REKHA INDUSTRIES Vs. CENTRAL BOARD OF EXCISE AND

JUDGEMENT

(1.) THE Department's case, as seen -from the records, is that the appellants manufactured during the period 6 -2 -69 to 16 -4 -77, a quantity of 1,01,81,375 pieces of pilfer -proof caps (hereinafter referred to as P.P. Caps) falling under Item No. 42 of the 1st Schedule to the Central Excises and Salt Act (hereinafter referred to as CET) without taking out a Central Excise licence and removed the said goods from the factory premises without payment of central excise duty leviable thereon. By a Show Cause Notice dated 6 -10 -77, the appellants were asked to show cause to the Collector of Central Excise why duty at the appropriate rate should not be demanded from them on the said quantity of P.P. Caps under Rule 9(2) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) and why a quantity of 2,23,645 pieces of P.P. Caps seized from them should not be confiscated under Rule 173 -Q(1) and why penalty should not be imposed on them. On completion of adjudication proceedings the Collector held that the seized goods were liable to confiscation under Rule 173 -Q but in their absence (they having been released against a bond), he forfeited a sum of Rs. 500/ - from the security deposit; he also ordered recovery of central excise duty at the appropriate rate on 59,06,859 pieces of P.P. Caps under Rule 9(2) as it existed during the material period. However, he did not impose any penalty on the appellants. On appeal, the Central Board of Excise and Customs held that the Collector's orders demanding duty on the goods as P.P. Caps under Item No. 42 of the CET were correct and dismissed the appeal. It is against this order of the Board that the appellants had preferred a Revision Application before the Central Government which has come to this Tribunal on transfer under the provisions of Section 35 -P of the Central Excises and Salt Act, 1944 for disposal as if it were an appeal presented before it.

(2.) THE contention of the appellants, in so far as the classification under the CET of the subject goods is concerned, is that they were tab seals, that they were used as tab seals for drums and not as pilferproof caps. In order for a cap to be a P.P. Cap it required a flange, a plug and a seal; the subject goods were merely tab seals without any flange or plug which, by itself, could not be used for any packages and could not serve the purpose of a P.P. Cap. It is also contended that even assuming the goods were P.P. Caps, the manufacture of these goods by the appellants had been allowed by the Department without any objection till 1974 though the Department was aware of the nature of the goods manufactured. The Central Board of Excise and Customs had examined the question of classification of P.P. Caps in 1975 and it had clarified that a cap could be called a P.P. Cap only if it had flange, plug, seal or a fastener which together were designed to prevent leakage, contamination, tampering, etc. In this context reference was made to the Pune Collectorate Trade Notice No. 149/75, dated 26 -10 -75 on similar lines. It was further contended that the cap seals or tab seals produced by the appellants could not, by themselves, be fitted on containers as they had no threads and, being made out of very thin tin, could be broken by pressure of hand and that merely fitting of such caps on containers could not safeguard the contents against pilferage. It was also contended that manufacturers of similar goods were neither required to take out Central Excise licence nor pay duty on their goods as P.P. Caps -M/s. Petrox Pvt. Ltd. and M/s. Meena Screen Printers. In the case of Trisure (India) Ltd. in the Bombay Collectorate, they were asked to pay duty only from the time their product was held to be excisable as P.P. Caps and not for the back period.

(3.) ON adjudication the Collector of Central Excise held that the total clearances of cap seals/P.P. caps during the material period were 59,06,859 pieces as against the quantity mentioned in the Show Cause Notice. He held that the cap seals or tab seals had a clear tear line in its body which splits while opening the same and the 2 pieces fall apart and, therefore, they were P.P. .Gaps. Since it is fixed over a drum closure, over the mouth of a drum, it is also a cap/cover and that it was nothing but a P.P. Cap. It was capable of being used only once and. to get to the contents, the cap had to be torn open. In the circumstances the Collector held that the subject goods were P.P. Caps. The Board, in its Order -in -Appeal, also held that the subject caps were used for keeping the lid otherwise fixed on the drums in position and also for the purpose of identification of the product with reference to embossing or painting on such caps. Nevertheless, considering the manner in which the cap was used, the object of making the contents pilferproof was also achieved. It was not necessary that such caps should be fixed on the opening of a container only with the help of a thread. The fact that the subject tab seals were pressure sealed would not disqualify them from being classified as pilferproof caps. Insofar as the contention that other manufacturers of similar caps were not being charged to duty, the Board held that the contention has not been substantiated and that in any case even if it were so, it could not justify the appellants from avoiding the payment of duty.