M/S. Mercantile Company vs Commnr. Of Central Excise, Calcutta

2. Acting on the basis of intelligence, a team of officers from CPO of Calcutta I Central Excise Commissionerate, Headquarters visited the factory-cum-office of the appellant on 5th September, 1997 and conducted a search operation. Search resulted in seizure of 3 files, 9700 pieces of Philips Ultra cleaner, 500 pieces of degreasing & cleansing fluid, 700 pieces of Switch cleaning oil all bearing brand name of Philips. These were detained and later seized on 9th February, 1998. Also, some 13 files belonging to M/s. T. Paul & Sons were tendered by the partner of the appellant firm. Certain other documents were also handed over to/seized by the raiding party.

3. On the basis of the statements made by Shri Arun Kanti Paul partner of the appellant and other records recovered from the said premises on the day of search, it was found that the orders were being received from M/s. Philips India Ltd., by M/s. T. Paul & Sons and the same were executed by the appellant on the basis of arrangement with M/s. T. Paul & Sons to the effect that the appellant gets a job charge of paise 0.20 per 50 ml. bottle of the said product. The price at which M/s. T. Paul & Sons raised bills to M/s. Philips India Ltd. is controlled by M/s. Philips India Ltd. and it appears from the cost sheet given in the statement of Shri Arun Kanti Paul that M/s. Philips India Ltd., had allowed a profit of 10%. The raw materials and packing materials supplied by M/s. T. Paul & Sons was being received directly at the factory premises of the appellant and the dispatch of the said products was directly from 298, Rabindra Sarani, Calcutta 700 073 to the consignment agent of M/s. Philips India Ltd. The goods received were filtered and put into 50 ml. plastic container by the appellant both manually and mechanically at its factory premises. After sealing, bottles were pasted with Philips Labels & holograms. Multi-colour holograms were received directly from M/s. Philips India Ltd.

4. Samples of seized goods were got tested from Departmental Chemical Laboratory at Customs House, Calcutta. The report of the Chemical Examiner was that Audio Tape Head Cleaner is in the form of colour less liquid and has the characteristics of methanol. Similarly, for Degreasing Cleansing Fluid, the report was that it is in the form of colour less transparent liquid and has characteristics of iso-prophyle alcohol. The sample of Switch Cleaning is in the form of colour less transparent liquid containing mixture of liquid hydrocarbon.

6. Assessee filed detailed reply to the show cause notice explaining that the activities carried on by the appellant did not amount to manufacture and that the classification proposed by the department was incorrect. Various other contentions on limitations as well as on merits were raised. According to the appellant, during the said period, the appellant worked as a job worker undertaking filtering, repacking and labeling the materials supplied to it and the same would not amount to manufacture.

7. Commissioner of Central Excise Calcutta 1 in its order in original dated 27th January, 1999, confirmed the demand of duty. It was held that sub-heading 3402.90 covers surface-active preparations, washing preparations and cleansing preparations, whether or not containing soap. Explanatory notes of HSN were referred to and relied upon wherein it has been provided that washing preparation act on the surfaces by bringing the soil on the surface into a state of solution or dispersion. With reference to the degreasing preparation, it was stated that these preparations are used with a basis inter alia of solvents and emulsifiers. That the goods covered under the heading 34.02 are selected basically on the properties/characteristics of the products than on the basis of the constituents from which the goods were manufactured.

9. On the question of limitation, it was held that the letter dated 8th March, 1994 relied upon by the appellant did not disclose the entire facts and did not reflect the situation in its proper perspective. The Department was not informed about the actual activity undertaken by the appellant. It was not disclosed as to whether a new name has been given and the applicability and functions of the products were not clearly stated. That new and distinctive product came into existence which was sold and known in the commercial world under a separate name having different and distinct qualities. Commissioner of Central Excise, Calcutta 1, confirmed the demand of duty Rs.42,62,862/- proposed in the show cause notice and also levied a penalty of Rs.10 lakhs on the appellant under Section 11AC and the interest under Section 11AB. A redemption fine of Rs.20,000/- was also imposed.

31. It appears that duty liability under the Central Excise Act & Rules was well known to the appellant as is evident from the correspondences made by Shri Arun Kanti Paul (who is the common partner of M/s. T. Paul & Sons and the appellant) on 23rd August, 1995 with M/s. Philips India Ltd. Shri Arun Kanti Paul, in his letter has stated that they could avoid Central Excise liability by printing thinner instead of solvent on the packs of bottles. M/s. Philips India Ltd., by its letter No. HD/CE/ACCY dated 6th September, 1995, endorsed the same and permitted M/s. Paul & Sons to print thinner instead of solvent on the outer pack. The direction of M/s. Philips India Ltd. was actually executed by the appellant by printing thinner instead of solvent on the cartons. Shri Arun Kanti Paul during examination, when asked to throw some light on the correspondence with M/s. Philips India Ltd., stated that he had some doubt about the excise liability of these products and accordingly he obtained legal opinion regarding the same and persuaded M/s. Philips India Ltd., to allow them to print thinner against solvent on the cartons. It clearly shows that the appellant although was conscious of the fact that the products manufactured by them could attract the Excise Duty, made a deliberate attempt to evade the same by printing thinner instead of solvent on the cartons.

ations, whether or not containing soap.

29.05 Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives.

Ultraclean Audio Tape Head cleaner (Special thinner for cleaning all kinds of recording head, pinch rollers and capstans of audio tape-

recorders).

(b) Liquid Paraffin falling under SH 2710.90

-do-

SCO- 845 Switch cleaning oil cleans and lubricates switch controls

(c) Isopropyl Alcohol falling under SH 2905.90

-do-

DCF 847 de-greasing and cleaning fluid (specially packed for servicing audio/video industry).

24. The goods covered under heading 34.02 are selected basically on the properties/characteristics of the products than on the basis of constituents from which the goods are manufactured.

26. The basic property of mixture is cleansing as is evident from the statement of the partner of M/s. Thinner & Company.

32. The Tribunal has rightly come to the conclusion that the department could under the circumstances invoke larger period of limitation.

33. For the reasons stated above, we do not find any merit in these appeals and dismiss the same with no order as to costs.