9911796707
TMI Blog1995 (11) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... ces was issued on 13-6-1990 wherein the show cause notices were made answerable to Collector of Central Excise, Meerut. In these show cause notices, there was no allegation of suppression or for imposition of penalty. However, these show cause notices were superseded by the notice dated 29-9-1993. On reconciliation of the figures supplied by the appellants, the Department found that during the period 28-10-1988 to 13-6-1989, the appellants had manufactured and cleared without payment of duty, the films on which the duty involved was Rs. 52,34,043.04. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why the duty amounting to Rs. 52,34,043.04 should not be demanded from them for the aforesaid period inasmuch as the appellants indulged in the production of excisable goods without a licence and clearance of the goods without payment of duty and without maintaining the prescribed records. They were also asked to explain as to why the penalty should not be imposed on the firm as well as on Shri R.K. Sharma, Commercial Manager. In the show cause notice, it was also alleged that they had suppressed the facts from the Department. In reply to the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23/88-CX. 3, dated 5-9-1988, the ld. Collector observed that the Board held cutting, slitting and perforation employed to jumbo rolls as not manufacture but in a subsequent clarification in their Circular No. 15/89, dated 24-2-1989, the CBEC had observed that cutting, slitting and perforation of jumbo rolls into finished cinematographic film ready for use would amount to manufacture. The ld. Collector held that this thinking of the Board appears further to have crystallised into modification of Chapter Note 2 to Chapter 37 of Schedule to the Central Excise Tariff Act, 1985 clarifying the entire issue. On the question of Trade Notices, the ld. Collector held that Trade Notices are in the nature of administrative instructions and guidelines and, therefore, they cannot act as estoppel against correct interpretation of tariff. Having regard to the above findings, the Collector held: "11. From the foregoing discussions I find that the party despite the clear instructions from the Department to follow Central Excise formalities and clear the goods on payment of duty, had managed to evade duty. (Discussed in detail in Para 8, supra). The removal of the goods without payment of duty woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat their product was non-excisable in terms of Board's Circular F. No. 119/1/88-CX. 3, dated 5-9-1988 and, therefore, there was no necessity of the licence; that surrender of their licence was accepted on 28-10-1988; that the appellants received a letter from Superintendent asking the appellants to get a licence in terms of Trade Notice No.18/89, dated 16-3-1989; that in the meantime, the Superintendent wanted some information which was supplied to him without delay. The learned Counsel submitted that on 19-5-1989, the Superintendent of Central Excise issued a show cause notice to the appellants asking them to explain as to why the duty amounting to Rs. 5,38,400/- (basic) and Rs. 26,920/- (special) excise duty should not be demanded on cinematographic films unexposed during the period 19th November, 1988 to 18th May, 1989; that without passing any order on the show cause notice, the Superintendent, Central Excise asked them to deposit larger amount of Rs. 7,19,214.40 (basic) and Rs. 35,960.72 (special) excise duty; that another show cause notice was issued on 14-6-1989 which concerned X-ray films, graphic art films and scrap for the period 14-12-1988 to 13-6-1989; that Corrigendum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of a clarificatory nature. The ld. Counsel submitted that this is a substantive amendment which has altered the legal situation; that there was nothing either in the Section Note or Chapter Note before 1-3-1994 which provided that cutting, slitting or perforation was a process of manufacture. Therefore, the learned Counsel submitted that this Chapter Note cannot be termed as a clarificatory note. 5. The learned Counsel submitted that there was no justification for imposing any penalty on the appellants or on Shri R.K. Sharma, Commercial Manager; that penalty under Rule 173Q can be imposed for the reasons mentioned in the Rule and not for any extraneous considerations; that there was no justification for imposing penalty on Shri R.K. Sharma who was not concerned with any of the operations mentioned under Rule 209A of the Central Excise Rules; that the liability of duty on the company has been fixed without taking into account the quantum of Modvat credit which was admissible in respect of inputs used in this case. 6. Shri A.K. Madan, learned SDR reiterated the findings of the Collector stating clearly that the Board had issued instructions that cutting, slitting and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erforation cannot be treated as a process of manufacture since the cinematographic films in question will remain cinematographic films only both before and after perforation." 9. What has been relied upon by the Department is a letter dated 19-4-1989 of the Superintendent, Central Excise to the appellants in which he has referred to the Trade Notice No. 18/89 dated 16-3-1989 in which the position earlier clarified by the Board on the term `manufacture' in respect of cutting, slitting and perforation of jumbo rolls was reversed. Under this Trade Notice issued by the Collector, Central Excise, Meerut, it was clarified that it is viewed that cutting, slitting and perforation of jumbo rolls into finished cinematographic films ready for use would amount to 'manufacture' and the position under existing tariff entry read with exemption Notification No. 40/88 C.E., dated 1-3-1988 will be as under : (i) Jumbo rolls for cine films would fall under sub-heading 3702.90 and would pay the concessional duty of Rs. 24/- per sq. metre under the Notification; and (ii) after cutting, slitting and perforation, the finished cinematographic films would fall under sub-heading 3709.20. It would th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar of the Board which stated that cutting, slitting and perforation of jumbo rolls does not amount to manufacture, whereas subsequently, a Trade Notice was issued by the Collector, Central Excise, Meerut which inter alia clarified that cutting, slitting and perforation of jumbo rolls shall amount to manufacture. In this changed position, it was reasonable that there was some delay in supply of information wanted by the Department. We also observe that the appellants had applied for a licence which was granted in the year 1987 and the surrender of this Central Excise licence was accepted by the Department on 25-10-1988. Thus we find that there was no suppression or wilful misstatement on the part of the appellants. We find that all the facts namely the fact of cutting, slitting and perforation was within the knowledge of the Department and hold that the demand is hit by limitation inasmuch as the period of demand was between 28-10-1988 to 13-6-1989 and the show cause notice was issued on 29-9-1993. We also observe that Trade Notice changing the clarification of the CBEC was issued on 16-3-1989 and till then the thinking of the Revenue and assessee was that cutting, slitting and perf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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