1. This is an appeal transferred to the Tribunal under Section 35B of the Central Excises & Salt Act, 1944. The appellants' representative has explained that the Mills brought in duty paid grey fabrics for bleaching/dyeing in their process house and thereafter the fabrics bleached/dyed were sent to P.V.C. coating plant within the factory.
After the coating of the P.V.C. the weight of cotton in the coated fabrics was more than 40% and this meant that the coated fabrics remain classified as cotton fabrics under item 19 of the Central Excise Tariff. However, before the fabrics were taken up for P.V.C. coating, the Mills were required to pay the duty of 0.5 ps. On the Medium/B coarse fabric for bleaching as per Sr. No. l(b)of Notification No.29/66 C.E. dt. 1.3.66. The learned Consultant for the appellant submitted that as per the Trade Notice No. 135 (MP)/Cotton Fabrics (5)/63 issued by the Collector of Central Excise, Bombay, the cotton fabrics required in the manufacture of plasticised fabrics are to be duty paid. Therefore, in terms of the aforesaid public notice, the appellants had to make out an AR 1 application for paying the duty on bleached fabrics before the bleached fabrics could be taken up for P.V.C. coating. In case the Weight of cotton fabrics was less than 40%, the coated fabrics were not considered as cotton fabrics and no further duty was leviable. But in the case of lots of the cotton fabrics covered by the present appeal, the test reports showed that the percentage of cotton fabrics in the coated fabrics was more than 40%, and hence the Central Excise Officer issued the differential demand for payment of duty due on their fabrics as per Sr. No. 5(b) of Notification No. 29/66 dt. 1.3.66. This demand was issued under Rule 10A of the Central Excise Rules, 1944. The learned Consultant stated that the recource to Rule 10A was not correct. Thereafter, the department had changed the stand to issue the demand under Rule 9(2) and decide the matter accordingly in confirming the demand and recovering the amount of differential duty. The appellants had filed the appeal to the Collector and petition to the Govt. of India and they had lost their case at both these stages. Thereafter, they filed the writ petition before the Hon. Bombay High Court and the Hon. High Court decided that Rule 9(2) was not attracted, and therefore, the order of the departmental authorities based on the wrong demand were quashed and the matter regarding the levy was again remanded to the departmental authorities. Thereafter, the Supdt. Central Excise issued a revised demand in his letter dt. 13.1.77 again under Rule 10A for the differential duty of Rs. 10,371/- on 41484 sq. metres of P.V.C.processed cotton fabrics cleared from the factory during the period 4.5.67 to 22.2.67 and the Asstt. Collector confirmed the demand in his order dt. 31.3.77. The first appeal of Ms. Jasmine Mills Pvt. Ltd. was rejected by the Appellate Collector in his order dt. 28.12.77 against which M/s. Jasmine Mills Pvt. Ltd. have filed a petition to the Government under old Section 36 of the Central Excises & Salt Act which has now been transferred to the Tribunal under Section 35-P. The learned Consultant stated that the department's reliance once again on Rule 10A was not correct. There had been an assessment of the processed cotton fabrics of 05. ps. per sq. metre under Notification No. 29/66 dt. 1.3.66, and the facts of the case revealed that there was mis-declaration on the part of the appellants and the same was covered under Rule 10. Hence, the departments' reliance on Rule 10A was not correct. Only Rule 10 could be invoked and since the first demand was issued by the Inspector on 13.9.67 for the period upto 22.7.67, the same was time-barred as the demand was issued more than three months later from the date of payment of the duty. The learned Consultant said that in the aforesaid circumstances he would rely on the Supreme Court's Judgment in the case of Asstt. Collector of Central Excise V.Ike Elphinstone Spinning & Weaving Mills Ltd. A.I.R. 1971 C. 2039 1973 Cen-CUS July vi (S.C.). The learned Consultant has also relied on the.
Bombay High Court's Judgment in the Case of M/s Arlabs Ltd. a copy of which has been filed with the appeal also. Since the notices issued were invalid Hon. High Court had set aside the order for the demand of duty. The learned Consultant further referred to the Judgment of the Calcutta High Court in the case of Mis. Electro Steel Castings Ltd. v.The Inspector of Central Excise and Ors. 1977, Tax, Law Reporter Part-II, 2116 (1977 Cen-Cus 79D). The ratio of this judgment is that in the case of non-levying of duty due to error or inadvertence by the officer, Rule 10 was attracted and Rule 10A is not applicable. In view of the aforesaid circumstances the learned Consultant requested that the appeal be allowed.
2. Shri Pattekar, J.D.R. for the department has submitted that the appellants took clearance of P.V.C. coated cotton fabrics on Nil duty gate passes which were required to be filed under Rule 50. He referred to Rule SO and read out the same. He further explained that the clearance was allowed in the aforesaid manner by acceptance on the declaration made by the factory that the percentage of cotton in the coated fabrics was less than 40%. Shri Pattekar has further argued that the demand issued was not in like form of showcause-cum-demand notice, but in the form prescribed by the Tobacco Excise Manual. No objection had been taken to this form of demand by the appellants before the Adjudicating Officer or the first Appellate Authority. The Asstt.
Collector had issued his order on the basis of demand notice, since the clearance of the coated fabrics was allowed on a Nil duty gate pass, there was no assessment document filed as required under Rule 52 and recourse to Rule 10A was quite correct, as there was no assessment. In view of the foregoing facts, the departmental representative requested for the dismissal of the appeal.
3. In reply the learned Consultant has explained that the points raised by the departmental representative had been covered in the Judgment of the Calcutta High Court in the case of Electro Steel Castings Ltd. 1977, T.L.R. PT-II 2116(1977 Cen-Cus70D). He reiterated that there had been an assessment at 0.5 ps. per sq. metre on AR. 1 and there had been no provisional assessment of the fabrics. It was a case of mis-statement by the appellants and this would also be covered by Rule 10. Hence the Consultant pleaded that the Rule 10A was not applicable.
He, therefore, requested that the appeal be allowed.
4. We have explained the submission on both the sides. From the facts of the case brought out in the appeal, papers" and during the course of the arguments, it is seen that M/s. Jasmine Mills Pvt. Ltd., bought duty paid grey fabrics from the market. They bleached these fabrics and paid duty for bleaching as per Sr. No. l(b) of the table in the proviso to the Notification No. 29/66 dt. 1 3.66 at 0.5 ps. per sq. metre.
Thereafter, a further process of manufacture was carried out, normally coating the cotton fabrics with P.V.C. in the appellants' factory. The intention of the manufacturing process was that the percentage of cotton in the fabrics should be less than 40%. In that case, further processed fabrics would cease to be cotton fabrics within the purview of item 19 and no duty would be recoverable. But it appears that this intention was not carried into practice in respect of the lots under appeal, and in these case the percentage of cotton in the fabrics exceeded 40%. Since the P.V.C. coating was a further process of manufacture, the coated fabrics attracted duty under Sr. No. 5(b) of the same table at 0.25 ps. per sq. metre. It is seen that this P.V.C.coated fabrics were processed fabrics within the entry at Sr. No. 5(b) of the table under proviso of Notification No. 29/66 dt. 1.3.66, and these coated fabrics were removed on Nil duty gate passes. In other words, the AR. l's on which the duty of 0.5 ps. for bleaching the grey fabrics had been paid, were not used for the clearance of the coated fabrics. It is thus seen that, there was no AR. 1 put in by the appellants for clearance of the goods a| required under Rule 52 and therefore, there was no assessment of duty on P.V.G. coated fabrics.
The appellants' plea that the duty had been assessed on A.R. 1 application is not borne out by facts. Similarly, the contention that during the relevant time the appellant's factory-was under the physical control and the Inspector in charge o the factory had signed the Nil duty gate pass for the removal of the P.V.C. coated fabrics is also not relevant. So far as the assessment of the fabrics on AR. 1 is concerne, it is seen that the assessment involved levy of duty for bleaching of the great fabrics as per Sr. No 1(b) of the table in question. After payment of this duty, there was further process of manufacture which changed the classification of the fabrics to Sr. No. 5(b) of this table. The goods thus classifiable under Sr. No. S(H) of the table were not assessed to duty or were not removed on any clearance documents under the Central Excise Rules. Since however, the clearance was within the knowledge of the1 Centra] Excise department, the Hon. High Court held that Rule 9 was not applicable, and therefore, the High Court had set aside the earlier adjudication orders of the Asstt. Collector and higher authorities. But it is seen that the] correct rule applicable to the facts in question is Rule 10A and not Rule 10.1 In this view the demand made by the Supdt. of Central Excise in his notice dt. 13.1,77 and confirmed in the Asstt Collector's order dt 31.3.77 under Role 10A is quite in order. It was possibly for these reasons that the goods originally had been accepted as non-excisable and allowed clearance accordingly on Nil duty gate passes. In this view it is difficult to accept the appellants' contention that there was mis-statement on their part and that the case falls within the ambit of Rule 10 and that Rule 10A is not attracted. We are unable to accept this contention. In the above events we find that the orders of the Asstt. Collector and the Appellate Collector are correct. The same are confirmed and the appeal is dismissed.