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TMI Blog2024 (9) TMI 1645X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. 2. Excise Appeal No. 50207 of 2021 has been filed by the Director of the appellant against the imposition of penalty under rule 26 of the Central Excise Rules, 2002 the Central Excise Rules. 3. The appellant manufactured and cleared Polyester Staple Fiber PSF classifiable under Chapter 55 of the First Schedule to the Central Excise Tariff Act, 1985 the Tariff Act. It is stated that this finished product PSF is manufactured out of two ingredients, namely, polyethylene terephthalate PET bottle scrap and 'popcorn' waste. 'Popcorn' waste is the name given to the agglomerate obtained from waste of plastic and products classifiable under Chapter 54 of the Tariff Act. The ratio in which the appellant claimed to be using the said ingredients PET and 'popcorn' waste is 90:10. This would mean that 90% of the total raw material input is PET bottle scrap. 4. PSF was exempt from payment of central excise duty w.e.f. 08.05.2012 by a Notification dated 08.05.2012 that inserted Serial No. 172A in the earlier Notification dated 17.03.2012. The appellant availed the benefit of the said exemption under Notification dated 17.03.2012 up to 10.07.2014. This exemption was withdrawn, and by another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PSF does not qualify as 'plastic waste' and hence would not be entitled to the benefit of NIL rate of duty under Serial No. 172A of the Notification dated 17.03.2012 and concessional rate of duty @ 2% under Serial No. 70A of the Notification dated 01.03.2011. The extended period of limitation under section 11A(4) of the Central Excise Act was also invoked, alleging suppression of facts with intent to evade payment of central excise duty by deliberate misuse of both the Notifications and using popcorn waste in the guise of PET bottle flakes. The show cause notice also called upon the appellant to show cause as to why penalty should not be imposed upon the Director of the appellant under rule 26 of the Central Excise Rules. 9. A detailed reply was filed by both the appellant and the Director on 27.08.2019 contesting the allegations made in the show cause notice. Reliance was placed on test reports to establish that 'popcorn' is a plastic waste used in the manufacture of PSF and so the appellant could avail the benefit of exemption as well as concessional rate of central excise duty under the said Notifications. It was also submitted that the extended period of limitation of five yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Rules is not sustainable. 13. Shri Mihir Ranjan, learned special counsel appearing for the department has, however, supported the impugned order and made the following submissions: (i) The present case is squarely covered by the decision of the Tribunal in M/s. Suncity Synthetics Ltd. vs. The Additional Director General (Adjudication) Excise Appeal No. 51185 of 2022 decided on 12.03.2024; (ii) Reliance has also been placed on the decisions of the Supreme Court in Commissioner of Customs (import), Mumbai vs. Dilip Kumar and Company and others 2018 (361) E.L.T. 577 (S.C.) and on State of Gujarat vs. Arcelor Mittal Nippon Steel India (2022) 6 SCC 459 to contend that if a Notification granting benefit of concessional rate of duty is subject to a condition, than it has to be strictly complied with and no word can be added or subtracted from the Notification; (iii) It is a settled law that when the text of the exemption Notification is plain and clear, no words can be added or deleted; (iv) The adjudicating authority is justified in taking the help of Harmonized System of Nomenclature to conclude that 'popcorn' cannot be classified as plastic waste or scrap; (v) The finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of PSF without availing CENVAT credit of inputs and inputs services under Serial No. 70A that was inserted in the Notification dated 01.03.2011 by Notification dated 11.07.2014. The relevant portion of the Notification dated 01.03.2011, as amended by Notification dated 11.07.2014, is reproduced below: Sl. No. Chapter or heading or sub-heading or tariff item of the First Schedule Description of excisable goods (1) (2) (3) 70A 54 or 55 Polyester staple fibre or polyester filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles. 19. The appellant claims that since PET bottle scrap is used as a major raw material in the manufacture of PSF, it would be entitled to claim the benefit of the aforesaid two Notifications, irrespective of the fact that a very small quantity of popcorn waste is also used in the manufacture of PSF. The adjudicating authority has not accepted this contention of the appellant for the following reasons stated in the order: "37. xxxxxxxxxxx. That the department vide the instant SCN has alleged that benefit under the Notifications would be available when Polyester Staple Fiber is manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India vs. Tata Iron and Steel Co. Ltd. 1977 (1) E.L.T. J61 (S.C.) ; M/s. JMK Energy vs. Commissioner of Customs, Delhi 2023 (2) TMI 619 - CESTAT New Delhi ; Indian Organic Chemicals vs. Collector of Central Excise, Madras 1988 (35) E.L.T. 535 (Tribunal); and Aravali Ispat Ltd. vs. Collector of Central Excise, Jaipur 1986 (26) E.L.T. 259 (Tribunal). 21. Learned special counsel appearing for the department, however, supported the impugned order and submitted that the word 'including' before waste PET bottle specifies that PET bottle waste can be used along with plastic waste and plastic scrap to manufacture PSF and, therefore, restricts the use of any other waste. The submission, therefore, is that when the text of the exemption Notification is plain and clear, no words can be added or deleted. To support this contention, learned special counsel placed reliance on the decision of the Tribunal in Suncity Synthetics. 22. The issue, therefore, is whether the benefit of the two Notifications would be available to the appellant when PSF is manufactured from specified inputs only, and not from any other raw material, apart from such inputs. 23. As noticed above, it is not in disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moulds and bottom stools used in the making of steel ingots. The claim of the respondent for exemption in respect of duty paid pig iron was rejected by the Assistant Collector of Central Excise by his order, dated 29th August, 1965. 13. The respondent filed appeals before the Collector of Central Excise who by order, dated 30th July, 1965 dismissed the respondent's appeals. 14. The respondent thereafter filed a revision petition before the Ministry of Finance under Section 36 of the Act. The Government by an order dated 7th July, 1967 rejected the revision petition of the respondent. The Government held that the respondent was not entitled to any exemption under Notification No. 30/60, dated 1st March, 1960 because remelted scrap obtained from unserviceable casting moulds viz., ingot moulds and bottom stools were used in conjunction with other non-duty paid pig iron in the manufacture of steel ingots. 15. The respondent challenged the orders in the High Court. The High Court quashed the orders of the Revenue Authorities. The High Court held that the Revenue Authorities fell into the error of interpreting Notification No. 30/60 by confining exemption to steel ingots in which " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and other power can also be used charged the devices. In our considered view, the adjudicating authority has erred in coming to this conclusion because the Notification does not say ―devices based solely on solar power but says ―solar based devices. It does not in any way forbid the alternative sources of power to support them. Simply because there are four other alternative means through which they can be charged, it does not mean that the imported goods are not solar power based devices. Therefore, the imported goods merit classification under 234 of Schedule I of Notification 1/2017. Consequently, the demand for IGST differential duty along with interest cannot be sustained." (emphasis supplied) 26. In Indian Organic Chemicals, the Tribunal held: "9. Shri Sachar has also ably argued that the decision of the Supreme Court in the case of Aluminium Corporation of India Limited v. Union of India & others (supra) and Union of India & Others v. Tata Iron & Steel Co. Ltd. (supra) was essentially based on the principle that where the raw material included duty- paid goods, the final product should not be required to pay duty again in respect of the duty-paid raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the raw materials mentioned in col. 2 of the corresponding entry of the table to the said notification. In the absence of these words finding of the adjudicating authority is not tenable in law. We are fortified in this view by Supreme Court's in the case of Union of India and others v. Tata Iron & Steel Company Ltd., Jamshedpur." (emphasis supplied) 28. The aforesaid decisions of the Tribunal in JMK Energy, Indian Organic Chemicals and Aravali Ispat emphasise that in a case where a Notification does not stipulate that the final product must be manufactured 'wholly', 'entirely' or 'exclusively' from a particular raw material, the benefit of the Notification should not be denied merely because a material other than that specified is also used in the manufacture of the final product. 29. In view of the aforesaid decisions of the Supreme Court and the Tribunal it has to be held that in the absence of the word 'only', 'exclusively', wholly' or 'entirely' in the two Notifications, the benefit of the two Notifications could not have been denied to the appellant merely for the reason that apart from using 90 percent PET bottles scrap, the appellant also used approximately 10 perc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in the Notifications. 33. Learned special counsel appearing for the department, however, placed reliance upon the decision of the Tribunal in Suncity Synthetics. Though it is correct that the Notification dated 11.07.2014 had come up for interpretation before the Tribunal in this case, but a perusal of the decision shows that it had not been contended on behalf of the appellant that in the absence of the words 'exclusively', 'entirely', 'only' or 'alone', before 'plastic scrap or plastic waste', the benefit could not be denied to the appellant even if 'popcorn' waste was also used to manufacture. The Tribunal was, therefore, not called upon to examine this contention, nor it has been considered. It is, therefore, in the absence of this consideration that the Tribunal held that presence of miniscule quantity of textile yarn would disentitle the appellant from claiming the benefit of exemption since the relevant entry in the Notification providing for exemption from duty is 'polyester staple fibre or polyster filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles'. 34. In the present case, it has been strongly contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not covered and do not find any mention under the relevant serial number of the Notifications ibid. 38.4 In view of the foregoing discussion, the conclusion that can be drawn is that popcorn is manufactured from mechanical and chemical processing of different types of waste viz. waste of plastic, yarn waste and textile fabric waste and in this manufacturing process polymers are broken down resulting in a product that is the primary form of PET. Thus the product 'Popcorn' is a primary form of a single thermoplastic material i.e. polyethylene terephthalate (PET). Since 'popcorn' does not qualify as plastic waste and scrap the benefit of the Notifications ibid is not admissible as the said Notifications allow only plastic waste and scrap as the inputs, including waste PET bottles to be used for manufacture of PSF. 'Popcorn' is not permissible as 'inputs' for availing Nil/concessional rate of duty under the Notifications ibid. Thus I find that the contention of the Noticee that 'popcorn' used to manufacture PSF is nothing but plastic waste does not have feet in view of discussions above nad accordingly I reject this contention." (emphasis supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to manufacture polyester staple fibre." (emphasis supplied) 41. Dr. Pradip K. Maji, Assistant Professor, Department of Polymer and Process Engineering, Indian Institute of Technology, Roorkee concluded in his report dated 3.5.2019. ".....POPCORN that has been tested is plastic waste. It can be confirmed that the popcorn has been produced during recycling of polyester waste and other polymer waste" ".....Popcorn materials are little degraded product of virgin materials." (emphasis supplied) 42. The Centre for Skilling and Technical Support (CIPET), Sonepat in its report dated 4.6.2019 concluded that - "1. Popcorn: Popcorn is an irregular shaped tiny lump with the dimension in 5 to 20 mm size. In other words we can say the densified form of PET Plastic waste (any kind of form) termed as popcorn. Popcorn can be manufactured by LDPE, HDPE, PP and Nylon PET waste. Waste of Polyester fibre/filament is subjected to various processes such as cutting and agglomeration or densifying process. The resultant material (irregular shaped and size) is termed aspolyester popcorn." ....The value obtained from test shows Popcorn is also a PET material. ....through the analysis it is ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, M/s. RPG Industrial Product Pvt. Ltd. failed to discharge their duties and responsibilities as required of them under the provisions of the Central Excise Act, 1944 and Rules made there under in as much as they have suppressed the fact regarding purchasing 'Popcorn' in guise of 'PET Flakes' from M/s. Khushi Fibers, M/s. PNGL International & M/s. Shruti Enterprises and utilizing the same in manufacture of 'Polyester Staple Fiber'. M/s. GPG have suppressed this fact from the department with the sole intent to evade payment of duty by fraudulently availing benefits of Notifications No. 12/2012-CE dated 17.03.2012 as amended and Notification No. 08/2014-CE dated 11.07.2014 as amended for nil/concessional rate of duty. Thus, M/s. RPG suppressed vital information from the department by their acts of fraud, wilful mis- statement and suppression of facts. They deliberately conducted their acts from the department with the sole intent to evade payment of central excise duty. They made incorrect assessment in respect of their manufacturing concerns and misstated facts in their ER-1 Returns. In view of aforesaid deliberate acts of fraud, wilful mis-statement and suppression of facts wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure-12. E.17 The allegation of the department that 'popcorn' was wrongly mentioned in the invoices as 'PET flakes' and therefore Noticee has suppressed/mis-stated facts is incorrect. The Noticee has never denied using miniscule quantity of popcorn for manufacturing its final product (PSF). This is evident from various statements tendered to the department at the time of investigation. The Noticee cannot be held responsible for description of goods mentioned incorrectly by supplier of raw materials in the invoices. E.18 It is therefore submitted that all the information was at the department's disposable and yet they raised no concern in this regard till they issued the impugned SCN. Once all the facts are available with the Department, they cannot proceed to invoke extended period of limitation alleging suppression of facts. E.19 It is submitted that except making a bald allegation of suppression of facts, the impugned SCN neither brings out any evidence nor shows any positive act of suppression on the part of the Noticee. The Noticee furnished the relevant information along with the supporting documents, to the department. Thus, it is submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waste and plastic bottle flakes only. This naturally leads to the further conclusion that such misstatement was made by them only in order to avoid the levy of Central Excise Duty. xxxxxxxxxxx. 39.4 Accordingly, I hold that the provisions of larger period of five years from the relevant date, as envisaged in Section 11A(4) of the Central Excise Act, 1944 have correctly been invoked in the instant case. In the light of the discussions in paragraphs hereinabove I hold that the Show Cause Notice succeeds both on Merits and on Limitation." (emphasis supplied) 50. Learned counsel for the appellant submitted that the extended period of limitation could not have been invoked in the facts and circumstances of the case. The contention is that nothing was suppressed from the department and that adequate disclosure had been made in the ER-1 returns, where in the details provided "description of goods", "quantity manufactured" and "quantity and value of goods removed from the factory". Quantities manufactured in respect of PSF were also disclosed, along with the Notification details under which exemption/concessional rate of duty was claimed by appellant. Learned counsel, therefore, submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessement made. An audit of the records of the appellant had also been conducted, but objection relating to wrong availment of the benefit under the exemption Notifications was never raised. It had also been stated by the appellant in the reply to the show cause notice that the appellant had never denied using miniscule quantity of 'popcorn' for manufacturing PSF and in this connection, the appellant had referred to the various statements tendered to the department at the time of investigation. It was, therefore, stated in the reply that once all the facts were available with the department, the department cannot allege that the appellant had suppressed any material fact. 55. A bald allegation of suppression of facts, without any positive evidence to show any act of suppression, could not have been made a ground to invoke the extended period of limitation. The impugned order merely mentions that the procurement of 'popcorn' in the guise of PET bottle flaks was done with an intent to evade duty and to avail the benefit of the Notifications. This finding is based on no evidence and reasons have also not been given to arrive at this finding. Once the appellant had filed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice." 59. The provisions of section 11A (4) of the Central Excise Act came up for interpretation before the Supreme Court in Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay 1995 (78) E.L.T. 401 (S.C.) . The Supreme Court observed that section 11A(4) empowers the Department to reopen the proceedings if levy has been short levied or not levied with in six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power with in five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. The relevant observations are: "2. ****** The Department invoked extended period of limitation of five years as according to it the duty was short le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of fraud, collusion, wilful statement, suppression of fact or contravention of any provision. These ingredients postulate a positive act and, therefore, mere failure to pay duty which is not due to fraud, collusion or wilful misstatement or suppression of facts is not sufficient to attract the extended period of limitation. 62. The aforesaid decisions of the Supreme Court were relied upon by the Supreme Court in Uniworth Textiles Ltd. vs. Commissioner of Central Excise, Raipur 2013 (288) E.L.T. 161 (S.C.) and the relevant portion of the judgment is reproduced below: "12. We have heard both sides, Mr. R.P. Batt, learned senior counsel, appearing on behalf of the appellant, and Mr. Mukul Gupta, learned senior counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision is reproduced below: "24. It would be seen that the ER-III/ER-I returns filed by the applicant clearly show that the applicant had categorically declared that it had cleared the final products by availing the exemption under the notification dated 17.03.2012. The applicant had furnished the returns on the basis of self assessment. Even in a case of self assessment, the Department can always call upon an assessee and seek information. It is under sub-rule (1) of rule 6 of the Central Excise Rules, 20028 that the assessee is expected to self assess the duty and sub-rule (3) of rule 12 of the 2002 Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the issue of valuation involved in this particular matter is indeed one were two plausible views could co- exist. In such cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determine his liability of duty correctly. This determination is required to be made on the basis of his own judgment and in a bona fide manner. 24. The extent of disclosure that an assessee makes is also linked to his belief as to the requirements of law. xxxxxxxxxxx. On the question of disclosure of facts, as we have already noticed above the assessee had disclosed to the department its pricing policy by giving separate letters. It is also not disputed that the returns which were required to be filed were indeed filed. In these returns, as we noticed earlier there was no separate column for disclosing details of the deemed export clearances. Separate disclosures were required to be made only for exports under bond and not for deemed exports, which are a class of domestic clearances, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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