JAY INDUSTRIES Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THE captioned appeal was initially filed as a Revision Application before the Central Government which, under Section 35 -P of the Central Excises and Salt Act, 1944, has come as transferred proceedings to this Tribunal, for disposal as if it were an appeal filed before it.

(2.) THERE will be occasion to refer to the facts of this case in some detail in the later part of this order and, therefore, it is proposed to set out at this junture, only the salient facts. The appellants are manufacturers of Polyurethane Foam (P.U.F.) which is an article falling under Item No. 15A of the Central Excise Tariff Schedule (CET). For manufacture of PUF, they imported certain raw materials, namely, polyesters and polyether. These raw materials used to be assessed by the Bombay Customs authorities to basic customs duty as resins under heading No. 39.01/06 of the Customs Tariff Schedule and countervailing duty as resins under Item No. 15A of the CET. Item No. 15A CET has been one of the items in respect of which the benefit of rule 56A has been extended by the Central Government. Raw materials falling under Item No. 15A on which countervailing duty of customs or excise duty had been paid could be used in the manufacture of other goods falling under Item No. 15A CET and the countervailing customs duty or excise duty, as the case may be, paid on the raw materials could be utilised towards payment of excise duty payable on the finished product, in this case PUF. The appellants applied for and obtained permission for availing themselves of this facility since October 1972. All of a sudden, the Superintendent, Central Excise, Hyderabad, issued a notice dated 24 -2 -1978 asking the appellants to show cause why the said facility under rule 56A should not be withdrawn from them and the amounts availed of by them as proforma credit should not be recovered from them. The ground given was that the raw materials, polyesters and polyether, were not resins falling under item No. 15A CET but were chemicals. After holding adjudication proceedings, the Asstt. Collector held that the concession under rule 56A was not admissible to the appellants and he, therefore, withdrew the concession with effect from 7 -10 -1977. He also ordered that the appellants should re -credit the proforma credit availed of by them after 7 -10 -1977 for breach of the provisions of rule 56A. The appeal against this order did not meet with success. Hence the present appeal.

(3.) THE appeal was heard on 12 -10 -1983. Shri Y.G. Ramamoorthy, the learned Counsel for the appellants, submitted that they manufactured, at the material time, Polyurethane Foam (P.U.F.) for which they used imported polyesters and polyether -these imported products were being assessed by the Bombay Customs to countervailing duty (CVD) equal to Central Excise duty under Item 15A, Central Excise Tariff Schedule (CET). Right from 10 -10 -1972, the appellants were enjoying the facility of proforma credit under Rule 56A of the Central Excise Rules, of the countervailing duty on the imported raw materials towards payment of duty on the finished product, namely, P.U.F. In 1978, a show cause notice was issued by the Central Excise authority stating that the proforma credit facility under Rule 56A was not available to the appellants on the ground that the related raw materials were not resins falling under the purview of Item No. 15A of CET but were chemicals, in accordance with the Chemical Examiner's report at page 47 of the paper book. The Counsel further stated that, from pages 48 to 56 of the paper book, it could be seen that the Appellate Collector of Customs, Madras held that the said raw materials were chemicals. It could thus be seen that Bombay Customs and Madras Customs were following different practices in the matter of classification and assessment of the said imported raw materials. Therefore, there could be no question of any mala fide intention on the part of the appellants in availing themselves of the proforma credit. The Counsel stated that the Madras Appellate Collector's order -in -appeal holding the raw materials as chemicals was reviewed in 1981 as may be seen from pages 57 to 59 of the paper book. However, the review only resulted in confirmation of the Appellate Collector's order. The Counsel also referred to a tariff advice issued by the Board (2/74 dated 15 -2 -1974) holding that polyesters and polyether, referred to as "polyols", were not liable to countervailing duty under Item 15A CET. This position continued till 1 -9 -1978 when an amendment to the terminology employed in chapter 39 of the Customs Tariff Schedule came into effect whereby polyols were brought within the purview of the said chapter. Therefore, at the material time, the raw materials were classifiable under Heading No. 39.01/06 as "polyols".