classified the goods under Heading 35.06 as claimed by the applicant. The jurisdictional Assistant Collector has also followed this clarification by the Board. In view of the above there could not be any charge of suppression of fact by the applicants. The ld. Sr. Counsel further contended that the Board having given its clarification on the issue of classification, the Commissioner cannot ignore or repudiate the Board’s Circular but is bound to implement it. The ld. Sr. Counsel relied upon the Supreme Court decision Collector of Central Excise, Bombay v. Jayant Dalai Private Ltd. reported in 1996 (88) E.L.T. 638 (S.C.) to say that the Collector could not go against Tariff Advice issued by the Central Board of Excise & Customs and that he is bound by it. For the same proposition the Supreme Court decision in the case of Poulose and Mathen v. Collector of Central Excise reported in [1997 (90) E.L.T. T264 (S.C.)] was also cited, wherein the Supreme Court had held that the Tariff Advice/Trade Notices are binding on the Department. Therefore, the Commissioner in this case could not take a different view by stating that the Chief Chemist report is not furnishing the relevant data for determination of classification as has been done in the impugned order. The consistent approval by the Department of their classification list over the period would itself be a ground against the Department invoking the longer period. The ld. Sr. Counsel in this context referred to the well established principle by decisions of the Tribunal that the authority approving the Classification List should do so after conducting all necessary enquiries, and in this case all the classification lists had been approved subject to the Chemical test. The ld. Sr. Counsel also assailed the penalty Under Section 11AC of the Act, because that section was not on the statute took at all when the Show Cause Notice was issued. The ld. Sr. Counsel further pleaded that the predeposit of the duty amount and penalty would cause undue hardship to the applicants. He referred to the application of funds as given in their Profit and Loss Account to show that they were out of pocket to the extent of Rs. 6.00 Crores (Rupees Six Crores only).
3. The ld. Sr. Counsel Shri M.I. Sethna appeared for Department and contended that the Board’s communication dated 3-6-1994 relied upon by the applicants is not in the nature of Tariff Advice and its also not of circular letter issued to all the Collectors. It is only issued in respect of the representation of the applicants herein. Therefore, the ratio of the case law cited in this regard for the binding nature of Board’s Tariff Advice will not be applicable. It was pointed out that the Board’s communication is issued in 1994, when the matter was already sub-judice before the Collector following the issue of the Show Cause Notice in 1993. On the other hand the Department has a strong case on merits as in Applicants case situation Section Note 2 to Section VI of the C.E.T. Act, becomes applicable in which case the classification would depend on the Chemical properties of the mixed final product. The Chemical Examiners report relied upon by the Commissioner clearly shows that the final product is in the nature of Polyurethene and accordingly the sub-heading 3909.60 which is specific for such material is applicable and not Heading 35.06 which is a residuary item covering glues and adhesives not elsewhere specified. The specific heading is therefore to be preferred as has been done by the Commissioner. The same result would follow according to the Sr. Counsel when the two reports of the Dy. Chief Chemist are read together. The ld. Sr. Counsel also argued that the Commissioner was justified invoking the longer period because the Department came to know that the products manufactured by the applicants are complementary to each other and are cleared in sets only when they filed classification list for export purposes giving individual classification of the ingredients of the products; this was a 1992, whereas the period involved in this case days back to 1988. The earlier declaration of the products was only as Plastic Adhesives by the applicants clearly there is suppression of facts. In any case, the ld. Sr. Counsel pointed out that Nine Show Cause Notices as listed Commissioner’s order are not time barred. Regarding the plea of financial hardship, the ld. Sr. Counsel urged that as per the balance sheet on 31-3-1996, it is seen that the applicants are closely held family concern where 70% equity dividend has been declared. There is also no evidence of any adverse market condition to show that the applicants business has suffered to make it is a financial hardship for them to predeposit the duty and penalty.
4. We have carefully considered the submissions. On the merits of the case the question is to consider the competing headings between 35.06 and 39.09 of the CETA for the products which are sold in sets and consisting of two different components. The classification will have to be decided in terms of the Section Notes, 2 to Section VI and Section Note I to Section VII. The argument that the Board’s letter of 3-6-1994 is in the nature of a Tariff Advice which is binding on the Commissioner is also arguable. We have perused this letter it is in the nature of reply to their representation by the applicant regarding their product. The Board has stated therein that their product CAC 1511 and CAC 1511-A presented together and intended to be used as adhesive merits Classification under Heading 35.06 CETA and the applicants are advised to contact the Collector Bombay III. Therefore this is not, on the face of it a Tariff Advice by the Board nor is it a Circular letter addressed all Collectors. On the other hand it is reply to a particular representation by the applicants. Prinia facie therefore, it would not have the attributes of an order Under Section 37B by the Board. The case law cited in this behalf are distinguishable as they related to instances where there were clarificatory orders and Tariff Advice by the Board addressed to the field formations which fall for consideration by the Supreme Court. In considering the plea that the longer period Under Section 11A cannot be invoked, the fact that the various Classification Lists filed by the applicants had been approved from time to time subject to Chemical Test, and also their RT-12 monthly Returns had been duly finalised would be relevant to take a view prima facie that the department could not alleged suppression of facts, especially when the applicants themselves have gone up to the Board with a representation regarding the classification of their product which has been duly consideration by the Board. It also happened that the Assistant Collector had followed the Board’s clarification in approving the classification list under Heading 35.06. The applicants have also pleaded financial hardship; apart from the submissions made in this regard by the ld. Sr. Counsel Shri Sethna, the perusal of their balance sheet as on 31-1-1997 shows that the applicants have Sales Income of Rs. 1,963.00 lakhs, Rs. 555.00 lakhs are due to them from Sundry Debtors. Having regard to the financial position, we direct, in terms of Section 35F of the Central Excises & Salt Act, 1944, the applicants should predeposit a sum of Rs. 3.5 crores on or before 30-6-1997 subject to which the predeposit of the balance duty amount and of the whole of the penalty amount is dispensed with and recovery is stayed pending the disposal of the appeal.
5. Matter to come up for ascertaining compliance with this order on 4th July, 1997. The Stay Application are disposed of accordingly.