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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 ..... xt that the Supreme Court held that if the intention of the government was to exclude exemption to duty paid pig iron when mixed with other materials, then the Notification would have used the expression, only or exclusively or entirely in regard to duty paid pig iron but these expressions were not used. Thus, the benefit of the exemption could not have been denied. 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 percent of popcorn waste in the manufacture PSF. Whether popcorn is plastic waste? - whether denial of nil/concessional duty to PSF manufactured by the appellant on the ground that popcorn in not plastic waste, is justified? - HELD THAT:- The benefit of the Notifications has also been denied to the appellant for the reason that popcorn is recycled PET material and not plastic waste and, therefore, would not fall within the scope of the Notifications. It should not be forgotten that the purpose of the Notifications is to encourage manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t records to the audit team . This finding is merely based on a presumption. It is expected that when an audit is carried out, all the relevant documents are examined by the officers who conduct the audit. The adjudicating authority cannot draw an inference that since an objection was not raised by the audit team, the appellant must not have disclosed all the documents to the audit team. The department, at all stages, had an opportunity to question the appellant within the stipulated time but that was not done. Even otherwise, the appellant had in the reply clearly mentioned that from the various statements tendered to the department at the time of investigation, the appellant had never denied that it was using minuscule quantity of popcorn for manufacture of the final product. It must also be remembered that mere suppression of fact is not enough. There has to be a deliberate attempt to evade payment of excise duty. The show cause notice must specifically deal with this aspect and the adjudicating authority is also obliged to examine this aspect in the light of the facts stated by the assessee in reply to the show cause notice. The provisions of section 11A (4) of the Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n disclosed by the department to prove that the Director dealt with the goods which were liable to confiscation with knowledge about the liability to confiscation. According to the learned counsel for the appellant, such a finding has not been recorded nor evidence was brought on record by the department. The impugned order dated 16.09.2020 passed by the adjudicating authority deserves to be set aside and is set aside. The two appeals are, accordingly, allowed. - HON BLE MR. JUSTICE DILIP GUPTA, PRESIDENT AND HON BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Shri B.L. Narasimhan, Ms. Sukriti Das and Shri Shivam Bansal, Advocates for the Appellant Shri Mihir Ranjan, Special Counsel for the Respondent ORDER JUSTICE DILIP GUPTA : Excise Appeal No. 50352 of 2021 has been filed by RPG Industrial Products Pvt. Ltd. the appellant to assail the order dated 16.09.2020 passed by the Additional Director General (Adjudication) the adjudication authority by which the demand of central excise duty has been confirmed against the appellant and an order for recovery of the same under section 11A(4) of the Central Excise Act 1944 the Central Excise Act has also been passed. The adjudicating autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garneted stock) of man-made fibers Loaded truck bearing Regn. No. HR55-X- 7411 Test Memo No. 1/2017 24.01.2017 The sample is in the form of dull white agglomerated lumps of assorted shape and sizes having uneven surfaces. It is composed of polyester. 2. Popcorn Storage godown Test Memo No. 2/2017 28.02.2017 The sample is in the form of hard white beads of irregular shape and size. It is wholly composed of Polyester (PET). 3. Finished goods (PSF) Storage godown Test Memo No. 3/2017 09.02.2017 The sample is in the form of off white crimpled fibrous mass, containing small bunches of crimped fibers of various length, made of polyester. 4. PET bottle flakes Factory premises Test Memo No. 4/2017 01.02.2017 The sample is in the form of colorless flakes. It is composed of Plyester and does not contain any material other than plastic. 7. Investigations were also initiated against the raw material suppliers of the appellant like PNGL International, Khushi Fibre Industries and Shruti Enterprises. Statements of the employees of these firms were also recorded. 8. A show cause notice dated 21.03.2018 was then issued to the appellant proposing to demand and recover central excise duty with inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the appellant assisted by Ms. Sukriti Das and Shri Shivam Bansal, made the following submissions: (i) The denial of nil concessional duty under Serial No. 172A of Notification dated 17.03.2012 for the period up to 10.07.2014 and, thereafter, under Serial No. 70A of Notification dated 01.03.2011 to PSF manufactured by the appellant from popcorn waste, amongst other inputs, by restricting the scope of entry to use of specified inputs only, is erroneous; (ii) The interpretation adopted by the adjudicating authority has the effect of reading conditions in the said Notification that are not present; (iii) Popcorn purchased from three suppliers by the appellant is nothing but a product manufactured from recycled plastic waste; (iv) Popcorn is not classifiable under Customs Tariff Heading CTH 3907 of the Tariff Act; (v) The benefit of cum-duty is available to the appellant; (vi) If the duty is held to be payable, the appellant would be entitled to avail CENVAT credit; (vii) The extended period of limitation could not have been invoked and so the demand is substantially time barred. (viii) Imposition of penalty upon the appellant and recovery of interest is not sustainable; and (ix) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 passed by the adjudicating authority. The relevant portion of the said paragraph is reproduced below: 20. Therefore, in view of the above, based on the documents submitted by M/s RPG and considering the purchase of Popcorn in the guise of PET bottle flakes from M/s Khushi Fibres, M/s PNGL International and Shruti Enterprises during the last three years, the percentage of popcorn used in the manufacturing of PSF is given below: Year Total material used in MT Popcorn used in MT % of popcorn used 2013-14 23364 833.5 3.57 2014-15 28256.4 2817.5 9.97 2015-16 27365.8 3808.1 13.92 2016-17 (up to Dec. 16) 21340.2 1804 8.45 TOTAL 100326.4 9263.1 9.23 17. The appellant claimed benefit of Serial No. 172A of the Notification dated 17.03.2012 and the relevant entry is reproduced below: Sl. No. Chapter or heading or sub-heading or tariff item of the First Schedule Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) 172A 54 or 55 Polyester staple fibre or polyester filament yarn manufactured from plastic scrap and plastic waste including waste polyethylene terephthalate bottles. Nil - 18. However, with effect from 11.07.2014 the appellant opted concessional duty @ 2 percent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible for the Notification ibid. It is a settled law that when the text of the exemption Notification is plain and clear no words can be added or deleted. In the instant case there is no ambiguity in the text of the notification as the benefit under the notification is available only if the PSF is manufactured from plastic scrap and plastic waste and PET bottle waste. It is also a settled law that statutory provisions which are mandatory in nature must be construed strictly in plain words and no intendment is permissible. xxxxxxxxx. (emphasis supplied) 20. The contention of the learned counsel for the appellant is that the view taken by the adjudicating authority is not correct for the reason that the Notifications do not use the terms only , exclusively , wholly or entirely before plastic scrap and/or plastic waste and so the appellant cannot be denied the benefit of duty at nil or concessional rate merely because a very small quantity of popcorn waste, which is nothing but recycled PET plastic waste, is also used in the manufacture of PSF. To support this contention, learned counsel for the appellant placed reliance upon the judgments of the Supreme Court in Union of India vs. Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, October, 1960, Notification No. 30/60 was amended by substituting the figures and words 29.35 per metric ton for the words and figures 30 per ton . 10. By Notification No. 75/62, dated 24th April, 1962, the Central Government in exercise of powers conferred by rule 8(1) of the Rules exempted steel ingots falling under Item 26 of the First Schedule to the Act and specified in Column 2 of the Table appended to the notification from so much of the duty of excise leviable thereon as is in excess of duty specified in the corresponding entry in Column 2 of the said Table. In column 2 of the said notification the following description and duty appear: S. No. Descritption Duty 1. If produced out of scrap obtained from duty paid pig iron Rs. 30 per M.T. 2. If produced out of old iron or steel or scrap obtained from duty paid steel ingots or products (75/62) Nil xxxxxxxxxx 12. Duty was realised from the respondent on steel ingots in the making of which duty-paid pig iron of rejected ingot moulds and bottom stools were used along with non-duty paid materials. The respondent claimed exemption in respect of duty-paid pig iron on rejected moulds and bottom stools used in the making of steel i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed with other non-duty paid materials. If the intention of the Government were to exclude the exemption to duty paid pig iron when mixed with other materials then the notification would have used the expression only or exclusively or entirely in regard to duty-paid pig iron. The object of the notification was to grant relief by exempting duty-paid pig iron. (emphasis supplied) 25. In JMK Energy, the Tribunal held: 19. The next question is whether the classification of the imported goods under IGST. S. No. 234 of Schedule I of the IGST Notification 1/2017 covers solar power based devices is correct. We find that the notification does not place any restriction of the Customs Tariff Heading and it applies so long as such devices fall under Chapter 84 or 85 of the Customs Tariff. Evidently, the goods falling under 8507 would also be entitled to classification under Schedule I at S. No. 234 if they are solar power based. There can be no manner of doubt that they are solar power based. The reason this classification was not accepted by the adjudicating authority is that they are not SOLELY based on solar power and other power can also be used charged the devices. In our considered view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the waste but to grant it pro rata. (emphasis supplied) 27. In Aravali Ispat, the Tribunal held: 4. We have carefully considered the pleas on both sides. We find substantial force in the appellant s plea. Notification 208/83 dated 1.8.83 as it stood before 1.3.84 did not spell out that the iron castings falling under Tariff Item 25 (16) (i) should be manufactured exclusively out of raw materials stated in corresponding entry of col. 2 of the table of that notification. Character of the admixture used for the manufacture of iron castings still remains the scrap of iron or pig iron falling under Tariff Item 25 (3) (i) or 25 (i). The circular of the Government quoted by the learned consultant supports his plea for availment of the said notification. Adjudicating authority s observation that the circular cannot override the provisions of the notification is no doubt correct but ignores the predominant character of the admixture used for the final product. Notification 208/83 does not stipulate that the final product must be manufactured wholly or entirely or exclusively out of the raw materials mentioned in col. 2 of the corresponding entry of the table to the said notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52/86 CE dated 10.2.1986 9 701400 Yarn spun wholly out of glass fibres (excluding continuous filament yarn) No. 59/88 CE dated 1.3.1988 - - Printed cartons, boxes, containers falling under Chapter 48 of the Schedule to Central Excise Tariff Act and made wholly out of paper or paperboard of heading / sub-heading nos. 4804, 4805.11, 4805.19, 4807.91, 4807.92, 4808 ad 4811.10. 31. In this connection, it would also be pertinent to also refer to Serial No. 123 of the Notification dated 01.03.2011 which provides for concessional duty benefit @ 2 percent to only those products which are wholly made of quilted textile materials. Thus, there is a marked difference in the language used at Serial No. 123 and at Serial No. 70A of the said Notification. 32. It would, therefore, be more than apparent that the intention in the two Notifications could not have been to restrict the scope of the said Notifications to goods manufactured only or exclusively out of plastic scrap or plastic waste, when such words are not specified 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be added to the Notification and the department would be justified in its belief only if the words exclusively , solely or only are added before plastic scrap or plastic waste in the Notification. Whether popcorn is plastic waste 36. The next issue that arises for consideration is whether denial of nil/concessional duty to PSF manufactured by the appellant on the ground that popcorn in not plastic waste, is justified. 37. The adjudication authority, based on the reports submitted by CRCL, inferred that popcorn is a primary form of PET and is not a plastic waste. The relevant findings of the adjudicating authority are reproduced below: 38.3 xxxxxxxxx. A combined reading of above reports reveals that popcorn is not a waste of yarn/fiber but it is raw material made from processing of textile polymer waste and is primary form of PET. CIPET Ahemadabad has held that popcorn produced using waste PET yarn can be considered as recycled PET material. However recycled PET material is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sized densified compound of polyester) can be made from LDPE waste, HDPE waste, PP waste, LLDPE waste, BOPP waste, HM waste, Polyester waste, Nylon waste etc. trim scrapes, synthetic fibres, synthetic fibre waste, carpet or any type of soft textile polymer waste. Popcorn making is done to convert textile polymer waste to dense cubes for easy feeding into Extruder. C. Waste of polyester fibre/filament/yarn in any form i.e. wiry, crimped, uncrimped, drawn, tow, textured, non-textured etc., (which is in fibrous or yarn form) is subject to various process (cutting and Agglomerating or Dencifying process) and the resultant material is irregular shaped irregular sized densified compound of polyester which is termed as Polyester Popcorn . The resultant product is i.e. Polyester Popcorn cannot be termed as waste of manmade fibre but it should be termed as raw material made from textile polymer waste and can be used along with pet flakes 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation has the effect of adding words or conditions in the said Notifications. Extended period of limitation 46. Learned counsel for the appellant submitted that the appeal pertains to the period from March 2013 to 02.01.2017 and since the show cause notice was issued on 21.03.2018, the demand raised for the period up to February, 2016 would be beyond the normal period of limitation and hence barred by time. 47. To examine this issue, it would be appropriate to examine the allegations that have been made on this issue in the show cause notice and the same are as follows: 24 . INVOCATION OF THE EXTENDED PERIOD The department has placed enormous faith and trust on the assessee for the purpose of determining and paying central excise duty correctly under the self removal and self assessment procedure assigned under the provisions of Central Excise Acts and Rules. However, 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 Fiber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly mentioned and disclosed the quantities manufactured in respect of PSF, along with the Notifications under which exemption/ concessional rate of duty was claimed. Copy of the ER-1 Returns filed by the Noticee during the disputed period is enclosed as Annexure-11. E.12 It was always open to the Department to scrutinize the declaration and the returns filed by the Noticee and verify the correctness of the assessment made. In fact, this was the obligation cast upon the Department under Rule 12(3) of the Central Excise Rules, 2002. xxxxxxxxxxx E.16 Further, it is also imperative to notice that the Department also conducted audit at the Noticee's premises during the relevant period and never raised any dispute regarding the availability of exemption or concessional duty benefit to the Noticee. Copy of the audit report is enclosed as Annexure-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx. These facts came to the fore only in the investigations. It is not the case of the Noticee that they (the Noticee) had produced all the relevant records to the Audit Team of the Department (if any such audit had been conducted). Nor had the Noticee on their own produced the relevant records/documents to the assessing officer. Therefore the department did not have the opportunity of detecting the misrepresentation/misstatements contained in their monthly returns. Thus, while the Noticee had all the facts of the case in their possession they withheld the same from the knowledge of the department and they waited for the department to unearth the evasion involved in the instant case. Therefore, I have no hesitation what so ever to conclude that the Noticee have knowingly misstated that they had manufactured PSF from plastic 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppressed any material facts from the department for it had filed ER-1 returns in which adequate disclosures had been made. The details included the description of the goods, the quantity manufactured, the quantity and value of the goods removed from the factory and also the quantities manufactured in respect of PSF as also the Notifications under which the appellant claimed exemption/ concessional rate of duty. 54. It does appear from the reply filed by the appellant that the appellant had been filing the prescribed returns giving details, including the quantities manufactured in respect of PSF along with the relevant Notifications under which exemption was being claimed. It was always open to the department to scrutinize the declaration and the returns filed by the appellant and verify the correctness 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reply to the show cause notice. 57. It is in the light of the aforesaid facts that the provisions of section 11A(4) of the Central Excise Act dealing with the invocation of the extended period of limitation and the decisions dealing with this aspect need to be examined. 58. Section 11 A(4) of the Central Excise Act, which deals with extended period of limitation, is reproduced below: Section 11A(4) Where any duty of excise has not been levied or paid or has been short-levied or shor- paid or erroneously refunded, by the reason of- (a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the 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 befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inabove that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in the proviso to Section 11-A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was 7 (2005) 7 SCC 749 11 E/52953/2018 not open to CEGAT to come to a conclusion that the appellant was guilty of suppression of facts. (emphasis supplied) 61. In Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore (2003) 3 SCC 410 the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (emphasis supplied) 64. It is, therefore, clear that the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. 65. In Raydean Industries, the Tribunal in connection with the extended period of limitation, observed that even in the case of self assessment, the department can always call upon an assessee and seek information and it is the duty of the proper officer to scrutinize the correctness of the duty assessed by the assessee. The Division Bench also noted that departmental instructions issued to officers also emphasise that it is the duty of the officers to scrutinize the returns. The relevant portion of the 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that in any scheme of self- assessment, it the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bonafide manner. The relevant portion of the judgment is reproduced below: 23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of Tribunal. We note that 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 req ..... X X X X Extracts X X X X X X X X Extracts X X X X
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