TaxTMI 
TaxTMI 
2011 (5) TMI 865
X X X X Extracts X X X X
X X X X Extracts X X X X
....dated 14-5-1992 for the purpose of exemption from excise registration on the ground that its turnover was below the exemption limit prescribed under the SSI exemption Notification No. 1/93, dated 28-2-1993 as amended from time to time, the officers of the department conducted search of the premises of the appellant firm on 8-9-1998 and it was followed by the investigation and in the course thereof apart from panchanama of the search, the statements of the proprietor of the firm and of the authorized signatory came to be recorded and thereafter, the show cause notice came to be issued in relation to the period from April, 97 to March, 98 requiring the appellants to show cause against the classification of the product declared by the appellant as folder under Chapter sub-heading 4819.19 of the CETA and consequently demanding the duty as well as imposition of penalty for suppressing the relevant facts. The show cause notice was contested by the appellants under their reply dated 22-1-2003. The adjudicating authority, however, confirmed the classification under Chapter sub-heading 4819.19 of the CETA, 1985 in relation to the product which was classified as the folder by the appellants ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in consonance with the facts alleged in the show cause notice. Referring to the show cause notice, it was sought to be contended that the same was issued on the ground that the folders were inherent part of cartons. According to the ld. advocate, there is therefore, a clear case of traversing beyond the scope of the show cause notice by holding that the folders would amount to container. In that regard, reliance is placed in the decision of the Apex Court in the matter of Commissioner v. Toyo Engineering India Ltd. reported in 2006 (201) E.L.T. 513 (S.C.), Commissioner of Cen. Excise, Nagpur v. Ballarpur Industries Ltd. reported in 2007 (215) E.L.T. 489 (S.C.), Commissioner of Central Excise, Bhubaneswar-I v. Champdany Industries Ltd. reported in 2009 (241) E.L.T. 481 and Commissioner of C. Ex., Chandigarh v. Shital International reported in 2010 (259) E.L.T. 165 (S.C.). It was then sought to be contended that the show cause notice could not have been issued on 30-12-2002 in relation to the period from April, 97 to March, 98 as it was not issued within the period of one year from the relevant period. Drawing our attention to the decision in the matter of Kushal Fertilisers (P) Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eriod in the case in hand. He further submitted that the expression "bags" which appeared in the CSH 48.19 clearly discloses that the containers need not be enclosed on all four sides as was the position prior to inclusion of those expression under the said CSH. Bags need not be necessarily enclosed from all four sides. He further submitted that the decisions which are sought to be relied upon in relation to the contention about the limitation of one year are totally irrelevant to the facts of the case as the suppression of relevant fact was revealed to the department much after the expiry of the relevant period and therefore, Nizam Sugar Factory and Khushal Fertilisers (P) Ltd's cases are of no relevancy to the case in hand. He also submitted that the authorities did not travel beyond the scope of the show cause notice and there is no substance in the contention that there was no suppression of relevant fact and that the appellants' bona fide believes that the product was classifiable under the CSH 4901.90. In support of his contention that prima facie case of bona fide belief is required to be made out, reliance was sought to be placed on the decision in the matter of Spie Capag ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aised essentially on the basis of the decision by the Apex Court in G. Claridge & Company Ltd's case and of the Tribunal in United Paper Products. 8. The Apex Court in G. Claridge & Company Ltd.'s case while dealing with the issue as to whether egg trays and other similar products were containers classifiable under CSH 4819.19 of the Tariff Entry or not, after taking into consideration the definition of the term 'container' in different dictionaries and extracts from the Glossary of Packaging Terms (USA) and Australia, observed that the term 'container' is used in three different senses : in a broad sense, it means a receptacle which contains; in a narrow sense, it means a receptacle in which articles are covered or enclosed and transported; and in a more limited sense, it means enclosures used in shipping or railway for transport of goods. Having considered the expression in three different senses, it was also observed by the Apex Court that : "if used in a broad sense, 'container' would include a tray because it is receptacle which contains articles and, therefore, an egg tray would be a 'container'. But an egg tray would not be a 'container' in a narrow sense because art....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he term like bags and letter boards and similar articles were not included in the tariff entry when the matter was considered by the Apex Court. Needless to say that bags need not be closed in all four sides. Rather they are open in one side. Folders are also normally open on three sides. As already pointed out above, the Apex Court has not held the egg trays being container essentially on the ground that they were not covered or enclosed on all sides and therefore were not suitable for transportation of articles. Inclusion of terms like bags, letter boards and similar articles in the Tariff Heading under 48.19 clearly discloses that entries thereunder are not confined to 'containers' which are enclosed on all sides and they can include containers which are open on one side or more. Being so, the decision of the Apex Court in G. Claridge & Company Ltd.'s case can be of no help to the appellants in the matter in hand. 10. The decision of the Tribunal in United Paper Products was clearly based on the decision of the Apex Court in G. Claridge & Company Ltd.'s case. That was also a case prior to the amendment to the said Tariff Entry and hence this decision is also of no help t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plied by M/s. SSP to Rupa & Co. were entered in the ledger account of M/s. Rupa & Co. under the heading "Packing Material". Referring to the above quoted materials and other investigations carried out, it was further observed in the show cause notice that : "from the foregoing it appears that the said assessee has intentionally misdeclared the item folders and classified the same under Chapter SH 4821.00 which was exempted and suppressed the fact that these folders were inherent part of printed cartons classifiable under Ch. SH 4819.19 and attracting duty". 14. It has also been observed in the show cause notice that "since in terms of discussions above and the investigations carried out, it appears that the assessee has manufactured the printed tops and folders in disassembled form, used for packing hosiery like vests, are correctly classifiable under Central Excise Chapter sub-heading 4819.19 chargeable to the central excise duty". 15. It was further observed in the show cause notice that "it is very clear that Shri Agarwal was well aware of the fact that the item 'folder' was an inherent fitment used inside the box with a view to adequately protect and keep the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in question falls within the ambit of the word 'container'. It is pertinent to note that the entry under Chapter Heading 48.19 clearly refers to the expression "other packing containers. As already seen above, the show cause notice describes the product being one which was manufactured for the purpose of adequate protection to the product when kept inside in such folders and this aspect was clearly understood by the appellants. It is stated in the reply "it is also further alleged that the folders/supporters are inherent fitments used in the packing of 'vests.' Being so, the contention that while deciding the case, the authorities had traversed beyond the show cause notice is purely an afterthought. Once it is clear from the records that the contention about traversing beyond the show cause notice is not sustainable in the facts and circumstances of the case, the decisions of the Apex Court in Toyo Engineering, Ballarpur Industries, Champdany Industries and Shital International can be of no help to the appellants. Undoubtedly, law that the authorities cannot traverse beyond the show cause notice is well settled. However, each case will have to be considered on the basis of the fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....art of the appellant". Undisputedly, in this case no information whatsoever relevant for initiation of action was submitted by the appellants during the period from April, 1997 to March, 1998. It is not the case of the appellants that during the said period there was any inspection of the appellants' premises. It is also not the case of the appellants that during the said period the departmental people had inspected the records maintained by the appellants. On the contrary it is an undisputed fact that there was search of the premises on 8-9-1998 and pursuant to that certain relevant facts were revealed to the department. Being so, it is a clear case of facts having come to the knowledge of the department pursuant to the efforts by the department and suppression thereof by the appellants. In these circumstances, therefore, the decision in Khushal Fertilisers (P) Ltd's case is of no help to the appellants. As far as the decision in Nizam Sugar Factory, it is essentially in relation to the issue as to whether the department can invoke the extended period of limitation by issuing second show cause notice in spite of the fact that the department had already issued first show cause noti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttles tight in the cartons and keeps the vial in place and also protects it. Take the printed paper in which sarees are wrapped while packing in cases or bales. The printed paper though goes into carton along with the saree is not classified as an inherent component along with the cartons. It is only an advertising material giving brand name of the saree and the address of the dealer/manufacturer, and is classified under Chapter 49. In view of the above we state that the folders are rightly classifiable under Chapter 4820.00 or 4901.00 and not under Chapter 4819.19 chargeable to duty as inherent fitment going into the cartons. A sample of the folder is enclosed for your perusal." 20. The contention is sought to be countered on behalf of the department while contending that the averments in the reply discloses thorough knowledge of the provisions of law to the appellants and if at all there was any doubt in the mind of the appellants, nothing prevented the appellants from seeking clarification from the department. Undoubtedly, no such clarification was sought for and there was clear attempt to evade the payment of duty and hence it cannot be said to be a case of bona f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fide only when it is formed after all reasonable considerations are taken into account. In Spie Capag S.A., the Tribunal had held that "the least that was expected of the appellant to discharge plea of bona fide belief was to make enquiries from Central Excise authorities or some reputed legal firm regarding dutiability of its manufactured by it. But this was not done. When as contended by the appellant, that there were conflicting decision, they were surely aware of the Bombay High Court decision in the case of Indian Hume Pipe case [1986 (26) E.L.T. 685 (Bom.)] and Tribunal decision in the case of Saurabh Construction Co. [1987 (27) E.L.T. 677 (Tri. - Del.)] holding RCC pipe as excisable goods. Besides, the Tribunal has in the Hindustan Shipyard [1987 (28) E.L.T. 586 (Tri. - Del.)] and Richardson and Cruddas [1988 (38) E.L.T. 176 (Tri. - Del.)] cited supra has held, that in works contracts if new commodity comes into existence it would be excisable. When there were so many case laws holding that the goods are excisable and when the contract also puts them on notice that the pipes will be dutiable, the plea of bona fide belief cannot be accepted." The ruling is a complete answer t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dutiability under the Central Excise Act. 27. In Padmini Products, the law laid down is to the effect that mere failure or negligence of the manufacturer to take out licence or pay duty when there was scope for doubt that the goods were not dutiable, cannot justify invocation of extended period of limitation. When the assessee by referring to a Board's Circular which is not applicable to the matter, chooses himself to consider the product to be non-dutiable, it cannot be said under any stretch of imagination that such an action would be a mere failure or negligence. 28. In Chemphar Drugs & Liniments' case, the law laid down is similar to one pronounced in Padmini Products. The assessee without disclosing the necessary information regarding the product manufactured by it, merely on the basis of non-applicable circular and by taking into consideration various other packing materials had choosen himself to consider the product to be non-dutiable; that was certainly conscious/deliberate withholding of information from the department. Being so, the decision in Chemphar Durgs & Liniments rather than assisting the appellants would justify the action taken by the departmen....