GOTHI THERMOFORMING INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellants in Appeal Nos. E/714, 715, 969, 970, 1054 and 1055/2005 are engaged in the manufacture of disposable plastic cups/containers [Heading 39.23 / 39.24 of the CETA Schedule], which are manufactured from plastic granules (raw material). The plastic sheets arise as an intermediate product during the course of manufacture of cups/containers from granules and the same are classifiable under Heading 39.20. These plastic sheets [intermediate product] are captively consumed in the manufacture of the disposable plastic cups/containers. During the period from April to November 1997, the appellants did not pay duty of excise on the captive clearances of the plastic sheets as they were of the view that the product was exempt from payment of duty in terms of para 3(c) of SSI exemption Notification No. 16/97 -CE dated 1/4/97. During the same period, they also did not pay duty of excise on plastic cups/containers [final products], claiming exemption under Notification No. 4/97 -CE dated 1.3.97. This notification prescribed 'nil' rate of duty for excisable goods falling under Headings 39.23 and 39.24 subject to the condition that no credit of duty be availed under Rule 57A of the Central Excise Rules, 1944 in respect of the inputs used in the manufacture of the final products. The appellants did not avail such input duty credit and hence claimed to be eligible for exemption for their final products under Notification No. 4/97 -CE ibid. Since the final products were cleared without payment of duty, the lower authorities held that, in terms of Notification No. 67/95 -CE dated 16.3.95, the appellants should have paid duty on their intermediate product [plastic sheets] which was used captively in the manufacture of the final products. Accordingly, duty was demanded on plastic sheets for the period April - November 1997. During December 1997 - March 1998, the appellants cleared their final products [plastic cups/containers] at concessional rates of duty under SSI exemption Notification No. 38/97 -CE dated 27.6.97. During this period also, they did not pay duty on their intermediate product [plastic sheets] for which they claimed the benefit of Notification No. 67/95 -CE ibid. The lower authorities took the view that, for payment of duty on the final products in terms of Notification No. 38/97 -CE ibid, the appellants should have taken into account the value of clearances [from the beginning of the financial year] of plastic sheets also in determining the aggregate value of clearances of 'specified goods' for the purpose of the Notification. Accordingly, after including the value of clearances of plastic sheets [from April 1997] in the 'aggregate value of clearances of specified goods' for the purpose of the Notification, the authorities found that duty was liable to be paid at tariff rate on the plastic cups/containers cleared by the appellants during the period December 1997 to March 1998. Consequently, differential demands of duty were raised on the appellants in respect of their final products cleared during December 1997 - March 1998. Penalties were also imposed on the parties under Rules 173Q and 209 of the Central Excise Rules, 1944. Hence the above appeals.

(2.) THE appellants in the remaining appeals are engaged in the manufacture of plastic bags [Heading 39.23 of the CETA Schedule], for which also the raw material is plastic granules. During the course of manufacture of the plastic bags from the granules, an intermediate product viz. "layflat tubing" emerges, which is classifiable under Heading 39.17. During the periods of dispute, April 1997 - March 1998 in most cases and December 1997 - March 1998 in a few cases, the appellants cleared their final product without payment of duty in terms of Notification No. 4/97 -CE ibid by fulfilling the relevant condition [that no credit of duty paid on inputs used in the manufacture of the final product be availed under Rule 57A of the Central Excise Rules, 1944]. They also did not pay duty of excise on their intermediate product [layflat tubings] which was captively used in the manufacture of the final product. In all cases, barring those of M/s. Uniplast Industries, M/s. Sujatha Polypack and M/s. Sakthi Plastics, both the authorities held that the appellants were liable to pay duty on the layflat tubings captively consumed in the manufacture of the final product as, according to the authorities, the benefit of exemption under Notification No. 67/95 -CE ibid was not available to the intermediate product inasmuch as the final product was cleared without payment of duty. The contention raised by the assessees that the layflat tubings became dutiable only from 3.12.1997 by virtue of the amendment brought to para 3 (c) of Notification No. 16/97 -CE ibid by Notification No. 69/97 -CE was rejected. In the cases of M/s. Uniplast Industries, Sujatha Polypack and Sakthi Plastics, the original authorities had accepted the said contention of the assessees, but the Commissioner (Appeals) rejected the same. In the result, there are demands of duty on the appellants in respect of layflat tubings for the respective periods. There are also penalties on all of them except M/s. Sakthi Plastics. Hence the appeals of these parties before the Tribunal. In Appeal No. E/394/2006, the department is aggrieved by non -imposition of penalty on M/s. Sakthi Plastics under Section 11AC of the Central Excise Act by the lower appellate authority. In this appeal, there is a further grievance that the quantum of duty demanded in the appellate Commissioner's order is short by an amount of Rs. 60,000/ -. The Department's appeal, which did not figure in the cause list, was called for by us for disposal along with the assessee's appeal.

(3.) WE have heard both sides and considered their submissions. Counsel for the assessees were led by learned Advocate Shri G. Shivadas and the case of the Department was presented by Smt. R. Bhagya Devi, learned SDR. Both argued extensively with reference to the provisions of Notifications 4/97 -CE (General Exemption), No. 16/97 -CE (SSI Exemption), No. 38/97 -CE (SSI Exemption) and No. 67/95:CE (General Exemption for intermediate products captively consumed and filed Argument Notes also). In respect of plastic sheets, contentious arguments were advanced with reference to an amendment brought to Notification No. 16/97 -CE by Notification No. 69/97 -CE dated 3.12.1997 and, on this basis, the period of dispute [April 1997 - March 1998] was divided into pre -3.12.97 and post -3.12.97 segments. Learned Counsel argued that the demand of duty raised on the appellants in respect of plastic sheets [intermediate product] for the pre -3.12.97 period was unsustainable as these goods were deemed to be exempt from duty under para 3(c) of Notification No. 16/97 -CE during such period. On the other hand, learned SDR contended that the provision of para 3 (c) relied on by the assessees for claiming exemption from payment of duty on the plastic sheets was retrospectively amended by Notification No. 69/97 -CE and consequently during the pre -3.12.97 period also, the clearances of plastic sheets for captive use as inputs in the manufacture of final products were not to be deemed to be exempt from payment of duty under para 3(c) of Notification No. 16/97 -CE as the final products were cleared at 'nil' rate of duty in terms of Notification No. 4/97 -CE during such period. Under Notification No. 16/97 -CE ibid, a SSI unit was entitled to exemption from payment of duty on their first clearances of specified goods [for home consumption] upto aggregate value of Rs. 30.00 lakhs. The concessional rate of 3% ad valorem was available for payment of duty on the next clearances of aggregate value of Rs. 20.00 lakhs and the subsequent clearances would attract duty @ 5% ad valorem. For the purpose of determining the aggregate value of clearances, the following clearances were not to be taken into account: