TMI Blog1989 (8) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... al product is known and marketed as ACR sheets. Thus the corrugated boards after impregnating with asphalt are conferred with special properties of thickness. Water proof, fire resistance, and therefore are specially treated paper boards. 1.2. On 25-5-1974, the Superintendent of Central Excise issued a memo to the respondent company stating that it had been decided to bring their factory under Central Excise Control since the corrugated and plain sheets coming into existence at the intermediary stage are liable to be assessed under T.I. 17(3) CET. The respondent company were, therefore, directed to apply for a Central Excise licence and to remove the goods on payment of duty. They were also required to give the production and clearance data of such intermediate sheets for manufacture of their final product ACR sheets. The above memo was followed thereafter by a formal show cause notice dated 25-5-1974. This notice was also in respect of the intermediate product namely corrugated and plain sheets which were impregnated with asphalt and cleared from the factory as ACR sheets. The respondents contested the above show cause notice vide their reply dated 8th July, 1974. Thereafter an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice mentioned above appears to be based on Collectorate Trade Notice No. 103/75, dated 2-8-1975 which in turn was based on Board s Tariff Advice No. 27/75 communicated in F.No. 61-12-1972-CX. II, dated 19-7-1975. On a perusal of the Board s Tariff advice, it is observed that this advice is based on Chief Chemist s note recorded in the File No. 61/12/72-CX.II. The Chief Chemist after examining the samples sent to him for analysis and opinion, opined that the samples satisfied the criteria of mill board given under Explanation to Notification 30/70 as amended. However, he drew attention to a Board s letter dated 8-2-1957 on the basis of which he stated that the samples are not mill boards. Nevertheless, he was of the opinion that since the product ACR sheets was made of paper pulp it qualified to be called paper board other sorts mentioned under Tariff Item 17(3) CET. The Chief Chemist also relied upon BTN Notes to opine that tarred roofing paper was covered under a Tariff Heading 48.07 pertaining to paper and paper board, impregnated, coated, surface coloured etc. in rolls or sheets. He, therefore, also opined that the roofing sheets fell under treated paper board fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for manufacture of ACR sheets is paper, still what the petitioner manufactures is not paper or paper board, but a totally different product known as ACR sheets, merely because at an intermediary stage of the manufacture of ACR sheets, the petitioner manufactures a board which is formed from the road pickings, it cannot be said that the petitioner is manufacturing paper board. Further merely because at the intermediary stage the goods answer the description of paper board they do not excisable goods. Paper boards are not manufactured by the petitioner, he manufactures ACR sheets. Once this intermediary product is turned into ACR sheets, no part of it remains as paper board, nor anything of the board remains as a by-product. The whole of it is converted into ACR sheet. I, therefore, do not think that the ACR sheet is an excisable goods. The intermediary stage of manufacture of a particular goods cannot be taken as basis for determining whether any person is a manufacturing excisable goods or not. If the petitioner is manufacturing excisable goods then alone he would be liable to take out a licence and not if at some intermediary stage of manufacture of particular goods, the goods an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reply dated 23-6-1978. Opportunity for personal hearing was also given to them by the Asstt. Collector on 17-8-1978. An adjudication order dated 18-12-1978 was passed by the Asstt. Collector of Central Excise holding that ACR sheets manufactured by the respondent company are specially treated paper board falling under T.I.17(4) [now Tariff Item 17(2) of CET] and accordingly he confirmed the demand of Rs. 1,04,84,057.57p. during the period 1-8-1971 to 8-2-1976. He, however, refrained from imposing any penalty under Rule 173-Q(c). 9. Thereafter the respondent company filed a writ petition No. 1826/79 against the aforesaid adjudication order dated 18-12-1978 of the Asstt. Collector making detailed submissions. A Division Bench of Andhra Pradesh High Court by its order on the said writ petition closed the writ petition directing the respondent company to take to appellate remedies under Sections 35 and 36 of the Central Excises and Salt Act, 1944. 9.1. Accordingly, the appeal was filed by the respondent company before the Collector of Central Excise (Appeals), Madras. The said Collector (Appeals) vide his order-in-appeal No. 185/84(G), dated 16-11-1984 made the following orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the finished product falls under Tariff Item 17(4) the earlier classification under Item 68 will cease to be operative and orders have already been issued in this regard. The present proceedings under Rule 10-A are sustainable as the product escaped assessment under Item 17 all these years under the impression that the same is not excisable. The contention of the party that they made a representation to Central Board of Revenue on the issue and that no decision should be taken until orders are received from the Board is not correct. The correct procedure regarding appeal and revision under the Act has to be followed by the party and passing of this order cannot be stayed for the reasons advanced." 11. Thereafter they filed an appeal before the Collector of Central Excise (Appeals) who vide his order dated 27-3-1985 has held that the demand will not be sustainable under Rule 10-A in the facts and circumstances of the case. The lower appellate authority has held that Rule 10 would be applicable; as regards the question on merit regarding classification of the product ACR sheets, the said authority has directed the matter to be examined afresh in the light of judicial/quasi-judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at High Court of Madras has relied heavily on the finding of the Collectors Conference without going into the correctness of the basis of that decision. The High Court has not arrived at independent decision on the classification of the product in conformity with the established principles. 13.1. He further submits that the basis of the decision of the Collectors Tariff Conference is the Note of the Chief Chemist, who, relying on BTN, has pointed out that tarred roofing paper finds mention under sub-heading (3) impregnated paper and paper board of Chapter Heading 48.07- "paper and paper board, impregnated, coated, surface coloured, surface decorated or printed (not being merely ruled, lined, or squared and not constituting printed matter within Chapter 49) in rolls or sheets and thus, according to the Chief Chemist, the roofing sheets merit to be treated as impregnated paper board. Learned Advocate has assailed this opinion on the following grounds :- (a) Tariff Entry 17 in particular and Central Excise Tariff in general during the relevant period is not modelled on B.T.N. Therefore, Explanatory Notes and Chapter Notes of BTN cannot be applied in interpreting entries in Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight Roofings. We observe from paras 39 and 40 of 1981 E.L.T. 738 (Mad.) that the High Court has relied heavily on the decision of the Collectors Tariff Conference as well as come independently to conclusion that the ACR sheets fall under T.I. 17(4). We agree with the learned Advocate for the respondents that learned Single Judge of the Andhra Pradesh High Court independently came to the contrary conclusion, even though the said judgment was set aside on technical ground. We notice that the said judgment has not been over-ruled on merits by a decision of a superior competent authority/court. Due note of the Andhra Pradesh High Court s decision by the learned Single Judge is, therefore, required to be taken. 13.4 Apart from this, we observe that the impugned order relies on the decision of the Collectors Tariff Conference which in turn relies on the note of the Chief Chemist. Learned Advocate for the respondents has rightly pointed out that the Explanatory Notes to the BTN, instead of including the roofing boards coated with asphalt on both sides specifically excludes the same from the purview of paper and paper board impregnated, coated etc. Further, it appears that the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. 473 Para 8 has clearly stated the test commonly applied to such cases is how the product identified by a class or section of people dealing with or using the product? That is a test which is attracted whenever Statute does not contain any definition. It is generally by its functional character that the product is identified.......................... It is a matter of common experience that the identity of an article is associated with its primary function. It is only logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is mainly an association in the mind of a consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind". 14. Keeping the above observation in mind, A.C.R. sheets can by no stretch of imagination be considered as paper boards in the instant case. The function of the product is admittedly cheap roofing material for the protection of homes of the poor people. It is also on record that the predominant content in the product is that of asphalt and not of paper pulp as is apparent from the analysis of samples ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the goods under consideration. From 26-5-1974 to 8-2-1976 the proceedings are continuing against the respondent company and therefore, the question of limitation does not arise. 19. Learned Advocate for the respondent company, on the other hand, urges that letter dated 25-5-1974 speaks of taking an L-4 licence for the manufacture of intermediate product. Therefore, it is apparent from the above as well as the show cause notice issued by the Supdt. on 25-5-1974 that the production of final product i.e. ACR sheets is fully known to the department in which the impugned intermediate product for which duty was demanded was used. In a subsequent notice issued by the Asstt. Collector on 29-7-1974 Rule 9(2) has been given up. This notice also speaks of the intermediate product i.e. base mats being manufactured and classifiable as paper board used in ACR sheets. Further, the department on introduction of Tariff Item 68 in the Central Excise Tariff for goods not elsewhere specified (NES) on its own approved the classification list for ACR sheets as falling under T.I. 68. This action of the department underscores the point that the ACR sheets before 1-3-1975 were non-excisable and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , error, collusion or mis-construction on the part of the officer. Similarly, the question of mis-statement as to the quantity, description or value of excisable goods on the part of the owner did not arise because they had not made any statement at all to the department. The assessee had not taken even a licence for the manufacture of ACR sheets leave apart their assessment. Thus, it was a case of total escape of duty by the action of the assessee/respondent company. Therefore, a question arises, can the subsequent action of the department by not raising an issue regarding the final product i.e. ACR sheets on 25-5-74 when they came to know of the production of ACR sheets by the respondent, will wash off the limitation in respect of assessment on goods removed prior to 25-5-74? We do not think so. Action of the department in issuing the first show cause notice on 25-5-74 and subsequent actions referred to by the learned Advocate for the respondent cannot be considered to have any effect on goods removed prior to this date. Assessment of the goods is required to be made at the time of removal thereof from the factory and duty is to be paid immediately before removal. Limitation is, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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