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2009 (8) TMI 996

..... Appellant ), against Order-in-Original No. 33/Demand/ACK-l/08 dated 31-3-2009 passed by the Assistant Commissioner, Central Excise Division-I, Kanpur, whereby the demand of Rs. 2,01,849/- has been confirmed along with interest under Section 11AB and penalty has been imposed under Section 11AC of the Central Excise Act, 1944 read with rule 25 of the Central Excise Rules, 2002. 2. The brief facts of the case are that the appellants are registered manufacturers of Flexible Laminated printed Film (in rolls and pouches) and waste and trimmings thereof falling under Ch. No. 39 and were availing SSI exemption as provided under Notification No. 8/2003-C.E., dated 1-3-2003 as amended. The department during the scrutiny of records of the appellant s factory noticed that they are engaged in manufacture of Flexible Laminated printed 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 rec .....

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..... ossed. It is stated that the Learned Adjudicating Authority was aware of the above amendments through the base Notification No. 175/86, ibid, and the Hon ble Supreme Court had even cited the example that such as an elastic band of an undergarment which bears brand name of the manufacturer for whom the small scale industry is manufacturing that elastic band is added/attached/sewed into the other fabrics so as to result in the final product i.e. the underwear in such case the benefit of SSI exemption will not be available to the small scale industry manufacturing the branded elastic bands, which are captively used in final manufacture of underwear itself; Emphasis supplied to amendments to Notification No. 175/86-C.E., ibid, which are detailed as under : - (a) Notification No. 223/87-C.E., dated 22-9-1987 (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 .....

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..... e packaging industry carving out the benefit of SSI exemption, without being hit by the concept of brand name or trade name of other manufacturer and was effective upto 31st of August, 2008 and vide yet another TRU under the Ministry of Finance, Department of Revenue in F. No. 354/124/2008-TRU dated 1-9-2008, the said clarifications were withdrawn although with a wrong observation of CBEC that the said TRU and CBEC Circular have been withdrawn pursuant to S.C. decision in the case of Kohinoor Elastic Pvt. Ltd. v. CCE, Indore, reported in 2005 (105) E.L.T. 3 (S.C.); That the Appellants crave indulgence of this Hon ble Chair and beg to submit that in the interim Order in the case of Sharda Packaging Pvt. Ltd., and Others, the Hon ble High Court of Judicature at Allahabad had observed as follows :- In 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 .....

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..... g on all Courts/Tribunal and bodies. It is clear that Circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of the Dhiren Chemical case because of the Circulars of the Board in many cases the department had granted benefits of exemption Notification. It was submitted that on the interpretation now given by this court in Dhiren Chemical case the Revenue is likely to reopen cases. Thus para 9 (para 11 in SCC) was incorporated to ensure that in cases where benefits of exemption Notification had already been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopen. However, this did not mean that even in cases where the Revenue/Department had already contended that the benefit of 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 oth .....

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..... hmedabad), para 9 it has been held as follows: - Apart from holding in favour of the appellant on merits, we also note that demand is squarely barred by limitation, show cause notice having been raised beyond the normal period. Admittedly, during the relevant period Board s Circular No. 389/22/98-CX., dated 5-5-1998 [reported in 1998 (26) RLT M80] was holding the field. After considering the disputed question the opinion expressed by the Board was as under : - The matter has been examined by the Board and it is clarified that : (a) In respect of situation (i) above the benefit of Notification No. 8/97-CX., dated 1-3-1997 cannot be extended to those units which manufacture goods out of both imported and indigenous raw material. The benefit is available 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 .....

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..... 7 vide TRU and CBEC Circular dated 29-10-1987 and 27-11-87 and w.e.f. 1st of Sept. 2008 Notification No. 47/2008, referred above, notified the packaging material for benefit of SSI Exemption; That the appellants submit that action of demanding back duty is but without authority of law for the reason that Hon ble Apex Court in the case of UP Pollution Control Board v. Kanoria Industrial Ltd., reported in 2001 (128) E.L.T. 3 (S.C.), held that : - No duty or tax can be levied but without authority of law . The appellant submit that the TRU & Board Circular referred above being binding upon the Revenue and being withdrawn vide yet another TRU Circular being No. 354/124/2008/TRU, dated 1-9-2008, the benefit of SSI exemption already given 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 provisio .....

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..... compulsory exaction of money by a Public Authority for public purposes the payment of which is enforced by law. However, Penalty is a different concept. Penalty is ordinarily levied on an Assessee for some contumacious conduct or for a deliberate violation of the provision of the particular statute. Penalty will not ordinarily be imposed unless party obliged either acted deliberately in defiance of law or was guilty of conducted contumacious or dishonest or acted unconscious disregards of its obligation. The penalty will also not be imposed for failure to perform a statutory obligation. Penalty will also be not imposed because it is lawful to do so, whether penalty should be imposed for failure to perform a statutory obligation 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 a .....

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..... None appeared on behalf of the department. 5. I have carefully gone through the facts of the case, the Order-in-Original, the grounds of appeal and the submissions made at the time of personal hearing. 6. After considering the facts of the case, I find that the issue to be decided in the case is, as to whether the department was right in demanding the duty from the appellants for the period in question on the basis of the interpretation given by the Apex Court in the case of M/s. Kohinoor Elastics that too against the law of the land laid down by the Hon ble Supreme Court in the case of Dhiren Chemicals that benefit already granted was not to be re-opened. The need to examine the issue has arisen due to the reason 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 t .....

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..... me the clarifications issued by the CBEC long back in the year 1987 i.e. Board s letter F. No. 345/35/87-TRU dated the 29th October, 1987 and F. No. 213/28/87-CX. 6, dated 27-11-1987. In the instructions contained in the letter F. No. 345/35/87-TRU, dated 29-10-1987 with reference to the above provisions, it has been clarified that names/logos of the brand name owner printed on metal labels, crown corks, P.P. caps and collapsible tubes are not brand name by themselves and as long as these metal labels are not affixed on the goods in the trade of which the name/logo printed on such metal labels etc. serves as branded name (within the definition of Explanation VII) they are not hit by the mischief of para 7 of 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 sha .....

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..... he small scale manufacturers on the goods, which bear the brand name of others were not withdrawn even after the order in the case of M/s. Kohinoor Elastics was passed because till that time the law as to whether the circulars will prevail over the Judgments of Apex Court was not clear and this question was referred to the Constitutional Bench by a judgment in the case of Commissioner of C. Ex., Bolpur v. Ratan Melting & Wire Industries, 2005 (181) E.L.T. 364 (S.C.) and also in the case of Kohinoor Elastics (supra). I notice that in para 9 of the judgment in the case of Kohinoor Elastics (supra), a reference has been made regarding the expected outcome of the judgement in the case of Ratan Melting & 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 .....

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..... evenue but, after the Hon ble Supreme Court or the Hon ble High Court declares the law on question arising for consideration, then the view expressed in the decision would prevail. In that case the circulars will not be binding upon the courts. It was however held in the said order that the cases in which the benefit of any provision as explained in the circulars has already been extended to the assessees, then the cases shall not be re-opened and the revenue would remain bound. It was further held that the para 9 in the judgment of Dhiren Chemical (supra) was not inserted to mean that Courts/Tribunals have to ignore a judgment of the Apex Court and follow circulars of the Board. 15. I notice that inspite 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 .....

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..... Circulars was available to the appellants at the material time because, the issue relating to interpretation of the para 9 of the case of Dhiren Chemical (supra) was finally settled on 14-10-2008 and the circulars were also withdrawn on 1-9-2008. As held by the Apex Court in the case of Dhiren Chemicals (supra), the benefit already extended cannot be re-opened and the benefit of the circulars has to be given to the appellants. Otherwise also, the Hon ble Allahabad High Court in the case of Sharda Packaging Pvt. Ltd., while passing an interim order after analyzing the findings given in the case of Kohinoor Elastics (supra) has held that the findings given in the said case would not apply to SSI units 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 constitut .....

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