ORDER
S.K. Bhatnagar, Vice President
1. This is a stay application filed with reference to the order of Collector of Central Excise, Cochin dated 8-4-1994.
2. Learned Counsel stated that the appellants are manufacturers of newsprint by Mechanical wood pulp process and claimed the benefit of Notification No. 163/67 and as amended by 79/86 which allows benefit to mechanical wood pulp amounting to not less than 50% of the fibre content.
3. The Department had issued a demand in respect of both post and pre 1986 period at the pulp stage; the demand portion of Rs. 50 crores belonging to the pre-1986 period has been dropped by the Collector. But he has confirmed a demand of Rs. 11,51,30,192.92 and also imposed penalty and confiscated plant, machinery, buildings, etc. invoking the larger period of limitation.
4. It was their submission that they had not only taken Central Excise licence but also filed a ground plan which shows the machinery, etc., used by them; and their Licence had been renewed from time to time.
5. Not only that a sample had been drawn by the Department after the change in Tariff in 1986 and the Chemical Examiner reported on 15-12-1987 that the sample contains mechanical wood pulp amounting to not less than 50% by weight of the total fibre content.
6. It was his submission that they had also filed classification lists and subsequently technical literature to justify that in newsprint industry also the process employed by them is considered as one of the varieties of mechanical wood pulp process and in this connection he would like to draw attention to the technical literature filed.
7. The Collector has himself given benefit in pre-86 period in view of the Board’s Circular but for the subsequent period, he has referred to the Tariff Heading and the HSN. However, in a similar case of Mysore Paper Mills an unconditional stay was granted by the Tribunal vide its stay order No. 172/95 and subsequently a final order was also passed vide Nos. 150 to 152/97, dated 8-1-1997 and he would rely upon these orders in support of their contention apart from the technical literature filed by them, the classification list and the Chemical examiner’s test report to show that these all also go to show their bonafides.
8. That apart, their financial condition is also not good. Though they were a profit making concern, of late the company is running into losses because of import of newsprint from other countries, as is apparent from the cost sheet filed by them indicating the position upto March, 1997.
9. It was his submission in the circumstances, neither there was any cause for demand of duty nor for penalty or confiscation.
10. Learned JDR strongly opposed the prayer. He stated that whatever was done prior to 86 is no longer relevant inasmuch as the Collector has already given them the required relief in respect of demand for pre-86 period.
11. Once the new Tariff had come into existence, they were required to file classification list in accordance with the new Tariff; and the new Tariff distinguishes between mechanical wood pulp, chemical wood pulp and semi-chemical wood pulp and, therefore, in their classification list they were required to show the quantities being manufactured under each of these categories which they did not do. This amounts to suppression of facts.
12. It was also his submission that the Collector’s order is essentially based on a Board’s Circular, dated 12-9-1990 (page 66) and this Board’s circular itself accepts the appellants’ proposition only for the pre-86 period and specifically distinguishes post-86 period and referred to the HSN in this regard. The Collector has accordingly taken into consideration the HSN Heading and the Explanatory Notes which clearly distinguish between 3 types of pulps made by 3 different methods.
13. In this connection he would also like to draw attention to the technical literature as well as the Note in the HSN Explanatory Notes. In the circumstances, the demand as well as the penalty and confiscation were justified.
14. In so far as the financial position is concerned, he would like to draw attention to their turn-over. The cost sheet filed itself shows a revenue of Rs. 15,472.60 lakhs and the depreciation is to the tune of Rs. 894.83 lakhs. In the circumstances, it will not cause them any undue hardship. In their stay application, they have offered to furnish bonds. But in view of the Supreme Court’s observations, it is clear that the bonds do not serve the purpose and hence they may not be accepted.
15. Learned Counsel also drew attention to the order of the Government of India, Ministry of Industry and the Department of Industrial Development to show in support of his contention that the process being employed by them was one of the processes recognised as a variety of mechanical pulp process and emphasised their bona fides.
16. We have considered the above submissions. We observe that the learned Counsel is correct in drawing our attention to the two orders of the Tribunal cited by him. Since the facts in the present case are similar, respectfully following the observations made therein, we consider that the appellants have been able to show a strong prima facie case. In this connection, we note that in the stay order also, the Tribunal had considered the matter as arguable on merits; but had taken into account the appellants bona fides and financial position, and the Tribunal’s final order also has been allowed on time bar.
17. In the present case also we observe that they have got a strong prima facie case on limitation and in view of the observations contained in the above two orders, we consider it appropriate to waive the pre-deposit of the entire amount (including duty and penalty) in question and stay its recovery during the pendency of the appeal.