ORDER
G.A. Brahma Deva, Member (J)
1. Heard both sides.
2. Arguing for the appellants Shri G. Shivadass submitted that show cause notice was issued on the following grounds :-
(a) Duty of Rs. 3,63,445.63 on HDPE tapes captively consumed during the period 19-12-1986 to 2-2-1987 on the ground that the said tapes have been consumed in the manufacture of HDPE rendering the appellants ineligible to the exemption provided under Rule 49.
(b) Duty of Rs. 35,217.60 demanded on the quantity of 8,700 Kgs. of HDPE tapes captively consumed in the manufacture of HDPE fabrics during the month of March, 1986 on the same ground indicated above.
(c) Duty of Rs. 7,38,418.45 on HDPE tapes captively consumed during the period 1-3-1986 to 31-1-1987 for stitching of woven fabrics on the ground that concessional rate of duty was available only if the HDPE tapes were intended for weaving of fabrics of sacks.
(d) Duty of Rs. 2,48,762.91 during the period 20-11-1986 to 18-12-1986 on HDPE sacks manufactured out of the circular looms which were not eligible for exemption under Notification No. 223/86, dated 3-4-1986 as amended by Notification No. 453/86, dated 20-11-1986.
3. He submitted that with reference to the ground No. (a) and (b) the issue is covered by series of decisions including the following decisions :
(a) CCE v. Chitra Polypack Industries – 1993 (66) E.L.T. 290
(b) Auroplast India Limited v. CCE – Order No. 169/89-D, dated 26-6-1989
(c) Prime N Pic Pvt. Ltd. v. CCE – Order Nos. E/216-271/90-D
(d) Narmada Plastics Ltd. v. CCE -1997 (94) E.L.T. 86 (Tribunal) : Order No. 76/97-D, dated 22-1-1997
(e) Narmada Stackwell Ltd. v. CCE – Final Order No. 147/97-D, dated 21-2-1997.
4. According to the department that HDPE tapes which have been consumed in the manufacture of HDPE fabrics which are covered from payment of duty thereby rendering the appellants ineligible to the exemption provided under Rule 49 as can be seen from the first ground shown in the show cause notice and as per second ground the duty has been demanded on the quantity of HDPE tapes captively consumed in the manufacture of HDPE fabrics during the month of March, 1986. The Tribunal has taken the view in the cases referred above that exemption cannot be denied in terms of Rule 49(4) of the Central Excise Rules in the context of the use of the HDPE tapes in the manufacture of HDPE sacks.
5. On a careful consideration of the submissions made by both sides on this issue and on going through the case law referred to above, we find that the issue has been settled in favour of the assessee and accordingly assessee succeeds on both the grounds.
6. As regards 3rd ground is concerned, the department has taken the view that concessional rate of duty was available in the case of HDPE tapes captively consumed for stitching of woven fabrics if tapes were intended for weaving of fabrics of sacks. Shri G. Shivadass submitted that Board of Excise and Customs has issued a telex dated 10-3-1988 to all the concerned officers not to demand differential duty in respect of HDPE tapes used for stitching of HDPE sacks for the period 1-3-1986 to 28-2-1987. It was submitted by Shri Jain, learned Department Representative that there was clear directions/instructions from the department on this issue but indicated in the telex not to press the demand. Further he submitted telex message issued by the Board is not binding. It was submitted by Shri Shivadass that apart from the telex message issue involved in this case has been covered by the decision of the Tribunal in the case of Narmada Plastics (P) Ltd. v. Collector of Central Excise, Indore as per Final Order No. 76/97-D, dated 20-1-1997 in Appeal No. E/3434/88-D which has followed the earlier decisions of the Tribunal in the case of Auro Plast (India) Ltd. as per Order No. 169/89-D, dated 26-6-1989. We find that in the case of Auro Plast (India) Ltd., the Tribunal held that benefit of Rules 9(1) and 49(4) can be extended to HDPE tapes and had observed that HDPE tapes as inputs have been utilised in the manufacture of HDPE sacks in terms of provisions to Rule 9. Since HDPE tapes and HDPE sacks were both falling under the same tariff before the New Tariff came into existence, condition No. 2 and 3 of the 3rd proviso to Rule 9 are, therefore, clearly satisfied. Accordingly it is held that no liability arises on the manufacture of HDPE tapes in terms of the said proviso to Rule 9 if they are utilised in the manufacture of HDPE sacks. In the instant case since HDPE tapes were used in the manufacture of HDPE sacks, following the ratio of the aforesaid decisions we accept the contention of the party and in the result, the appellants succeed on this issue also.
7. As regards ground No. (d) is concerned the appellants did not press this plea and accordingly this ground is dismissed as such.
8. We find that penalty of Rs. 7 lacs has been imposed in this case as against Rs. 1 lac duty demanded. Since duty amount has been reduced considerably and taking into consideration the plea advance on behalf of the appellants that there was no intention to evade payment of duty, we find that reduction is called for and accordingly penalty has been reduced to Rs. 1 lac.
9. Appeal is disposed of in the above terms.