HINDUSTAN PENCILS (P) LTD. AND ORS. Vs. CCE

JUDGEMENT

(1.) Since the point of dispute in these seven appeals is common, the same were heard together and are being disposed of by a common order. The details of these appeals are as under: - - <FRM>JUDGEMENT_50_LAWS(CE)5_2015.htm</FRM>

(2.) Heard both the sides.

(3.) Shri D.B. Shroff, Senior Advocate and Shri Sushil Singh, Advocate, the learned Counsels for the appellant, pleaded that in both the cases initially the appellant were paying duty, that while HPPL were paying duty and availing duty exemption under Notification No. of the duty paid through PLA, the other appellant SWPL were also paying duty, though they were not availing of the exemption under Notification No. , that in both the cases it is on the instructions of the Department that the appellants stopped the payment of duty, as the Jurisdictional Assistant Commissioner, in the case of HPPL vide his order dated 13/11/06 rejected the refund claims under Notification No. by taking the view that the process undertaken by the appellant does not amount to manufacture and in this regard he had relied upon two judgments of Hon'ble Kerala High Court in the cases of Deputy Commissioner v/s. B. Thampan reported in, (1995) 96 STC 631 (Ker D.B.) and Deputy Commissioner v/s. N. Janardanan reported in, (1995) 96 STC 632 (Ker D.B.) wherein Hon'ble Kerala High Court held that converting soft wood into pencil slats no new commodity emerges and does not amount to manufacture, that this decision had been taken by the Assistant Commissioner after studying the process being undertaken by the appellant, as in his order dated 13/11/06 in the case of HPPL, the Assistant Commissioner mentions the process being undertaken by the appellant and also the fact that manufacturing process of the product, in question, had been studied by the Headquarters Preventive branch of the Central Excise Commissionerate, Jammu & Kashmir, that once the Department has taken a decision after studying the process that the same does not amount to manufacture, the Department just on the basis of decision of the Tribunal in the case of Lion Pencil Pvt. Ltd. v/s. CCE, Bombay reported in : 1996 (87) E.L.T. 314 (Tri.) cannot reverse its stand, that in this judgment, the Tribunal had not considered the judgments of the Hon'ble Kerala High Court in the cases of Deputy Commissioner v/s. B. Thampan reported in, (1995) 96 STC 631 (Ker DB) and Deputy Commissioner v/s. N. Janardanan reported in, (1995) 96 STC 632 (Ker DB) and hence this judgment of the Tribunal is per -incuriam, that once the Department in the case of HPPL vide Assistant Commissioner's order dated 13/11/06 had taken stand that pencil slats being made by them are not excisable as the process undertaken does not amount to manufacture and similarly once the Department had advised the other appellant SWPL that the pencil slats being manufactured by them are not excisable, the Department is barred from changing its stand by the principle of res -judicata, that in this regard he relies upon the judgment of the Tribunal in the case of CCE, Bangalore v/s. AVRA & Co. Bangalore reported in : 1987 (31) E.L.T. 238 (Tri.) and also of the Apex court in the case of CCE, Nagpur v/s. Shree Baidhanath Ayurved Bhawan Ltd. reported in : 2009 (237) E.L.T. 225 (S.C.), that making of wooden slats involves cutting of the timber logs into blocks which are further cut into smaller blocks, that the smaller blocks are then boiled in order to soften the wood so that the same can be sliced easily into thin slats, that slats are than naturally dried and are called unstained slats, that the naturally tried slats are fed into the pressure vessel where they are subjected to high pressure at high temperature and this is done so that certain anti -termite chemicals and colouring materials are absorbed by the wooden slats, that these slats are called stained slats, that from the entire process it is clear that no new commodity with distinct name, character and uses emerges, that just because pencil slats are covered by sub -heading 44219040, it does not mean that the same would be excisable, as for this purpose, the Department has to produce the evidence to show that the same are the result of manufacture and are marketable, that in this regard he relies upon the Apex court's judgment in the case of CCE, Hyderabad II v/s. Aldec Corporation reported in : 2005 (188) E.L.T. 241 (S.C.), that no evidence has been led by the Department to prove that the pencil slats which come into existence in the factory of the appellant are marketable, that the Tribunal in the case of Paharpur Cooling Towers P. Ltd. v/s. CCE reported in : 1988 (36) E.L.T. 364 (Tri.), has held that chemical treatment of chir scantlings and plywood scantling does not convert them into a new and commercial product so as to be excisable, that in the present case the pencil slats which had been obtained by cutting the wooden blocks obtained by sawing of timber logs remain timber and their boiling to soften the same and heat and pressure treatment is only to enable the absorption of colouring material and anti termite chemicals for preserving the wood and as such basic character and uses do not change and no new product having distinct, commercial identity and uses emerges, that the process undertaken by the appellant in this case does not pass the test of manufacture as laid down by the Apex court in the case of Union of India v/s. Delhi Cloth & General Mills reported in : 1977 (1) E.L.T. J (199) (S.C.), that in any case, there is absolutely no justification for invoking extended limitation period under proviso to Sec. 11A(1) and imposing the penalty on the appellant under Rule 25 (1) of the Central Excise Rules, when the entire process being undertaken by the appellant was known to the Department from the very beginning and it is the Departmental officers who after studying the manufacturing process of the appellants had informed them that the process being manufactured by them does not amount to manufacture, that this fact is absolutely clear from para 9 of the order -in -original dated 13/11/06 passed by the Assistant Commissioner in the case of HPPL, wherein the Assistant Commissioner has observed that the manufacturing process of the product, in question, has been studied by the Headquarters Preventive Central Excise Commissionerate, Jammu & Kashmir and on this basis, the Assistant Commissioner (Preventive) has intimated that the activity has been carried out by the assessee cannot be treated as manufacture in terms of Central Excise Law, that in view of this, the Department subsequently cannot allege that the appellant have suppressed any material facts from the Department and invoke extended limitation period under proviso to Sec. 11A(1), that since there was absolutely no suppression of any facts on the part of the appellants and the appellants had stopped the payment of duty in respect of the pencils slats only on the instructions of the Department and it is subsequently the Department which had changed its stand, there is absolutely no justification for imposition of penalty on the appellants. Shri Shroff, therefore, pleaded that in view of the above submissions, the impugned orders are not correct.