JUDGMENT
V.K. Agrawal, Member (T)
1. In these five appeals – four filed by M/s. Optel Telecommunication Ltd. and one Appeal filed by Revenue against the common Order-in-Appeal No. 475-478/2004 dated 25.6.04, the issue involved is whether the optical Fibre Cables manufactured by the assessee is classifiable under Heading No. 90.01 of the Schedule to the Central Excise Tariff Act as claimed by the assessee or under Heading 85.44 as confirmed by the Commissioner (Appeals) and whether the demand of differential duty raised under Section 11A of the Central Excise Act on finalisation of the assessment is recoverable in view of the revalidation of the actions taken under Section 11A of the Act in terms of Section 110 of the Finance Act.
2. Another issue involved in these appeals is whether parts and accessories of optical fibre cables are classifiable under Heading 90.33 as against 85.44 of the Central Excise Tariff.
3. Shri P.C. Jain, learned Advocate, mentioned that the assessee, an undertaking of State Government of Madhya Pradesh, manufacture Optical fibre cables is respect of which first classification list No.1/89 effective from 1.7.89 was filed by them classifying the product under Heading 90.01. of the Tariff; that the proper officer approved the classification in November, 1989; that subsequently the assessee filed classification list from 1990 to 1994 which were not approved by the Department and they continued to pay the Central Excise duty under Heading 90.01; that seven show cause notice from 22.10.92 to 22.4.94 were issued to them alleging contravention of Rules 9(1), 52 A, 173 F and 173G of the Central Excise Rules, 1944 on clearance of optical fibre cables and parts and accessories by paying duty under Heading 90.01 instead of Heading 85.44 without proposing any changes in the classification lists. For the first time a show cause notice dated 9.6.94 was issued to them proposing changes in classification to Heading 85.44 on the ground that the optical fibre cables manufactured by them can not be said to be made by other than individually sheathed fibre or fibres in bundles so as to classify them under heading 90.01; that the Assistant Commissioner who adjudicated the show cause notice has held that colouring of fibre itself amounts to sheathing and accordingly optical fibre manufactured by them should be classified under Heading 85.44.
3.2 He, further, mentioned that another show cause notice dated 7.6.95. in respect of parts and accessories of optical fibre cables was issued proposing classification under Heading 85.46 instead of 90.33 claimed by the assessee; that this show cause notice was also adjudicated by the Assistant Commissioner vide Order-in-Original No.2/96 dated 10.1.96 classifying the joint closures under Heading 85.44; that the Assistant Commissioner under another Order-in-Original No.106/96 dated 19.11.96 confirmed the demand of duty and imposed penalty.
3.3 He also mentioned that a show cause notice dated 29.5.97 was issued for demanding the duty for the period 20.9.90 to March, 1992 on the ground that these assessments were provisional in terms of Rule 9B of the Central Excise Rules; that the Assistant Commissioner under Order-in-Original No.6/99 dated 16.3.99 confirming he demand of duty and ordered payment of interest also.
4. Learned Advocate submitted that the show cause notice issued by the Department is very vague as it does not mention the basis for the view taken by the Department that the optical fibre cables manufactured by them can not said to be made of other than individually Sheathed fibre/fibres in bundles; but made up of individually sheathed fibre making them classifiable under Heading 85.44; that the fibres which eventually take the form of cables are not individually sheathed by them; that the expression “individually sheathed” can only mean that each individual fibre must be sheathed whereas in the case of impugned cables manufactured by them, at no stage of the various processes undertaken by them, individual fibre is sheathed; that the assessee is having a technical collaboration with M/s. Furukowa Electric Company of Japan; that the first stage in the process of manufacture is manufacture of “pre-form”. The second stage is the fibre drawing process in which the pre-form is taken to the fibre drawing tower where the same is heated at one end to the melting point and then this end is pulled downwards using a computer controlled process to draw the fibre and a thin coating of UV cured acrylate is simultaneously applied to it; this coating is invisible to the naked eye; the third step involves colouring of fibres for purposes of identification using various types of colouring ink; loose tubings in which two fibres (one coloured and one with natural colour) are placed in a loose tube into which jelly is filled with the two fibres being loosely accommodated in the tube; Stranding of loose tubes; loose tubes (3 numbers of 6 numbers). along with filler PE cord are stranded around FRP center Tension Member to form the core of the cable. Jelly is applied during the core manufacturing stage and a polyester film is wrapped around the core which is held in place by PE Tapes; PE sheathing and jacketing; It is the loose tube cores which are sheathed with black LDPE and to provide extra strength to the cable with respect to rodent attack, suitable nylon jacketing is also done.
4.2 Learned Advocate emphasised that process of sheathing is carried out only on loose tubes which have been stranded together with each of the loose tubes containing two fibres with the fibre as such not being subjected to sheathing at any stage; that thin UV cured acrylate coating does not constitute sheathing; that this is apparent from the Explanatory Notes of HSN below Heading 90.01 wherein it is mentioned that “optical fibre cables consists of concentric layers of glass or plastic of different refractive indices. invisible to the naked eye, which renders the fibres less prone to fracture.” He mentioned that in their case also, the fabrics are drawn from glass having a very thin coating of UV Acrylate and this is squarely covered by the Explanatory Notes of Heading 90.01. He also contended that even if tube is considered as sheathing, it contains two fibres and not individual fibre. He also mentioned that two samples of the optical fibre cables manufactured by them were sent for examination to the Department of Elect. Engineering, SV Government Polytechnic, Bhopal who certified that the cables manufactured by them are multi fibre sheathed cable; that they had also sought expert opinion from T C Raghvan, General Manager, Telecommunication Project, Bombay who has opined that the optical fibre cables manufactured by them and supplied to Department of Telecommunication are not made up of individually sheathed fibre and that the fibres are only given a protective coating of resin which is integral part of fibre. He also pointed out that optical fibre cables (identical in structure and design to the cables manufactured by them) were also imported from their collaborator in Japan in February, 193 and the customs Department had classified the same for the purpose of levying the countervailing duty under Heading 90.01 of the Central Excise Tariff. Learned Advocate also mentioned that as held by the Supreme Court in the case of Dunlop India Ld. and Madras Rubber Factory Ltd. v. Union of India (1983 ELT 1566 (SC) when there is no reference to the use or adaptation of the article, the basis of end use for classification under the tariff entry is absolutely irrelevant. Learned Advocate also contended that as the show cause notice is vague without giving the reasons for treating the cables as individually sheathed, it deserves to be set aside. He relied upon the decision in the case of Madhumilan Syntex Pvt. Ltd. v. Union of India (1985 (19) ELT 329 MP) wherein it has been held that a show cause notice is not an empty formality and the law requires that the show cause notice should give an opportunity of leading evidence in support of ones allegation and controverting the charge or allegation as are made against the persons called upon to show cause; that a mere opportunity of submitting an explanation is not enough. Reliance has also been placed on the decision in the case of Crystic Resins (India) Pvt. Ltd. v. CCE, New Delhi [1985 (19) ELT 285 285 (Tri)] wherein the Tribunal has clearly held that the notice issued should have explained the process of reasoning. The Tribunal has held therein that “it is not enough to assume that the notice receiver will read his mind and know what he means by the notice; he must be told as clearly as possible by the Central Excise why he was considered disentitled to the exemption.” Learned Advocate contended that as this has not been specifically mentioned in the show cause notice in question, it is liable to be set aside. Finally, he submitted that there can not be any short levy unless and until the classification of the product is approved; that therefore, the demand is pre-mature. Reliance has been placed on the decision in the case of ITW Signode India Ltd. v. CCE [2003 (158) ELT 403 (S.C)]
6. Learned Advocate mentioned that the Commissioner (Appeals) vide Order-in-Appeal No.399/2000 dated 10.3.2000 remanded the Order-in-Original No.42/94 dated 1.4.94 by which the classification was changed from Heading 90.01 to Heading 85.44 in view of the inconsistency and infirmity in the Order-in-Original; that once the said Order had been remanded, the other Order-in-Originals confirming the demand do not survive.
7. Countering the arguments Shri R C Sankhla, learned Senior Department Representative, submitted that Heading 85.44 of Central Excise applies to “optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors”; that as per the Concise Oxford english Dictionary, 10th Edition, Revised, sheathing means “protective casing or covering,” and sheathe means “encase in a close-fitting or protective covering.” He submitted that by putting a UV cured acrylate coating on individual fibre, sheathing of individual fibre has been done and as individual fibre has been sheathed, it is squarely covered by Heading 85.44 of the Central Excise Tariff. In this regard, he relied upon the Explanatory Notes of HSN below Heading 85.44 wherein it is mentioned that “the sheaths are usually of different colours to permit identification of the fibres at both ends of the cable. Optical fibre cables ae used mainly in telecommunication because their capacity for the transmission of the data is greater than that of electric conductors.” He also contended that Heading 85.44 applies to individual sheathing and number of fibres therein does not matter; that it is not bundles which is covered by Heading 90.01; that as per the Concise Oxford Dictionary bundles means “a collection of things or quantity of material tied or wrapped up together.” He also mentioned that the Orders confirming the demand of duty were passed after the classification of the product has been changed by the proper officer by issuing a show cause notice dated 9.6.94; that after the Order regarding classification was remanded by the Commissioner (Appeals), the Adjudicating Authority in de novo proceedings again classified the impugned product under Heading 85.44 of the Tariff and as such the demand of duty confirmed under other Orders survive. Regarding Appeal filed by the Revenue, learned Senior Departmental Representative reiterated the grounds contained in the memo of Appeal according to which the RT 12 returns of the assessee were assessed provisionally as the declarations filed by them under Rule 173B and Rule 173 C of Central Excise Rule 173 B and Rule 173C of Central Excise Rules, 1944 for the relevant period have not been approved by the proper officer; that the Assistant Collector had ordered for provisional assessment on 24.3.92; that therefore, the assessments for the period of six months prior to the Order of provisional assessment should be treated as provisional and demand of differential duty is recoverable in view of Section 110 of the Finance Act.
8. We have considered the submissions of both the sides. Heading 85.44 applies, inter-alia, to optical fibre cables, made up of individual sheathed fibre, whether or not assembled with electric conductors or fitted with connectors. Heading 90.01 reads as under:
Optical fibres and optical fibre bundles; optical fibre cables other than those of Heading No.85.44; sheets and plates of polarizing material; lenses (including contact lenses), prisms, mirrors and other optical elements, of any material un mounted, other than such elements of glass not optically worked.”
Thus Optical fibre cables fall under both Headings 85.44 and 90.01, if the optical fibre cable is made up of individually sheathed fibre, it fall under Heading 85.44 and all other optical fibre cables fall under Heading 90.01. The process of manufacture, as given by the assessee and mentioned in brief in Order-in-Original No.13/2002 dated 8.8.2002 clearly shows that after the fibre has been drawn and coloured for identification purposes, two fibres are placed in a loose tube filled with jelly and these loose tubes, (three numbers or six numbers) ae stranded around FRP center tension member to form the core of the cable. In the process of manufacture, nowhere it is mentioned that the fibre is sheathed individually which is required for classifying it under Heading 85.44. Learned Advocate has referred to Webster’s english Dictionary, 1983 edition, according to which “Individual” means ‘subsisting as one indivisible entity or distinct being; single; pertaining to one only.” There is substantial force in the submissions of the Advocate that even if the stage of lacing fibres in loose tubes is treated as the process of sheathing, no individual cable is sheathed, as even according to Order-in-Original No. 13/2002, two fibres cables ae placed in the loose tubes. No material has been brought on record by the Revenue to show that coating of UV cured acrylate amounts to sheathing of optical fibre cables. Explanatory Notes of HSN under Heading No.90.01 also does not support the findings of the learned Commissioner that the coating of acrylate amounts to sheathing as the Explanatory Notes clearly mentions that the optical fibre cables drawn from glass have a very thin coating of plastics invisible to the naked eyes; which renders the fibres to less prone to fracture. The Revenue has also not brought any material on record to prove that this thin coating of acrylate is not invisible to the naked eyes. The Appellants have also brought on record the Certificate given by he Department of Electrical engineering of SV Government Polytechnic, Bhopal according to which cables manufactured by the assessee are multifibre sheathed cables. They have also brought on record the opinion given by the Chief electrical Manager (P) in the Office of Chief General Manager telecommunication Projects, Bombay according to which the optical fibre cables in question is not made up by individually sheathed fibre. Revenue on the other hand, has not brought any technical opinion to rebut the opinion / Certificate brought on record by the assessee. The Deputy Commissioner in the Order in Original No 13/2002 has referred to the test report given by the Chief Examiner, CRCL, which, according to him, does not give direct reply to the query whether optical fibre cables are made up of individually sheathed fibre or not. We also agree with the learned Advocate that as the classification of the impugned product depends only on the fact whether the optical fibre cables is individually sheathed or not, the end use can not be a factor for determining the classification of the fibre. Accordingly, we hold that the Department has not proved that the impugned optical fibre cables is made up of individually sheathed fibres so as to warrant classification under Heading 85.44. Accordingly, we set aside the impugned order and allow all the appeals filed by the assessee without going into other submissions raised by the learned Advocate. Consequently, the Appeal filed by the Revenue is rejected.