TMI Blog1985 (12) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... ol top stage. This item reads as under : 43. WOOL TOPS and carded gilled slivers containing, in either case, more than fifty percent by weight of wool calculated on the total fibre content. In these proceedings, we are concerned only with those blended wool tops which contained more than 50 percent by weight of wool. 3. During the material period (1980-81 to 1983-84), the appellants paid the duty at the pure wool top stage. The Collector has held that the duty was legally payable at the blended wool top stage, that is, the stage at which wool tops were taken for manufacture of another commodity woollen yarn (Tariff Item 18B). However, while so holding, the Collector has not demanded the full duty again. He has only asked for the difference between the pure wool top stage duty and blended wool top stage duty, by giving, credit to the appellants for the duty already paid. On this basis, he has confirmed four demands - one for each of the four financial years 1980-81, 1981-82, 1982-83, and 1983-84 - totalling in all about Rs. 18.72 lakhs against the appellants. He has also held them guilty of unauthorised removals of blended wool tops without payment of the duty due and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05-09-1981 - Show cause notice issued by the Central Government to M/s. Modella Woollen Mills stating its tentative view that the Board s Order-in-Appeal was not correct in law and proposing to revise it. 05-02-1982 to 18-02-1982 - Revenue Audit Party visited the appellants factory and to reported that their assessment practice was contrary to the Collector s Trade Notice dated 3-12-1980.Consequent thereto, the Sector Officer i/c of the appellants factory made a note to that effect in their Production Register. (The appellants have not produced this Register before us. They say that it is not available). 27-05-1982 - The appellants wrote to the jurisdictional Superintendent of Central Excise that the two constituents of their blended tops - pure wool tops and synthetic/cellulosic tops - were paying duty separately and that duty on blended tops for the second time was not leviable. The Superintendent endorsed on their letter: Party is allowed to clear blended tops as usual till further clarification. 29-05-1982 - The Superintendent asked the appellants to submit their production records for blended tops and to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m into four main heads: I - Whether excise duty was legally payable at the blended wool top stage. II - Whether any portion of the demands confirmed against the appellants was time barred. III - Whether the penalties imposed on them were justified. IV - Whether any calculation mistakes in the demands needed rectification. 6. (i) The principal argument of the appellants is that since in terms of Entry 84 of List I of the Seventh Schedule to the Constitution of India and Section 3 of the Central Excises and Salt Act, 1944, the taxable event for excise is the manufacture of the goods, the duty is chargeable at the earliest stage when the excisable goods come into existence and that Rule 9 should be harmoniously interpreted so that it does not provide Section 3. A glance at paragraph 11 of the Supreme Court judgment reported at 1983 E.L.T. 1986 (S.C.) - U.O.I. and others v. M/s. Bombay Tyre International Ltd., etc. is enough to show that there is no basis for the theory of earliest stage put forth by the appellants. After discussing the earlier Federal Court, Privy Council and Supreme Court judgments which had drawn a distinction between the nature and character of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of removal of pure wool tops for blending because such removal is not for manufacture of another commodity, pure wool tops and blended wool tops both being the same commodity - wool tops. On the contrary, if the appellants proposition were to be accepted, the scheme of excise as set out in the statute would get distorted. For example, a composite textile mill could then claim that it would pay the duty only on the grey cotton fabrics, that is, the earliest stage at which cotton fabrics came into existence and not on the processed cotton fabrics. In their judgment in the case of M/s. Empire Industries Ltd. [1985 (20) E.L.T. 179 (S.C.)], the Supreme Court have held that processing of cotton fabrics is also manufacture and further processing duty is payable thereon. The appellants say that Item 19 relating to cotton fabrics lists processed fabrics as a separate sub-item in the tariff. True, but so does Item 43 by including blended tops in its expanded definition. (ii) The appellants say that the stage of Consumption in Rule 9(1) applies to them and that duty is payable by them when they remove pure wool tops for consumption into preparation of blended wool tops. Their plea i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to saying that though 15 Kgs. of blended wool tops are actually removal for spinning into yarn, duty should be charged only on 10 Kgs. which was their weight before blending. We find no authority for such a proposition. (iv) It is argued by the appellants that the process of blending does not amount to manufacture of a new product since both pure wool tops and blended wool tops remain classified in the same Item 43 and hence no further duty should be chargeable after blending. They add that the Collector has also accepted that from pure wool top to blended wool top no manufacture is involved. We find that the appellants are proceeding on a wrong hypothesis. The time chart of events given by us earlier shows that Item 43 was amended on 1-3-1975 to include blended wool tops containing more than 50% wool within its ambit. No interpretation which seeks to nullify a deliberate legislative amendment made by the Parliament is acceptable. Reading the tariff entry as it prevailed during the material period, blended wool tops containing more than 50% wool were specifically covered by it. The fact of manufacture has, therefore, to be presumed [1980 E.L.T. 735 (Delhi) - Hyderabad Asbestos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 9(1), no doubt, enabled a unit to pay duty at the pure wool top stage if it wanted to remove pure wool tops out of its factory. The appellants stated that they too benefitted by purchasing duty paid pure wool tops from other units and the authorities did not demand further duty or differential duty when they blended such duty paid wool tops. We can only say that it is for the Government to take notice of such loop-holes in the taxation scheme and to eliminate the scope for manipulations. But that cannot be a sanction for not paying the duty which is clearly due under the law. (vii) The last plea of the appellants concerning the substantive issue is that the Collector relied on the order dated 20-7-1982 of the Central Government passed in the case of M/s. Modella Woollen Mills but that the Government s Order stood on Rule 51-A which the Collector had not invoked against the appellants and, therefore, the impugned orders of the Collector should fall. We find that this argument is fallacious for two reasons. First, the Collector has not relied on the Government s order; he has exhaustively dealt with all the arguments of the appellants with his own reasoning and repelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 1944 and are liable for penal account under Rule 173Q of Central Excise Rules, 1944 besides payment of Central Excise duty amounting to Rs. . The notice further called on the appellants to show cause why the duty due as shown in the Annexure to the notice should not be recovered from them under Rule 9(2) and why penalty should not be imposed on them under Rule 173Q. The statement of the allegations thus clearly brought out that the appellants had neither made the necessary declaration (by way of classification list) to the excise authorities nor had they accounted for the production and removal of blended wool tops in excise registers and documents. The appellants were, at the relevant time, working under the self removal procedure and not under physical type of control. Under the self removal procedure, the excise authorities gained knowledge of the operations of an assessee through the prescribed declarations and assessment documents. The appellants admitted that they had filed no such declaration or classification list or assessment documents in respect of their blended wool tops. This is precisely what the statement in the show cause notice alleged. Suppression is merely an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intimations whether the appellants would use such wool tops in the pure form or mix them with other fibres to a blend of over 50% wool or less than 50% wool. The appellants cannot absolve themselves of their primary responsibility of making the prescribed declarations and submitting the prescribed assessment documents and expect the authorities to gain knowledge of their operations through involved and doubtful deductions from D-3 intimations and production of other commodities. (iii) The appellants rely on the old tariff advice of 1976 and plead for the benefit of Promissory Estoppel, relying on the Supreme Court Judgment reported at 1985 (22) E.L.T. 306 (S.C.) [U.O.I, and cothers v. Godfrey Philips India Ltd. and others]. The Collector has relied on his subsequent trade notice dated 3-12-1980. The appellants argue that there is no evidence that the trade notice was received in Dhariwal at all and in any case the Collector could not supercede the Government of India s Tariff Advice of 1976. During the hearing before us, the learned representative of the department stated that the Collector s trade notice dated 3-12-1980 had been issued on the authority of the Ministry of Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings in the case of their competitor M/s. Modella Woollen Mills, located in the same collectorate. How could then they be unaware of the change of assessment practice brought about by the Collector? They have cited before us the Bangalore collectorate trade notice of 1976. It is really surprising that they were aware of what was going on about their industry in the far away Bangalore collectorate but plead ignorance of the change of practice in their own collectorate. Further, their conduct after February 1982, when the audit party visited their factory and a note regarding wrong assessment practice followed by them was made in their production register, shows that even when they were pointedly made aware of the change of practice, they defaulted in complying with the directives issued by the authorities. The plea of ignorance of the trade notice of 3-12-1980 is, therefore, not at all convincing. We are satisfied that they were quite aware of the trade notice and so was their Head Office at Kanpur regarding the change in assessment practice. There is, therefore, no question of any Promissory Estoppel on and from 3-12-1980. (iv) The appellants contend that the real reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants argued that Rule 9(2) could not be applied unless there had been specification of the time, place and manner under Rule 9(1), which had not been done in their case, and secondly, Rule 9(2) could not be invoked for the purpose of recovering escaped revenue; the only provision available under the Act for such recovery was Section 11A which had not been cited in the show cause notices issued to them. We find no substance in their arguments. The appellants unit was duly licensed under the Central Excise Act and Rules for all the commodities manufactured by them and we take it that the attendant formality of approving the ground plans must have been gone through also. The time, place and manner for payment of duty by the licensed assessees are set out in the Rules (9, 9A, 49 etc.) for information and compliance of all the assessees. So far as the blended wool tops are concerned, the time, place and manner were further specified in the Collector s trade notice dated 3-12-1980. Secondly, the case before us is not one of escaped revenues in the sense of an unknown manufacturer having removed his goods without payment of any duty whatsoever. What really happened in the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -much-as, they stated, differential duty had been demanded even in respect of the blended wool tops which contained less than 50% by weight of wool, or blended wool tops made out of duty paid pure wool tops brought from outside had been included, or certain batches of blended wool tops were included in the demand twice by mistake, etc. We wish that the appellants had taken up these instances of error in their reply to the show cause notice or during hearing before the Collector. Even so, we do not consider it fair that the appellants should be called upon to pay any amount because of some errors in computation. We, therefore, order that the Assistant Collector should hear the appellants on instances of such computation mistakes and exclude the amount which were due to any obvious errors. 10. In the two cross-objections filed by the department, no further relief has been asked for. The prayer made in these cross-objections only was that the appeals filed by the appellants should be dismissed. It is, therefore, not necessary to pass any separate order in respect of the cross-objections. They stand disposed of in terms of the orders passed on the appeals themselves. 11. To sum up, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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