TMI Blog1990 (7) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... ectness of the declaration of installed capacity, certain records and documents obtained from the factory premises revealed actual installed capacity was more than 2,000 metric tonnes per annum. 3. The Central Excise Officers visited the factory on 15-4-1981 and verified and recorded the width of Deckle, steam pressure, speed of M.G. Cylinder and moisture for the finished paper. Based on the data, the production of the paper machine was calculated and it was found that production worked out to 2468.4 metric tonnes per annum of 330 working days. 4. A show cause notice was issued to the appellants on 28-5-1982 proposing recovery of differential duty short paid on paper cleared from the factory during the period from 18-6-1977 to 31-3-1982, imposition of penalty and confiscation of plant and machinery. The appellants replied on 6-8-1984, stating that the installed capacity never exceeded 2,000 metric tonnes per year and stating that charges against them were based only upon correspondence between the appellants and various Departments for increase of the licensed, capacity to enable them to instal accordingly, which they could not do. 5. The Collector of Central Excise held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication dated 8-11-1979 wherein the quantity of excisable goods, which the factory is capable of producing per year is shown as 1800 metric tonnes. The query raised by the Department on 13-2-1980 regarding the difference between the figure of 1800 Metric tonnes found in AL-4 application and the figure of 3600 metric tonnes shown in the previous AL-4 application was answered by the appellants, who submitted that the figure of 3600 metric tonnes was only an estimate whereas the actual production for the preceding year never exceeded 1800 metric tonnes per annum. The classification lists were approved and the AL-4 application for renewal was also approved and in view of this the appellants would submit that there was no suppression of facts on their part and therefore the extended period of limitation would not be applicable. 8. The learned DJI submits that the Collector has come to the conclusion on the baais of several docoments each of which is relevant for the purpose of computation of installed capacity. In addition to the documents such as the appellants application to the Ministry of Industry dated 19-5-1971 agreement with Rajendra Paper MBIs dated 15-12-1973 for installatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits laid down in the Notification. In view of the above, the learned DR contends that the appeal is to be dismissed both on the aspect of limitation and on merits. 11. For the purpose of better appreciation of the dispute involved in this appeal, it would be useful to set out the relevant Notification - i.e. Notification No. 128/77 dated 18-6-1977. Notification No. 128/77 dated 18-6-1977 In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Govt. of India, in the Ministry of Finance (Department of Revenue and Insurance), No. 45/73-Central Excises, dated the 1st March, 1973, the Central Government hereby exempts paper other than paper boards, cigarette tissue, glassine paper, grease proof paper, coated paper (including waxed paper) and paper of a substance not exceeding 25 grammes per square metre, and containing not less than fifty per cent by weight of pulp made from bagasse, jute stalks, cereal straw or waste paper manufactured and cleared from a paper mill of the type described in the Table below, from so much of the duty of excise leviable thereon as is specified in the correspondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndigarh. 13. The appellants also entered into an agreement with M/s. Rajendra Paper Mills Pvt. Limited on 15-12-1973 for installation of paper mill machinery wherein it was stated that the anual capacity of the mill is 3600 metric tonnes. The installation charges were paid according to the agreement and there is no averment that the agreement was not carried out. The application dated 21-12-1973 to the Delhi Stock Exchange Association Limited for enlistment of securities mentions the installed capacity of the Mills as 3600 metric tonnes. This is the capacity indicated in letter dated 13-2-1974 to the Regional Manager, Canara Bank, enclosed memorandum dated 4-2-1974, and letter of 27-6-1980 to Canara Bank for Bank facilities. In their letter of 28-7-1980 to Canara Bank it was stated that the average production during the month of June 1979 was 8 tonnes per day which works out to 2640 metric tonnes per annum (i.e. 8 tonnes x 330 working days). The letter to Canara Bank dated 29-8-1980 shows the production for the year ending 31-3-1980 as 2119 metric tonnes and the production figures also indicated that the installed capacity was more than 3350 metric tonnes per year based on actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstalled capacity in respect of all varieties of paper and paper boards does not exceed 2000 tonnes Seventy-five per cent of the duty leviable 2. Paper mill whose annual installed capacity in respect all varieties of paper and paper boards exceeds 2000 tonnes but does not exceed 5000 tonnes Sixty per cent of the of duty leviable 3. Paper mill whose annual installed capacity in respect all varieties of paper and paper boards exceeds 5000 tonnes but does not exceed 10,000 tonnes Fifty per cent of the of duty leviable. Provided that the paper mill (i) does not have a plant attached thereto for making bamboo or wood pulp and (ii) manufactures paper out of pulp brought by it or made by it from any raw material other than bamboo or wood." 12. The department has relied upon several documents and records of the assessee for holding that the assessee was not entitled to 75% duty concession under the notification. Initially the appellant was a Private Limited Company which had applied to the D.G.T.D. for registration for manufacture of paper with an installed capacity of 2000 metric tonnes but on the Company being converted into Pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conservator of Forest Chandigarh, for allocation of EUCALYPTUS for the mills. In the application dated 20-12-1978 to the Senior District Industries Officer, Faridabad the appellants requested allotment of 6000 litre of K-Oil per month as they were having a paper plant with production capacity of 10 Tonnes per day which works out to 3330 MT per annum. The letter dated 20-8-1980 to the Managing Director, Haryana Industrial Development Corporation (Page 118 of the paper book) mentions the installed capacity as 10 metric tonnes per day and actual production as 7 metric tonnes per day. The application dated 19-9-1980 (Pages 119 to 124 of the paper book) for term loan of Rs. 60 lakhs mentions the installed capacity as 10 metric tonnes per day. 14 . The monthly production report for the period Jan. to Apr. 1976 mentions the production capacity as 300 Tonnes per month which works out to 3600 MT per year. The capacity of the mill is shown is 10 metric tonnes per day in the letter of 19-10-1974 addressed to S.F. India Ltd. (Pages 130 to 133 of the paper book). 15 . There is a plethora of evidence to establish that the installed capacity of the appellants Mill exceeded 2000 metric ton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely limits the evaporation on the M.G. drying cylinder. It was observed that the main sections of the machine were not properly balanced. The installed capacity calculations of the paper machine are given below. The samples of the web before and after dryers were collected for the moisture determination. Moisture in the web before dryer - 68% Moisture in the web after dryer - 7% Total quantity of water evaporated kg. per kg. of finished paper - 68.7 =100.68 = 1.906 Evaporation drying rate on M.G. Cylinder = 5.5 lb hrft 2 = 26.85 kg hrm 2 Surface area of the M.G. Cylinder = 3.14 x 1.8 x 3.0 = 16,956 m2 Therefore installed drying capacity of the = 26.85 x 16,956 x 24 machine 1.906x1000 = 5.732 Tonnes per day. Taking 15% more capacity for the hood installed on the machine, the drying capacity of the machine = 5.732 x 1.15 = 6.5918 Tonnes per day Based on 330 working days in a year, the installed drying capacity = 6.5918 x 330 = 2175 Tonnes/yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper. The pulping of waste paper is carried out in Hydrapulpers which are two in numbers, with a capacity of 250 kgs. over-day waste paper in each Hydrapulper. In each Hydrapulper, one hour is reported to complete the pulping process i.e. pulp made out of waste paper ready for paper manufacture. The yield, in terms of paper, based on raw-material is reported as 77%. Number of Hydrapulper = 2 Capacity of each Hydrapulper = 250kg. Time required to complete = 1 hour Pulping process in each hydrapulper Maximum number of hour available for each Hydrapulper per day = 23 Number of Hydrapulper made ready in one day = 23 x 2 = 46 Capacity of the plant (Pulp mill) = 46 x 250 = 11.5 tonnes per day Production of pulp for 330 days = 11.5 x 330 = 3795 tonnes / per annum Paper production for 330 days considering yield as 77% = 3795 x 0.77 = 2922 tonnes per annum. Sd/-...........x (J.P. MAMGAIN) Superintendent (Paper Tech.). D. PRODUCTION DRYING CAPACITY (BASED ON DATA FURNISHED AND IDEAL WORKING CONDITIONS) DATA: Number of dryer = 1 M.G. Cylinder } Source: Drawing number VPM/400/77 M.G. Dryer assembly Diameter = 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess rimming effect. Wf = Mw- Mf 100-MW Mw = 65% Mf=5% W = 65 - 5 100 - 65 = 1.71 Ibw/lbp Rp =Rw Wf 6.39 1.71 =3.731bp/(hr)/Ft 2 Determinalion of S = 0.0218 x N x D W Where D = Diameter of M.G. Cylinder in inches N is number of dryer D = 120" S = 0.0218 x 120 W = 2.616 Ft/inch width W = 72" (max width of the paper) Efficiency = 95% = 3.73 x 2.6 x 6 x 72 x 24 x Production drying capacity 0.95 2000 = 8 tonnes per day. = 8 x 330 = 2640 tonnes/annum Production for 330 days The drying capacity has been reported as increased by 10% by incorporation of drying hood, which has a linear bearings on production increase. So, increase in production due to drying hood = 2640x0.10 = 264 tonnes per annum Net production drying capacity is 2640 x 264 == 2904 tonnes p.a. Sd/-........ (J.P. MANGAIN) Superintendent (Paper Tech.) Dated : 28-4-1981 New Delhi. 17. On a detailed reading and analysis of the 2 reports, it is found that the factual production of the paper machine based on instantaneous data as verified has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved by the Department. The estimated production in the AL-4 application dated 20-5-1974, 16-11-1975 and 29-11-1976 was shown as 3600 MT and in the AL-4 application dated 26-11-1979 the estimate was shown as 1800 MT. Before renewing the L-4 licence for the years 1980 to 1983 the department wrote to the appellants seeking clarification regarding the installed capacity. This is seen from the letter of the Supdt. of Central Excise dated 13-2-1980 which reads as follows :- Office of the Superintendent of Central Excise-111 Faridabad C. No. CE-7/VPM/78/264 13-2-1980 To M/s. Venus Paper Mills Ltd., 50 NIT Faridabad. Sub - Renewal of L-4 Licence for the period 1980-82 Dear Sir, Please refer to your letter No. VPM/126 dated 26-7-1979 thereunder the L-4 licence was submitted to this office for renewal. On scrutiny of your AL-4 it has been found that you have shown at Sl. 6,1800 M. tonnes as the quantity of excisable goods which the factory is capable of producing while it was declared as 3600 M. tonnes in your previous AL-4 submitted for renewal of licence. You are therefore requested to please submit your L-4 licence (enclosed herewith) with your amended AL-4 imme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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