1. This matter which was originally before the Central Government by way of revision petition under Section 36 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) has been received by the Tribunal as an appeal by virtue of provisions of Section 35P of the Act, and is being disposed of as such.
2. This appeal is directed against a composite order passed by the Appellate Collector of Customs and Central Excise, Madras whereby he disposed of appeals filed by the present appellant along with two appeals of other parties because there were identical questions for determination. This was by his order dated 11-2-1980, which had, in turn, confirmed the order passed by the Assistant Collector of Central Excise, Kottayam on 5-7-1978.
3. The facts giving rise to the controversy are to the effect that the appellants, claimed to be a partnership concern, is manufacturing certain products relating to tyre industry and it is alleged that one of the products which is finally turned out for clearance from the factory is termed as "tread rubber with cushion backing". They also manufacture a product which is described commonly as "cushion compound" but the appellants contend that the product which they are making is simply known as "cushion" and that it is not finished goods but an intermediary product which they use for Cushion Backing of the tread rubber which is finally taken out of the factory after paying the requisite excise duty. This product which they describe to be plain "cushion" is, according to them, consumed inside the factory when it is in semi-finished stage and thus cannot be treated as goods commonly known as "cushion compound" and that the latter product is a finished product mostly used for re-soling or retreading of tyre.
4. It appears that in the classification lists, which the appellants had been filing from time to time under the requisite rules, before the Central Excise authorities, this product which they now term as "cushion" was not shown to be liable to excise duty and accordingly no duty was paid thereon but some time in 1974, on 24-9-1974 to be precise, the Range Officer of the area served a notice on the appellants calling upon them to show cause as to why excise duty for the period 1-4-1968 to 13-10-1972 amounting to Rs. 1,01,288.36 be not realised on this product which had been produced by them and used as cushion compound for Backing as Tread Rubber. The appellants contested this notice by contending that although the product has been boadly known as Cushion Compound but in reality it was substance different from the same and was only in the nature of a semi-finished product, to be called only as 'cushion', and that it was not being sent out or traded in the market as cushion compound but only used inside the factory for the preparation of another finished product on which full excise duty as levied was being paid under Tariff Entry 16A(2) of the Central Excise Tariff and that no separate duty was payable on this article known as 'cushion'. The notice was also resisted on the ground that it was barred by time as Rule 9(2) could be attracted only in case there was clandestine removal as contemplated by Rule 9(1) of the Central Excise Rules and that since the appellants had been showing all the goods made, produced or used by them in the classification list, which was approved by the Central Excise Authorities, it could not be said that there was any suppression of truth on their part, and that the notice was thus not enforceable. They further urged that Rule 10 of the Central Excise Rules also stood in the way of enforcement of the demand. They also seemed to have questioned the mode of valuation resorted to by the Excise authorities. It was further pleaded that goods having been used and the finished products having been cleared and sold in the market the realisation of the proposed amount would lead to undue hardship for them as the levy, which was in the nature of an indirect tax, would not be recoverable from their consumers and so the burden would not be capable of being passed at that stage which according to the appellants, was essential characteristics of an indirect tax such as excise duty.
5. The Assistant Collector of Central Excise, Kottayam by his order dated 5-7-1978 confirmed the demand rejecting all the contentions set forth by the parties in their reply dated 17-10-1974 filed to the show cause notice holding that before the issuance of the Exemption Notification No. 208/72 issued on 14-10-1972, this product was leviable to excise duty and that the appellants have wrongfully used the goods without paying the same. The plea of the party that only that product which is known as 'cushion compound' properly and used for re-soling, retreading or repairing of tyres, was leviable to excise duty, did not find favour with the Assistant Collector and holding that such a user of this article known as 'cushion' or 'cushion compound' which, according to him, were identical terms, was very much in vogue and that till the issuance of Notification No. 208/72-C.E., which exempted such goods if used inside the factory of manufacture for further production of rubber products, central excise duty would be leviable as contemplated by Tariff Entry No. 16A(2).
6. The Appellate Collector upheld this view by his order dated 11-2-1980 in the appellants' case as well as two other orders, in the case of two other parties who were similarly affected by separate orders passed by the Assistant Collector on similar demands having been made. The Appellate Collector positively held that to attract Rule 9(2) of the Central Excise Rules, 1944, it was not essential that the removal should be clandestine and further that Rule 10 would not apply to these set of cases and that High Court of Kerala having held in the cases taken by these very parties that these cushion compound even when captively consumed was a product directly falling within the description of the Tariff Item 16A(2) of the Central Excise Tariff and thus exigible to excise duty. The appeal was thus dismissed.
7. Feeling aggrieved by this dismissal, the appellants came up with this appeal which reiterated the same pleas, namely, that this particular product was simply known as 'cushion' in trade parlance and was very much different from what is generally known as 'cushion compound' and their product was an unfinished one and not cleared from the factory as such nor marketed or sold nor in its semi-finished stage was used for re-soling or retreading of tyres and as such was not liable to excise duty separately under Tariff Item 16A(2) of the Central Excise Tariff and that the lower authorities erred in holding it to be so and that they were using this only for manufacture of a finished product known as "tread rubber for cushion backing" on which they were paying full excise duty and that this disputed item known as 'cushion' was not a finished product so as to amount to 'manufacture' as contemplated in Section 2(f) of the Central Excise Act, 1944 but was only being employed as an integrate d process in the preparation of another article and that resultant product was being cleared after payment of duty and that in case excise duty would be held leviable on this first product, namely, 'cushion' also, it would inflict double burden on the appellants leading to unjust hardship. It is further contended that, in fact, the Excise Authorities realised this position and it was for this reason that they did not realise any duty prior to 14-10-1972 although they were regularly approving the classification lists and that it was only on issuance of Notification No. 208/72 dated 14-10-1972 that a doubt arose in the minds of the concerned authorities and impugned demand was made which, according to the appellants, is not sustainable.
8. They also pleaded that reliance placed by the Appellate Collector on the judgment of the Kerala High Court was not justified in this case because what was held there was a result of faulty arguments of appellants' counsel and not because of lack of facts to support their contention and further that the issues are not identical. They further pleaded that Department did not demand duty on 'Tread Rubber' which was also used for captive consumption apparently for the reason that product was also being used for manufacture of another product and that on the same analogy, no duty was leviable on the 'cushion compound' consumed inside the factory as 'Cushion Backing for Tread Rubber'. The appellant also questioned the basis of calculation of the duty which was demanded by means of the notice and which has been confirmed by means of the order assailed in this appeal.
9. The appeal was taken up for hearing on 8-2-1982 when Shri A.Balakrishnan, Consultant appeared for the appellants whereas Revenue was represented by Shri K.D. Tayal, Senior Departmental Representative.
The learned Consultant, at the outset, formulated the points at issue as under :- (1) as to whether the 'cushion compound' taken for captive consumption inside the factory was dutiable or not; .
10. The learned Consultant, however, elaborated only the first two arguments emphasising that this product which has been characterised as 'cushion compound' was, it fact, only 'cushion' and not marketed out but used inside the factory for the manufacture of a finished product known as 'Tread Rubber with Cushion Backing' and that no duty could have been levied on this intermediary product. He also raised the question of limitation under Rule 10 as also the inapplicability of Rule 9(2) of the Central Excise Rules with reference to which the Notice for Demand seems to have been made.
11. The learned Departmental Representative controverted these arguments by firstly referring to the judgment of Kerala High Court which was the writ petition filed by this very appellant and in which it was categorically highlighted that this article which was decribed as 'cushion' and professed to be used captively for the purpose of 'cushion backing of tread rubber' has been held cushion compound leviable to excise duty and it was contended that it was no longer open to the appellants to raise the same issue. He further drew our attention to a Notification issued by the Central Government on 20-2-1982 being Notification No. 20/82-C.E., wherein the Central Government, in excise of the powers vested under Section 37 of the Act, had amended Rule 9 of the Central Excise Rules, 1944 by appending following Explanation thereof :- Explanation.-For the purposes of this rule, excisable goods produced, cured or manufactured in any place and consumed or utilised- Whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under Sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation." He further pointed out that this Notification has been given a retrospective operation with effect from the date of commencement of the Act itself, namely 1-3-1944 by virtue of Section 51 of the Finance Act, 1982 with the result that the position as now stands, the goods produced, cured or manufactured in a factory though used in another process in the same factory for the manufacture of another product have become excisable by introducing a deeming provision that such user would be tantamount to removal from the factory or the premises.
12. We thus find that apart from the fact that the issue stands concluded by the judgment of Kerala High Court in the writ petition filed by this very appellant being Writ Petition No. 1461/72 decided on 16-1-1974 wherein it was held that the 'cushion compound' said to be captively consumed for 'cushion backing of tread rubber' was a product directly falling within the description given against Tariff Entry 16A(2) and liable to excise duty. Otherwise also, in view of the position as now introduced retrospectively by Section 51 of the Finance Act, 1982 with reference to the Notification No. 20/82-C.E., dated 20-2-1982, the argument that the goods were intermediary goods and captively consumed inside the factory and consequently not liable to excise duty, does not survive or remain available to the appellants.
The appeal has thus to fail on merits.
13. We also do not feel impressed with the arguments that notice given under Rule 9(2) of the Central Excise Rules, 1944 was not sustainable for the reason that during the period under reference, namely, 1968 to 1972, there was no built-in limitation in Rule 9(2) nor even by implication nor Clause (1) of Rule 9 speaks only of clandestine or surreptitious removal. The attack on the Notice of Demand and the orders of the Excise authorities confirming the same, is apparently based on some misconception on the part of appellants and is not sustainable. Reference to Rule 10 also seems to be misconceived because that rule pertains to cases of "short levy", and not those of "non-levy" which is in the present case.
14. No other point was urged before us during the hearing and no attempt was made to show as to how the computation of the price for the purpose of excise duty which has been questioned in the appeal, was wrong.
15. We, therefore, find it to be a case where the appeal has no merits and is liable to dismissal. The same is dismissed accordingly.