TaxTMI 
TaxTMI 
2024 (9) TMI 1645
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....t the appellant for the month of March 2013. 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 10.07.201....
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....rest and penalty on the ground that one of the input namely, popcorn waste used by the appellant for manufacturing 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 centr....
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....) Imposition of penalty upon the appellant and recovery of interest is not sustainable; and (ix) The imposition of penalty upon the Director under rule 26(1) of the Central Excise 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 adde....
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....tion 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 on clearance 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 o....
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....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. 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....
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.... 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 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 uns....
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....ce 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, 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) ....
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....ig 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. 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 n....
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..... 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 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 ....
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....s 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 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....
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....er 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 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 ....
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....o 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 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 de....
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....r 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 tendered to the department at the time of investigation. The Noticee cann....
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.... 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 correctly bee....
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....appellant pointed out that it had not 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 ....
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....ect in the light of the facts stated by the assessee in 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 specif....
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.... amount to wilful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made hereinabove 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....
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....n it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with knowledge that the statement was not correct." (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 exe....
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....e belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held 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 provisi....