IMPORTANT POINT
Extended period of limitation u/s 11A proviso of Central Excise Act is to be applied only if conditions precedent therefor are satisfied.

Headnote:Central Excise Act, 1944 — Section 11A Proviso — Extended period of limitation — Conditions precedent therefor to be satisfied — Respondent manufactured paper based decorative laminated sheets and goods were classified under Chapter 39 of Custom Excise Tariff — Appellant’s case it should have been classified under Chapter 48 — Classification for the year 1993 was approved by Revenue — Show cause notice issued on 9.12.1997 invoking extended period of limitation — Commissioner of Excise rejected contention of Respondent — Appellate Tribunal however allowed appeal on a finding that though benefit of notification was not available if manufactured goods were coated with plastic but demand pertaining to period 8.1.1993 to 31.3.1994 was hit by time limit specified u/s 11A of the Act — Appeal — Manufacturing process indisputably was disclosed by Respondent — Issue as regards applicability of exemption in terms of notification was incidental to basic classification of product and question as regards classification of decorative laminated sheets being falling under Chapter 39 of Central Excise Tariff and not under Chapter Heading 48 had been operating in the field — Not a fit case for intervention.
       Held : A proceeding under Section 11A of the Act indisputably could be initiated within a period of six months, as the law thence stood. The period of six months has been extended to one year in year 2000. The proviso appended to Section 11A of the Act extending the period of limitation is required to be applied if the conditions precedent therefor are satisfied. The manufacturing process indisputably was disclosed by Respondent. It is not in dispute that the question as regards classification of the decorative laminated sheets being falling under Chapter 39 of the Central Excise Tariff and not under Chapter Heading 48 had been operating in the field. It is also not in dispute that the issue as regards applicability of the exemption in terms of notification No. 135/89 was incidental to the basic classification of the product. (Para 12)
       It is difficult to believe that although the Respondent, prior to 8.1.1993, had been paying duty at the rate of 35% ad valorem, the benefit of notification No. 135/89 dated 12.5.1989 had been accorded to it without any verification and only on the basis of the statements made by the Respondent.(Para 13)
       At no point of time, the Revenue doubted the correctness or otherwise of the manufacturing process or the ingredients disclosed by the Respondent. The stand of the Respondent that the Industry as such had adopted the same manufacturing process and had been extended the benefit of the Exemption Notification of 1989 has not been called in question. If the stand of the manufacturer is correct, there was no reason as to why it should be singled out.(Para 14)
       This Court decided Bakelite Hylam Ltd. (supra) on 10th March, 1997. The impugned notice was issued only on 9.12.1997 evidently relying on or on the basis thereof. (Para 15)
       It is not a case where the Respondents had not disclosed the activities of manufacturing products carried out by them by declaration or otherwise. They responded to each and every query of the Appellant, as and when called upon to do so. The authorities of the Appellant must have verified the said disclosures. At least they are expected to do so. The disclosure made by the Respondent was acceptable to them. Their bona fide was never questioned. (Para 16)
       The applicability of the extended period of limitation is, therefore, required to be considered in the aforementioned context. Proviso, it is trite, provides for an exception. It is not the rule. A case, therefore, has to be made out for attracting the same.(Para 17)
       Keeping in view the peculiar facts and circumstances of this case, we are of the opinion that it is not a fit case where this Court should interfere.(Para 20)

JUDGMENT

S.B. Sinha, J. — Leave granted.

2. Whether extended period of limitation envisaged under the proviso appended to Section 11A of the Central Excise Act, 1944 (for short "the Act") would apply to the facts and circumstances of the present case is the question involved in this appeal.

3. Before adverting to the said question, however, we may notice the basic fact of the matter which is not in dispute.

4. The Respondent herein manufactures paper based decorative laminated sheets. The goods manufactured by the Respondent were classified under Chapter 39 of the Custom Excise Tariff Act whereas according to the Appellant it should have been classified as sub-heading No. 4823.90. The classification for the year 1993 was approved by the Revenue. By a letter dated 6.12.1994, it requested Respondent to intimate the manufacturing process of the product, to which a reply was sent by it in terms of its letter dated 7.12.1994 disclosing the manufacturing process stating:

"Brief Manufacturing Process of Paper Based Laminated Sheets

The process of manufacture of the above products involving in three major stages is as under:

1. Preparation of Reactive Mixtures like (i) Melamine formaldehyde and (ii) Phenol formaldehyde. The reactive mixture process involves mixing of Melamine Powder with Formaldehyde and Phenol with Formaldehyde in separate chemical reaction vessels, separately under high steam pressure and continuous sterling. The reactive mixture are used for treatment of various papers, used for the manufacture of paper based laminated sheets.

2. Paper treating process:

Under the process absorbent Kraft paper is treated with Phenol Formaldehyde reactive mixture and Overlay Tissue paper and design prints or colour base papers are treated with Melamine formaldehyde reactive mixture under stream through chemical treating and drying machine.

3. Hydraulic pressing process

This process is the last and final one which involves hydraulic pressing of various layers chemical mixture treated papers under high hydraulic pressure and steam temperature. During the process the reactive mixtures treated papers are turning into a homogeneous substance, which is called "PAPER BASED LAMINATED SHEETS".

The raw materials used as under:

1.Unbleached Absorbent Kraft paper

2.Plain coloured and design printed base paper

3.Barrier paper

4.Tissue paper

5.Polly-Propelone Filins

6.Melamine Powder

7.Phenol

8.Formaldehyde

9.Methanol (Mehtyl Alcohol)

10.Denatured spirit

11.Urea

12.Printing Inks for printing designs & base paper

BRIEF PROCESS OF MANUFACTURE

Number of layers of unbleached Absorbent Kraft paper treated with Phenol formaldehyde Reactive mixtures are laid on a carrier steel plate, on which one layer of each Melamine formaldehyde reactive mixture treated base paper and overlay tissue paper are laid with and further high gloss mirror finished stainless steel press mould is placed on the treated paper. Similarly number of sets of reactive mixture papers duly treated are made by using polypropylene films for separating the sheets. The above sets are then put into the flat bed of hydraulic press for final pressing High pressure temperature upto 1800 to 3200 per sq. inch and temperature at 145 to 150 C is given. Thus the sheets are prepared into a homogeneous mass is called paper based laminated sheets.

End used

The end use of paper based laminated sheets are mainly as follows:

i)Making furnitures

ii)Panelling purpose

iii)Interior furnishing of Rail coaches & passenger buses etc. etc."

5. Yet again, a query was raised in regard to the use of plastic as an input for the manufacture of primal product, i.e., laminated sheets falling under sub-heading No. 4823.90. A reply thereto was also sent by the Respondent by a letter dated 22.12.1994 stating:

"It is intimated that we are using Phenol, Melamine and Formaldehyde falling under Chapter 29 of Central Excise Tariff. Further, it is clarified that a gluing solution is obtained by mixing of phenol and formaldehyde and melamine and formaldehy

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2006 Supreme(SC) 768

IMPORTANT POINTExtended period of limitation u/s 11A proviso of Central Excise Act is to be applied only if conditions precedent therefor are satisfied.

Cases Referred (3)

IMPORTANT POINT
Extended period of limitation u/s 11A proviso of Central Excise Act is to be applied only if conditions precedent therefor are satisfied.