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TMI Blog1985 (5) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... d and why penalty should not be imposed on them. After protracted correspondence, the appellants sent a reply dated 5-12-1977. On adjudication the Collector of Central Excise, Kanpur by order dated 29-6-1978 held the charges established. He imposed a penalty of Rs. 10 lakhs and also demanded duty of Rs. 4,32,412.41 under Rule 9(2) of the Central Excise Rules. The appellants filed an appeal to the Central Board of Excise Customs. The Board under order dated 7-6-1980 confirmed the order of the Collector except to the extent of reducing the penalty to Rs. 4,32,000/-. The appellants preferred a revision petition to the Government which, on transfer, has been numbered as Excise Appeal No. 816/80-D of this Tribunal. 2. In respect of similar asbestos yarn manufactured and cleared by the appellants during the period November, 1973 to March, 1976, a fresh show cause notice dated 25-10-1978 was issued to the appellants and on adjudication the Collector of Central Excise, Meerut, passed order on 4-7-1983 imposing a penalty of Rs. 10 lakhs and confirming the demand for payment of duty on the quantity of goods as mentioned in the show cause notice. The appellants have preferred an appeal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is described by the appellants in their reply dated 15-12-1977 to the first show cause notice as follows:- Apart from moulded stocks, we also obtain by spinning, products which are broadly classified by us into (i) metallic and (ii) Non-metallic yarns. The metallic yarns also known as wire inserted yarns are plain asbestos yarns with an insert of fine wires of brass or zinc : these are described for the sake of convenience as BM or ZM (though occasionally copper is also used and the quality produced is called CM). The non-metallic yarns contain either a core of cotton yarn around which yarn spun out of asbestos and viscose fibres is used for braiding or are comprised entirely of just asbestos and viscose fibres. The insert or core of cotton yarn is provided to reinforce the asbestos viscose yarn. Asbestos fibre and viscose staple fibre are blended, mixed, carded and then spun into yarn. After this yarn has come into existence, it is either used as such (as non-metallic yarn) or is twisted or plied with light gauge wire or cotton yarn which are introduced as cores with a view to imparting tensile strength to the single yarn. The twisted or plied yarns containing, in addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as viscose staple fibre is present in the asbestos yarn manufactured by the appellants (even though the cotton fibre may be present in the form of cotton yarn) the asbestos yarn would fall under TI 18E, and that the process of braiding has brought into existence a new excisable commodity which would fall under TI 18E. 11 Shri Narasimhan contended that unless viscose staple fibre and cotton fibre as such had been mixed and then spun (along with asbestos fibre) into a yarn the resultant yarn would not be classifiable under TI 18E. But we find that similar contention had been raised in other cases before the Tribunal but rejected. We may note in this connection the case of M/s. Porritts and Spencer (Asia) Ltd. v. Collector of Central Excise, Delhi, (1985 ECR 272). The period in dispute in the said case was 1-3-1971 to 31-10-1976. That is to say the period covered included the period after the introduction of TI 18E and the amendment thereof subsequently in 1973. In that case also the appellants had contended (though, in the context of the facts of that case, this contention had to be considered with reference to the period subsequent to 29-10-1974) that as there was no mixi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stages the appellants were contending that the adjudicating authority, as quasi-judicial authority, must come to its own conclusion and not be led by any Trade Advice or the opinion of the Law Ministry. There can also be no doubt that the opinions contained in the Trade Notices would not be binding on this Tribunal on the question of proper classification, nor could it be said that there is any question of promissory estoppel involved, since the trade advices relied on by the appellants are all subsequent to the disputes having arisen in the present cases. 14. On the question of the nature of the process carried on by the appellants this is what they had stated in their reply to the show cause notice:- Braiding includes twisting, plaiting and intertwining and inasmuch as the yarns produced by us are twisted (which expression includes plaiting) and plied, they are clearly covered by the expression braided yarns and since they are manufactured out of duty paid yarns (both cotton and viscose staple fibre) they are classifiable, as stated in the Trade Notice, not under item 18E but under item 68". In para 5 of that reply the appellants had referred to - Tariff Advice 12/74 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were also silent on this point. He accordingly held that the samples were fully representative of the production of asbestos yarn and belting by the appellants. Shri Narasimhan contents that this conclusion was improper. It is seen from the test memos (1 of 1973 and 2 of 1973) and the declaration forms connected therewith, that the samples of asbestos yarn and asbestos belting had been drawn, the necessary entries in connection therewith in the declaration forms being that they were out of 50 Kg. each. The manager of the appellants has signed these forms the declaration being to the effect that the appellants were perfectly satisfied with the manner of sampling. Shri Sachar contends that if the appellants were to feel that the different lots would have different composition, and therefore, the samples should be drawn from each lot, it was open to them to have objected to the method of sampling at the time of drawal of samples and the fact that they had not done so would establish that the contention now raised is incorrect and imaginary. In this connection we may further note that in their reply dated 15-12-1977 to the show cause notice the objection with reference to the samples ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Works, the Government took note of the contention that the assessee had disputed the representative character of the samples even before the test result was received and in the said circumstances dropped the review proceedings that had been initiated. In the case of Howrah Enterprises, the Central Board of Excise and Customs observed that the result of the test of the sample drawn could have been applied in respect of belting of the same lot from which sample was drawn, and that the result could not be adopted for further clearances of belting of the same type only if there was a practice of drawing prospectively until the next sample was drawn but there was no such practice in existence. In the case of Madhu Wool Spinning Mills the test was with reference to certain bales of rags imported. The High Court observed that the test report of samples drawn from one bale could not be straightaway applied with reference to all the remaining bales. 21. In the present instance it may be seen that there is no claim on the part of the appellants that their production varied from time to time with reference to the constituents in the yarn manufactured. Nor had they protested against the repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the assessee and that if such a request is made but denied, that would amount to violation of principles of natural justice. In this connection, he relies upon a decision of the Madras High Court in the case of Smt. P. Seenakamalam (Writ Petition No. 1598 of 1969). It may be noted that this judgment was rendered on 20th March, 1972 i.e. long prior to the amendment of Rule 56 in 1974. (Shri Narasimhan has made available a copy of the judgment as extracted from the departmental compilation of Central Excise Cases - 1972). The High Court had observed as follows :- It is not in dispute that the procedure for taking samples by the department is that three separate samples of the requisite quantity are to be taken, bottled, corked and sealed, and one bottle to be handed over to the party, another retained by the Department and the third sent up for chemical analysis. The taking of three samples is to ensure that if the test of one sample sent to Chemical Examiner is found to be defective or improper either the party or the Department, as the case may be, may send the sample remaining with either, for a re-test . It may be noted that in the present case also the sampling was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en arrived at on the basis of calculations mentioned in Annexure-A of that offence report of resins case against the appellants. This case related to moulded brakelinings and not woven brakelinings involved in the present dispute. The moulded brakelinings utilised asbestos fibre direct and no cotton either in fibre or yarn form. In the Annexure-A above referred to the resin content had been mentioned at 54%. It is on that basis that the balance of 46% has been mentioned in the show cause notice in the present case as that of asbestos yarn. Hence there can be no doubt that the said percentage was wholly incorrect. In these circumstances the argument in this regard that, in the absence of such denial in the earlier stages they cannot be urged to raise such a plea now or that the appellants must be held to have rightly admitted the percentage, cannot be correct. 26. Another criticism in this connection is that in the show cause notice the quantum of duty evaded was calculated on the basis of production of moulded as well as woven brakelinings. The Collector himself had realised this error and had purported to suitably modify the figures in his order. But the contention of Shri Naras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Tribunal to send for the report amongst other documents. The same was ordered by order dated 30-10-1985. Thereupon an affidavit of the Deputy Collector (Technical) of Central Excise, Kanpur was filed that no test had been carried out of the sample drawn on 2-11-1973 and that the reference to this in the order of the Collector may be read as to the report of the test of sample drawn on 15-2-1973. Subsequently, an application was filed to so amend the order of the Collector. That prayer was rejected as this question could be considered in hearing the appeal only. Hence the reference to this test report in the Order of the Collector and his reliance on the same was patently erroneous. We may incidentally note that under the same application the department wanted to file a test report of a sample drawn on 7-1-1974 and that prayer was rejected since no reference had been made to any such report in the adjudication and there was not even an acknowledgement for service of the copy of any such report on the appellants at any time. We may note that the Collector relied solely on the report of the samples drawn on 2-11-1973 in coming to a conclusion that it was correctly representative of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antification of the penalty (even as reduced by the Board) cannot be supported. In respect of the second it has been seen that the order of the Collector is wholly based on a test report even the existence of which is now denied by the department. Further the entire demand is barred by time. 32. We are, therefore, of opinion that the impugned orders cannot be supported. On the question whether at any rate so far as Appeal No. 816/80 is concerned whether a de novo adjudication by the Collector should be ordered, we have bestowed our careful attention. We are of opinion that such a course also may not be necessary for the following reasons. The show cause notice proceeded on the basis of a percentage of the asbestos yarn in the finally manufactured product and that percentage has now been found to be defective. There appears to be no other material available such as report on chemical test of the woven brakelinings from which this percentage could be worked out. Therefore the proper duty that may be payable on the asbestos yarn cannot be quantified in the absence of this information. Hence even if a de novo adjudication is ordered, which will have to be preceded by an amendment t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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