1989 (8) TMI 212 - AT - Central Excise

Summary

Issues Involved:

1. Classification of Asphalt Corrugated Roofing (ACR) sheets.
2. Applicability of Rule 10 or Rule 10-A for the demand of duty.

Issue-wise Detailed Analysis:

1. Classification of Asphalt Corrugated Roofing (ACR) Sheets:

The respondents, a Joint Sector Public Limited Company of the Government of Andhra Pradesh, manufacture asphalt corrugated roofing sheets (ACR sheets). The process involves converting waste paper into pulp, forming it into sheets, drying, corrugating, impregnating with asphalt, and painting with aluminum paste. The Superintendent of Central Excise issued a memo on 25-5-1974, directing the respondent company to apply for a Central Excise license and remove the goods on payment of duty, as the intermediate product (base mats) was considered excisable under T.I. 17(3) CET. The respondent company contested this, stating differences in manufacturing process, raw material, appearance, and end-use compared to mill board.

The Assistant Collector issued a show cause notice on 29-7-1974, demanding duty on the intermediate product, which was contested by the respondents. The Andhra Pradesh High Court, in a writ petition, initially suspended the Assistant Collector's detention order. The final product ACR sheets were classified under T.I. 68 from 1-3-1975. A subsequent show cause notice on 2-9-1975 demanded duty on ACR sheets under Rule 10-A for the period 1971 to 31-3-1975, based on the classification under T.I. 17(4) as "specially treated paper board."

The Chief Chemist's opinion, which influenced the classification, was based on BTN Notes, stating that "tarred roofing paper" fell under treated paper board. However, the respondents argued that the ACR sheets were not paper boards but a distinct product used as light roofing, with more than 50% of its weight being asphalt. The Andhra Pradesh High Court's Single Judge ruled that ACR sheets were not excisable as they were not paper boards. This was later set aside by the Division Bench on the grounds that the classification of the intermediate product was not properly addressed.

The Tribunal observed that the Explanatory Notes to the BTN specifically excluded roofing boards coated with asphalt from being classified as paper boards. The Tribunal concluded that ACR sheets did not fall under T.I. 17(4) during the relevant period and were not excisable before 1-3-1975, thus classifiable under T.I. 68 thereafter.

2. Applicability of Rule 10 or Rule 10-A for the Demand of Duty:

The demand for duty on ACR sheets for the period 1-8-1971 to 31-7-1975 was contested on whether it should be covered under Rule 10 or Rule 10-A of the Central Excise Rules, 1944. The Collector (Appeals) held that Rule 10 would be applicable, not Rule 10-A. The matter was further complicated by the fact that Rule 10-A was declared ultra vires by the Madras High Court, but this was later resolved by the Supreme Court upholding its constitutional validity.

For the period up to 25-5-1974, the Tribunal found that Rule 10-A was applicable as the respondent company had neither taken a license nor observed any Central Excise formalities, leading to a total escape of duty. For the period after 25-5-1974, Rule 10 was applicable as the department was aware of the production of ACR sheets, and the show cause notice issued on 2-9-1975 was valid for one year preceding the notice.

Conclusion:

The Tribunal dismissed the appeal for restoration of the order-in-original No. 3/76, dated 31-12-1975, confirming the classification of ACR sheets under T.I. 68 and not under T.I. 17(4), thereby making the demand for duty under Rule 10-A inapplicable. The judgment emphasized the need for proper classification based on the product's functional character and market understanding, aligning with international trade practices.