ORDER
S.L. Peeran (J), Member
1. The appellants are aggrieved by the order-in-original dated 27-12-1990 passed by the Collector of Central Excise & Customs, Ahmedabad. By this order, the learned Collector has confirmed the duty demand of Central Excise duty amounting to Rs. 11,54,192/-under Rule 9(2) read with Section 11A of the Central Excises and Salt Act, 1944 and has also ordered for confiscation of seized HDPE sacks valued at Rs. 2,14,940/- under Sub-rule 1 of Rule 173-Q of the Central Excise Rules but however, has granted an option of redemption fine of Rs. 10,000/-. As the goods had not been produced at the time of adjudication, the security deposit of Rs. 10,000/- under B-11 bond has been appropriated. A penalty of Rs. 5 lakhs each has been imposed under Rule 173Q(1) of the Central Excise Rules on the company and Shri Naranbhai Narottamdas Patel under Rule 209A of the Central Excise Rules, 1944.
2. The appellants are engaged in the manufacture of HDPE tapes, HDPE fabrics woven on circular looms and HDPE sacks made out of fabrics woven on circular looms. They were availing the benefit of exemption in respect of HDPE woven sacks under Notification No. 175/86 as amended. The Preventive staff of N.G. Division carried out a detailed search/verification on the basis of information that the appellants had created dummy units and showing production and clearance of HDPE sacks on the name of said unit. A Panchnama dated 16-12-1988 was drawn in the presence of Shri N.N. Patel, Chairman of the factory and one Shri Prahalad Bhai Somabhai Patel. During the course of panchnama, the Depttl. officers noticed that the machineries are for the manufacture of HDPE tapes woven on circular looms and for HDPE sacks were owned by the said factory. Therefore, it appeared that a faint boundary line drawn on the surface of the factory separately. The said factory’s area of 14 mtrs x 16 mtrs was also shown in the factory’s ground plan as on 24-3-1988. They recorded stock as shown in the Central Excise RG.I – HDPE laminated woven sacks 50,000 pieces and 315 kgs of HDPE waste but the same was not found in factory’s BSR. On further verification by officers, they found 47 bundles bearing No. 17047 each containing 1000 of HDPE non-laminated woven sacks in loose condition in the nearby premises. The explanation of the Director was also obtained.
3. On the basis of these investigations, show cause notice was issued on 30th May, 1989 alleging contravention of Rules 173B, 173C, Rule 9 read with 173F, 173G(4), 57 read with 226 and 173G, 52A read with 173G(2) and 173G and 173Q of Central Excise Rules. They were also called to explain as to why Rs. 2,14,940/- should not be confiscated and duty amount of Rs. 11,54,192.90 P. should not be recovered Under Section 11A of the Central Excises and Salt Act, 1944 read with Rule 9(2) of the said Rules and exemption availed by them in respect of HDPE sacks for the year 1977-78,1978-79 should not be disallowed. The department had proceeded to classify the HDPE tapes as falling Under Sub-heading 5406.90 of CET 1985 and HDPE fabrics woven on circular looms falling Under Sub-heading 5408.00 falling under Chapter 54 and HDPE sacks made out of fabrics woven on circular looms falling Under Sub-heading 6301.00 of Chapter 63 of the Schedule to the Central Excise Tariff Act, 1985.
4. Among other things, the appellants contested the correct classification of the goods in this case and had taken the stand that the items HDPE sacks were not classifiable under Chapter 54 as contended by the department but they were rightly classifiable Under Sub-heading 3923.90 and exempted under Notification No. 132/86-C.E. upto 1-3-1988 and thereafter, under Notification No. 53/88-C.E. falling under Heading 3901 and claimed duty exemption on these products. The appellants took the stand that they had not committed any evasion of duty and not contravened any of the provisions of the Act and Rules and hence they had contended that they were not liable to pay duty nor any penalty was to be imposed on them. They also further contended that the classification of the impugned goods had been finally settled by the Bench of Hon’ble High Court of Madhya Pradesh in the case of Raj Packwell Ltd. Indore and Ors. v. Union of India reported in [1990 (50) E.L.T. 201] and had submitted that by applying the ratio of the said ruling, the goods had to be classified under Chapter 39 and hence, there was no question of paying any duty as the goods were exempted. We are not reproducing the other submissions made by the appellants on the aspect of creation of a dummy unit and utilising the benefit of the Notification No. 175/86-C.E., dated 11-3-1986 as the question of classification alone would decide the case in favour of the appellants by applying the ratio of the ruling of the M.P. High Court cited by them.
5. We have heard Shri R.S. Dinkar, learned advocate for the appellants and Shri J.N. Nair, learned DR for the Revenue. The learned advocate has made detailed arguments on all aspects of the matter and in the conclusion, reiterated that the ruling of the Hon’ble M.P. High Court in the case of Raj Packwell Ltd. is fully applicable to the facts of the case and the Hon’ble High Court had taken into consideration all the pleas which had been raised by the Revenue. Therefore, the learned Collector should have followed the ratio and by not following the same, the learned Collector has in fact committed a serious error. Shri J.N. Nair, learned DR reiterated the findings given by the learned Collector.
6. The learned Collector has, by his impugned order, not considered the question of application of the ruling of M.P. High Court in this case but, however, has confirmed the duty as classifiable under Chapter 54 of the Central Excise Tariff Act as noted by us. The question of classification of these products was also taken up by this Bench in the case of Kanpur Plastipacks Ltd. v. Collector of Central Excise Kanpur (Order No. E/407 to 409/92-D dated 21-9-1992). The Bench, after considering the entire evidence of the appellants and also taking into consideration the ruling of the Madhya Pradesh High Court, has over-ruled the department’s stand on the classification and upheld the appellants claim for classification of the impugned goods under Chapter 39. The ruling of the Madhya Pradesh High Court is a detailed ruling and the Bench has considered all the evidence on record and has held that the impugned goods cannot be brought within the Chapter 54 as textiles but they are rightly classifiable as articles of plastics under Chapter 39 of the Schedule of CET Act, 1985. The ratio of both the rulings are applicable to the facts of the case. The findings given by the Tribunal in the case of Kanpur Plastipacks Ltd. in para 5 are reproduced below –
“We have carefully considered the submissions made by both the sides and perused the ruling rendered by the Hon’ble Madhya Pradesh High Court. We have also seen the reasoning given by the learned Collector in the impugned order. We find that the Hon’ble Madhya Pradesh High Court has considered all the aspects of the matter and as indicated in the contentions placed by the Revenue, has upheld the classification under Chapter 39, as noted by us (supra). The ratio of the ruling rendered in the case of Shri Radhey Industries by the Tribunal has been gone into by the Hon’ble High Court and has held that even as per this ruling HDPE tape is a plastic material and the tape was coming under TI 15A (2) and not under item 18. The Hon’ble High Court has observed that in view of the aforesaid decisions given on facts by the Tribunal and as confirmed by the Supreme Court and accepted by the Department, there is no dispute that the HDPE sacks are articles of plastics and not textile materials. The High Court has also considered the Chapter notes, Section notes of Chapter of both 39, 54 and the evidence produced in the nature of letter issued by the Dy. Director, Ministry of Textile and Textile Commissioner and has concluded that the articles HDPE strips or tapes would fall under Heading 3920.32 and not under Heading 5406.90 and similarly HDPE sacks would fall under Heading 3923.90 and not under Heading 5406 of CET Act, 1985. In view of this ruling, there was no reason for the learned Collector (Appeals) to have not followed the ruling of the M.P. High Court as the same is having a binding effect in this matter. The evidence produced by the appellants has also been of similar nature as the one placed before the Hon’ble M.P. High Court. There is no reason to differ from this ruling. The learned Collector’s reasoning is not sustainable and is liable to be set aside. In the result, the appeals are allowed with consequential relief, if any.”
Following the ratio of the above two rulings, the appellants claim for classification under Heading 3923.90 has to be upheld. The appeals are allowed with consequential relief, if any.