Customs, Excise and Gold Tribunal - Bangalore
Gowtami Textile Industries And Sales ... vs The Commissioner Of Central Excise on 25 August, 2006
Equivalent citations: 2007(114)ECC272, 2007ECR272(TRI.-BANGALORE)
ORDER S.L. Peeran, Member (J)
1. All these appeals raise a common question of law and facts and hence they are taken up together for disposal as per law. The details of the appeal Nos, SCNs, OIOs and periods are given in tabulated form as below:
Sl. No. Appeal No. Name of the Party SCN No. & Date OIO No. & Date Period Duty (AED) Rs.
1.
E/1265/1998 M/s. Gowtami Textile Industries & Sales Corporation v. The Commissioner of Central Excise Visakhapatnam O.R. 52/95 Dt. 17.10.95 3/98-ASR Dt.20.02.98 passed by the CCE, Vizag 1.11.90 to 31.3.95 and 24.4.95 to 31.7.95 Duty: 32,75,816 Penalty: 6,50,000 Interest Under Section 11AB
2. E/1308/98 Sri Sai Fabrics v. CCE, Vizag O.R. 47/95 dt. 09.10.95 4/98-ASR Dt: 25.02.98 passed by the CCE, Vizag 1.10.90 to 31.7.95 Duty: 6,42,193 Penalty:
1,30,000 Interest Under Section 11AB
3.
E/1310/98 Venkataramana Printing & Dyeing Works v. CCE, Vizag O.R. 48/95 Dt: 09.10.95 6/98-ASR Dt: 26.02.98 passed by the CCE, Vizag 1.10.90 to 31.7.95 Duty: 2,68,408 Penalty:
55,000 Interest Under Section 11AB
4.
E/1325/98 Dhanalakshmi Cloth Dyeing & Printing Works v. CCE, Vizag O.R. 53/95 Dt: 17.10.95 2/98-ASR Dt: 19.02.98 passed by the CCE, Vizag April, 1992 to July, 1995 Duty: 7,32,998 Penalty:
1,50,000 Interest Under Section 11AB
2. The appellants were carrying on the activity of (a) Padding (Starching); (b) Stentering (c) Calendering along with certain processes viz. bleaching, dyeing, printing, etc. in the same factory of production/processing. The appellant M/s. Gowtami Textile Industries & Sales Corporation had been filing declarations for the periods 1986, 1988 and 1991 which is not denied by the Commissioner in para 16.3 of the said order against the party. The parties had been allotted Code Number by the Department vide their letter dated 6.3.1987 by the Superintendent of Central Excise, Anti Evasion Unit, Guntur. The Show Cause Notices in all these cases had been issued in October 1995. The allegation in the Show Cause Notice is that the benefit of Notification No. 253/82-CE, as amended from time to time is not applicable to them as they were using power in carrying on the various processes of manufacture. The appellants had contended that the power was not used in carrying on these processes, but it was used only for the purpose of pumping the water to the overhead tanks. However, their plea has been rejected on the ground that there were admissions made by the party and that there was a huge use of diesel. The appellants denied that they had made any admissions pertaining to use of power in the manufacturing of these processes. Their contention is two fold. (a) that the Show Cause Notice does not allege wilful suppression of facts with intention to evade duty and, therefore, the invocation of larger period is not sustainable and (b) that when they have not used power for various processes and that the department was aware of their activity, therefore, the question of invoking larger period does not arise for confirming demands. It is their submission that the Commissioner has not given categorical and specific finding that they have used power in the various activities. He has relied on the statement pertaining to the fact of pumping of water to the overhead tanks. This activity cannot be treated as a process of manufacture as it is not part of the manufacturing activity. On this plea that the pumping of water to the overhead tank does not amount to a process of manufacture, the learned Counsel relies on the ratio of the following rulings. Shalimar Paints Limited v. CCE, Kolkata 2001 (136) ELT 451(Tri.-Kolkata) [This case was maintained by the Supreme Court by dismissing the Civil Appeal filed by the Department as reported in 2002 (143) ELT A76(SC).] 2.1 The learned Counsel relies on the following ratio of the judgment with regard to time bar.
(i) Nizam Sugar Factory v. CCE, A.P. 2006 (197) ELT 465(SC)
(ii) Cosmic Dye Chemical v. CCE, Bombay
(iii) CCE v. HMM Limited
(iv) Kaur & Singh v. CCE, New Delhi 1997 (94) ELT 289(SC)
(v) T.N. Dadha Pharmaceutical v. CCE, Madras 2003 (152) ELT 251 (SC)
(vi) Raj Bahadur Narain Singh Sugar Mills Ltd. v. UOI
(vii) Gopal Zarda Udyog v. CCE, New Delhi 2.2 The learned Counsel further points out to the ruling rendered in their own case as In this case, this bench, after detailed consideration, rejected the Revenue appeal and held that the benefit of the Notifications are required to be extended to these activities. The learned Counsel submits that there was an amendment to the subsequent period granting the benefit even if power is used. However, for the earlier period, the benefit of Notification was not to be extended if power was used. It is the case of the assessees that power has not been used for the various activities even as per the admitted position from the Show Cause Notice. The power was used only for pumping the water to the overhead tank which cannot be treated as a process of manufacture. Therefore, he submits that the benefit of the Notification cannot be denied and that the demands are barred by time.
3. The learned JCDR contradicts the Counsel's submission pertaining to use of power. He points out to para 13 and 14 of the Commissioner's order in the case of M/s. Gowtami Textile Industries and Sales Corporation wherein the Commissioner has relied on the statements of the parties. The Commissioner has noted in para 13 of the Gowtami Textile Industries and Sales Corporation case that starching and stentering machines were affixed with 3 H.P. Diesel Engines and calendaring machine driven by 1/2 H.P. Motor (electric) for the processing of grey fabrics undertaken by them in the course of manufacture of the goods viz. sarees and other dyed/printed fabrics. He has relied on the photograph available on record to show that they were using diesel engine at their premises. He has also noted the details of expenses incurred towards the cost of diesel, available in their Books of Accounts.
4. The learned Counsel, in counter, submits that the above conclusion of the Commissioner is based on the letter dated 2.9.1995 from the Inspector of Factories. However, the appellants were able to get a clarification from the same Inspector by their letter dated 28.07.1999. He has clarified that the machinery mentioned in column 5 of this office letter is not correct as the plans approved and licence issued is only for 15 H.P. The said letter also states that regarding the details of installations in column No. 5, it is clarified that "we do not have any recorded observations made during the inspections to say that the machines noted in column No. 5 are installed and put into operation." He submits that in view of the subsequent clarification given by the Inspector of Factories, the conclusion drawn by the Commissioner is not based on any evidence of mahazar drawn by the Inspecting Officers. No mahazar has been drawn with regard to the use of electricity and the said machines were working on electric motors.
5. The learned JCDR submits that in the case of M/s. Shri Dhanalakshmi Cloth Dyeing & Printing Works, there is a letter given by the Factory manager admitting the use of power. In counter, the learned Counsel submits that in case of M/s. Shri Dhanalakshrni Cloth Dyeing & Printing Works, the assessee is seeking relief on the basis of time bar.
6. On a careful consideration of the submission made by both sides, we notice that two issues arise for consideration:
(i) as to whether the benefit of Notifications in question can be extended to the assessees. On this point, in so far as M/s. Gowtami Textile Industries & Sales Corporation is concerned, the Commissioner has relied on the letter of the Inspector of Factories. However, the Inspector has issued a clarificatory letter, the contents of which has been extracted supra. The Revenue ought to have drawn mahazar when the officers have visited the factory. No such mahazar has been drawn by the Revenue to show that the said machines had been working on electric motors. Therefore, mere reliance on the initial letter of Inspector is not sufficient for the reason that the said Inspector of Factories has clarified in subsequent letter that he has not examined as to whether the installed machines were put into operation on the basis of electricity or not. The only evidence is statement recorded in M/s. Shri Dhanalakshmi Cloth Dyeing & Printing Works case which cannot be the evidence for relevance in respect of other cases. However, in para 12.4 of the impugned order in the case of M/s. Gowtami Textile Industries & Sales Corporation, there is a statement of Shri A. Pola Kumar, General Manager, which admits the use of the power in running the machine. Similar statements have been given by the assessees in other cases also. They have not resiled these statements. In view of this fact, the conclusion has to be drawn that electricity has been used for running the machines. In view of this evidence, we have to uphold the findings of the Commissioner with regard to the use of electricity for running the machines and hence, the benefit of Notification has been rightly denied.
(ii) In so far as the demands being barred by time, it is seen that for the purpose of invoking larger period, the Show Cause Notice should clearly indicate that there is deliberate suppression of facts with an intention to evade duty as noted by the Apex Court and in the judgments and the gist of orders extracted supra. We have perused the Show Cause Notice and find that the crucial ingredients to invoke larger period has not been brought out in the Show Cause Notice. Furthermore, it cannot be said that the appellants' existence was not known to the Department. M/s. Gowtami Textile Industries and Sales Corporation had been filing returns. The Department, through the Superintendent of Anti Evasion Unit attached to the CCE, Guntur, has granted Code Numbers to all the units.
7. The learned JCDR submits that the fact of use of electricity was not made known and, therefore, suppression has been brought out. Although this fact can be taken as not having been disclosed, but the Show Cause Notice should bring out the ingredients of the proviso to Section 11A of the Act inasmuch as that it has to be brought out that there was an intention to evade duty and the appellants had wilfully suppressed the facts for invocation of larger period. As these vital ingredients have not been brought out in the Show Cause Notice, therefore, the judgments cited supra would apply to the facts of the case. Hence, we are of the considered opinion that the demands are barred by time and the same have to be set aside.
8. However, the demands for the period of six months prior to the issue of Show Cause Notice are required to be confirmed as the benefit of Notification cannot be extended.
9. The impugned orders, confirming demands, for larger period is set aside while confirming the demands for a short period of six months. The Commissioner shall re-work out the penalties after quantifying the duty for six months. Matter is sent back to the Commissioner to quantify the duty for six months and impose penalty at the rate of 10% of the duty liability as has been done by the Tribunal in cases of this nature. The appeals are disposed of in the above terms.
(Pronounced and dictated in open Court)