TaxTMI 
TaxTMI 
2019 (6) TMI 263
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....n with respect to these matters. The show cause notices were issued in 1992 and 1994 and after decision vide Order-in-Original No. 22/1998 dated 28.01.1998, the matter was remanded by the Tribunal vide Final Order No.517-524/2003 to reconsider the issue afresh. In the second round of litigation vide Final Order Nos. 1470-1474/2009 the matter was again remanded to the original authority with specific direction to consider the issue of classification which was disputed but not considered despite the direction of CESTAT in the original remand order. In the impugned order, the question of classification of products was discussed and the demands were confirmed. The issue in brief is that VIPPL is a limited company engaged in manufacture of two products called "Cable Filling Compound" (CFC) and "Cable Cleaning Compound" (CCC). They avail the benefit of SSI exemption. Show cause notice No.150/92 was issued alleging that the turnover of VIPPL should be clubbed together with the turnover of VIPI, Newton and Appolo Engineering Industries (AEI) alleging that these three are not separate manufacturing units but are fictitious entities operating from the same premises. Accordingly, differential....
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....urless and non toxic. In effect the cable filling compound has to act as a seal protecting the signal carrying wires at the cable joint from exposure to various hazards." 4. Based on this opinion of the Chartered Engineer the appellants claim that the goods in question deserve to be classified as lubricating preparations/ preparations of a kind used for oil or grease treatment of textile materials etc., under Chapter heading 3403.99. Learned counsel for the appellants submits that the expert opinion of the Chartered Engineer should have been accepted by the Commissioner or he should have countered it by referring it to another expert in the matter. Since he has not referred another expert, he is bound to accept the Chartered Engineer's certificate and the goods should have been classified under Chapter heading 3403 as claimed by them. On this point, learned departmental representative submits that the adjudicating authority has not in any way disputed the Chartered Engineer's certificate but has come to a conclusion regarding the classification based on the report of the Chartered Engineer itself. He draws the attention of the bench to Para 15 to 20 of the impugned order which re....
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....e essential character and not on residual or auxiliary character. 34.03 applies to lubricating materials. Therefore, I hold that CFC does not fall under 34.03. Next question is of appropriate classification? Department's view is that it is classifiable under 38.03 as a residuary product of chemical or allied industries, not elsewhere specified or included. The main contention of the notice against classification under 38.03 is that CFC is not a product of chemical or allied industry. The Chartered Engineer has opined that the product is not a chemical substance but while preparation seasoned for a specific purpose for using underground telephone cables. Answers given by the Chartered Engineer in question No. 4 & 5 are reproduced. "4. From the ingredients used in producing the preparations made in accordance with the specification given by department of Telecommunication, can the preparation be countenanced as chemical product and if so, what type of categorization can we give to this? Is it a chemical product or alcoholic product? If it is not so what product it is? Ans. The resultant substance on integration of components is NOT a chemical compound. It is simply a physically....
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....ary in nature. 20. Since CFC falls under 38.23 benefit of 287/86 is not available. I also find that neither CFC nor CCC conform to above description of speciality oils. One of the conditions for specialty oil is that it is intended for industrial use (other than for use as lubricant and of which lubrication function, if any, is only secondary in nature). Even if the classification of CFC is accepted under 34.03, it would mean that its main function is lubrication. In that event it will not be a speciality oil. As regards CCC, the decision is similar i.e., since it is classifiable under 34.03 its main function is lubrication, and it goes out of the purview of speciality oil. In either case, benefit of notification 287/86 is not available, neither to CFC nor to CCC." 5. We have considered the arguments on both sides on this point of classification. We do not agree with the learned counsel for the appellant that the classification has to be decided by a Chartered Engineer. A Chartered Engineer can give his expert opinion regarding the nature of the material but the classification is to be done by the officers or the adjudicating authority or the appellate authorities. We do not f....
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....0. Products under both these headings are eligible for exemption under notification 287/1986. Therefore, the demand to that extent does not sustain. As far as the balance demand of Rs. 5,46,232/- is concerned, it is on CFC on account of clubbing together the turnover of VIPPL with the turnover of VIPI, Newton and AEI. Learned counsel would submit that VIPI had a separate SSI registration and they are also registered under Andhra Pradesh Sales Tax during the period. Similarly both Newton and AEI had separate AP Sales Tax registration. Therefore, the clubbing of turnover by these organisations with that of VIPI is incorrect and therefore, demand on this count needs to be set aside. Countering these arguments, learned departmental representative submits that as far as the demand with respect to CCC is concerned, the adjudicating authority has clearly discussed as to why the exemption under notification 287/1986-CE dated 05.05.86 is not applicable to the product. He would draw the attention of the bench to this notification which reads as follows: "In exercise of the powers conferred by Sub Rule (1) of Rule 8 of Central Excise Rules, 1944, the Central Government hereby exempts speci....
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.... is a proprietary concern manufacturing cable filling compound (CFC) located at 60A, IDA, Cherlapally. The Directors of VIPPL include Shri C. Ramdas and Smt Meera Ramdas. Smt Meera Ramdas is proprietrix of M/s VIPI....." 11. He would submit that the department themselves have agreed in a subsequent notice that VIPI is a separate manufacturer and not same as VIPPL, although the former is a proprietary concern and the later is a limited company. He would submit that if the turnover of VIPI is deducted from the show cause notice No.150/92, the demand on appellant would be substantially reduced and therefore, demand needs to be dropped to that extent. He also prays that the penalties and fine imposed under this show cause notice in the impugned order may be set aside. 12. We have considered the arguments on both sides. As far as this show cause notice is concerned, the entire demand arises on the presumption that VIPPL is the only true manufacturer and VIPI as well as Newton and AEI are dummy entities create solely for the purpose of splitting the total turnover so as to remain under SSI limit. The turnover during the relevant period of these entities was as follows: Sl. No. Name....
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....d their goods and differential duty on this account works out to Rs. 2,13,736/-. There were some invoices without corresponding Central Excise gate passes, the duty on which worked out to Rs. 22,486/-. Thus, the total demand of Rs. 13,88,790/- was made under Rule 9(2) of Central Excise Rules read with section 11A of Central Excise Act on VIPI as above. It was also proposed to impose penalty on them under Rule 9(2), 52A, 173Q and 226 of Central Excise Rules, 1944. It was also proposed to confiscate machinery used for manufacture of goods under Rule 173Q. Further, there was also a demand on VIPPL in this show cause notice. It is alleged that from the auditor's statement of VIPPL the total value on clearances for Income Tax purposes was declared as Rs. 1,26,48,744/- during 1992-93. After allowing necessary deductions, the assessable value works out to Rs. 1,14,82,180/- whereas the value declared with the Central Excise is only Rs. 1,05,24,501/-. Accordingly, differential duty on the value of Rs. 9,60,679/- amounting to Rs. 1,65,717/- was demanded from them. It was further alleged that VIPPL had maintained four separate registers and the total duty shown to have been paid as per the re....
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....-duty to the extent it is confirmed. He, further pleads that there is no case for confiscation of machinery or imposition of redemption fine or imposition of penalties either on the firms or on the individuals. Therefore, he pleads that the entire demand may be dropped. 18. Learned departmental representative with respect to this show cause notice reiterates the findings in the impugned order and submits that the demands were, after due consideration, confirmed and therefore, the demand, interest as well as the penalties need to be upheld. 19. We have considered the arguments on both sides. With respect to this show cause notice, we find that the demand against VIPI is on the following grounds: (1) Clearances without payment of duty amount to Rs. 1,21,892/-: The relevant period for this is 01.04.1991 to 31.03.1992. Learned counsel submits that this demand will not be sustainable if the department hold that VIPI is a dummy unit and VIPPL is the only correct unit as alleged in the first show cause notice. We have considered this argument and find that as far as the allegation regarding VIPI being dummy unit is concerned, we have not accepted it and therefore, set aside partly ....