1. This matter arose from notice No. 198/B/SS.1/118/81-CXV, dated 7-11-1981 issued by the Government of India under Section 36(2) of the Central Excises and Salt Act, 1944 calling upon M/s. Natwar Lal Bhikhabhai to show cause why the order in appeal No. 40/1981, dated 11-3-1981 passed by the Board should not be set aside as it appeared to be not proper or correct.
2. The dispute was in respect of the manufacture of acrylic plastic tubes and bangles from methyl methacrylate monomer by M/s. Natwar Lal.
The Collector of Central Excise, Ahemdabad ruled that the benefit of exemption Notifications No. 68/71-CE, dated 29-5-1971 and No. 38/73-CE, dated 1-3-1971 was not permissible and that therefore the bangles and tubes produced and cleared in the period January 1977 to December 1979 valued at Rs. 25.26 lakhs should be charged to duty. The Collector also imposed a penalty on the producer.
3. In the appeal the Board set aside the penalty on the ground that there had not been any clandestine removal of the goods. It also held that the duty was not payable by the party on account of the provisions of the Rule 9A(5) Central Excise Rules and because of Notification No.143/80-CE, dated 20-9-1980 which exempted the goods from payment of duty 4. At the hearing on 30-1-1985 Mrs. Zutshi argued on behalf of the Central Excise Department and said that the action of the Board was not correct. It was not permissible to apply Notification No. 143/80-CE, dated 20-9-1980 to goods produced and cleared before December 1979. A notification of this kind cannot have retrospective effect by saying that because of Rule 9A(5) the duty would not have to be paid. The Board was wrong and there was no sanction in the law for this.
5. The learned Counsel for M/s. Natwar Lal argued that in the judgment of the Gujarat High Court in Mis. Jalal Plastic Industries v. Union of India - 1981 (8) E.L.T. 653 (Guj.), Special Civil Application No. 1477 of 1980 the court ruled that "articles made of plastic", meant articles for the manufacture of which plastic materials has been used as raw material. It would not cover nonplastic raw material which undergoes polymerisation process in the course of manufacture. It held that since monomer was not plastic material, bangles manufactured out of them would not fall under Item 15A of Central Excise Tariff.
6. She also argued that in view of the fact that Notification No.143/80-CE exempted such bangles made from methyl methacrylate monomer unconditionally with effect from September 1980, there was no case for recovery of the duty.
7. The learned Counsel for the Department said that the decision of the Gujarat High Court has already been appealed before the Supreme Court by the Government and therefore that decision was not final.
8. The findings of the Board are wrong on both accounts. Notification No. 143/80-CE cannot cover these cases which were cleared more than a year before it was issued. The Board, of course, used this notification in an indirect way by bringing into operation in conjunction with Rule 9A(5) Central Excise Rules. This rule has been misapplied. Rule 9A deals with date for determination of duty and tariff valuation. The provisions of this rule specifies the rates of duty that should be applied in various situations such as when goods are removed from the factory or from a warehouse, or when duty becomes payable on goods which had been removed under bond for rewarehousing, without being actually rewarehoused. The rule provides for different dates in such different cases, each dependent on facts as spelt out in the sub-rules for various situations. Sub-rule 5 provides that if there are cases not covered by the preceding 4 sub-rules, the rate of duty will be the rate in force on the date on which duty is paid. Since the duty had not been paid on the plastic bangles and tubes (manufactured by M/s. Natwar Lal) till October, 1980 when the Collector passed his order, it would be paid only thereafter when Notification No. 143/80-CE would be in force and according to this notification, the rate of duty would be nil.
Hence on the day the duty would be paid by M/s. Natwar Lal the duty under Rule 9A(5) would be zero duty. The Board has misunderstood the meaning of this rule because this is a case of the bangles and tubes being removed from the factory and would, therefore, be covered by Rule 9A(l)(ii) and the rate of duty would be the rate applicable on the date of their removal before Notification No. 143/80-CE came into force.
9. Plastic bangles and tubes of this kind manufactured by this factory cannot be manufactured unless the monomer undergoes polymerisation.
Indeed there is no denial of this by the respondent party nor can this fact be contradicted. It is a technological fact and there is no need for any detailed discussion. M/s. Natwar Lal will understand this as they know the process well. The fact that it is called acrylic plastic makes it evident that it has undergone polymerisation. We are not aware of acrylic sheet or articles that are not thermoplastic polymer or copolymer derived from acrylic acid methacrylic acid ester of this acid or acrylonitrile etc. Methyl methacrylate is a monomer for polymethacryiate as is used in the formation of acrylic plastic.
Acrylic plastic bangles and tubes have to be articles made of plastic and must fall under Item 15A Central Excise Tariff.
10. However in view of the Gujarat High Court judgment that a plastic bangle made from a monomer, which undergoes polymerisation during manufacture, would not be an article of plastic assessable under Item 15A Central Excise Tariff, we set aside the notice of review dated 7-11-1981 issued by the Government of India.