TMI Blog1984 (3) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... eral layers of treated paper/treated fabric are compressed under heat and pressure to form rigid plastic laminates. The treated paper/fabric were consumed captively for the manufacture of rigid plastic laminates without paying Central Excise duty leviable thereon under Item 17(2) (treated paper). Item 19B (treated cotton fabric) and Item 22B (treated glass fabric). Classification Lists under these items filed by Formica had been duly approved by the Department and Formica was paying duty on clearances of these goods to outside parties but not on those goods which were taken into captive consumption within the factory for production of rigid plastic laminates. The Excise authorities issued to Formica nine show cause notices demanding payment of duty on the captively consumed goods covering the period from 13-1-1976 to 31-12-1981. In due course, the Assistant Collector of Central Excise, Pune confirmed these demands by his order dated 20-3-1982. He held that Formica was liable to pay duty on treated paper/ cotton fabric and treated glass fabric (consumed captively by it in the manufacture of rigid plastic laminated sheets), under Items Nos. 17(2), 19 and 22B respectively. Formica pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt : fraud, collusion, wilful mis-statement, suspression of facts or contravention of the provisions of the Act or Rules [Rule 9(1) hire] with intent to evade payment of duty, None of these ingredients was present in the present case. Central Excise officers were located is Formica s factory right from the year 1978 onwards and they were fully aware of the happenings. It is significant that the show cause notices had not invoked Rule 173-Q which would have been the case if there was deliberate intent to evade duty. (ii) In 1975, consequent on the introduction of Item 68, CET and in response to the Department s direction, Formica had declared the stocks of Treated Paper and Treated Glass Sheets [shown as falling under Item 15A(2), CET] as on 28-2-1975. They had further submitted that the materials manufactured in their factory and consumed internally to make rigid plastic laminates would not corns under the purview of Item 68 CET. The Supdt. of Central Excise, by his letter of 9-4-1975, told Formica that resin-treated paper fell under Item 68, CET and that duty would be leviable on sales as well as internal consumption. There was considerable exchange of correspondence between Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 250/- under Rule 9(2) (pages 65-70 of the paper book). On appeal, the Appellate Collector upheld the Assistant Collector s findings regarding the classification of treated glass fabrics under Item No. 22(3) of the CET. However, he held that the alleged suppression of facts was not established since the Department had full knowledge of the products manufactured by the appellants. He further observed that the demand was raised against Formica after the duty from them had been assessed and recovered under Item No. 68, CET. On this basis he ordered revision of the demand in terms of Rule 10. The penalty imposed on Formica under Rule 9(2) was set aside (pages 72-79 of the paper book). Shri Venkataraman stated that this narration of events would go to show that the Department s story of suppression of facts on the part of Formica was totally misconceived since the very same charge had been levelled against them and they had been acquitted by the Appellate Collector. (e) The classification of treated glass fabrics had come up for consideration of the Central Government in the Revision Application filed by Formica against the Appellate Collector s order of 25-8-1978 [See sub-para ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns in form R.T. 12 in respect of these goods taken into captive consumption were submitted by Formica to the proper officer. From the dates the classification lists were approved in respect of treated paper under Item 17(2) (23-3-1977), treated cotton fabrics under Item 19(3) (20-7-1977) and treated glass fabrics under Item 22B (22-5-1980), there had been no protest or appeal against the said classifications. However, no R.T. 12 returns were submitted in respect of these goods taken into captive consumption. In respect of goods captively consumed not only classification lists but price lists were also necessary in order to enable the proper officer to determine the correct amount of duty chargeable. Formica had not submitted any price lists from 1977. Thus, the provisions of Rule 173-F were not complied with by Formica and the Department could not have made any assessment in the absence of information about the goods captively consumed. In the circumstances, it was clear that there was deliberate intention on the part of Formica to suppress material facts and, therefore, the extended period of 5 years for recovery of duty was available to the Department in the present cases. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l used for treatment purposes. Phenol Formaldehyde, melamine and Expoxy resins were all plastic materials. In Items 22B and 19(3), CET there is no reference to plastic materials as defined in Item 15A, CET. All these are resins and plastic materials. The stage of the resin is not material nor its limited short life. (c) The letter dated 31-7-1981 (pages 1 to 3 of the paper book) of Formica itself designates these substances as blend of resins. In this context, Formica s letter of 13-1-1982 (pages 7 to 9 of the paper book) was also referred to. In the circumstances, it was urged that there was no doubt that these were preparations of artificial plastic materials. (d) The classification list for treated cotton fabrics [19(3), CET] was approved on 20-7-1977, to take effect from 18-6-1977. That for treated glass fabric [22(B)] was approved on 22-5-1980 to take effect from 1-4-1980. The treated glass fabric was designated at various times by different names, such as coated glass fabrics, glass fabrics or prepreg. In respect of treated glass fabric, the directions contained in the Supdt. s letter of 20-9-1980 were not followed by Formica. The classification list for treated paper [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Item 68 in 1975 and under Item 17 in 1977. Similarly, treated glass fabrics were held to fall under Item 68 when the Item was inserted in the Tariff in 1975, shown as falling under Item 22(3) in the show cause notice dated 25-6-1977, under Item 22B on 2-1-1980 and against not under Item 22(3) in the Government s revision order of 24-2-1981. In this welter of confusion and doubt there could be no question of suppression of any facts or any mis-statement, Formica took Central Excise licence under compulsion and also made duty payments for clearances outside factory under compulsion. The Order-in-Appeal at pages 72 to 79 of the paper book clearly held that there was no suppression of facts and this order was not reviewed by the competent authority. If at all, therefore, the question of suppression could be raised only for the period after August, 1978. (c) All assessments upto December, 1980 had been finalised and if the Department had not collected duty on the goods captively consumed the fault lay with the Department. 8. On the subject of classification, the following points were made :- (a) Synthetic resins were not the same thing as plastic material; else they would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer. The technology adopted by each manufacturer in the formulation of resin solutions, treating of fillers and ultimate pressing conditions arc peculiar to each manufacturer, though the end-product manufactured by each of them would ultimately meet the specifications laid down by the Standards Institution. It would be difficult for one manufacturer to use treated material of another manufacturer to produce a specific product by using his own norms of pressing a grade of laminate. All treated materials, therefore, are produced for captive consumption. Formica argues on this basis that what is referred to as treated fabric and treated glass fabric are only intermediate products and not manufactured products. The impregnation of the resin on the fillers is completed only when the operation in the press is completed, i.e. lamination and the process of impregnation. The treated materials do not have any distinctive name, character or use as compared to the input material. It is thus submitted that the process of treating the input paper, fabrics and glass fabrics is not a manufacturing process at all. A further point taken up is that glass fabrics cannot be described as textile fabrics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow :- The question of classification of paper, fabrics or glass fabrics which are impregnated with resin solution before they are used in the manufacture of industrial laminated or decorative laminates has also been considered. It has bean claimed by the trade that these impregnated paper/fabrics are in the form of intermediate products and hence would not be liable to duty. Further, this argument has been emphasised by bringing out the fact that these intermediate products are seldom sold (occasional stray sales have taken in the past 3 years) and the shelf-life of these products under carefully controlled conditions can be extended upto six months only Having regard to the fact that the intermediate impregnated paper/ fabrics are capable of being sold, (though in effect it need not be) and that such intermediate products are covered well by the respective Tariff Items 17,19 and 22, there could be no doubt regarding their excisability. The fact that they have shelf life only under controlled conditions and that the manufacturers effort to sell them have not proved the desired results, do not in any manner change the situation. The fact that such intermediate products we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the item. The relevant entry reads as follows :- Paper and Paper board, all sorts (including paste-board, millboard, straw-board, card-board and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on which the aid of power- (1) X X XX XX (2) Paper board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified. The tariff item, therefore, would take within its sweep treated papers. The learned Consultant relied upon the Tribunal s decision in Golden Paper Udyog case - 1983 E.L.T. 1123 in support of his contention that even if the treated paper was held to fall under Item 17(2) CET, it could not be subjected to duty again. In this connection, we may observe that we have, in our Order No. 95/84, dated 20-2-1984 in Appeal No. 1452/81-C - C.C.E., Hyderabad v. Uma Laminated Products (P) Ltd., Hyderabad, 1984 (17) E.L.T. 187 (Tribunal) held that treated paper (polyethylene coated/laminated/sandwiched paper in that case) would fall for classification under Item 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cotton Spinning and Weaving Mills Another v. Union of India and others - 1983 E.L.T. 239 (Del.). 20. There is some confusion and discrepancy in the submissions made at different stages of the proceedings on the question whether the substance with which the treatment was undertaken was a resin or not. This aspect is not material for determination of the classification of treated paper as for that of treated fabrics/glass fabrics. We shall refer to this aspect later but in the context of treated paper, we would like to observe that the Tariff Item 17(2) does not specify the material with which paper should be treated to bring the treated paper within its ambit. The treatment should result in an article different from the untreated paper and it must have characteristics and uses different from those of the untreated paper. In the present case, the treatment is done with a resin or a blend of resins or a resin solution according to the different terminologies used by Formica. The treated paper as it is called has unlike the untreated paper, a limited shelf-life and is used for the manufacture of rigid plastic laminates. It is thus different from the untreated paper. There is lit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s posed before us, is not classification of treated glass fabrics under Item 22(3), CET, but of deciding between Items 22B, CET as held by the lower authorities and Item 68, CET as claimed by Formica. Item 22B reads as follows:- Textile fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials not elsewhere specified. For any article to fall under this Item, it must satisfy the following tests :- (a) It should be a textile fabric, (b) It should be impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials, (c) It should not be elsewhere specified in the tariff. 22. Now, in accordance with the book Textile Terms and Definitions published by the Manchester Textile Institute (7th edition) a standard book of reference-a textile fabric is A manufactured assembly of fibres and/or yarns, which has substantial surface area in relation to its thickness and sufficient mechanical strength to give the assembly inherent cohesion (page 70). The same book it page 77 defines glass fibre as follows :- A fibre made by extruding molten glass to suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt claims were made at different times. The competing items seem to be Items 15A, 22(3), 22B, 22F and 68, CET. Of these, Formica no doubt withdrew their claim for classification under, Item 22F. But, for arriving at a proper decision, we have considered it proper to keep all the aforesaid tariff items in view. We have already said Item 22 did not cover glass fabrics as the item stood before the 1977 Budget. To the extent glass fabrics are man-made fabrics, one could say that Item 22 covered the goods on and from 18-6-1977. But, on a closer reading of the tariff, it will be apparent that the more appropriate item for glass fabrics would be Item 22F- Mineral fibres and yarn and manufactures therefrom . It would appear that this is the rationale behind Notification No. 87/76, dated 16-3-1976 showing glass fabrics under Item 22F. Even after the 1979 budget amendment to Item 22F by which sub-clause (iv) of the Explanation to Item 22F was changed from- manufactures containing mineral fibres and yarn, other than asbestos cement products , to- manufactures in which mineral fibres or yarn or both predominate in weight , glass fabrics would appropriately be classifiable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esins. 26. Formica s contention is that the synthetic resin used for treatment is not a cellulosic derivative or a plastic material . It may be that it is not a cellulosic derivative. But no authority has been produced in support of the contention that it is not a plastic material. The argument is that Item 15A says Artificial or synthetic resins and plastic materials . Hence, there is a distinction between resins and plastic materials and the two do not refer to one and the same thing. This argument is of no avail. Artificial or synthetic resins are plastic materials. They have many applications in plastics, textiles, etc. (see page 891 of the Condensed Chemical Dictionary by Gesner G. Hawley. 10th edition). The treated cotton fabrics under consideration were correctly held to fall under Item 19(III) C.E.T. 27. Now, we proceed to deal with the question whether the demands raised against Formica were hit by limitation. Formica has strenuously contended that the extended period of 5 years could not be invoked since they have no application to the facts of the present case. They have argued that in the period prior to that involved herein, the very same allegation of suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that a Central Excise Office was located in the Formica factory itself, Formica was also remiss in not declaring the quantity and value of the goods manufactured by them and captively consumed by them-especially after classification lists were submitted by them in respect of these very goods. Formica, admittedly, were working not under the physical control procedure but under the self-removal procedure under which the primary responsibility for correct payment of duty in accordance with duly approved classification and price lists has been cast by law on the assessee himself. Any slackness on the part of the Excise staff posted in the factory would not, in our view lessen or mitigate the burden cast on the assessee. The fact that Rule 173-Q was not invoked in the show cause notices is not material to the above position. It is seen from the Assistant Collector s order of 20-3-1982 (the order passed by the original authority in these proceedings) that one of the submissions made before him by Formica was that the treated material was not being removed from the factory premises but was converted within the same premises in the cause of a single and integrated process into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-1-1981 which have not been produced before us either by Formica or by the Department. 29. Yet another aspect of the matter is that there appears to have been doubt and uncertainty in the mind of the Department itself in the matter of classification. Resin-impregnated paper was considered by the Board, by its Tariff Advice 51/75 of 31-10-1975, not to fall within the ambit of 17 C.E.T. However, the Board changed its stand and by its Tariff Advice No. 123/81 of 16-11-1981,held that impregnated paper/fabric were classifiable under Items 17, 19 or 22, as the case may be. The position which emerges, therefore, is that be classification was far from clear both to the authorities and he assessee. This factor coupled with the exchange of correspondence between the Department and Formica (to which we have adverted) would prima facie point to the absence of any mala fides or deliberate intent to evade duty on the part of Formica. However, they cannot be absolved from their responsibility of paying duty on the goods captively consumed by them at least from the time classification lists in respect of treated paper/cotton fabric/glass fabric were submitted by them which were approved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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