Customs, Excise and Gold Tribunal - Tamil Nadu
Commr. Of C. Ex. vs Singaravelar Spinning Mills (P) Ltd. on 30 June, 1998
Equivalent citations: 1999(105)ELT630(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. These are two appeals of Revenue. Since the issues are identical, they were heard together and are being disposed off by a common order :-
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Appeal No. Duty Rs. Respondent Consultant/Advocate
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E/1207/96 Order- 1,37,200 Singaravelar Shri S. Kandaswamy, in-Appeal No. Spinning Mills (P) Consultant 396/96 (CBE), Ltd. dated 11-6-1996 E/1255/96 Order- 1,09,997.64 M/s. Lakshmi Shri V.S. Venugopalan, in-Appeal No. Saraswathy Advocate. 268/96 (CBE), Cotton Mills (P) dated 17-4-1996 Ltd.
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2. The only common issue involved is availability of Modvat credit under capital goods to carding machine and speed frame which manufacture carded combed cotton etc., which is an intermediate product exempted from duty.
3. Heard learned JDR, Shri Ravinder Saroop, who submitted that the goods in question are eligible for C.G. credit only after omission of Chapter Heading 52.02 from the annexure to Rule 57Q by Notification No. 60/94 (N.T.), dated 21-10-1994. Since no retrospective effect is mentioned therein so credit is not eligible.
4. Secondly, Rule 57Q is to be read by itself (de hors) and it is not correct to resort to proviso to Rule 57-S for allowing credit prior to 21-10-1994. Therefore, Order-in-Appeal errs in allowing credit albeit after deducting 2.5% there-of per quarter up to 21-10-1994. Cited this Tribunal Final Order No. 2587/97 on Titan Industries.
5. Therefore, since the aforesaid intermediate product is exempted, credit cannot be taken as per Rule 57R(2).
6. Furthermore, in Appeal No. E/1255/96, certain other minor issues are also involved which will be considered later. "
7. Learned JDR submitted that department has led evidence of sale of carded/combed cotton, so it is marketable and 'goods'. Cited decision in the case of Viswabharathi Textiles vide this Tribunal Final Order No. 724/97-SRB, dated 12-3-1996 which was on all fours with present case. Learned JDR also submitted that as per Order No. 66/98 in case of Tricky Distilleries dated 16-3-1998 1998 (104) E.L.T. 784 (Tribunal), a reference was allowed to Hon'ble High Court in view of conflicting decision. He also reiterated the other grounds of the two appeals.
8. Heard Shri S. Kandaswamy, learned Consultant for respondents in Appeal No. E/1255/96. He submitted as follows :-
(i) Credit date of receipt of C.G. are not inter-linked under Rule 57Q. Only from 16-3-1995 date of receipt was introduced therein under Notification 11/95 (NT). In their case, production started in November 1994 and Credit was taken after 4-10-1994 (para 1 of Order-in-Original).
(ii) Cotton carded/combed alleged to be marketable and hence exempted intermediate product was in fact not marketable, hence not goods. Cited :-
1977 (1) E.L.T. 0 199) - DCM 1988 (38) E.L.T. 535 (S.C.) - Ujagar Prints 1989 (44) E.L.T. 131 (Tribunal) - Surma Valley 1995 (76) E.L.T. 241 (S.C.) - Moti laminates 1994 (74) E.L.T. 492 (S.C.) - Parle Products
(iii) Mere mention of a product in tariff does not amount to excisability. Cited :-
1989 (40) E.L.T. 280 (S.C.) - Bhor Industries 1995 (77) E.L.T. 372 (Tribunal) - Indian Textile Paper Tube Co.
1996 (81) E.L.T. 606 (Tribunal) - United Phosphorus He, therefore, concluded that there was no merit in Revenue's appeal.
9. Heard learned Advocate Shri Venugopalan. He submitted as follows :-
(i) Carded Cotton Combed was not marketable. Cited :-
1988 (36) E.L.T. 11 (Bom.) - Grentex & Co.
1996 (64) ECR 630 (Tribunal) - Jeyamurugan Cotton Mills 1996 (84) E.L.T. 315 (Tribunal) - Cheran Spinning Mills
(ii) The machines are not merely for cotton fibre. Any virgin blended fibre can be used in it. They were manufacturing both cotton yarn as well as man-made yarn through these C.G.
(iii) Reiterated technical opinion of CEMA & SITRA and cited 1987 ECR 921 (Bom.) wherein it was held that slivers were not goods,
(iv) Notification 60/94, dated 21-10-1994 Was clarificatory in nature and, therefore, had retrospective effect.
(v) The 2.5% depreciation awarded in Order-in-Appeal is fair and just,
(vi) Department has led evidence of stray sales. A Single swallow does not make a spring,
(vii) Name of sole selling agent mentioned in GP 1 does not override the fact that the goods were infect transported by pilot roadways to the respondents mills.
He, therefore, prayed that Revenue's appeal be dismissed.
10. We have considered the arguments on both sides and records of the case. Learned JDR has cited 3 case laws, which are considered sequentially below :-
(i) Order No. 2587/97 - Titan Industries of this Tribunal. We have perused it and find that it only remands the matter back to lower authority. As such no finality is obtained and it does not help the Revenue's case.
(ii) Order No. 724/97, dated 12-3-1996 in E/658/95/MAS in the case of Viswabharathi Textiles Ltd. We have perused it and find that it was held there in that as appellant has not urged that carded cotton combed is non-marketable against specific findings of the impugned order, therefore, matter was remanded on other grounds. As such it is distinguishable on facts as in these appeals respondents have strenuously argued that the product is not marketable.
(iii) Order No. 66/98, dated 16-3-1998 in the case of Tricky Distilleries 1998 (104) E.L.T. 784 (Tribunal). We have perused this order and it concerns the eligibility of Diesel Engines for gensets for electricity generation and consequent use in manufacture of Acetic Anhydride. The conflicting decisions in Vellathal Spinning Mills (P) Ltd. and M. Forgings of this Tribunal's orders were referred to, the Hon'ble High Court. Neither of these are cited here. The order is also distinguished as it deals with a different product.
11. Learned Advocate and learned Consultant have cited many case laws which are now considered below :-
(i) 1977 (1) E.L.T. (J199) (S.C.) - DCM, 1988 (38) E.L.T. 535 (S.C) - Ujagar Prints. In these it was held that a new article must emerge under 'manufacture'. We find that in this case cotton fibre is the input and carded cotton combed sliver is the output. Clearly, both are not the same and a new item emerges. This case law, therefore, does not help the respondents.
(ii) 1989 (40) E.L.T. 280 (S.C.) - Bhor Industries Ltd. Therein, it is held that marketability is an essential ingredient. In these appeals, this law is accepted by both sides. The dispute is on facts not on this law -whether carded cotton combed is marketable or not? Hence, this case-law does not help the respondents.
(iii) 1989 (44) E.L.T. 131 (Tribunal) - Sarma Valley Saw Mills (P) Ltd., wherein, sawn timber is held non-excisable. This is distinguished on facts as the product in our appeals is different.
(iv) 1994 (74) E.L.T. 492 (S.C.) - Parle Products, wherein it is held that manufacture involves the emergence of a commercially new and different article. In the appeals under consideration, the dispute is on applying facts to this law and not on the law itself.
(v) 1995 (76) E.L.T. 241 (S.C.) - Moti Laminates, wherein, it is held that the new commodity to be goods must be usable, movable, saleable and marketable. In these appeals, the dispute is on applying facts to this law and not in this law-point itself.
(vi) 1995 (77) E.L.T. 372 (Tribunal) - Indian Textiles Paper Tube Co., wherein, it is held that burden of proof of marketability is on department. In the appeals under consideration, the Revenue claims it has led evidence of sale, whereas, respondents claim these to be stray sale. Hence what requires consideration is facts applied to this law and not the law-point itself.
(vii) 1996 (81) E.L.T. 606 (Tribunal) - United Phosphorus, wherein, it has been laid down that mere mention in Tariff, Drawback Rules or Technical Books etc., does not make goods a marketable commodity. Neither side, in subject appeals, are disputing this law point seriously. Facts need to be evaluated on this issue.
(viii) 1988 (36) E.L.T. 11 (Bom.) - Grentex & Co. and Ors., wherein, the product held non-excisable is carded gilded sliver out of woollen fibre and is, therefore, distinguished on facts.
(ix) 1996 (64) ECR 630 (Tribunal) - Jayamurugan Cotton Mills Ltd. and 1996 (84) E.L.T. 315 (Tribunal) - Cheran Spinning Mills, wherein, Tribunal has not considered the issue on merits but merely remanded the matter back to lower authorities. It is of no help to us.
12. The issue to be considered, therefore, is basically as follows :-
(a) Whether cotton combed carded sliver is 'goods', being a new item which is marketable? and
(b) Whether Notification No. 60/94 (NT), dated 21-10-1994 can be applied with retrospective effect, being clarificatory in nature; and
(c) Whether Rule 57Q is to be read with Rule 57-S and hence impugned Order-in-Appeal giving 2.5% per quarter deductions is correct in law?
13. We will first consider the question of the product being "goods". The Revenue says that in Order-in-Original, department has discharged its burden of proof by leading evidence of sale. The relevant portion of the Order-in-original No. 363/95, dated 22-9-1995 reads as under :-
M/s. Kandasamy Spinning Mills (P) Ltd., have cleared 8674 Kgs. of the carded/combed cotton (Heading 52.02) to M/s. JKK Nataraja Mills (P) Ltd., on payment of Nil duty, over the period of only 11 days from 21-1-1994 to 31-1-1994. Similarly M/s. Hi-life Textiles (P) Ltd., have cleared over 17400 Kgs of the cotton simplex Bobbins (52.02) to M/s. Hi-Life Padma Weaving Inc. during the Year 1994-95.1 also note that the consignees in these two cases had facility only for the operations beyond the carding combing stages and had to necessarily obtain the carded/combed cotton from others for their spinning operations during the relevant period, which also points to the marketability and also the actual removals of the carded/combed cotton as such in the market.
14. This evidence clearly shows that the product is both marketed and marketable. What is more significant than the sale enumerated therein is that the two mills had no in-house carding/combing machines of their own and had to purchase carded/combed cotton from outside for the manufacture of yarn. Thus in a continuously recurring manner, this item is bought and sold. This is not a case of stray sales, as it continues over a long period of time. Neither is this case a case of any special technological gap. These are two units which are commercially engaged in spinning yarn. They have not felt the need for a car ding/combing machine as they can buy the product from other known sources. This evidence clearly satisfies the law as laid down in the case laws of M/s. Bhor Industries, Moti Laminates and Indian Textile Paper Tube Co. (supra). The respondents have not led any evidence to the contrary, because mere expert or technical opinion of SITRA/CEMA is super ceded here by actual marketability to such an extent that two units engaged in manufacture of yarn just do not consider if necessary to install car ding/combing in-house facility. It is not disputed that carded/combed cotton is an essential stage in spinning of yarn and that yarn cannot be spun otherwise directly from cotton fibre.
15. The other argument that the same machine is used for MMF also is irrelevant as long as such use is not exclusive thereto. Respondent admits that cotton fibre too is fed-in to produce cotton combed/carded. Since we hold that these are goods, they fall under 52.02. In view of that the exclusion contained in Rule 57Q is applicable and the machinery used for obtaining carded/combed cotton is not eligible for Modvat, credit under Rule 57Q up to 20-10-1994.
16. We have perused the contents of Notification 60/94, dated 21-10-1994. A plain reading thereof shows that nowhere is there any word or phrase to specify that it is clarificatory in nature or that it applies with retrospective effect. Therefore, as per settled law, we refuse to read any intendment in it and the respondent's pleas on this account fail. Respondents in their cross appeal cite some circular of the Board. This Tribunal is not bound by it and would only consider the wording of the said notification.
17. In view of the aforesaid findings, we conclude that Modvat credit on carding machine and speed frame was not available up to 20-10-1994 under Rule 57Q read with Rule 57R(2). Thus the impugned Orders-in-Appeal are liable to be set aside on these items.
18. We find that in view of these conclusions already reached, there is no need to go into the question of whether Rule 57Q is to be read with Rule 57-S or not. Therefore, we do not pass any orders on this issue.
19. In Appeal No. E/1207/96 by Revenue v. Singaravelar Spining Mills (P) Ltd., the grounds of appeal pertain only to carding machine and speed frame. In appeal No. E/1255/96 by Revenue v. Saraswathy Cotton Mills (P) Ltd., there are some additional issues involved. Now we proceed to consider them. These issues are :-
(i) that credit is not available on parts if generating sets i.e. diesel engines as the same are not covered by explanation to Rule 57Q;
(ii) As credit in respect of Sl. Nos. 10 & 15 of annexure to SCN dated 11-8-1994 was taken on quadruplicate copies of invoices, therefore, credit is not correctly taken;
(iii) Credit in respect of sapecostat oil (Sl. No. 12 of SCN dated 19-1-1995) is not capital goods at all under Rule 57Q. The Order-in-Appeal is silent on this, yet the Order-in-Original is set aside on this too; and
(iv) No appeal was filed against Order-in-original on item Can Bowl with Oil Tray, yet Order-in-Appeal is silent and since Order-in-original is set aside, it goes beyond the appeal regarding oil tray;
(v) Credit on capital goods taken on GPI No. 15/30.03.94 and Invoices 2358, dated 8-8-1994 and 3427, dated 4-10-1994 are not in the name of respondent;
(vi) Though respondents had not appealed against Order-in-Original disallowing credit of Rs. 5,576/- as well as 25,524/-, yet Order-in-. Appeal has had the effect of expunging this as the entire Order-in-original has been set aside.
20. As regards sub-paras (i), (iii), (iv) & (vi) above are concerned, since now the impugned Order-in-Appeal is being set aside, the Order-in-original stands restored and, therefore, no further orders are required from us thereon. The unintended mistake in the impugned order thus now stands rectified.
21. As regards sub-para (ii) above is concerned, any credit taken on quadruplicate copy is not correct, since the effect of this order is to restore the Order-in-original, no further orders are required on this too.
22. As regards sub-para (v) is concerned, we have already held that credit is not available on other merits. As the impugned order is to be set aside, no further orders thereon are necessary.
23. In view of the aforesaid discussions and findings, we set aside the two impugned Orders-in-Appeal. The two Revenue appeals are allowed accordingly.