SUNIL PLASTIC INDUSTRY Vs. COLLECTOR OF C EX AND CUSTOMS

JUDGEMENT

(1.) FOR hearing the applicants' appeal on merits, they are required to deposit a sum of Rs. 4,10,89,692/- towards duty.

(2.) Shri Satalvad, the learned advocate, on behalf of the applicants contended that the order of the Collector is prima facie bad in law and the demand confirmed by him is also time barred. He pointed out that the demand has been made right from the date of commencement of manufacture viz. 1/5/81 to 30/4/84, by issuing a show cause notice dated 25/7/84. The applicants have filed declaration for claiming exemption from the licensing control since they were manufacturing HOPE & PP monofilament yarn, which were eligible for exemption under Notification No. 194/72 and 242/79. The aforesaid exemption Notifications totally exempted HDPE monofilament yarn of 60 deniers and above and Poly Propylene monofilament yarn of the same deniers. In view of the declaration filed, they were not required to file any classification list. All the same, they were maintaining the record of raw materials used in the manufacture of monofilament yarn. They had, alongwith the LDPE & PP, mixed HDPE granules as well. The department as late as in 1984 issued a show cause notice on the ground that the exemption is available only in respect of HDPE & PP monofilament yarn and since there is admixture of LDPE granules, exemption is not available. The duty has been demanded at the rate of Rs. 28 per kg, whereas the sale price of the rope, which is made out of the yarn itself is Rs. 23 per kg. On merits, Shri Satalvad pointed out that even as per the Board's circular relied upon by the Collector of Nagpur, admixture of LDPE granules is permissible for availing exemption. When the order of the Collector of Central Excise, Nagpur was pointed out to the Collector, though he has taken the point, he dismissed on the ground that in that case the percentage of LDPE granules was only to the extent of 20% whereas in the case of the applicants it ranges from 35% to 46% as per the raw material record maintained by them. On this ground, the Collector has rejected all other evidences in the form of affidavits to show that these are marketed as HDPE & PP yarn and also the certificate produced from SASMIRA. He also pointed out that the department has not produced any test results to rebutt their contention that it is not classifiable as HDPE monofilament yarn. He also referred to the Rules of interpretation and the Section Notes relating to Section 11 and contended that where the product is a mixture composed of different articles, it should be classified according to the predominance of the articles and also the essential character. In this case, if the predominance is to be judged in the term of weight of the raw materials, H.D.P.E. is more than 50% and hence it should be classified as only HDPE monofilament yarn. In regard to the time bar, Shri Satalvad contended that the applicants being an exempted unit, they were not required to file classification list. All the same, they were maintaining raw materials record. They also filed the declaration claiming exemption from the licensing control. If the department had any doubt regarding the classification and eligibility to exemption they, could have drawn samples and tested and initiated proceedings right at the time of submission of declaration. He, therefore, contended that the allegation of suppression is not sustainable. He also pointed out that for evasion of more than Rs. 4 crores there is not even a suggestion for imposing a penalty in the show cause notice and no penalty has been imposed. This itself suggests that the department was convinced of their bonafides and no suppression can be alleged only for purpose of payment duty.

(3.) AFTER hearing both the sides, we find that the basic issue to be decided in the appeal is regarding the classification of the monofilament yarn manufactured by the applicants and their eligibility for exemption under Notification No. 194/72 and Notfn. No. 242/79. The type of yarn manufactured by them as seen from the findings of the Collector is composed of 35% to 46% LDPE granules. The fact that LDPE granules is mixed with the HDPE is not disputed. It is also evident from the order of the Collector, Nagpur, which is also taken cognisance by the respondent Collector, that even in a case of mixture of LDPE of 20%, he has conceded that the exemption is eligible. The question whether the LDPE content upto 46% would change its essential character or would make it predominant, is a contentious issue which can be considered at the time of hearing of the appeal. All the same, we are unable to appreciate the Collector's stand in contending that there is an element of suppression in this case. The Collector has held that the applicants should have declared HDPE/LDPE mixture as raw material. We observe that there is no specific column in the declaration to give the details of raw materials. We also find that only from the Chart based on the records maintained by the applicants, the percentage on LDPE has been taken and not on the basis of the departmental test results. This goes to indicate that the records were with applicants for showing raw materials, which were made available for departments verification during ... adjudication.