ORDER
K.K. Usha, J. (President)
1. The appellants are engaged in the manufacture of rolled products such as bars, rods of iron arid non-alloy steel, round bars, CTD bars etc. These goods are presently classifiable under Chapter Heading 72.09 of the Schedule to the Central Excise Tariff Act, 1985. Prior to 1986 they were classified under Tariff Item 25 of the first Schedule to the Old Tariff Act. These goods are manufactured from re-reliable materials from ship breaking and from open market. The issue raised in these Appeals is whether the appellants are entitled to exemption under Notification No. 208/83-CE., dated 1-8-83 as amended. The Appeals are directed against the findings of the Collector that the appellants are not entitled to the benefit of the notification.
2. Apart from the submissions on merits, the appellants contended before us that the Department has wrongly invoked the extended period of limitation in their case and that the demand is barred by limitation. In the case of M/s. Steel Rolling Mill the demand is for the period 1-8-83 to 31-8-87 and in the case of M/s. Lucky Steel Industries the period is from 26-9-84 to 31-8-87. The show cause notice in the first case is dated 26-7-88 and in the second case dated 14/16-8-89, It is contended on behalf of the appellant that Department was aware of the manufacturing activity carried on by the appellants during the relevant period; that in the year 1981 the issue of the appellants taking licence under the Central Excise Act was raised but was dropped on the basis of the representation submitted by their association; that statements under Section 14 of the Central Excise Act were taken from the partners of the Steel Rolling Mill of Saurashtra on 16-12-86, 19-5-87 and 13-1-88 wherein they had admitted the fact of manufacturing rolled products from ship breaking material and also from the scrap purchased from open market and that they have not obtained Central Excise licence during the relevant period. The statements had been taken from the partners of Lucky Steel Industries on 26-2-87, 21-5-87, 27-1-88, 14-6-88 and 4-7-89, which contained similar admission. While some gate passes showed nil rate of duty, other documents showed payment of duty at appropriate rates, and that the Department was well aware of the fact that the appellants were taking the benefit of the provisions contained under Notification No. 208/83-CE. Under these circumstances, appellants would submit that there was no justification in taking recourse to the extended period in their case.
3. The appellants would further contend that prior to March, 1986 when the old Tariff Act was in force, there was no distinction between re-rollable scrap/material obtained from ship breaking and from any other source. With the enactment of the new Tariff Act, 1985, a distinction for the first time was drawn in re-rolling material on the basis of the source from which it was obtained (obtained from ship breaking).
4. When Notification No. 208/83-C.E., dated 1-8-83 was amended to incorporate chapter sub-headings of the New Tariff Act. Sub-headings 72.15 and 72.09 which cover re-rollable material obtained from ship breaking, were not included in the table annexed to the notification. It is the case of the appellants that such non-inclusion was an oversight since, by Notification No. 101/87, dated 27-3-87, Notification No. 208/83 was again amended to include goods falling under Chapter Headings 72.15 and 73.09. It was under these circumstances the appellants entertained a bona fide belief that they were entitled to exemption under Notification No. 208/83 and continued to clear the goods manufactured without any duty.
5. The learned Counsel for the appellants further pointed out that the dutiability of the re-rollable scrap obtained from ship breaking itself was contentious during the relevant period. The Department was of the view that ship breaking amounts to manufacture and hence re-rollable scrap so obtained would be subject to levy of excise duty. Ship breakers contended that ship breaking did not amount to manufacture and hence there would not be levy of excise duty. There were several Writ Petitions filed before the Hon’ble Gujarat High Court. These Writ Petitions were finally disposed of by the Hon’ble High Court of Gujarat on 1-5-86 on the basis of consent terms. One of the consent terms in the agreed order passed was that the Government would evolve suitable mechanism to ensure waiver of excise duty on ship scrap for the past period. The learned Counsel would further contend that all these factors contributed to the bona fide belief entertained by the appellants that they are entitled to exemption under Notification No. 208/83. Therefore, according to the appellants, they are not guilty of suppression with intention to evade duty.
6. The learned Counsel has also submitted that appellants’ case was covered by the Circulars issued by the Board. The subject notification had incorporated an “Explanation” that for the purpose of the notification, all stocks of inputs in the country except such stocks as are clearly recognizable as being non-duty paid, shall be deemed to be inputs on which duty has already been paid. The Budget Circular for 1983 had clarified as under :-
“3. Under Notification No. 208/83-C.E., certain final products have been fully exempted if they are produced out of specified inputs on which duty has been paid. Inputs purchased from the market have also been deemed to be duty paid vide Explanation to this Notification. Some doubts have since been raised as to whether old and used items used in the manufacture of final products can be considered to be inputs for the purpose of this notification. It is clarified that no distinction need to be made between fresh unused items and old and unused items for the purpose of this notification. Old and used items should also be considered to be inputs and deemed to be duty paid for the purpose of this notification so long as their physical characteristics render them classifiable under any of the sub-items mentioned under the input column in the said notification. It is also clarified that old, used and unserviceable rails which are purchased by re-rollers for cutting and rolling into various other products cannot be considered as material for railway track construction. As such they would fall under sub-item (11) of the new Item No. 25 which covers unspecified angles, shapes and sections and hence the same may be treated as inputs for the purpose of Notification No. 208/83-C.E., dated 1-8-83”.
Para 9-b of the Circular also stated with regard to Notification No. 208/83, dated 1-8-83 that “However, in view of the Explanation to this notification, it should not be necessary to insist on duty paying documents in respect of inputs purchased from the market”. The learned Counsel has pointed out that the appellants purchased their inputs partly from ship breakers and partly from others in the market.
7. It is the further submission of the learned Counsel for the appellants that their case regarding time limit is covered by the judgment of the Apex Court in the case of Dhiren Chemical Industries – 2002 (143) E.L.T. 19 and the decision of the Larger Bench of this Tribunal in the case of C.C.E., Vadodara v. Adarsh Re-rolling Mills – 2002 (143) E.L.T. 533 (Tri.-LB) = 2002 (51) RLT 657 wherein it was held that Circulars of the Board are binding on the revenue. The learned Counsel has pointed out the Tribunal’s observations relating to eligibility of re-rollable material obtained from the breaking of old condemned railway locomotives equally applied to the re-rollable material obtained from the market or directly from ship breakers. The learned Counsel also submitted that the Bombay Bench of this Tribunal had allowed the Appeal of similarly placed assessees vide Order Nos. CI/2286-93/WZ/2002, dated 5-8-2002 [2002 (148) E.L.T. 43 (Tribunal)].
8. On the other hand, the Departmental Representative pointed out that when the appellants were bound to take licence under Central Excise Act and Rules and when they failed to do so it cannot be contended that they were acting bona fide. They never filed Classification list or Price List or any other documents during the relevant period, which would have alerted the Departmental Authorities about the manufacturing activity by using inputs obtained from ship breaking process. The learned Departmental Representative further pointed out that under similar circumstances by a majority view, this Tribunal has rejected the similar contention on period of limitation in its Final Order No. 366-386/2002-B, dated 4-9-2002 [2002 (148) E.L.T. 1250 (T)].
9. We find merit in the contention raised by the appellants on the ground of limitation. It is true that appellants had not obtained a licence under Central Excise Act and Rules during the relevant period nor had they filed any Classification List or Price List. But the fact that these appellants units were once licensed up to 1976, they were de-licensed as per the direction of the Department, and again in 1982 the issue of their licensing was considered and found not required, are not disputed. Further, the issue as to whether ship breaking amounting to manufacture was before the Gujarat High Court and a consent order was passed by the High Court in 1986. Moreover, the Board had clarified that all inputs from the market, irrespective of old or new, used or fresh were to be treated as duty paid. In particular, it had been clarified that re-rollable materials obtained from cutting and breaking unusable rail lines would be eligible inputs. The same is the position in respect of re-rollable materials obtained from the breaking of old and used rail engines. Re-rollable materials obtained from ship breaking are on a similar footing. The appellants’ purchases were also a mixed lot. As noted in the show cause notice itself partly duty paid materials and partly non-duty paid materials. The presumption in the notification is that all inputs in the market are duty paid. The goods purchased by the appellants came under that presumption and the clarifications of the Board.
10. In the light of the facts in these cases, we hold that invocation of extended period of limitation in the show cause notices issued to both the appellants is unsustainable in law. We, therefore, set aside the Orders impugned on the ground of limitation. The Appeals stand allowed as above.