ORDER
Shri S.S. Sekhon, Member (T)
1) The appellants are manufacturers of batteries and during the course of manufacturere, they prepare `Compound Rubber’ which is captively consumed in the manufacture of Battery containers. The however did not file the classification list for these goods, being excisable, but claimed the benefit of Notification 71/68 dt 1-4-68. The benefit of the notification is subject to the provision that Modvat Credit should not have been availed on the inputs contained in the manufacture of the goods. The Show Cause Notice dt. 10-9-90, was therefore issued.The Collector confirmed the demand. As he found there was no provision for the Reversal of MODVAT once credit was taken.
2) This was prior of the decision of the Supreme Court in the case of Chandapur Magnet Wires Pvt Ltd. 1996 (81)ELT 3(SC). Therefore, the Tribunal set aside the order and allowed the appeal vide its order No 1087/76 dt. 25-6-96, to redetermine the penalty, after taking into consideration any evasion of duty established,after considering the appellants plea for the benefit of the notification in question in the light of the facts in the case and the Supreme Court decision in the case of Chandrapur Wire Magnets(supra).
3. Against the very same order-in-original, Revenues appeal was decided by the Tribunal, vide order No 1298/1996 dt 19.8.96. In this order, the Tribunal held, while the application of notification 71/68 vide the Remand was in order No 1087/96 dt 25.6.96, and it was for the Respondents to impress upon the Collector, the appeal before them was concerned about the controversy relating to retrospective effect of notification 377/86.They found, that it did not purport to have retrospective effect as no such infrence could be seen in notification 377/86. They held that the benefit of this notification No 377/86, was available for the period commencing 29–86 and not prior to that and they specifically observed-
“We take note of the fact that the question whether the respondents are entitled to large relief under notification No 71/86 requires to be decided by the Collector and the notification No 377/86 will have practical significance only if respondents are held to be not entitled to notification No 71/68”
4. The Collector consequent to these decisions, of the Tribunal, considering the process of manufacture, especially the statement of one Sh. Rajagopal, Assistant Production Manager came to the finding that what was emerging from the mixing machines of natural rubber, sythetic rubber, china clay, sulphur, etc.were` irregular shaped sheets of Compounded Rubber’, which he found to be not covered a `sheets’ but as `Primary Rubber’ and thereafter on a comparative study of two notifications concluded that Notification No 71/86 did not exempt `compounded rubber in the form of irregular sheets’ from payment of duty as according to him it covered only `sheets’ and also he found only notification No 371/86 prescribed a concessional rate of duty on such goods. He also found that notification No 68/86 dt 10.2.86 exempted parts of Stationery Batteries. Stationery Batteries and containers in the form, of plates x sheets were concluded by him to be only parts thereof and `irregular sheets of compounded rubber in primary from’ could not be held to be such parts. Therefore, he applied the benefit of notification No 371/86 with effect from 29.7.86 on `irregular sheets of compounded rubber’ and did not extend the benefit under notification No 71/68. He also did not find any reasons for applying the ratio of the decision in the case of Chandrapur Magnet Wires Pvt Ltd. of the Supreme Court which was specific direction given to him by the Tribunal in the effects of this case as he did not find `irregular sheets’ to be part of battery. He therefore, confirmed the duty demand and imposed a penalty under rule 173Q(1).
5. We have heard both sides, considered the submission and find-
(a)from the process of manufacture, as recorded by the Adjudicator, “natural rubber, synthetic rubber, chine clay, sulpher, etc. is mixed and “irregular sheet of Compounded Rubber are formed” which are unvulcanised. They are cut to shape and thereafter vulcanised to the desired plate, etc.The question therefore is, hether such `Compound Rubber irregular sheets’ are covered by the tariff and notification No 71/68.Even though, as submitted by the Ld. Advocate.The Adjudicator has travelled beyond the Show cause Notice, which does not specifically raise this charge, We reject this plea, and proceed to decide the same, as a plain reading of the notice reveals, the charge is on eligibility under not 71/68 exigibility of Compounded Rubber use, in the course of manufacture of Batteries.
(b)We fine that tariff heading 40.05 reads as-
“40.05.00 Compounded Rubber, unvulcanised, in primary forms or in plates, sheets or strip.”
Therefore, so long as the entity is Compounded Rubber and is unvulcanised, in any form i.e. primary, plates, sheets or strips it would be classified under 40.05. `Primary form’, as per chapter note 2 to chapter 40 prescribes, that the expression, applies only to liquids and paste, blocks of irregular shapes, lamps, bulbs, powers granule,s combs and similar bulk forms. It therefore does not cover “irregular sheets of Compounded rubber” which are emerging from the mixture machines and then used, cut to size or wrapped for vulcanisation process. Note 9 to chapter 40, stipulates, that the expression plates, sheets and strips, apply to and do not exclude uncut “irregular shaped sheets’.We therefore find that “Irregular Shaped Sheets” would be covered by the tariff entry 40.05 under the head “Sheets” and not `Primary form’ of Compunded Rubber as held by the Adjudicator.
(c)There is no finding arrived at by the Adjudicator that the `irregular shaped sheets of Compounded Rubber’ are marketable or that they have a shelf life, to constitute exigible goods.It is now well settled that mere conforming to a striff description would not render the entity exigible. If the entity is not exigible,there is no question of levey only because they meet the tariff description. The exigibility of the `irregular sheets’ itself, is therefore not therefore not established.No duty could be therefore demanded on the same.
(d)We find that notification No 71/68 exempts
…..”all rubber products in the form of plates, sheets and strips unhardened whether valcanised or not, and whether combined with any textile material or otherwise other than the products which are made either wholly or party of rubber and which are used for the resoling, retreading or repairing and tyres in declaring the products commely known as tread rubber, camel back, cushioncompound, cushion gum, tread gum and tread packing strips) falling under heading 4005….”
(Emphasis supplied)
Therefore,when we find that the entity under consideration is covered by the expression sheet’ under heading 40.05, it would therefore be covered by the benefit of notification No 71/68 subject to reversal of MODVAT credit availed, as held by the Tribunal in the Remand order No 1087/96 dt 25.6.96. The denial of the same by the Adjudicator is therefore not upheld. The finding of the Adjudicator that `Irregular Shaped Compounded Rubber sheets’ are not intermediates, as such and parts of Satationary Battery is not upheld. The downward integration, cannot be limited to only the penultimate part ie hardened sheet/containers, but would also apply to the prior stage and would cover unvulcanised rubber. We therefore, find no reason in the order to sustain the exigibility, and even if held exigible, the disallowing of benefit of notification No 71/68. Therefore demands as determined cannot be sustained.
(e) When demands cannot be sustained, for captive consumption or otherwise the `Irregular Compounded Rubber Sheets’ are found to be exempt on reversal of credit, we find no violation of rule 9 as read with rule 49 and therefore any liability to arise for penalty under rule 173 Q (1). Penalty is thus not sustainable.
6. In view of our findings, the order is set aside, the appeal is allowed.
(Pronounced in the Court on 20/3/2001)