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TMI Blog1992 (1) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... received on payment of duty is mixed thoroughly with cotton chindies and dried in hot air oven for manufacturing PF Chindies and PF pre-peg. This pre-peg material can be moulded into various articles under high pressure and controlled temperatures. The appellants' claim before the Collector was that pre-peg was an intermediate product in the manufacture of articles of plastics as well as laminated sheets. The appellants were paying duty on the pre-peg and availed exemption in respect of "articles of plastics" which were covered by serial No. 38 of the Table appended to Notification 132/86. The Classification List had been approved by the Assistant Collector. 3. While the appellants' claim is that the exemption under the Notification can not be denied on the ground that, during the process of manufacture of the product, another product not mentioned in the notification, emerges at the intermediate stage, the Department's claim is that the exemption is available only if the goods are actually made from the goods falling under Heading 39.01 to 39.15. 4. Arguing for the appellants, Shri V. Sridharan, the Ld. Counsel, submitted that it was not necessary that articles of plastics shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Collector of Central Excise -1989 (43) E.L.T. 183 (SC) = 1989 (24) ECR 645 (SC) in which, while interpreting Notification 46/72-C.E., dated 17-3-1972, the Court held that benefit to soap made from rice bran oil was available even if rice bran fatty acid (derived from rice bran oil in another factory of the assessee), is used instead of rice bran oil. The Court held that rice bran oil, being the ingredient from which rice bran fatty acid is obtained, the exemption was available in terms of the aforesaid Notification. Shri Sridharan submitted that the principle of interpretation, applicable to Notification 46/72, would equally apply to Notification 132/86, which is the subject-matter of the present appeal. 6. At this stage, Shri Sridharan handed over photo copies of the following letters issued by the Central Board of Excise & Customs on which he wanted to place reliance: (a) F. No. 13/22/82-CX. 1, dated 5-6-1984 addressed to all Collectors of Central Excise; (b) F. No. 386/13/83-A.U., dated 20-11-1985 addressed to all Collectors of Customs & Central Excise; (c) F. No. 93/13/87-CX. 3, dated 25-6-1987 (d) No. 93/37/88-CX. 3, dated 22-8-1990 7. He submitted that in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption was available if the conditions of the Notification were otherwise satisfied. The same view was taken by the Board when the new tariff was introduced and this is clear from their letter dated 22-8-1990 in respect of Notification 53/88, the relevant portions of which are reproduced below: "A question has been raised as to whether the exemption Notification No. 53/88- C.E., dated 1-3-1988 be amended in order to extend the exemption to articles of plastics which are made out of goods falling under Heading Nos. 39.01 to 39.15 through the stages of intermediate goods not falling under 39.01 to 39.15 and purchased from the market. The matter has been examined by the Board. The Board felt that there was no stipulation in the Notification No. 53/88-C.E., dated 1-3-1988 that it applied to integrated units only. So long as the non-integrated unit could prove that the intermediate goods had been produced out of the duty paid material of Heading Nos. 39.01 to 39.15, it would be entitled to the exemption as envisaged in the said Notification." 9. In support of his argument, Shri Sridharan also referred to the decision of the Tribunal in the case of Eagle Flask Industries (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n technologically articles of plastics could not be made out of resins alone because the use of fillers/plasticisers was necessary for making articles of plastics. 12. The Ld. Counsel, thereafter, submitted that if these arguments were not found acceptable, the appellants were entitled to the benefit of exemption under Notification 175/86-C.E., dated 1-3-1986 by virtue of Explanation II, because goods exempt under any other Notification, not being a Notification based on the value or quantity of clearances made in a financial year, have to be excluded for the purpose of calculating the clearances of the manufacturer during the year in question. He also questioned the inclusion of net sales for the year 1985-86 while calculating the total value of clearances in the impugned order. He submitted that the figure of Rs. 5,43,832.25 should be excluded because the appellants were entitled to exemption for these clearances under Notification 182/82 which was permissible under Explanation II of Notification 175/86. If this is done, they would be within the limit of Rs. 1.50 crores prescribed in Notification 175/86 for clearances of the previous year as a condition of eligibility to exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the Classification Lists in which the manufacturing process has been set out, we reproduced the following extract :- "We are manufacturers of articles of plastics from Phenol Formaldehyde Resins. As articles made from these resins are poor in mechanical strength, we re-inforce them with Cotton Fabrics or Cotton Chindies to improve mechanical strength. We herebelow give our manufacturing process : "We purchase Phenol Formaldehyde Resin, Cotton Fabrics and Cotton Chindies. . After receiving these materials, they are inspected and we carry out the following operations: P.F. Prepeg. - Phenol Formaldehyde Resin is taken into a tray of our treating plant and we pass Cotton Fabric through it and then dry it in an oven heated by hot air. In this oven resin advances chemically and dry material is collected at the end. This stage of resin is called 'B' stage and it forms 52%-58% of the weight of the dried material. This material is called P.F. Prepeg. P.F. Chindies. - Phenol Formaldehyde Resin is taken into a mixer and Cotton Chindies are added to it. After mixing it thoroughly this material is dried in hot air oven. In the oven resin advances to 'B' stage and the dried material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-6-1991 in which it was held that Prepegs were excisable articles which were bought and sold in the market. In these circumstances, we are unable to accept the plea that P.F. Prepegs and P.F. Chindies are produced in the intermediate stage of the process of manufacture; nor is it possible to accept the plea that the ratio of the various decisions cited by the Ld. Counsel is applicable to the subject goods as a result of which they are entitled to exemption under serial No. 38 of the Table appended to Notification 132/86. 19. It is significant that "Articles of plastics" find mention at two places in the Notification. These are as under : Sl.No. Sub-heading No. Description of Rate Conditions 37 38 39.22.00 39.22.90 Artyicles of Paltics - do - 15% Nil If (i) Such articles are made out of goods falling under Heading Nos. 39.01 to 39.15 of the said Schedule on which duty of excise leviable thereon under the Central Excises & Salt Act, 1944 (1 of 1944) or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid; or (ii) such articles are produced out of scrap of plastics 20. A simple reading of these t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the foregoing, while we reject the appeal so far as claim for exemption from duty under Sl. No. 38 of the Table appended to Notification 132/86, dated 1-3-1986 is concerned, we direct that the appellants' liability to duty shall be determined afresh after taking into account the exemption under Notification 175/86, dated 1-3-1986 to which they are entitled by virtue of Explanation II. The impugned order is set aside and the matter remanded to the Collector for fresh calculation of the duty. In doing so, the Collector is directed to furnish to the appellants the details of the duty and the basis on which it is arrived at so that they have the opportunity of explaining their viewpoint on it. They may also be given an opportunity of a hearing before the order is finally passed. It should be possible to complete this within a maximum period of three months. 24. In view of the submissions before us, we do not consider it to be a fit case for imposition of penalty. 25 [Assent per: Jyoti Balasundaram, Member (J)]. - While agreeing with the learned Member (Technical) I would like to add the following. 26. In the case of Bradma of India Ltd. (supra), the Tribunal held that the em ..... X X X X Extracts X X X X X X X X Extracts X X X X
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