TMI Blog1989 (8) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... excess of what was recorded in RG-1. The said quantities were seized by the visiting Officers. Also, certain accounts and documents were seized under a Mahazar on the same day. Statements were recorded from Shri G.H. Doshi, Managing Director on 8-12-1986 and also from some workers of the factory. Statements were also recorded from some of the customers. Based on the statements recorded from Shri G.H. Doshi, workers and the customers and also on the basis of the documents seized, the Central Excise Department issued a show cause notice to the appellants dated 12-5-1987 in which it was proposed to demand a duty of Rs. 21,43,996.90 paise under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excises and Salt Act (Act for short) for the period May 1984 to December 1986. 536.5 Kg of polyurethene foam seized from the appellants premises was also proposed to be confiscated and imposition of penalty on the appellants and confiscation of land, building, plant, machinery, etc. were also threatened. 3. Annexure-1 to the show cause notice gives the break-up of the demand of Rs. 21,43,996.90. Firstly the show cause notice has alleged that the appellants had consumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. No. 4 9 of the Annexure to the Mahazar). The appellants contended before us that this register was not supplied to the appellants and had they been given a copy of the same, the error which crept in the order regarding the consumption of TDI could have been avoided. They had now inspected the said register and during the hearing they explained the alleged discrepancy. According to the appellants during the period in question they consumed only 38750 kgs of TDI and not 42500 kgs as alleged in the show cause notice as also in the order-in-original. They showed us the entries made in the raw material register at page 355 of the paper book wherein out of 10500 kgs of TDI taken for consumption on 25-2-1986, the appellants had hypothecated a quantity, 1250 kgs and 2500 kgs of TDI were released from the bank on 21-3-1986 and 24-9-1986. These were explained by the Advocate of the appellants during the personal hearing before us and he took us through the photocopy of the register which was relied on by the Collector. 7. Apart from pleading before us on the basis of the seized documents, the appellants also moved an application for admission of additional evidence by way of a certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise duty or without the cover of any Excise Gate Pass. The charge of clandestine removal fails. We are fortified in this conclusion by the fact that as submitted by Shri Lakshmikumaran for the appellants, there is not even an allegation, either in the show cause notice or subsequently, that there was a higher consumption of another essential raw material namely polyether. It was argued before us and we are convinced, that to produce the higher quantity of polyurethene foam the appellants not only required higher consumption of TDI but also correspondingly higher consumption of polyether. Both the raw materials were being imported by the appellants and they were maintaining the proforma credit registers and Modvat credit registers for polyether and there is no allegation of excess consumption of polyether. 11. Having held that there was no clandestine removal we now proceed to deal with the other allegations contained in the show cause notice and the contentions of the appellants, and of the Revenue. 12. As mentioned by us earlier, the show cause notice assumed that 90% of the production of polyurethene foam by the appellants was of deluxe and commercial grades and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tunnel, foam material is ready except for needing some time for cooling and curing. According to the contentions of the appellants before the Collector, which were not disputed by the Collector in his order, the polyurethene foam blocks manufactured by the appellants are generally of the dimensions 40" width and 76" length. This is for the reason that the mattresses which are to be sold ultimately are of the size 36" x 72" the height of the foam varies from 26" to 30" and assuming a minimum height of 26" the volume of an untrimmed block would be 79040 cubic inches namely 40" x 76" x 26". While trimming of the side, top and bottom sections the dimensions of the block are reduced to 36" x 72" x 21" and the volume would be 54432 cubic inches. Thus the rejected portion of the foam works out to 24608 cubic inches which is about 31% of the initial polyurethene foam blocks. It is possible to recover some sheets of 3rd grade quality from the top section (dome portion). It appears, from the arguments, that these percentages would be correct in perfectly ideal conditions where the foaming was perfect. It was explained to us during the hearing that polyurethene foam reaction is an exo-therm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect. The Collector himself accepted that there were substantial defects in the manufacture of polyurethene foam during a particular period in the early days of the Unit and has in fact given the benefit of doubt to the extent of 2750 kgs. We, therefore, hold that much more than 31% of the foam produced by the appellants could have become waste, scrap or 3rd grade. According to the findings of the Collector in the impugned order nearly 65% of the production must be good quality which would leave only 35% as comprising 3rd grade shreddings, top skin, bottom skin, etc. The assumption made by the Collector in this regard, that 50% of the 3rd grade quality shown by the appellants should be commercial grade does not appear to be correct or based on any acceptable evidence. We cannot, therefore, accept it. Further 3rd grade quality of polyurethene foam is always sold in weight by the appellants and this fact was not disputed by the Collector. We, therefore, hold that the percentage of polyurethene foam production as 3rd grade quality namely 36.5% claimed by the appellants has to be accepted. 16. Having decided that the gradation made by the appellants regarding 3rd grade quality was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross examination of the said Shri P.C. Joseph before the Collector revealed that he has not even seen the samples lying in the premises of the appellants, which were ultimately seized. We find that if anybody has given a statement that there is no difference between the foam of any density, such statement cannot be accepted as being fully true. It is well known that in the market the price of polyurethene foam mattresses of the same dimensions namely 72" x 36" vary considerably depending upon density. It cannot be denied that greater cushioning effect would need polyurethene foams of higher densities. Polyurethene foam used as a lining material in ladies hand-bags and cheap qualities of such foam cannot be compared with higher density polyurethene foam used in the Upholstry and furniture of costly varieties. 18. Having disposed of the finding of the Collector regarding the correctness of the gradation of commercial and deluxe commercial grades of polyurethene foam by the appellants we now turn to the allegation of under valuation. It is true that the appellants had received advances from 3 dealers namely Joshi Trade Links, Everest Industries and Indu Industries. It was stated be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the scrap. In this regard the Learned Collector gave a specific finding at para 37.6 of the impugned order that the price realised per kg. of the shredding was Rs. 14/- per kg. and thus the value has to be taken as Rs. 9.50 per kg. instead of Rs. 6/- originally declared by the appellants. Here the contentions of the appellants are not convincing and accepting the submissions maids by the learned DR, we hold that the value of the shreddings be increased from Rs. 6/- per kg. to Rs. 9.50 per kg. 22. Similarly the value of the side skin, bottom skin and top skin has also to be increased to Rs. 16.50 per kg. as here again we are not convinced with the arguments of the appellants. We, therefore, hold that the orders of the Collector in increasing the value of the side skin, bottom skin and top skin to Rs. 16.50 per kg. and increase in the value of shreddings to Rs. 9.50 per kg. are correct. 23. The appellants raised the issue of the classification of the side skin, bottom skin, top skin and shreddings before the Collector. They also raised the issue of classification of polyurethene foam under Tariff Item 15(A) before 28-2-1986. In view of the findings given by us on the clearanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We accordingly over-rule the objection raised by the learned Departmental Representative that the appellant should not be permitted to raise the dispute regarding the determination of rate of duty. 25. Side skin, bottom skin and top skin were earlier dealt with by the Tribunal in the case of Duro Foam Industries v. Collector of Central Excise [1988 (33) E.L.T. 723]. In that case the Collector of Central Excise, Baroda came on appeal to this Tribunal on the ground that the waste parings and scrap of polyurethene foam should be classified under Heading 39.15, After hearing the arguments of both sides this Tribunal held that side skin, bottom skin and top skin and shreddings would be correctly classifiable under Heading 39.15 as Waste and Scrap . In fact the Collector in the impugned order has classified the shreddings under 39.15 but for some reason did not classify the side skin, bottom skin and top skin under Heading 39.15. Collectors have to follow the Tribunal s orders, according to which the side skin, bottom skin and top skin as also the shreddings are correctly classifiable under Heading 39.15. The Collector is directed to consider the question of classification keeping thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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