At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore
By, THE HONORABLE JUSTICE: S.S. GARG
By, MEMBER AND THE HONORABLE JUSTICE: V. PADMANABHAN
For Petitioner: J. Harish, Deputy Commissioner (AR) And For Respondents: Venkatesh R. Bhagat, Advocate
1. The present appeal is filed by Revenue against the Order-in-Appeal No. 359/2003, dated 28-10-2003. The respondent was engaged in the manufacture of Veneered Particle Board-commercial, falling under Tariff Item 16B(ii) of the erstwhile Central Excise Tariff and were availing the benefit of Notification No. 148/73-C.E., dated 21-7-1973. In terms of the Notification, the goods covered by Explanation II of the Notification were liable to duty on their value determined in terms of Tariff Value fixed for the goods. The Explanation II to the Notification is reproduced below for ready reference:
"Explanation II: Particle Boards, veneered with plywood panels on one or both sides shall be treated with as one or two layers of plywood, as the case may be, and each layer of plywood shall be assessed to duty at the tariff value applicable to commercial or decorative plywood, as the case may be."
It appeared to the Department that the goods in question were Particle Boards not covered by the above explanation and hence the Department took the view that the goods are required to be assessed to duty at appropriate rates on the value determined under erstwhile Section 4 of the Act. The duty short paid was demanded by issue of various show cause notices for the period from 1-11-1973 to 31-12-1977. The notices were issued citing erstwhile Rule 10 and 10A. While passing the Order-in-Original, the demands falling under following periods were dropped on the ground of time bar.
1-11-1973 to 30-9-1974 and 1-1-1976 to 30-4-1976
The rest of the demands were upheld by the original authority and when the issue was carried out before the Commissioner (Appeals), the impugned order came to be passed in which the entire demands were dropped. Aggrieved by the decision, Revenue is in appeal before us.
With the above background, we heard Dr. Harish, DR for the Revenue as well as Shri Venkatesh R. Bhagat, Learned Advocate appearing for the respondent.
2. The Learned DR submitted that the demands were dropped by the Learned Commissioner (Appeals) mainly on the following grounds:
(i) The respondent will be eligible for the benefit of the Notification. The Board had clarified only in 1989 that the goods of the types manufactured by the respondent i.e. Veneered Particle Boards not covered with plywood panels, but with veneer on either side would not be treated as covered by the Explanation II. The Commissioner (Appeals) took the view that the clarification cannot be made applicable retrospectively to the period in question in the present case.
(ii) There was a practice of allowing the benefit of the Notification to the goods being manufactured by the assessee as seen from the Trade Notice issued by the Collector of Central Excise, Bangalore No. 26/70, dated 21-2-1970.
(iii) The demands have been made in the case by quoting erstwhile Rule 10A which does not fulfill the requirement of raising demand under Rule 10.
Accordingly the Learned Commissioner (Appeals) has dropped the entire demand. The Revenue has challenged the above order mainly on the following grounds:
(i) The goods manufactured by the respondent are Veneered Particle Board. The original adjudicating authority has given the finding that the goods manufactured by the respondent did not have plywood panel on one or both sides and hence the goods are not covered by the Explanation II of the Notification No. 148/73.
(ii) Since the issue of the benefit of Notification is against the respondent, the citing of the 1989 Board Circular is only incidental and cannot be used to say that the effect of the Circular cannot be granted to the earlier period.
(iii) He further argued that wrong quoting of the Rule in the show cause notice will not vitiate demand if the show cause notice otherwise outlined the reasons in detail for making the demand. In this connection, he relied on the decision of the Hon'ble Supreme Court in the case of J.K. Steel Ltd. v. Union of India - 1978 (2) E.L.T. J 355 (S.C).
3. The Learned Counsel for the respondent justified the impugned order. His main submissions are summarized below:
(i) The Explanation figuring in the Notification No. 148/73 was finding place even in the earlier Notifications issued for granting the same benefit right from 1962 onwards. It was the consistent stand of the Department that Veneered Particle Boards will be entitled to the benefit of the Notification. He submitted that the Commissioner (Appeals) has rightly held that the Circular issued in 1989 denying the benefit of the Notification for such goods cannot be made applicable retrospectively for the earlier period.
(ii) He also argued that the show cause notices issued had quoted the wrong Rule which vitiated the entire proceedings and the demand cannot be upheld. In this connection, he relied on the decision of the Hon'ble High Court of Bombay in Bhor Industries v. Union of India - MANU/MH/0317/1990 : 1991 (51) E.L.T. 287 (Bom.).
(iii) The Learned Counsel also asserted that the goods in question were Particle Boards which were pasted on both sides with a very thin layer of plywood, on top of which the veneers were affixed. Hence he submits that the benefit of the Notification will be allowable to such goods.
(iv) He also agitated that there was no change in Explanation contained in Notification No. 148/73 as compared to the earlier Notification No. 201/69. The Trade Notice No. 26/70 continued to be applicable in which Veneered Particle Boards have to be assessed to duty as two layer plywood at the tariff value applicable to commercial or decorative plywood.
4. We have heard both sides and perused the records.
5. Before considering the question of the Notification benefit, it is necessary to appreciate the nature of the goods manufactured by the respondent during the disputed period. The nature of the goods manufactured has been described by the original authority in this order dated 6-11-2001. The "Veneered Particle Boards - Commercial" is said to have core made up of Particle Board covered with only one layer of veneer. The core is not covered on either side with plywood panels.
5.1 For the goods to fall within the scope of the Explanation II to the Notification, the Particle Boards should be covered on one or both sides with plywood panels. From the nature of the product outlined in the Order-in-Original, we conclude that the goods in question are not pasted with plywood panels on one or both sides. Another argument has been advanced that the veneer is pasted on top of plywood which is first pasted on the Particle Board. But the facts of the case, as appearing from the Order-in-Original, do not substantiate the above view advanced on behalf of the respondent. The Explanation to the Notification specifically gives the benefit of the Notification to Particle Boards, veneered with plywood panels on one or both sides. The crucial aspect of the benefit of the Notification get extended only when there is at least one plywood panel pasted on either side of the Particle Board. In the absence of such a plywood panel, we are of the view that the benefit of the Notification cannot be extended to the goods manufactured by the respondent during the relevant time.
6. We have perused the copy of the Trade Notice No. 26/70 as well as the Board's Circular dated 1989. The Board's Circular of 1989 has clarified the position that the benefit of the Notification will not be allowable to Veneered Particle Boards unless they are covered with plywood panels. Even though such clarification stands given only in 1989, even for the earlier period the benefit of the Notification is not allowable for such goods as seen from the wording of the explanation itself. We are of the view that the 1989 clarification of the Board has only clarified the position at a later date and there is no need to answer the question of whether the clarification is applicable retrospectively.
6.1 On a perusal of the Trade Notice No. 26/70, dated 21-2-1970, we note that it has clarified the position with reference to the Notification No. 201/69, dated 16-8-1969 it is clarified that the tariff value is to be determined on the basis of the plywood. The Trade Notice has clarified that the Veneered Particle Board on which decorative plywood is pasted on either or both sides are to be assessed as though it consisted only of said plywood. We note that the Trade Notice has not clarified the aspect of whether the Veneered Particle Board without the plywood will be eligible for such benefit. As it is we find that the reference to Trade Notice is not relevant to
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decide the issue before us. 7. Lastly we consider the argument made on the question of citing the wrong provision in demanding the differential duty. It is on record that some of the show cause notices have cited Rule 10 for demand of the differential duty whereas the certain other show cause notices have cited Rule 10A of the erstwhile Central Excise Rules, 1944. 8. We have perused the various case-laws cited by both sides on this question. We note that the Hon'ble Supreme Court in the case of J.K. Steel Ltd. (supra) have held that the show cause notices citing wrong Rule are not vitiated if the issuing authority competent to issue it under the correct Rules has issued it. 9. By following the decision of the Apex Court we are of the view that by citing Rule 10A, instead of Rule 10, the demand proceedings do not get vitiated. In the light of the above discussions we set aside the impugned order and allow the appeal of the Department.