9911796707
TMI Blog1994 (7) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... s/Squares falling under Heading 74.14 out of used railway material viz. old and used rails/wheels/axles/metal tyres etc. were exempted from the payment of Central Excise duty in terms of Notification No. 202/88-C.E., dated 20-5-1988. Since the Department was of the view that old and used railway material i.e., rails/wheels/axles/metal tyres did not fall in the category of any of the inputs specified in Column 2 of Notification No. 202/88-C.E., dated 20-5-1988, the appellants were served with a show cause notice alleging the contravention of various provisions of the Central Excises & Salt Act, 1944 and Rules and they were required to show cause as to why Central Excise duty on the finished goods cleared during the period indicated in the show cause notice should not be recovered. The show cause notices which were issued on different dates in 1993 and sought the recovery of duty on clearance during different periods between 1988 and 1991 by invoking the extended period of limitation in terms of the proviso to Section 11A on the grounds that the appellants had suppressed material facts from the Department. 2. In their written replies to the show cause notices and also during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter F. No. B/28/8/83-TRU dated 8-9-1983 that all these materials would be treatable as railway material under Item 25(11) of the erstwhile Tariff and not under Tariff Item 25(10) since they were to be regarded as shapes and sections and it was further clarified that in all such cases the benefit of the exemption Notification 208/83, dated 1-8-1983 would be admissible. He also referred to the Trade Notice No. 31/CE/83 (3-TI 25) dated 14-9-1983 issued by the Chandigarh Collectorate wherein it was accepted that used railway materials are eligible for exemption under Notification No. 208/83. He contended that clarifications and circulars issued by the Board from time to time not having been withdrawn or modified during the period of demand, there was no justification for the Department to take a contrary view. He submitted that rejected railway materials were nothing but rollable or re-rollable materials which had been specifically included as inputs in Column 2 at Serial No. 2 of the Table annexed to the Notification No. 33/92 dated 1-3-1992 and the amending notification being clarificatory in nature it must be regarded as having retrospective effect as held by the Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voked by the Collector for confirming the demand was illegal since the Department was fully aware of the appellant's activity and there was no suppression of fact. In this regard he submitted that the proceedings initiated against the appellants in an earlier case were dropped by the Department. In support of his contention he cited the decision in the case of Neyveli Lignite Corpn. Ltd. v. Collector of Central Excise, reported in 1992 (58) E.L.T. 76 and Metal Fabric, reported in 1992 (57) E.L.T. 70. 5. On behalf of the appellants M/s. Sawan Mal Shibu Mal Rolling Mills, M/s. Kalsi Steels and M/s. Gopal Industries (Serial Nos. 5, 6 and 7 of the Cause List) Shri Bhangoo, Learned Advocate appeared before us and Shri K.K. Anand, Ld. Advocate appeared on behalf of M/s. New India Steel Inds., M/s. Agarwal Steel Rolling Mills and M/s. Rehal Indl. Corporation (Serial Nos. 12, 13 and 14 of the Cause List). They reiterated the points made by Shri Santhanam. Shri Bhangoo submitted that the only other point which he wished to make was that the Collector had erred in holding that re-rollable materials used as inputs by the appellants were not eligible for exemption under Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.02 as "railway track and construction material of iron and steel" since being unserviceable material it was no longer capable of being used as railway track construction material. He submitted that from 1963 onwards the Board has issued several clarifications in regard to the question whether the re-rollable materials purchased from railway could be deemed as covered by the description of the input as given in the notifications issued from time to time. He added that the controversy was again raised after the introduction of the Central Excise Tariff Act, 1985 and the Board once again clarified that re-rollable materials purchased from railways could be deemed as angles, shapes, sections of iron and non-alloy steel appearing in Column 2 of the Table against Serial No. 2 of the Notification 202/88. He argued that under these circumstances the order passed by the Collector denying the benefit under the said notification was wholly incorrect. He submitted that after duly considering the definition of angles/shapes and sections given in Chapter 72, the Board had clarified that the earlier clarifications were equally applicable to the Central Excise Tariff Act, 1985. He argued that u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention he placed reliance on the following case law :- Nagpur Engg. Co. Ltd. v. Collector of Central Excise, 1993 (63) E.L.T. 699. H.C.L. Ltd. v. Collector of Central Excise, Meerut, 1994 (71) E.L.T. 608. 7. Learned Advocate Shri A.K. Mahajan appeared on behalf of M/s. Golden Steel Industries (Serial No. 16 of the Cause List). He reiterated the submissions made by Learned Advocate Shri R. Santhanam. 8. On behalf of the respondents, Learned JDR Shri S.K. Sharma stated that the inputs used by the appellants were old and used railway material such as rail, wheels, axles, sleeper bars which at the time of clearance after manufacture were treated as railway materials. He contended that under these circumstances when they are sold after use by the railway authorities, they would continue to be railway materials falling under Chapter 73 of Tariff Schedule. He contended that there was no force in the appellants argument that the goods in question which were not cleared from the factory as "angles, shapes and sections" would be treatable as "angles, shapes and sections". He submitted that in Notification 208/83 only the Tariff Headings of the inputs in question were spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the following are the main questions that arise for consideration in these cases :- (i) Whether used and rejected railway materials used as inputs by the appellants for the manufacture of their finished products could be deemed as angles, shapes and sections which figure as permissible inputs in Col. 2 against Serial No. 2 of Notification No. 202/88-C.E., dated 20-5-1988. (ii) Whether the order confirming the demand by invoking the extended period of limitation under proviso to Section 11A is sustainable. 10. In these cases similarly worded show cause notices were issued in which it was alleged that M.S. Rounds/Squares falling under Heading No. 72.14 were not eligible for exemption in terms of Notification No. 202/88-C.E., dated 20-5-1988 since rejected railway material/old and used rails/wheels/ axles/Metal Tyres etc. used as inputs were not specified in Column 2 against Serial No. 2 of the said Notification. It is seen that while the main show cause notice in each of these cases gave the same general description of the inputs i.e. "rejected Railway Material/old and used Rails/Wheels/Axles/Metal Tyres etc.", the description of the actual inputs used as give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icatory in nature has to be deemed as having retrospective effect. It is seen from the impugned orders that the Collector while rejecting the appellants contention that the inputs used by them were angles, shapes and sections simply observed that the "inputs used by the noticees for the manufacture of finished goods did not fit in the description of the inputs specified in the said notification and, therefore, the finished goods manufactured out of the same are not eligible for the exemption thereunder". However, while making his submissions on behalf of the respondents, the Learned Departmental Representative has argued that the materials in question having been originally cleared after being manufactured as "railway or railway track construction material falling under Heading 73.02" and not as "angles, shapes and sections" of Chapter 72, they would continue to be "railway or railway track and construction material" of Chapter 73 of the Tariff Schedule even when they are sold as old and unserviceable materials. 11. For the proper appreciation of the rival contentions we refer to Note 1(n) to Chapter 72 and Heading No. 73.02 of the Central Excise Tariff Schedule, which are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the appellants, on the ratio of the Gujarat High Court judgment quoted above, such unserviceable railway materials would neither be treatable as railway track construction material falling under sub-heading 73.02 nor as "angles, shapes and sections" but only as "old and used re-rollable scrap". We are therefore of the view that during the relevant period old and unserviceable railway material used by the appellants was not covered by any of the inputs specified in Column 2 against Serial No. 2 of Notification No. 202/88-C.E., dated 20-5-1988 and accordingly the final products manufactured by the appellants by using such inputs were not eligible for exemption under the said notification. The appellants have contended that even if the inputs in question are held as "old and used re-rollable scrap", they have to be deemed as inputs specified in Notification 202/88-C.E., dated 20-5-1988 since the amending Notification No. 33/92-C.E., dated 1-3-1992 by which the item "rollable and re-rollable material" was added to the list of inputs specified in Notification No. 202/88-C.E. being clarificatory in nature has to be deemed as having retrospective effect. We are not impressed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval in regard to the view expressed by the Collector Central Excise, Indore in his letter F. No. XV(73)30-7/86/CX, dated 29/30th April, 1987 that old and used rail cuttings, sleepers, sleeper bars etc. were treatable as angles, shapes and sections falling under Chapter 72. On perusal of correspondence between the field formations and the Board on this subject, we are inclined to agree with the appellants that during the relevant period it was a practice of the Department to treat old and rejected railway materials such as rails, rail cuttings, wheels, axles, metal tyres etc. as angles, shapes and sections falling under sub-heading 7210.10 of the Tariff Schedule. We are therefore inclined to accept the appellants claim that in view of the past practice of the Department during the relevant period, they had entertained a bona fide belief that the final products manufactured by them out of old and rejected railway materials were exempted from the payment of Central Excise duty in terms of Notification No. 202/88-C.E., dated 20-5-1988. In the case of Padmini Products v. Collector of Central Excise, [1989 (43) E.L.T. 195 (SC), the Supreme Court has held that mere failure or negligenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant period the final products were dutiable on account of the inputs used in the manufacture thereof not being specified in the Notification 202/88, on the ratio of the Tribunal's Final Order E/161/94-B1, dated 9-3-1994 in the case of M/s. Chamundi Steels Re-rolling Mills v. Collector of Central Excise, Bangalore and the decision in the case of Jagraon Machine Tools v. Collector of Central Excise, reported in 1993 (65) E.L.T. 300 (Trib.), they would be entitled to Modvat credit that might have been admissible in respect of "re-rollable scrap" in terms of the relevant order of the Ministry. In this regard it is seen that in Final Order E/161/94-B1, dated 9-3-1994, the Tribunal having regard to the appellants contention that if benefit of Notification No. 202/88 is disallowed they would be entitled to Modvat credit in terms of Notification No. 177/86 read with Rules 57A to 57J of the Central Excise Rules, had remanded the matter to the Collector for consideration of the following issues :- "Whether the demand of duty raised may be reduced by allowing the modvat credit after verifying the duty paying documents prescribed under rule 57G(ii). In ascertaining that the inputs used ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
