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Collector of Central Excise Vs. Travancore Plywood Industries - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(21)ELT212TriDel
AppellantCollector of Central Excise
RespondentTravancore Plywood Industries
Excerpt:
.....period and the demand of the differential duty was confirmed under rule 9(2; of the central excise rules, 1944.4. being aggrieved with the said order of the assistant collector of central excise, trivandrum, m/s. travancore plywood industries limited filed an appeal before the appellate collector of central excise, madras, who vide his order-in appeal no. 2194/80, dated 5-12-1980 allowed the appeal by observing that condition (a) mentioned in notification no. 198/76 lays down that only the accounts maintained under the central excise rules can be relied upon for the purpose of calculating clearances under this notification. even if m/s. travancore plywood industries limited, produced goods earlier, they did not maintain the central excise records and it is only the accounts.....
Judgment:
1. The facts giving rise to this appeal are that M/". Travancore Plywood Industries Limited (hereinafter called the respondents) obtained a Central Excise Licence L-4/1 Synthetic Resins/77 for the manufacture of Phenol Formaldehyde Synthetic Resins falling under Item No. 15-A(1) of the Central Excise Tariff on 13-7-1977. They filed Classification List No. l/77-78(SR), dated 7-9-1977 in respect of the resins manufactured by them and the said classification list was approved w.e.f. 16-9-1977 by the Assistant Collector of Central Excise, Travancore, classifying the product under Item 15-A(1) C.E.T. and giving the benefit of 25% rebate of duty in terms of Notification No.198/76, dated 16-6-1976 computing the base production as Nil for the purpose of said Notification.

2. Later on, the Excise authorities discovered that the respondents had been manufacturing and clearing for their own consumption Synthetic Resins falling under Item 15-A(1) from 1974 onwards without obtaining a Central Excise Licence and without payment of excise duty and accordingly it was found to be incorrect to compute the base production as Nil for the purpose of Notification No. 198/76 and their eligibility or otherwise for the rebate of the duty in terms of the said Notification. The approval given to the Classification List No. 1/78 was, therefore, withdrawn with effect from 29-4-1978 and Show Cause Notice was sent to the respondents on 29-4-1978 asking them to show cause why differential duty on this product Phenol Formaldehyde Resins cleared during the period 15-9-1977 to 29-4-1978 be not recovered.

3. The Assistant Collector, Trivandrum, vide his Order No. V/15A/17/ 149/77, dated 23-8-1979 held that the resins are not entitled for rebate of duty as per Notification No. 198/76 during the relevant period and the demand of the differential duty was confirmed under Rule 9(2; of the Central Excise Rules, 1944.

4. Being aggrieved with the said order of the Assistant Collector of Central Excise, Trivandrum, M/s. Travancore Plywood Industries Limited filed an appeal before the Appellate Collector of Central Excise, Madras, who vide his Order-in appeal No. 2194/80, dated 5-12-1980 allowed the appeal by observing that condition (a) mentioned in Notification No. 198/76 lays down that only the accounts maintained under the Central Excise Rules can be relied upon for the purpose of calculating clearances under this Notification. Even if M/s. Travancore Plywood Industries Limited, produced goods earlier, they did not maintain the Central Excise records and it is only the accounts maintained under the Central Excise Rules which could be taken into account for the purpose of calculating the base period and base clearance.

5. Not satisfied with the said order of the Appellate Collector, the Government of India issued Review Show Cause Notice No. IV/16/38/80 Review (Part II) dated 28-6-1981 under Section 36(2) of the Central Excises and Salt Act, 1944 asking the respondents as to why the order passed by the Appellate Collector be not reviewed.

"The reasoning of the Appellate Collector does not appear to be correct. It is not correct to interpret the condition in the Notification that the basis should only be the accounts maintained under the Central Excise Rules and, since no accounts were maintained under Central Excise Rules, fixation based on the adjudication by the Appellate Collector is not sustainable, for, on the same analogy, it could be said that if no Central Excise accounts are maintained, no base clearance could be fixed, and, therefore, the assessee is not entitled to the concession under Notification No. 198/76. The wording of the Notification suggests that the Notification does not altogether bar, in the absence of any Central Excise accounts, resort to other available records provided they are accepted as records under the Central Excise Rules. The figures arrived at by the Collector after detailed and fair adjudication under the Central Excises Act and Rules can be deemed to be the figures from the accounts maintained under the Central Excise Rules for the purpose of Notification since the figures are arrived at as provided in the provisions of the Central Excise Rules. If the interpretation of the Appellate Collector is accepted, it will amount to giving benefit to an assessee for wilful violation of Central Excise Rules, i.e. non-maintenance of statutory rules." 7. Those review proceedings, pending before the Government of India, now stand transferred to this Tribunal under Section 35 P(2) of the Central Excises and Salt Act, 1944, to be heard as an appeal.

8. We have heard Mrs. Vijay Zutshi, S.D.R. for the appellant and Shri V. Ganapathy, Consultant for the respondents and gone through the record.

9. The issue in this case is regarding the fixation of the base clearance for the purpose of Notification No. 198/76. Following the detection of illicit manufacture and clearance (captive consumption) of Phenol Formaldehyde Synthetic Resins by the assessee, M/s. Travaucore Plywood Industries Limited, Punalur, the Collector adjudicated the case holding the assessee liable to the offence charged. That finding of the Collector of Central Excise that the assessee manufactured these excisable goods without obtaining excise licence during the period 1974 to 16-9-1977 has become final as the appeal before the Central Board of Excise and Customs was also dismissed on this point.

10. The entire case hinges upon the interpretation of Notification No.198/76. Condition (a) mentioned in this Notification reads as under : "Clearances made during any financial year shall be separately calculated for all the goods specified in column (3) of the said Table against such serial number specified in the corresponding entry in column (1) thereof on the basis of the accounts maintained under the Central Excise Rules, 1944 in terms of the unit for calculation specified in the corresponding entry in column (4) of the said Table." 11. According to Mrs. Vijay Zutshi, learned Departmental Representative, Notification No. 198/76 is to be read as a whole and it is not to be interpreted in a narrower sense as has been done by the Appellate Collector. If we take a strict view of the interpretation of this Notification that for the purpose of computing the base year and the base clearance, only the accounts maintained under the Central Excise Rules can be relied upon, that would amount to giving a premium on violation of law and giving benefit to an assessee who has cleared excisable goods without payment of Central Excise duty and without taking out a Central Excise Licence.

12. Shri V, Ganapathy, the learned Consultant for the respondents submitted that condition (a) of Notification No. 198/76 clearly shows that only the accounts maintained under the Central Excise Rules can be relied upon for the purpose of calculating clearances under this Notification. If the respondents had also manufactured those goods earlier without obtaining the Excise Licence, they did not maintain the Central Excise records and it will not be correct to go against the condition mentioned in the Notification for the purpose of calculating the base period and base clearance. According to him, the stand taken by the department in adding the quantity of resins produced prior to the issue of the licence is not correct. L-4 Licence was issued to them only on 13-7-1977 for manufacturing this product Phenol Formaldehyde Synthetic Resins. There could not be any excise records regarding the manufacture of this product prior to 13-7-1977 as the respondents were not having any excise licence to manufacture the same. The licence granted was to take effect ^respectively and not retrospectively. The Appellate Collector of Central Excise took correct view in holding that it will not be correct to go against the condition mentioned in the Notification for the purpose of calculating the base period and base clearance.

13. Shri Ganapathy also drew our attention towards the Order-in- Original passed by the Assistant Collector wherein he totally denied the rebate as per Notification No, 198/76. According to Shri Ganapathy, if the value of the goods manufactured during the entire period i.e.

from 1974 to 16-9-1977 is taken into account for the purpose of the fixation of base clearance, even then the respondents might be entitled to rebate under Notification No. 198/76 The Appellate Collector has not touched this point at all which requires determination as the order passed by the Assistant Collector on this point is contrary to law.

Shri Ganapathy also pointed out that the relevant period is 16-9-1977 to 29-4-1978 and the Show Cause Notice was issued on 29-4-1978. Only demand for six months could be within time. The Appellate Collector has also not taken this fact into account. The respondents have challenged the recovery on the point of limitation also before the authorities below.

14. As far as the findings of the Appellate Collector on the point, that only the accounts maintained under the Central Excise Rules can be relied upon for the purpose of calculating clearances under this Notification No. 198/76 should be taken into account, are not sustainable in the eyes of law. We have to consider Notification No.198/76 as a whole and not only condition a) attached to it. This Notification is not to be interpreted in a restricted and narrower sense. A perusal of the record shows that the respondents have been manufacturing this product i.e. Phenol Formaldehyde Synthetic Resins even prior to the issue of the excise licence i.e. 16-9-1977. Their letter dated 12-7-1977 sent to the department shows that they have been producing and cleared Resins from September, 1974 onwards. For interpreting the provisions of Notification No. 198/76-C.E., we have to take into account the entire value of the goods manufactured by the respondents right from September, 1974 onwards for the purpose of calculating clearances under this Notification. The Collector of Central Excise has already held against the respondents that they had manufactured excisable goods without excise licence and cleared them without payment of excise duty. These findings have become final qua the parties as the appeal filed by the assessee before the Central Board of Excise and Customs was also dismissed on this point. It is logically incorrect to take a view that the base clearance for the purpose of said Notification should be restricted only to the record maintained under the Excise Rules. When admittedly, the assessee manufactured these goods without excise licence, it does not seem to reason as to why the value of those goods should not be** taken into account for the purpose of calculating clearances under this Notification. The view taken by the Appellate Collector on this point seems to give a premium on violation of law and giving benefit to an assessee who has cleared excisable goods without payment of Central Excise duty and without taking out a Central Excise Licence.

15. The Notification No. 198/76 or the condition mentioned thereunder nowhere prohibit the inclusion of the value of the excisable goods manufactured by an assessee without obtaining the excise licence for the fixation of base clearance under this Notification. Excisable goods manufactured without obtaining excise licence, naturally are not to be found in the record maintained under the Excise Rules but for the purpose of fixing base clearance under Notification No. 198/76, the other records showing such clearances can certainly be taken into account.

16. Under these circumstances, we set aside the findings of the Appellate Collector of Central Excise, Madras on this point.

17. Regarding the contention of Shri Ganapathy, the learned Consultant of the respondent that the Appellate Collector did not deal with the contentions of the respondents that the Assistant Collector was not justified in disallowing the entire rebate and that the demand was barred by time, we find force in it.

18. If the entire value of the goods manufactured by the respondents right from 1974 is to be taken into account for calculating clearances under this Notification, it might be possible that the respondents be entitled for some rebate under Notification No. 198/76. Disallowing the entire claim without fixing the base clearance cannot be said to be justified. Similarly, the Appellate Collector should have also decided the point of limitation raised by the assessee.

19. As the order passed by the Appellate Collector is silent on both these points, so we are remanding this case back to the Collector (Appeals) Madras, with a direction that for the purpose of the fixation of the base clearances under Notification No. 198/76, the value of the goods i.e. Phenol Formaldehyde Synthetic Resins manufactured by the respondents since September, 1974 should be taken into account, and if the respondent/assessee is found to be entitled to some rebate in view of the Notification No. 198/76, he should be given the same. He should also decide the point of limitation raised by the respondent/assessee in the circumstances of the case. The Collector (Appeals) shall decide the matter as early as possible but not later than six months from the date of receipt of this order.


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