Obeetee Textiles Pvt. Ltd. vs Commissioner of Central Excise

Syed Zafar Moonis has accepted notice on behalf of Respondent. He prays for and is allowed four weeks'' time to file counter affidavit. The Appellant will have one week thereafter to file rejoinder affidavit.

List on 27th September, 2011.

In order to satisfy ourselves, we raised a question to Shri Laxmi Kumaran appearing for the Appellant as to whether this Central Excise Appeal against the order of Custom, Excise & Service Tax Appellate Tribunal dated 4.7.2011, is maintainable in the High Court.

Shri Laxmi Kumaran submits that u/s 35-G of the Central Excise Act, 1944 an appeal lies to the High Court against any orders passed in appeal by the Appellate Tribunal on or after 1st July, 2003, not being an order relating, among other things, to the determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment. He submits that the appeal in the present case relates to the waiver of pre-deposit for hearing the appeal by Custom, Excise & Service Tax Appellate Tribunal. Under the proviso to Section 35-F this appeal not raising any question having relation to the rate of duty of excise or to the value of goods for the purposes of assessment is maintainable in High Court. He has relied upon a judgment of Supreme Court in Navin Chemicals MFG & Trading Company Ltd. v. Collector of Customs 1993 (68 E.L.T. 3 (SC) in which the Supreme Court considered the question of maintainability of the appeal in the light of Section 129-C and held in paragraphs 7, 11 and 13 as follows:

The controversy, therefore, relates to the meaning to be given to the expression `determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment''. It seems to us that the key lies in the words `for purposes of assessment'' therein. Where the appeal involves the determination of any question that has a relation to the rate of customs duty for the purposes of assessment that appeal must be heard by a Special Bench. Similarly, where the appeal involves the determination of any question that has a relation to the value of goods for the purposes of assessment, that appeal must be heard by a Special Bench. Cases that relate to the rate of customs duty for the purposes of assessment and which relate to the value of goods for the purposes of assessment are advisedly treated separately and placed before Special Benches for decision because they, more often than not, are of importance not only to the importers who are parties thereto but also to many other importers who import or propose to import the same or similar goods. Since the decisions of CEGAT in such matters would have wide application they are, by the terms of the statute, to be rendered by Special Benches. The phrase "relation to" is, ordinarily, of wide import but, in the context of its use in the said expression in Section 129C, it must be read as meaning a direct and proximate relationship to the rate of duty and to the value of goods for the purposes of assessment.

It will be seen that Sub-section (5) uses the said expression `determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment'' and the Explanation thereto provides a definition of it `for the purposes of this Sub-section''. The Explanation says that the expression includes the determination of a question relating to the rate of duty; to the valuation of goods for purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Although this Explanation expressly confines the definition of the said expression to Sub-section (5) of Section 129D, it is proper that the said expression used in the other parts of the said Act should be interpreted similarly. The statutory definition accords with the meaning we have given to the said expression above. Questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. The statutory definition of the said expression indicates that it has to be read to limit its application to cases where, for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of the goods.

The order of the Additional Collector under appeal before CEGAT in the present case did not have any direct or proximate relation, for the purposes of assessment, either to the rate of duty applicable to the said goods or to the value thereof. All that the Additional Collector''s order did was to confiscate the said goods allowing to the Appellant the option of redeeming them upon payment of a fine of Rs. 10,000/-. That the Appellant might avail of the option, pay the fine and clear the said goods, when questions as to the rate of duty and value for purposes of assessment might possibly arise, is far too remote a contingency to satisfy the test that is laid down.

Shri Laxmi Kumaran has also relied upon judgment of Bombay High Court in Videocon Industries Ltd. v. Commissioner of Customs, Aurangabad 2011 (263) E.L.T. 28 (Bom.) in which the judgment of Supreme court in Navin Chemicals MFG & Trading Company Ltd (supra) was considered and it was held in paragraph-7 as follows:

Applying the ratio laid down by the Apex Court in the aforesaid case, in our opinion, the pre-deposit order passed by CESTAT cannot be said to have direct and proximate relationship to the rate of duty/to the value of goods. The expression ''determination'' means decision on merits. Pre-deposit order does not decide any question having a relation to the rate of duty or value of goods as contemplated under Sections 130 or 130E of the Customs Act, 1962. Therefore, appeal against an order of pre-deposit passed by the Appellate Tribunal would be maintainable before the High Court. u/s 130 of the Customs Act, 1962, appeal against all orders of the Tribunal except orders determining the question relating to determination of rate of duty or value of goods are maintainable before the High Court. Therefore, the fact that the appeal u/s 130E of the Customs Act, 1962 against the order, determining the rate of duty or value of goods is maintainable before the Apex Court, cannot be a ground to hold that the appeal against the order of pre-deposit would also be maintainable before the Apex Court.

Prima facie on the basis of these decisions, we are satisfied that an appeal, in which the rate of duty of excise or the value of goods for the purposes of assessment is not involved, can be heard u/s 35-G by the High Court.

On merits of the case it is submitted that the excise duty was levied on jute carpets manufactured by five companies. The Tribunal held in four cases that the duty is not leviable as jute is pre-dominant by weight in the carpets manufactured by them. In Commissioner of C. Ex., Bhubaneswar-1 v. Champdany Industries Ltd., 2009 (241) E.L.T. 481 (SC) relying upon Rule 3 of Central Excise Rules, the Supreme Court held that dominant intention in the rule specifically, Clause (a) thereof is that the heading which provides the most specific description shall be preferred to the heading providing a more general description. Following this interpretation in paragraph-46 of the judgment it was held that the goods manufactured by the Respondent-company are to be classified as jute carpet floor coverings. The Supreme Court found another reason namely that the argument raised by the counsel of Petitioner was not a part of the show cause notice. The Civil Appeal Nos. 7075 and 7076 of 2005 were decided on 8.9.2009 upholding the consistent findings of fact recorded by the Commissioner (Appeals) and Tribunal. On the same day the Supreme Court heard and decided Civil Appeal No. 3758 of 2006 Commissioner of Central Excise v. UNI Products (I) Ltd. and Civil Appeal Nos. 3828 of 2007 Commissioner of C. Ex. Hyderabad-I v. Charminar Non-Wovens Ltd. and dismissed the revenue appeals. These judgments are reported in Excise Law Tribunal Vol-II at pages 481, 491 and 494 respectively.

We are surprised to find that the Custom, Excise & Service Tax Appellate Tribunal has, in the present case having considered the aforesaid judgments, which in our view cover the question, went on to distinguish the judgment both on question of facts as well as interpretation of Rule 3, and held that the Appellant does not have a strong prima facie case for consideration of the application for waiver. After going through the judgment of the Supreme Court and facts obtained in the case we are unable to find any distinction, whatsoever. We are also of the prima facie opinion that the Tribunal committed breach of the judicial discipline in distinguishing the Supreme Court judgments, applicable to the facts of the case by giving its own reasons. It has not only differed on reasons given on same facts, but has also ventured to distinguish the reasons given on the question of law.

In the facts and circumstances, we stay the effect and operation of the order dated 4.7.2011 passed by the Custom, Excise & Service Tax Appellate Tribunal, New Delhi in Appeal No. E/977/2010-EX(DB) M/s Obeetee Textiles (P) Ltd. v. C.C.E. Allahabad, and direct that the appeal be heard by the Custom, Excise & Service Tax Appellate Tribunal, subject to decision of this appeal, without insisting upon the pre-deposit of the excise duty and penalty.

We also call upon the counsel appearing for the department to explain as to how the Custom, Excise & Service Tax Appellate Tribunal could have taken a different view both on the facts and the question of law, which are prima facie covered by the judgments delivered in similar cases which were decided in favour of companies manufacturing the jute carpets. A copy of the order be given to counsel for the Appellant today.