TaxTMI 
TaxTMI 
1990 (11) TMI 417
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....puted by the Department, rosin comes in the form of a lump and cannot be used as such, so emulsion has to be prepared by adding some other material and dissolving them in the water. Process, adopted for this purpose by all the appellants, is more or less the same. The process, as stated in the impugned order in para 8 in Appeal No. E/4015/89-C (M/s. Stadfast Paper Mills, Appellant), is that the product, in question, is manufactured by reacting caustic soda lye in water and then heating the same with Rosin for 4 to 6 hours. In appeal memo of Appeal No. E/401/89-C (Orient Paper Mills) (in para 3), the process is stated as under: "The appellants mix soda ash and rosin and heat them with steam. The result out produce is cooked rosin. It is passed through strainer and the material so obtained is passed through emulsifier where it is mixed with the steam and water. The product at this stage is a clear rosin emulsion. It is not a solution because rosin does not dissolve in soda ash or water. This product is pumped through a meter to a tank and mixed with pulp and sent to paper machine for being used for sizing of paper. It is this rosin which serves as a sizing agent for paper al....
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....declared that they were manufacturing this product; that they had not filed the classification list or price list and that they had intentionally evaded payment of duty. Most of the appellants were availing of benefit of Notification No. 225/86 dated 3-4-1986 by taking credit of central excise duty paid on rosin purchased and setting off towards the payment of excise duty on the paper cleared by them. So, it was alleged in some of the show cause notices that as the rosin was utilised as raw-material in manufacture of the product, in question, which was excisable, the appellants were not entitled to avail of benefit of such notification and they were also asked to show as to why they should not be asked to pay the duty for which they have claimed set off during the said period. 7. So, following issues arise in these appeals : (i) whether the material, in question, which is being manufactured, at the intermediate stage, is 'sodium rosinate'; (ii) if not, whether it is derivative of rosin; (iii) whether it is marketable; and (iv) whether there was justification for invoking longer period of limitation. 8. As facts involved in above appeals are more or les....
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....f the appellants. This would suggest that on that date, the Department knew about the manufacture and its process. For (i) Pratap Paper Mills; (ii) Charan Kamal Card Board Paper Mills; and (iii) A.B.C. Papers Ltd., the Ld. Advocate adopted the above arguments. 11. L.A., Sh. Sridharan, made following submissions : In Vinod Paper Mills Ltd., chemical test report has not stated the composition, but has only stated 'aqueous solution'. The appellants mixed soda ash with rosin and what emerges is salt and water. Some part of it may be 'sodium rosinate', but most of the part will remain only 'rosin'. In fact, what is being prepared is sizing material. There are three types of material from which sizing material is prepared available in the market as stated in the technical literature. They are (i) powder form; (ii) paste form; and (iii) protein fortified. From this solution, which is in question, can be prepared, but solution is not marketable and is not marketed. He referred to technical literature and dictionary meaning of sodium rosinate. Entry 3806(B)(6) in HSN does not cover the material in question and at the relevant time, the Indian Tariff Nomenclature was not "Pari Materia"....
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....rms described in text books and referred to by the adjudicating authorities, the solution i.e. the material, in question, has to undergo some further process. But the appellants do not undertake this process and so it is not marketable. T.I. 38.01 covers derivatives, but this product is not derivative. He referred to technical literature. He also referred to Trade Notice issued by the Hyderabad Collectorate Number 188/89 dated 27-9-1989 [1989 (43) E.L.T. - T13], to show that similar product has been declared to be non-excisable. 15. L.A., Sh. Sharma for Shreyans Paper Mills Ltd. adopted the arguments advanced by Sh. Sridharan, Ld. Advocate. 16. Sh. Prabhakar, Financial Controller for United Pulp adopted the arguments and referred to Trade Notice issued by the Baroda Collectorate No. 178/89 dated 18-9-1989 [1989 (24) ECR 21C]. He, further, submitted that discussion about manufacture of sodium rosinate is not correct. Moreover, reference in the impugned order to Trade Notice is not proper because, the Trade Notice is dated 14-7-1987 while the period, in question, is 1-3-1986 to 28-2-1987. The Collector is not clear whether the appellants are allegedly manufacturing sodium rosin....
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....of paper. There is free rosin in the emulsion which applies to paper to make paper water repellant. So, it is not a solution. Solution is homogenous while emulsion is not homogenous and it has been clarified in question no. 5 in questions/answers produced in the impugned order. The appellants have clarified how the material differs from sodium rosinate which has been stated in the impugned order itself. The material, in question, will have to undergo process of evaporation and saponification before converting it into sodium rosinate. Moreover, sodium rosinate is manufactured from rosin and caustic soda (sodium hydroxide) while the appellants are preparing sizing material by adding soda ash to rosin. Moreover, the material, in question, is not derivative of rosin and it is a mixture of two things. The test report was not given to the appellants, even though sample was drawn after hearing. So, no reliance can be placed upon it and so composition of the product is not proved. In HSN under Chapter Heading 38.09, preparations are included, but no derivatives and in T.I. of CET, paper sizing agents are not included. By amending T.I. from 10-2-1987, by Amendment Act, 1985, [1986 (27) E.L.....
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....nate can be used only after dilution in water. So, first the appellants have to produce sodium rosinate and then they diluted in the water. He referred to technical note prepared by one Dr. R.S. Tripathi, General Manager (W) of the Mandya National Papers Mills Ltd. which is produced as additional submissions by the appellant in Appeal No. E/3319/89 wherein it has been stated as under : "Rosin is weighed and cooked in the kettle having steam check up arrangement for 3-6 hours alongwith soda as solution.... A concentrated rosin emulsion is prepared which is diluted to 2.0 per cent concentration in the dilution tank with hot water." 26. He also referred to the written submissions wherein it is stated as under : "The shelf life of the 'sizing solution' is very short." Then, he referred to a letter dated 12-6-1987 (page 21 of the Paper Book of the said appeal) addressed to the Chairman, C.B.E.C. by the Secretary of Indian Paper Mills Association wherein it is stated as under : "But this rosin cannot be used as such and it has to be mixed with soda ash and the resultant compound - Sodium Abietate/Rosinate is used in the manufacturing process." 27. He also referred to a ....
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.... Constitution and it is an inclusive definition and more products can be covered under that. On the point of double taxation, he submitted that when physical properties on rosin change as a result of chemical reaction, it could be taxed again. On marketability, he further contended that in M/s. Chhotabhai Jethabhai Co. and Others v. UOI - ECR C (SC 147) (1932-1982 Compilation of S.C. Judgments) wherein in para 35, it has been laid down that excise duty is levied because of the mere fact that the goods have been produced or manufactured and are unrelated to and not dependent on any commercial transaction in them. He submitted that this has not been over-ruled uptil now and so whether the product is marketable and is marketed has no relevance. Regarding limitation, he submitted that all the appellants knew that the product that they were manufacturing had become excisable and it was their legal duty to file classification list and declare the production of the same to the Department. It was a statutory duty which they had dis-regarded intentionally and that was a suppression. Shri Sunder Rajan reiterated the arguments stated in the appeal memos of the four appeals preferred by the De....
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....1894/89 (Zenith) (at pages 20 & 21 of the paper book), there are two test reports. As stated therein, they were the samples of rosin paste produced on different dates and reports of the Chemical Analyser are as under : (i) the sample is a thick viscous liquid of sodium rosinate. The solid content of the sample is 32.5% (by ml.) (ii) the sample is sodium rosinate in the form of thick and light yellow coloured paste. The percentage content of solid matter is 36.3. 33. In the impugned order, the Additional Collector has (at page 3 of the copy) held as under: "Rosin and soda ash or caustic soda which are the principal raw material for Sodium Rosinate, are cooked together in vessel with water by steam to convert the same into soluble form i.e. sodium rosinate. The same solution is added to stock (Pulp) alongwith other chemical in a chest for manufacture of paper. Rosin in turn reacts with other chemical in the manufacturing process of paper. It is used by paper industry for sizing of paper. It is a derivative of rosin and finds mention in the explanatory notes to HSN below Heading No. 38.86". 34. In the show cause notice (page 14)....
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....oap)". 39. So, here also what is sought to be made dutiable is aqueous compound which is used as sizing material and not sodium rosinate as such. No attempt is made to find out whether sodium rosinate, as such, is manufactured and if so, whether it is in continuous process. It has been consistently contended by all the appellants and submitted by all the advocates that the appellants do not manufacture sodium rosinate as such nor do they manufacture sizing material which is marketed in different forms, but they are manufacturing the liquid compound which is used in the process of sizing of the paper. So, if the dictionary meaning of the sodium rosinate is kept in mind, there is no evidence that any of the appellants is manufacturing sodium rosinate. 40. Sh. Sunder Rajan, mainly relied upon and referred to the record in Appeal No. E/3319/89 (Mandya National Paper). This is a government enterprise and it can be presumed that the facts stated by them can be relied upon. In this appeal a technical note, prepared by Dr. R. Tripathi, General Manager (W), is produced wherein it is stated as under: "SIZING" Process in MNPM In our Mill, we are using rosin size which is a part of....
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....cal) of the derivatives should be markedly different from those of the original compound. 43. As submitted by Sh. Bajoria, there is no attempt made on the part of the department to find out whether any of these requirements are fulfilled. According to Sh. Bajoria, this is not a derivative and if at all it can be described as derivative, it is not a satisfactory derivative and if it is incomplete product, it cannot be marketed and cannot be made dutiable . He also contended that the material, in question, contains rosin and rosin makes paper water repellant and so it is used for sizing purpose and that is why material is referred to as rosin size and there is substantial quantity of free rosin therein and there is no complete saponification. So, the material is emulsion and not solution. Solution is homogenous in nature while emulsion is not. So, as pointed out by him, it is not proved that the material, in question, conforms to the definition of rosin derivative. 44. In Appeal No. E/401/89-C (at page 4), five questions which were put to the appellant and answers by the appellant (By Sh. B.M. Lal), have been reproduced, which are as under: Questions Answers 1. Is it c....
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....and so it is not possible to take out the product, in question, at intermediate stage and market it. We do not find in any of the impugned orders against which the assessees have come in appeal, that the authority made any attempt to look into this aspect. But in Appeal Nos. E/1743/89-C and E/1744/89-C, wherein the Revenue has come in appeal, in the impugned order, the Collector (Appeals) has noted as under : "Observe that it is not denied by the Assistant Collector that the solution of rosin and caustic soda i.e. so-called 'derivative of rosin' comes into existence in the continuous manufacturing process of paper and that it is not possible to take the solution out of the manufacturing machine for the purpose of marketing. Thus, the solution so produced in the course of manufacture of paper, has no identifiable existence of its own except in the mixture of paper pulp, during the process of sizing of paper." 47. All the appellants have stated the process of the manufacture of the material and have stated that it is a continuous process. 48. Shri Sunder Rajan referred to a technical note of Sh. Tripathi produced in Appeal No. E/3319/89-C, but then in that very note, it is s....
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....y Sh. Sunder Rajan is accepted, then also the position of law, as laid down by the Hon'ble Supreme Court, in Bhor Industries, etc. has to prevail as it should be presumed that the earlier interpretations are over-ruled or reversed, if not explicitly, then by implication. In the present appeals, the Department has not produced any evidence about the marketability, but in most of the impugned orders, technical literature has been referred to show that three types of sizing materials are being marketed in India. Even if it is so, then also the appellants have contended that they do not manufacture any of these types of material, but they are preparing a solution which has to be prepared for use from one of these materials also if one of these materials is purchased and used by the appellant. As contended by the L. Advocates, that if any of these types of material is to be produced, the appellant has to carry out some further process which they are not carrying out. It is also contended by L.A., Sh. Kumtakar that if sodium rosinate is a product which can be prepared out of this solution, the solution is an intermediate product and no sodium rosinate is produced by the appellants. In th....
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....empted by virtue of Notification No. 118/75 dated 3-4-1975. Being an exempted product prior to the coming into force of new tariff, not much attention was paid on its excisability both by the department as well as by the manufacturers." 53. In Appeal No. E/1116/88-C (Orient Paper) (at page 25 of the impugned order), it has been observed as under : "Even otherwise, the demand has arisen solely as a result of introduction of new Tariff w.e.f. 28-2-1986 and hence there is no fraud, collusion, wilful mis-statement, suppression of facts, etc. for invoking extended period under the provisions of Sec. 11A". 54. So, even some of the adjudicating authorities have admitted that it is the position. In this view, there was no justification for invoking longer period of limitation and wherever it has been invoked and orders have been passed, as a result thereof, such orders will require to be set aside. In the cases where the question of limitation is not there, in light of the discussion above, as it is not proved that any excisable product is manufactured by the appellants at the intermediate stage, in marketable form, the appeals will have to be allowed on merits and the impugned or....