1990 (3) TMI 215 - AT - Central Excise

Issues Involved:
1. Maintainability of the appeals under Section 35E of the Central Excises & Salt Act, 1944.
2. Classification and Excise Duty on Synthetic Organic Dyestuff (wet cake) under Tariff Item 14D.
3. Limitation under Section 11A of the Central Excises & Salt Act, 1944.
4. Valuation of Synthetic Organic Dyestuff for excise duty purposes.

Issue-Wise Detailed Analysis:

1. Maintainability of the Appeals under Section 35E of the Central Excises & Salt Act, 1944:

The respondents raised preliminary objections regarding the maintainability of the appeals filed by the Additional Collector under Section 35E of the Central Excises & Salt Act, 1944. They contended that the Additional Collector is not a 'Collector' as per the Act and therefore, cannot file an application under Section 35E. The Tribunal observed that the Central Excise Rules, 1944, framed under Section 37 of the Act, define 'Collector' to include 'Additional Collector' and any officer specially authorized under Rule 4 or 5. The Tribunal held that the definition of 'Collector' in the Rules has the same statutory force as the Act, and thus, the direction given to the Additional Collector to file the application was in conformity with the provisions. Consequently, the preliminary objections were dismissed, and the appeals were deemed maintainable.

2. Classification and Excise Duty on Synthetic Organic Dyestuff (wet cake) under Tariff Item 14D:

The Tribunal examined whether the wet cake of Synthetic Organic Dyestuff manufactured by the respondents was liable to excise duty under Tariff Item 14D. The respondents argued that the wet cake was not fully manufactured, not marketable, and not capable of dyeing textiles. They cited various judgments to support their claim that unfinished goods are not liable to excise duty. However, the Tribunal referred to the Bombay High Court judgments in the cases of Sandoz India Limited and Amar Dyechem Ltd., which held that the process of blending and pulverizing is not necessary to complete the manufacture of dyes. The Tribunal concluded that the wet cake attained the nature and character of Synthetic Organic Dyestuff and was independently excisable under Tariff Item 14D. The Tribunal rejected the respondents' contention that the wet cake was not marketable, noting that the respondents used it captively for manufacturing dispersed organic pigment paste. Therefore, the wet cake was liable to excise duty under Tariff Item 14D.

3. Limitation under Section 11A of the Central Excises & Salt Act, 1944:

The Tribunal addressed the issue of whether the demand for duty was time-barred under Section 11A of the Act. The show cause notices were issued in April 1984 for the financial year 1981-82, which was beyond the normal six-month limitation period. The Additional Collector had held that there was no suppression or misstatement of facts by the respondents, and thus, the longer five-year limitation period was not applicable. The Tribunal agreed, noting that the manufacture of Synthetic Organic Dyestuff was known to the Department, and there was no positive evidence of conscious or deliberate withholding of information by the respondents. The Tribunal cited the Supreme Court judgment in Chemphar Drugs and Liniments, which emphasized that something positive other than mere inaction is required to invoke the extended limitation period. Therefore, the demands were held to be time-barred.

4. Valuation of Synthetic Organic Dyestuff for Excise Duty Purposes:

The Tribunal briefly touched upon the issue of valuation, stating that the price of pigment paste cannot be used to determine the assessable value of Synthetic Organic Dyestuff (wet cake). The value should be determined in accordance with the Central Excise Valuation Rules read with Section 4 of the Central Excises & Salt Act.

Conclusion:

The appeals were disposed of with the Tribunal holding that the wet cake of Synthetic Organic Dyestuff was correctly chargeable to excise duty under Tariff Item 14D, but the demands were time-barred under Section 11A of the Act. The valuation of the dyestuff should be determined as per the Central Excise Valuation Rules and Section 4 of the Act.

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