SRI AYYAPPAN SILICATE AND Vs. CCE

JUDGEMENT

(1.) Both these appeals arise from a common proceedings and from common Order -in -Appeal No. 135/2002 (CBE) (GVN), dated 10 -7 -2002 by which the Commissioner (Appeals) has held that M/s. Sri Ayyappan Cottage Industries (ACI, for short), Pollachi, a proprietary concern manufacturing soap with the aid of power, employing rural women and youth, were manufacturing cheap quality of soap meant for the poor. They purchased duty paid raw materials like Sodium Silicate, Caustic Soda Lye and non -edible oil for the manufacture of soap without the aid of power. The appellant M/s. ACI, Pollachi had sent to M/s. Sri Ayyappan Silicate and Chemicals Products (P) Ltd. (ASCPL, for short) solid sodium silicate for job work purposes to convert the same into liquid sodium silicate. M/s. ASCPL had addressed a letter dated 7 -12 -1993 to Collector of Central Excise, Coimbatore seeking clarification from the department regarding excisability and dutiability of liquid sodium silicate manufactured out of duty paid sodium silicate and the Superintendent of Central Excise, Pollachi -I Range vide his letter O.C. No. 15/94, dated 4 -1 -1994 had clarified that the process of dissolving the Solid Form of Sodium Silicate in water would not amount to manufacture and such units would not come under the purview of the Central Excise Licensing Control. Therefore, they surrendered the Registration Certificate dated 17 -10 -1994 and had filed a declaration on 21 -10 -1994, thereafter did not file any declaration after the introduction of Note 10 to Chapter 28 of Central Excise Tariff which was introduced w.e.f. 1 -3 -1997 to the effect that : -

(2.) It is alleged that solid sodium silicate is duty paid item which was received by M/s. ASCPL from M/s. ACI for conversion to liquid sodium silicate on job work basis. The same being converted to liquid sodium silicate amounted to production of new goods which was marketable and hence M/s. ASCPL were liable to pay duty and since they have cleared without payment of duty, they were liable to invocation of larger period and for penal action.

(3.) The appellants had taken the ground that this process of conversion from solid to liquid sodium silicate did not bring into existence any goods which were marketable in nature and that they were clearing the same in tankers and not repacking from bulk packs to retail packs. It was their contention that no new goods had come into existence which was marketable to the consumers. It should be repacked from bulk packs to retail packs only then the goods can be said to be marketable. They, further, took the ground that as the department had itself taken a view that process of converting into liquid sodium silicate did not result into a excisable commodity and hence they surrendered the licence, therefore, they held a bonafide belief that as the goods were not marketable, they were not liable to file any declaration under Note 10 to Chapter 28 of its introduction w.e.f. 1 -3 -1997. It is the contention of the appellants that since they held a bonafide belief, the larger period was not invocable. They also took up the contention that even if the item is said to be marketable, they were entitled for the benefit of Modvat credit in terms of the Tribunal judgment rendered in the case of Chamundi Steel Rerolling Mills v. CCE, Bangalore, 1996 (81) E.L.T. 563 and that of Supreme Courts judgment rendered in Formica India Division v. CCE, 1995 (77) E.L.T. 511 (S.C.). They also submitted that duty was cum -duty and they were entitled for claim of deductions under Section 4(4)(d)(ii) and relied on the judgment rendered in the case of Srichakra Tyres, 1999 (108) E.L.T. 361. However, all these pleas were rejected by the Commissioner (Appeals) and the Additional Commissioner in his Order -in -Original. It was pointed out that the Additional Commissioner in the Order -in -original in Para 22 had clearly recorded as under : -