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TMI Blog1990 (3) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ather, they purchase raw hides from the open market which are chrome-tanned in their own fully equipped tannery. The appellants have been registered as a small scale industries unit with the Directorate of Industries, Government of Uttar Pradesh for the manufacture of the following products :- "Tannery products, namely, Upper Leather, Lining Leather, Industrial Leather and Leather Belting Chrome Nylon combination". The goods, manufactured by the appellants admittedly fall under T.I. 68. The appellants genuinely believed that they were entitled to the grant of full exemption from duty under Notification 115/75-CE dated 30-4-1975 whereunder goods falling under T.I. 68 and manufactured in factories covered by any of the scheduled industries have been exempted from whole of the duty leviable thereon, one of the scheduled industries being "Tanning Industry". 3. On 24-3-1979 the Central Excise Inspector visited the appellant's factory and drew samples of the goods manufactured by them. The appellants furnished full details in respect of their factory to the Superintendent of Central Excise on 27-3-1979, declaring that the value of their clearances during the year 1978-79 had exceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers of nylon laminated belts; Thirdly : their sale of leather goods which can at best be termed as the products of tanning industry is negligible, which proves that their main industry is to manufacture nylon laminated belts and that tanning is an ancillary process." He has held that the appellants are not entitled to claim deduction on the amount trade discount/commission as it is of the nature of deferred payment and has not been allowed at the time of removal of goods from the factory. He has further held that the demand for duty is not barred by limitation on the ground of non-compliance of the requirement of undertaking under Notification 111/78 under which they gave a declaration on 27-3-1979. 7. Aggrieved by the order of the Collector, the appellants have filed the above appeal. 8. We have heard Shri A.K. Jain, learned counsel for the appellants and Shri Asthana, learned SDR for the respondent. 9. The issues to be decided are :- (a) whether nylon sandwiched leather belting or belts are products of tanning industry eligible for the benefit of Notification 115/75 dated 30-4-1975. (b) whether the demand for duty is partly time-barred. (c) whether the trade discount/com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion limit of Rs. 15 lakhs. The declaration given on 27-3-1979 is not a declaration under Notification 111/78 dated 1-3-1978 as held by the Collector. The Collector has misconstrued the declaration of 27-3-1979 as one given under Notification 111/78 and on that erroneous assumption has held that "in the said declaration the estimated value of sale during 1979-80 was mentioned as Rs. 16 lakhs. In view of their declaration, it was incumbent on them to have applied for a licence the moment they had crossed Rs. 12 lakhs i.e. 80% of their estimated value." On this wrong reasoning, the Collector has justified invoking Rule 9(2) which provides for an extended period of limitation of 5 years in cases of suppression etc. Therefore it cannot be said that the appellants have suppressed any facts and removed goods clandestinely, justifying the invoking of Rule 9(2) CE Rule. 11. Notification 31/76-C.E. dated 2-2-1976 unconditionally exempted T.I. 68 goods (among others) from the operation of Rule 174 of C.E. Rules and therefore the appellants were not required to take out a licence. Under the subsequent Notification 111/78, the condition of dispensation from licensing being subject to the aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perlone in between oriented plastic. "For the purpose of manufacturing their products they received raw hides which were subjected to the process of chrome tanning at their works. The tanned leather so prepared is utilised by them in the preparation of leather beltings and belts in question and their factory was covered under tanning industry as tanning was an ancillary process to the process of manufacture of their beltings." 15. The process of manufacture is as follows:- " Process to manufacture Nylon sandwich leather Belts The Raw hides are purchased from local markets and are tanned as under : (1) Soaking The hides are put in tanks for overnight in water and then washed with fresh water to remove salt, dust and dirt & to make hides softer. (2) Pasting The hides are then pasted with the paste of sodium sulphite & water on grain side kept for overnight. (3) Unpairing The pairs are removed with a blunt knife. (4) Liming The hides are again put in tanks with water and lime for 3 days to make loose the extra flashing so that it can be easily removed. (5) Fleshing The flesh is removed with the help of blunt knife. After fleshing they are again put in lime liquor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the leather belting obtained is sandwiched with nylon to give added strength for the resultant sandwiched leather belting. The item will therefore be covered under the exemption given for the purpose of excise under Item 68 of the first schedule of the Central Excise and Salt Act, 1944. Since they are products manufactured by the tanning industry covered under the above schedule." 2) "NIRANKAR SINGH M.Sc. (Tech) DIRECTOR OF INDUSTRIES, DIRECTORATE OF INDUSTRIES U.P. KANPUR. TO WHOM IT MAY CONCERN. Dated, Kanpur, Dec 10, 1980 I have visited M/S Nylon Laminated Belts (P) Ltd., Agra several times in my capacity as Area Development Officer/Jt. Director of Industries, Agra. 2. All the machines/equipments used in a tannery are installed in their unit, like - LIME YARD, WOODEN DRUMS, SHAVING MACHINE, BUFFING MACHINE, STAKE MACHINE, HYDRAULIC PRESS ETC. Hydraulic press in a tannery is used for glazing and embossing whereas at this unit it is used for bonding Nylon strip to leather. 3. Process adopted is - LIMING, DELIMING, FLESHING, CHROME TANNING FAT LIQUORE, SHAVING, NAILING, CONVERTING LEATHER IN FORM OF ROLL, BONDING TO STRIP - the same/similar as in any tannery. 4. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing your factory in the recent past. The facts are as follows :- i) You are having a tannery for producing the belt. ii) You are purchasing nylon cloth from some other source, currently from M/s. H.L. Textiles, Amritsar, Punjab. iii) The bulk of the facilities are being used for tanning the leather used for manufacturing the belt. iv) The Notification No. 115/75 provides exemption from the whole of the duty for the following: a) Coir Industry b) Cashew Industry c) Tanning Industry d) Oil Mill and Solvent Extraction Industry e) Rice Mill Industry The details are given under the exemption 974 (Item 68). It is therefore obvious that your product should be exempted under Notification No. 115/75 of Central Excise as the belt produced is basically a tannery product. Yours faithfully, Sd/-xxxx (G.N. Pandey) 18. The Collector has totally ignored the above opinions of experts in the particular field and he has not even referred to them in his order. Instead he has rejected the contention of the appellants regarding exemption on the grounds that :- a) the party has himself admitted in his reply to the show cause notice that tanning is ancillary to the main process of manufact ..... 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