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TMI Blog1993 (8) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of Notification No. 208/83 as amended from time to time. 2.2 In order to understand the controversy it is appropriate to reproduce relevant portions of Notification 208/83, as it stood from time to time :- ***** 2.3 With effect from 1-3-1986 new Central Excise Tariff under Central Excise Tariff Act, 1985 came into existence having six digit Tariff Headings. Consequent to change in Tariff, Table to the Notification No. 208/83 also underwent a change which is reproduced as below :- ****** 2.4 Simultaneously, a new Heading 72.15 in the new Tariff was introduced as follows :- Heading No. Sub-heading No. Description of goods 72.15 7215.00 Goods and materials of heading Nos. 72.03, 72.06, 72.07, 72.08, 72.09, 72.10, 72.11, 72.12 and 72.13 obtained by breaking up of ships, boats and other floating structures. In other words, goods and materials of iron and steel obtained as a result of dismantling of ships, boats and other floating structures were made specifically liable to duty under the said Tariff Heading 72.15. It is to be noted at this stage that Tariff Heading 72.15 did not find a place in Col. 2 relating to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate dutiable items under Headings 72.15 and 73.09 but did not introduce the ship breaking scrap as a specified input in Notification 208/83. 2.9 With regard to both the aforesaid periods the department contends that ship breaking scrap is a commodity known to the market separately and in any case it was specifically spelt out in the Central Excise Tariff w.e.f. 1-3-1986. That being the position, since ship breaking scrap is not specifically mentioned as an input in Col. 2 of the Table to the Notification 208/83, the manufacturers making final products falling under Col. 3 against S. No. 2 of the said Table would not be entitled to the benefit of the said notification. 2.10 Appellant manufacturers, on the other hand, contend that Notification 208/83 does not speak of the origin of the inputs. It speaks of goods falling under specific sub-items of Item 25 of the Tariff before 1-3-1986 and of specific sub-headings of Chapter 72 after 1-3-1986. Re-rollable scrap is nothing but goods and materials falling under the aforesaid various specified sub-items or sub-headings, as the case may be. This is not disputed by the department. In this connection learned advocates/consultants for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. 2.13 Learned JDR, Shri M.S. Arora, on the other hand, contends that ship breaking has been held to be an activity of manufacture by Calcutta High Court in the case of Re : S.S. Jain, supra. Therefore, duty on ship breaking scrap whether under 72.03 or under 72.06 to 72.10 would be liable to duty. Since ship breaking scrap is not specifically mentioned in Notification 208/83 as a specified input, the notification would not be available to the appellants. 2.14 We have carefully considered the pleas of both sides. We observe that the inputs under Col. 2 of the Table to Notification 208/83 does not describe the goods with reference to their origin. This speaks of goods falling under various sub-items of Item 25 of the CET before 1-3-1986 and goods falling under various sub-headings of Chapter 72 after 1-3-1986. Both before 1-3-1986 and after 1-3-1986 upto 26-3-1987 the specified inputs are (i) ingots, blocks, lumps and similar forms of iron and steel not elsewhere specified (ii) blooms, billets, slabs and sheet bars (including tin plate bars) and hoe bars of steel (iii) pieces roughly shaped by rolling or forging of iron or steel not elsewhere specified (iv) bars (including fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (35) E.L.T. 142 (Tribunal)] The Tribunal relying on Patna High Court s decision in the case of Tata Yudogawa, supra, held that the appellants are entitled to the benefit of notification under S. No. 4 of Notification No. 101/66 i.e. surface active agents used in the manufacture of emulsifiers, wetting out agents, softeners and other like preparations were deemed to have paid the appropriate amount of duty of excise or the addl. duty under Indian Tariff Act, 1934 even if they had been cleared at nil rate of duty by their manufacturers-suppliers. 2.16 Learned advocate, Shri Setalvad has pointed out that Notification 208/83 also speaks of the inputs having already paid duty. This condition, he submits, is further clarified by the Explanation that all inputs in the country are to be deemed to be duty paid. Since the inputs have been purchased within the country, therefore, these are to be deemed to be duty paid. The notification itself makes this position clear. He, no doubt, admits that there is an exception to the aforesaid deeming clause i.e. those stocks which are clearly recognisable as being non-duty paid are not to be deemed to be paid. The learned advocate submits that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products namely, steel ingots w.e.f. 1-3-1977. This has been the basic structure of the Central Excise Tariff from that date onwards. Accordingly, he submits in the context of Notification No. 208/83 that when inputs suffer nil rate of duty under a legal provision whether by a notification or a circular of the CBEC waiving the duty, then it should be considered as an input on which duty leviable has already been paid; otherwise, submits the learned advocate, the consequence would that each alternate product of manufacture in the down-stream will attract duty and the other alternate product would be exempt from duty. Such cannot be the effect of the notification. He further submits that the procedure under Rule 56A or 57A for credit of duty paid on inputs is also available in respect of iron and steel products. Notification No. 208/83 avoids scriptory work in giving exemption from duty on final products out of duty paid inputs. In this connection, he referred to a circular dated 15-5-1986 of Ministry of Finance, Department of Revenue from F. No. 139/28/86-CX.IV. It is reproduced below :- I am directed to refer to endorsement No. AISRA/12/AGM/86/340 dated the 19th April, 1986 to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving effect to term (3) of the consent order has been engaging the attention of the Government with a view to devising a suitable mechanism for waiving of the arrears of duty on ship-scrap for the past period. It has been decided to waive the duty on ship-scrap leviable under erstwhile T.I. 25, or Chapter 72 or 73 of the Central Excise Tariff Act, 1975, for the period prior to the issue of Notification No. 386/86-C.E., dated the 20th August, 1986. Accordingly, the Show cause notices and the confirmed demand notices may be withdrawn in these cases." [Emphasis supplied by the learned advocate] 2.20 In the aforesaid submissions, it has been urged that the goods should be treated to be duty paid or in any case there is no question of demanding duty on ship breaking scrap prior to 1-3-1986 and thereafter and consequently no duty should be demanded on other products out of such re-rollable ship breaking scrap in terms of Notification No. 208/83. 2.21 Learned JDR, Shri M.S. Arora, on the other hand, has contended that ship breaking has been held by Calcutta High Court as an activity of manufacture resulting in excisable goods as reported in S.S. Jain Co. Another, supra - paras 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are clearly recognisable as non-duty paid . There was no such exception in the cases relied upon by the ld. advocates/consultants, as mentioned above. Since the goods have been brought from ship breaking yards, therefore, as submitted above, the goods are clearly recognisable as non-duty paid. He further submits that there is a direct judgment of the Tribunal reported in 1989 (44) E.L.T. 70 (Tribunal) in the case of CCE v. Choday Apparaw Steel Re-Rolling Mills. Relevant extracts from para 12 of the said judgment of the Tribunal is reproduced below :- ****** 2.22 We have carefully considered the pleas advanced on the second condition of Notification 208/83 whether the inputs brought by the appellants were duty paid or not. While we agree that the explanation to Notification 208/83 treats all stocks of inputs in the country to be deemed to be inputs on which duty has already been paid, it carves out an exception that such stocks as clearly recognisable as being non-duty paid are to be excluded from such deeming fiction. As rightly pointed out by the learned JDR for the Revenue ship breaking scrap purchased from ship breakers directly are clearly recognisable as being non-duty pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that on the basis of various judgments already cited regarding the deeming duty paid character of such goods the assessees were under a genuine bona fide belief of treating the goods as duty paid and as such there was no wilful mis-statement or suppression of facts on their part. Hence in view of the Supreme Court s judgments in the two cases, mentioned above larger period of five years under Section 11A should not be invoked. The demands, therefore, according to them are time barred. 2.24 We have carefully considered this common and general plea of the advocates/consultants but we are not persuaded to agree to the same. Explanation to Notification 208/83 is worded differently from the expressions considered by the Courts in various judgments relied upon by the learned advocates/consultants. We would not, therefore, agree to the aforesaid general plea for giving a blanket relief to the various appellants herein on the question of limitation, inasmuch as, in our view, the appellants have wilfully misdeclared that the inputs (rerollable scrap) used by them were duty paid. We would like to examine the special facts and circumstances of each appellants case which we do hereafter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppress any fact with an intention to evade payment of duty. The aforesaid plea is not tenable. The circulars referred to by the appellants relate only to purchase of certain iron and steel products to be deemed to be duty paid if purchased from the open market except such inputs which are clearly recognisable as being non-duty paid. We have already held above, that rerollable scrap obtained from ship breakers/ship breaking units is clearly recognisable as non-duty paid. Therefore, the appellants cannot take benefit of the aforesaid circulars. Declaration in the classification list by the appellants was a declaration of his intention to use the duty paid inputs which obviously on the facts and circumstances are not duty-paid, as discussed earlier. Therefore, the approval of the classification list on the basis of a representation by the appellants that the raw material/input would be duty paid would not give any advantage to the appellants inasmuch as their representation to the effect that raw materials/input is duty paid, has been found to be incorrect. The demand of duty, therefore, has been correctly confirmed and in the facts and circumstances penalty has also been correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steel scrap which shows that duty is payable at the rate of Rs. 365/- per M.T. but has actually been paid at 25% thereof under protest. It, therefore, cannot be held, submits the learned advocate that these two consignments are not duty paid. It appears that there was some dispute going on between the Excise authorities and the ship breaking unit and only 25% of duty was being paid under orders of some competent authority. It has been contended that all the consignments of re-rollable scrap obtained by the appellants were duly accompanied by gate passes indicating availing of Notification 386/86-C.E., dated 20-8-1986 or it shows payment of duty at appropriate rate barring two consignments at S. Nos. 18 and 22 of Annexure II. The adjudicating authority has not discussed at all the effect of accompanying gate passes with the consignments of re-rollable scrap received by the appellants. The said authority has merely repelled the general plea of the appellants that these are not to be deemed to be duty paid. It is, therefore, necessary to remand the matter to the adjudicating authority to consider the effect of gate passes received alongwith the consignment as mentioned in Annexure II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses by the ship breakers which should have cautioned the unit that some of the ship breakers were paying duty under protest and therefore it was incumbent on their part when they received scrap directly from the licensed premises of the ship breaker to satisfy themselves that the scrap was duty paid. It is admitted by the adjudicating authority that the consignments were received under gate pass showing payment of some duty. He, however, holds that since the gate passes show payment of duty by ship breakers under protest, therefore, it was incumbent on the appellants to satisfy itself that the scrap was duty paid. This finding of the adjudicating authority is clearly untenable on the admitted facts. Notification 208/83 does not indicate as to what rate of duty is required to be paid by the inputs. It only speaks of the inputs having already paid duty. If the accompanying gate passes indicated payment of duty, even though under protest, these consignment cannot be said to be non-duty paid. Accordingly, the demand of duty for the period 1-8-1983 to 28-2-1986 is set aside. For the second period i.e. 1-3-1986 to 27-3-1987 demand of duty of Rs. 53,290.00 has been confirmed on the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w does not help the appellants in respect of purchase of ship breaking scrap from ship breaking units. This circular is applicable only to such ship breaking scrap as is purchased from the open market after its clearance from ship breaking units and not otherwise. Ship breaking scrap lying in the ship breaking unit is to be treated as non-duty paid and therefore, as held above, the ship breaking scrap utilised by the appellants has not been substantiated by them to be duty paid. Consequently, demand of duty has been righlty confirmed invoking the larger period of 5 years because a mis-representation was made that the inputs purchased by them were to be duty paid. Therefore, demand of duty from the appellant firm and penalty imposed on the said firm is sustainable and we hold accordingly. MAHALAXMI ROLLING MILLS 2.33 In this case there is a demand of duty of Rs. 1,85,657/-. It is broken up into three periods, namely (i) 1985 to 28-2-1986, (ii) 1-3-1986 to 26-3-1987 and (iii) 27-3-1987 to 8-7-1987. Learned advocate, Shri Harbans Singh for the appellants has submitted that the show cause notice in this case does not allege that the inputs used by the appellants are non-duty paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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