TMI Blog2009 (8) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... nted Film (in rolls and pouches) for various buyers as per the brand names belonging to them. The department on the basis of condition of para 4 to the said notification, which provided that the exemption shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person denied the benefit and raised a demand for recovery of duty along with interest for the period from April, 2007 to January, 2008 and to initiate penal proceedings. The appellants in reply to show-cause-notice submitted that their goods were exempted from duty as SSI exemption was available to them, but the department on the basis of the findings given by the Hon ble Supreme Court in the case of M/s. Kohinoor Elastic (P) Ltd. v. CCE - 2005 (8) LCX15, held that the SSI exemption on the appellants goods was not available as the same were branded goods and attracted the mischief of para 4 of the said notification. 3. Feeling aggrieved with the said order, the appellants have filed this appeal on the following grounds :- That on the facts and circumstances of the case the order passed by the Learned Assistant Commissioner, Central Excise, Division-1, Kanpur, is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Notification No. 224/87-C.E., dated 22-9-1987 (c) Notification No. 225/87-C.E., dated 22-9-1987 As stated, the above referred 3 Notifications, carved out the exception with regard to embossing of a brand name as referred supra by the Appellants. That the Appellants submit that the said exception, disentitling the SSI Units manufacturing excisable goods or integral part of excisable goods, bearing brand name of other manufacturers, was done, not with an intention to compel the manufacturer of the packaging material in the form of printed cartons of paper or paper board, metal containers, HDPE woven sacks, adhesive tapes, sticker, PP caps, Crown corks and metal labels etc., which is not an integral part of the final excisable goods. With the intention of the Government not to exclude such small scale industries from the benefit of promotional incentive of SSI exemption offered by Exemption Notification No. 175/86-C.E., the Central Board of Excise and Customs issued two Circulars detailed hereunder :- (i) Tax Research Unit Clarification Letter issued in F. No. 345/35/87-TRU dated 29-10-1987. (ii) Central Board of Excise Customs, Ministry of Finance, Department o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these circumstances, we are of the opinion that the decision in the case of Kohinoor Elastics Pvt. Ltd. v. Commissioner of Central Excise, Indore - 2005 (188) E.L.T. 3 (S.C.) which was in respect of elastic bands prepared with the brand name of the manufacturer of the undergarment and which is attached to the fabric of the underwear as such, would not apply to SSI manufacturing packaging material. By this interim order this Hon ble Court had held and observed that the judgment of Hon ble Apex Court in the case of Kohinoor Elastics Pvt. Ltd., was not applicable to SSI Units manufacturing packaging material, copy of Order is enclosed. That the Appellant further beg to submit that in the case of Kohinoor Elastic (P.) Ltd., supra the Hon ble Apex Court had placed the said decision for reference before the Constitutional Bench on the limited issue that in case of departmental clarification and any Circular issued by Board giving an interpretation contrary to judgment of Supreme Court diversions of opinion whether such Circular could prevail over judgments of Supreme Court. The Petitioners beg to submit that the CBEC Circular under reference before the Hon ble Apex Court in Kohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exemption Notification was not available, and the matter was sub-judice before a court or a Tribunal, the Court are Tribunal would also given effect to Circular of the Board in preference to a decision of the Constitution Bench of this Court. Where as a result of dispute the matter is sub-judice, a Court/Tribunal is, after Dhiren Chemical Case, bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that Courts/Tribunals have to ignore a judgment of this court and follow Circulars of the Board. That was not what was meant by para 9 of Dhiren Chemical case. Emphasis supplied. That the Appellants further say that the Hon ble Apex vide the above decision had followed the earlier decision of Apex Court in the case of Kalyani Packaging Industry v. U.O.I, reported in 2004 (168) E.L.T. 145 (S.C.) (Emphasis supplied) and the Petitioners beg to submit that in the case of Kalyani Packaging Industry the Hon ble Apex Court had followed and clarified the position of law laid by yet another decision of Hon ble Apex Court in the case of Collector v. Dhiren Chemical Industry reported in 2002 (139) E.L.T. 3 (S.C.). (Emphasis S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable to those units which manufacture goods only from indigenous raw materials. (b) In respect of situation (ii) a unit is eligible for the benefit of Notification No. 8/97-CX, ibid, even if, imported consumables are used since the Notification does not debar the use of imported consumables, provided other conditions of the said Notification are satisfied. That the appellants say that as is seen from the above, the Board entertained a view that even imported consumables are used, the benefit of the Notification would still be available to the appellant. The said Board s circular was subsequently withdrawn vide Circular No. 614/5/2002-CX dated 31-1-2002 [reported in 2002 (48) RLT M 115]. As per the said circular, the issue of use of imported consumables was re-examined and it was decided to withdraw the earlier circular. The reasoning of the authorities below that in view of such subsequent Circular issued on 31-1-2002, withdrawing the earlier circular of 1998, the benefit cannot be extended to the appellants. We find no justification in the above reasoning in as much as it stands decided by umpteen numbers of decisions of the Hon ble Supreme Court that the circulars issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en vide Boards Circular cannot be taken away retrospectively and withdrawal of CBEC Circular shall only have a prospective effect and cannot snatch away or nullify any provisions of statute making it nugatory with retrospective effect; The Hon ble Supreme Court in the case of UCO Bank Ltd. v. Commissioner Income Tax (W.B.), 1999 (111) E.L.T. 673 (S.C.), has held as follows :- Departmental Circulars not meant for contradicting or nullifying any provisions of the statute but are meant for ensuring proper and efficient administration of the statute, for mitigating the rigors of too literal and an application of a particular provision of the statute in certain situations by applying a beneficial interpretation to the provision and for ensuring uniformity of assessment-such circulars binding on the department-section 119 of Income Tax Act, 1961 - Corresponding Section 37 of the Central Excise Act, 1944 and Section 151A of Customs Act, 1962. That it may not be out of place to mention here that in the appellant s case much prior to issue of Show Cause Notice, the Noticee had filed a Writ Petition before Hon ble High Court of Judicature at Allahabad vide Writ Petition No. 784/2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a matter of discretion of an authority to be exercised judicially and on a consideration of all relevant circumstances. Even if a minimum penalty is prescribed the authority competent to impose penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. The appellants relied upon the decision of Pratibha Processors v. UOI reported in 1996 (88) E.L.T. 12 (S.C.), wherein it has been held in Para 13 that the penalty is ordinarily levied for some contumacious conduct or for deliberate violation of provisions of a particular Statute. The Appellants further rely upon the following decisions : - (i) That the Hon ble S.C. in EID Perry v. ACCT reported in 2000 AIR 551 it has been held that if party did not pay tax due to bona fide belief that he acted in defiance of law and his conduct is dishonest and that he acted in conscious disregard of his obligation, only then imposition of penalty is justified; (ii) Nestle India v. CCE - 2004 (163) E.L.T. 249 (Tri.) wherein it has been held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue as to whether the circulars will prevail over the Judgments of Apex Court as raised in the case of Kohinoor Elastics (supra) and M/s. Ratan Melting Wire Industries, three member bench 2005 (181) E.L.T. 364 (S.C.), was settled by the order of the constitutional bench of the Apex Court in the case of Ratan Melting Wire (supra) on 14-10-2008 and the circulars extending the benefit of SSI exemption were operative upto 31-8-2008. The second reason to examine the issue is the interim order of Hon ble High Court, Allahabad wherein it has been held that the case of Kohinoor Elastics Pvt. Ltd. v. Commissioner of Central Excise, Indore - 2005 (188) E.L.T. 3 (S.C.) which was in respect of elastic bands prepared with the brand name of the manufacturer of the undergarment and which is attached to the fabric of the underwear as such, would not apply to SSI manufacturing packaging material. 7. I have gone through the facts of the case and the submissions of the appellant made in the grounds of appeal and those reiterated before me at the time of personal hearing. As is evident, the only basis of raising the demand and passing the Order-in-Original in this case is the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notification. This position was further reiterated in the Board instructions issued under F. No. 213/28/87-CX. 6, dated 27-11-1987 specifically, with reference to the dutiability of packing materials like metal containers, HDP woven sacks etc., manufactured by the SSI Unit. This means that in both the said letters the availability of SSI exemption to the packaging material bearing brand names of others has been discussed and it has been clarified that the SSI exemption shall be available in such cases. The appellants have also informed that the said circular was in operation upto 31-8-2008 as the same were rescinded vide Circular F.No. 354/124/2008-TRU, dated 1-9-2008. The appellants have also placed before me the copy of Circular No.(s) 71/71/1994-CX., dated October 27, 1994 dated in which the issue of availability of SSI exemption was again clarified by illustrations and it was held in para 5 to 9 that the goods that are manufactured as per the specific requirement of the customers and the brand name, which the small scale unit puts on such goods is meant for use of the customer only for further manufacture, then the use of the brand name in such cases will not attract the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wire (supra). Hon ble bench has observed that the fate of the Civil Appeal No. 3197 of 2000 and Civil Appeal No. 1469 of 2002 under consideration in the case of Kohinoor Elastic (supra) will depend upon the judgement delivered by the constitutional bench in case of Ratan Melting wire (supra). 13. The appellants in the grounds of appeal have informed that the decision by the constitutional bench of the Apex Court in the case of Ratan ( supra) was delivered vide order dated 14-10-2008 as reported in 2008 (231) E.L.T. 22 (S.C). After going through the said order, I notice that the Civil Appeal No. 3197 of 2000 and Civil Appeal No. 1469 of 2002 in the case of Kohinoor Elastic (supra) were also tagged with the Civil Appeal in the case of Ratan (supra), which meant that the decision in Ratan s case was also going to have binding effect in respect of both the said Civil Appeals. The appellants have argued before me that the constitutional bench of the Apex Court in the case of Ratan (supra) has ruled to the effect that where the Boards (CBEC) Circulars gave interpretation different from the interpretation of the legal provisions given later on by the Supreme Court, the Revenue cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of clear cut findings of the Apex Court in the case of Kalyani Packaging (supra), the position did not change and still the para 9 in the case of Dhiren Chemical (supra) was being interpreted as if, the clarifications in the circulars issued by the statutory bodies would prevail over the law of the land as laid down by the Hon ble Apex Court. Due to this very reason, the findings of the Apex Court in the case of Dhiren Chemical (supra), para 9 were again relied upon in the case of Ratan (supra) before three member bench and it was claimed that the said para operates in the favour of the assessee. The Hon ble bench of the Apex Court after considering the interpretations given in the case of Commissioner v. Indian Oil Corporation Ltd., 2004 (165) E.L.T. 257 (S.C.) [Para 3] and Commissioner v. Maruti Foam Pvt. Ltd., 2004 (164) E.L.T. 394 (S.C.) [para 3] observed that : 3. A disparate view has been taken in CCE v. Maruti Foam Pvt. Ltd. [2004 (6) SCC 722 para 7] and Commissioner of Customs, Calcutta and Ors. v. Indian Oil Corpn. Ltd. and Another [2004 (3) SCC 488 para 34]. It appears to us that the law declared by this Court is binding on the Revenue/Department and once the position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s manufacturing packaging material. 18. Therefore, in light of the discussions hereinabove and following the law laid down by Hon ble Supreme Court in the case of Dhiren Chemical and affirmed in the case of Ratan Melting, constitutional bench (supra) and also following the findings of Hon ble High Court, Allahabad in the case of Sharda Packaging (supra), I find that the SSI exemption was available to the packaging materials bearing other s brand for the period prior to order of constitutional bench of the Apex Court in the case of Ratan Melting (supra) as the issue of applicability of circulars was settled only after that order and thus, the department was bound, not to re-open the case, where benefit was already granted. Therefore, for the same reason, the appellants were eligible for SSI exemption during the period under dispute i.e. from April, 2007 to January, 2008. I therefore, hold that the demand raised against the appellants is not maintainable and liable to be set-aside. 19. As regards penalty, I observe that this was not an issue of clandestine removal rather, it was a case of interpretation of notification. It is a fact on record that on the basis of circulars issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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