Veena Industries vs Union Of India (Uoi)
2001 Latest Caselaw 583 Bom

ORDER

1. Heard both sides.

2. The Petitioner No. 1 is the manufacturer of domestic electric flour mills. It is fitted with electric meter. After the show cause notice and hearing the Petitioners the demand was made for the Central Excise Duty. The said demand came to be confirmed by the Commissioner, Central Excise, Mum-bai-I, by order dated 12-10-1998 in the following terms :-

"I confirm the demand of Central Excise duty amounting to Rs. 67,52,038/-(Rs. sixty seven lakhs fifty two thousand and thirty eight only) Rs. 60,59,152/- BED and Rs. 6,92,886/- SED) against SCN No. V/PI/15-16 dtd. 6-6-1994 in respect of M/s. Veena Industries Bombay, under Section 11A(2) Central Excise Act, 1944 and Rule 9(2) of Central Excise Rules, 1944 which shall be paid forthwith.

I also impose a penalty of Rs. 50,00,000/- (Rs. fifty lakhs only) on M/s. Veena Industries, Bombay under Rule 173Q (1) of Central Excise Rules, 1944.

I order confiscation of land, building, plant, machinery etc. used in connection with the manufacture, production, storage, removal and disposal of the impugned goods belonging to Veena Industries under Rule 173Q (2) of Central Excise Rules, 1944. However M/s. Veena Industries are permitted to redeem the said land, building, plant and machinery etc. on payment of a fine of Rs. 20,00,000/- (Rs. twenty lakhs only) in lieu of confiscation, within one month of the receipt of this order.

M/s. Vspur Mill Sales Corporation were concerned in transporting, removing, keeping, concealing, selling, purchasing and dealing with the impugned goods which they manifestly knew were liable to confiscation urf-der Central Excise Act, 1944. I, therefore, impose a penalty of Rs. 30,00,000/- (Rs. thirty lakhs only) on M/s. Vspur Mill Sales Corporation under Rule 209A of Central Excise Rules, 1944.

I impose a penalty of Rs. 15,00,000/- (Rs. fifteen lakhs only) on Shri Suresh Chimanlal Choksi, A/2,11, Prithvi Apartments, Altamount Road, Bombay, in the capacity of proprietor of Vspur Industries and Karta proprietor of VMSC under Rule 209A of Central Excise Rules, 1944.

I impose a penalty of Rs. 5,00,000/- (Rs. five lakhs only) on Smt. Veena Choksi, A-2/11, Prithvi Apartments, Altamount Road, Bombay, under Rule 209A of Central Excise Rules, 1944.

I Impose penalty of Rs. 10,00,000/- (Rs. ten lakhs only) on Shri Paresh Shah, 214, Panjarpole Lane, Bombay, under Rule 209A of Central Excise Rules, 1944.

I impose a penalty of Rs. 5,00,000/- (Rs. five lakhs only) on Shri Shashikant Rane, 34/1063, Kher Nagar, Bandra (East), Bombay, under Rule 209A of Central Excise Rules, 1944."

This is challenged before CEGAT. The Petitioners filed an Application under Section 35-F for waiver of pre-deposit. The CEGAT passed the following order on 1-6-2000 :-

"For the reasons discussed above the stay application of the applicants in all these cases cannot be allowed for the waiver of the pre-deposit in full, except for Shashikant Rane, Excise clerk of Veena Inds. M/s. Veena Inds. and its proprietor Suresh Choksi are directed to make a pre-deposit of Rs. 25 lakhs and VMSC of Rs. 10 lakhs, Paresh Shah of Rs. 5 lakhs and Veena Choksi Rs. 3 lakhs towards the duty and penalty under the impugned order, within three months from the receipt of this order subject to which the balance of deposit of duty and penalty on all the applicants are waived and recovery stated."

Thus, the amount towards excise duty, penalty, etc. excluding interest which comes to about Rs. 2.2 crores. By way of pre-deposit about Rs. 43 lakhs are ordered to be deposited. This is challenged here.

3. We find that the Tribunal has taken into consideration the financial hardship and passed the said order. The CEGAT in that order observed on merits as under :-

"16. Now coming to the merits of the case, it is seen from the paper books the applicants have made out a detail reply and written submission by way of defence in support of their case. From the column No. 8A in EA3 in the appeals preferred regarding the description and classification of goods the appellants have mentioned machinery (domestic grinding mills used for working of cereals falling under Sub-rule 8437.00 of the Central Excise Tariff exempted under notification 111/88 dated 1-3-1988 according to the appellant and under sub-heading 8509.00 according to the impugned order. The impugned order involves the rate of duty and also the above materials. The written submissions and the reply to the show cause notice and the show cause notice discloses that earlier the applicants had classified their Vspur Mills under 8509 through oversight instead of 8437, as per their additional written submissions filed on 23-9-1998 in the personal hearing. The show cause notice alleges that the Vspur Mills falls under chapter 8509. In reply to the show cause notice the applicants claim that their product fall under 8437. Allegation is on the wrong assumption. The department has not raised legal demands on the grinding mills falling under 8437.00 as per Board circular dated 5-12-1994 and show cause notice deserves to be withdrawn. The Board circular is binding on the Central Excise officers. In view of the objection in the defence the adjudicating officer has to decide the classification of mills is 8509 or 8437. In response to that the adjudicating authority has discussed in page 24 and 25 about the classification of the goods. According to it Veena Industries had claimed for the first time that the goods are not classifiable under 8509. He has observed that the classification of the issue is not in show cause notice, and there is no dispute in that regard. But he has considered both the chapter heading and after the discussion has held that on merits goods falls under classification chapter heading 8509 as Electro mechanical appliances that self contained the electric motor and not under heading 8437 and it is held accordingly. Even the Board circular is also discussed and held as prospective. From the contention of both the sides, and the arguments and also in the show cause notice and reply and written submission, it is apparent that the question of classification of goods involved is evident from the impugned order which has considered all the contentions of the applicants in the course or the adjudication. The defence set up by the applicants in that regard are required to be discussed in detail in the course of the hearing of the appeal on merits. At this stage the material available on record namely the statement of witnesses and the abundant records produced in this case by both sides require detail consideration regarding the value of clearance to decide the availability of exemption under the notification. Prima facie the contention of the applicants that the clearance was below Rs. 7.5 lakhs in the relevant years cannot be upheld now, in view of the detail analysis of the scrutiny of the records in the course of the impugned order which prima facie supports the show cause notice, so on facts the applicants have no prima facie case in their favour as claimed. Even though about 90 case laws are cited by the applicants and produced in the paper book no specific ruling is pointed out to show that their case is fully covered for the grant of unconditional stay. Their defence makes out that they have indirectly admitted the case of the department in the show cause notice and have given explanation to them. That by itself is insufficient to make out a prima facie case in favour of the applicants. It has to be decided in the light of unretracted statements of the witnesses and the records which can only be done this case is still to be finalised. The question whether the Board circular on the basis of which the applicants are claiming classification and benefit of duty exemption under Notification 111/88 and the nature of the Board circular issued are a matter of controversy between the parties and as such the applicants case that they have got a prima facie case in that regard cannot be upheld. The matter is arguable."

A further attempt was made for modification of the said order dated 1-6-2000, but the said attempt failed and it came to be rejected by CEGAT by passing the order on 16-5-2001.

4. Same arguments are advanced. We find that the CEGAT is correct in holding that prima facie such a domestic flour mill fitted electric motor falls under Chapter 85 of Central Excise Tariff Act, 1985 sub-heading 8509.00 and not under 8437.00. It is found to be an Electric Mechanical domestic appliance with self contained electric motor. However, considering the circular dated 5-7-1994 issued it came to be observed that there is an arguable case. An attempt was made to show that in similar circumstances the CEGAT has taken the view in 2001 (43) RLT 169 (CEGAT-Delhi), CCE, Rajkot v. Electro Mech. Engineering that it falls under sub-heading 8437. However, it is clear that in the said case it was small domestic 'flour mill' without any fitted electric motor was for consideration. It was driven by separate electric motor. It was grinding mill without motor. Therefore, the matter was remanded to the first authority to consider the nature of the appliance and appeal of revenue was allowed.

5. In view of the above, it is not possible to differ from the view taken by CEGAT.