1994 (11) TMI 228 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for SSI exemption under Notification No. 175/86.
2. Use of the brand name 'Teflon' and its impact on exemption eligibility.
3. Invocation of the extended period for demand under Section 11A.
4. Quantum of duty demanded and computation errors.
5. Validity of clause 7 of Notification No. 175/86 under Article 14 of the Constitution.
6. Non-application of mind and procedural lapses in the Collector's order.

Issue-wise Detailed Analysis:

1. Eligibility for SSI exemption under Notification No. 175/86:
The appellants argued that they were eligible for the small-scale exemption under Notification No. 175/86, dated 1-3-1986 as amended, despite using the brand name 'Teflon.' They contended that 'Teflon' was owned by M/s. E.I. Dupont of U.S.A. only in relation to the resin 'Poly-tetrafluro-ethylene (PTFE)' and not in respect of fibre glass tape coated with such resin. The Collector, however, denied the exemption, claiming that the use of the brand name of a foreign company disqualified them from the benefit.

2. Use of the brand name 'Teflon' and its impact on exemption eligibility:
The appellants maintained that the 'Teflon' mark on the cartons used for packing the tapes was not owned by any person in relation to their product, namely, Teflon Coated Fibre Glass Tape. They provided additional documents to support this claim, including a certificate from Remfry & Sugar and letters from M/s. Dupont South Asia Ltd. and M/s. Dupont Far East Inc. The Collector, however, did not consider these documents and confirmed the demand based on the description of the goods in the invoice and other documents.

3. Invocation of the extended period for demand under Section 11A:
The show cause notices alleged that the short levy occurred due to fraud, wilful suppression of facts, and intent to evade duty. The Collector confirmed the demand for the extended period on the grounds of mis-statement and mis-declaration, even though these grounds were not explicitly mentioned in the show cause notice. The appellants argued that the department was aware of their activities and the nature of their products, as evidenced by earlier proceedings and Modvat declarations.

4. Quantum of duty demanded and computation errors:
The appellants contended that the quantum of duty demanded was incorrect as the Modvat credit of the duty paid on inputs used in the manufacture of final products was not allowed. They cited several legal precedents to support their claim that the duty should be recomputed. Additionally, they argued that the invoice price should be treated as cum-duty price, and duty payable should be deducted in terms of Section 4(4)(d)(ii).

5. Validity of clause 7 of Notification No. 175/86 under Article 14 of the Constitution:
The appellants highlighted that clause 7 of Notification No. 175/86 had been struck down as violative of Article 14 by the Calcutta High Court and a Division Bench of the Allahabad High Court. They argued that the Tribunal should follow these judgments and read the notification without clause 7. The Tribunal, however, decided to adopt the Karnataka High Court's judgment in the case of Nectar Beverages Pvt. Ltd., which upheld the validity of clause 7.

6. Non-application of mind and procedural lapses in the Collector's order:
The appellants pointed out that the Collector did not address their claim that Teflon Coated Glass Fabrics were cleared in rolls with plain brown paper covering without any markings or brand name. The Tribunal agreed that the impugned order showed non-application of mind and was not a reasoned order. Additionally, the Collector failed to examine the appellants' claim that the department was aware of their activities and the nature of their products.

Conclusion:
The Tribunal set aside the impugned orders and remanded the matter to the Collector for de novo adjudication in accordance with the law, after affording the appellants a suitable opportunity to be heard in person. The appeals were allowed by way of remand, and the miscellaneous applications were disposed of accordingly.