Custom, Excise & Service Tax Tribunal
Century Enka Ltd vs Cce Raigad on 20 December, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
COURT No. I
Excise Appeal No. 86129 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
M/s. Raigad Processors Appellant
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
WITH
Excise Appeal No. 86130 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
M/s. Konkan Synthetics Fibers Appellant
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
WITH
Excise Appeal No. 86131 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
M/s. Century Enka Ltd. Appellant
C-61, MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
2 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
WITH
Excise Appeal No. 86132 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
M/s. Konkan Synthetics Fibers Appellant
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
WITH
Excise Appeal No. 86153 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
Shri D.B. Roongtha Appellant
Century Enka Ltd.
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
WITH
Excise Appeal No. 86154 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
Shri S.B. Kamath Appellant
Century Enka Ltd.
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
3 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
WITH
Excise Appeal No. 86155 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
Shri G.M. Jain Appellant
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
WITH
Excise Appeal No. 86156 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
Shri G.M. Singhvi Appellant
Century Enka Ltd.
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
AND
Excise Appeal No. 86157 of 2014
(Arising out of Order-in-Original No. 122-157/MAK (122-157)
Commr/RGD/13-14 dated 08.01.2014 passed by Commissioner of Central
Excise, Raigad)
Shri R.S. Dhand Appellant
Century Enka Ltd.
MIDC, Bhosari, Pune 411 026.
Vs.
Commissioner of Central Excise, Raigad Respondent
Utpad Shulk Bhavan, Plot No.1,
Sector 17, Khandeshwar,
Navi Mumbai 410 206.
4 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
Appearance:
Shri D.B. Shroff, Sr. Advocate, Shri Prakash Shah, Shri Prasad
Paranjape and Shri Mohit Raval, Advocates, for the Appellants
Shri V.K. Singh, Special Counsel, for the Respondent
CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO. A/87358-87366/2019
Date of Hearing: 11.09.2019
Date of Decision: 20.12.2019
PER: SANJIV SRIVASTAVA
These appeals are directed against order in original No
122-157/MAK (122-157) Commr/RGD/13-14 dated 08.01.2014
of the Commissioner Central Excise Raigad. By the impugned
order Commissioner held as follows:
(A) In respect of Show Cause notice bearing F No V/Adj
9SCN) 15-159/2001/MVIII dated 30.05.2001 for the
period from April 2000 to March 2001:-
1) I hereby reject the declaration No 1/2000-01 dated
8.5.2000 filed under Rule 173B of the Central Excise
Rules, 1944 by M/s KSF (PYU)
2) I hereby disallow the exemption benefit under
notification 6/2000-CE dated 1.3.2000 as claimed in
declaration No 1/2000-01 dated 8.5.2000 under Rule
173B of the Central Excise Rules, 1944 by M/s KSF
(PYU)
3) I hereby confirm the demand of Central Excise duty
totally amounting to Rs 38,24,41,595/-/- (Rupees Thirty
Eight Crore Twenty Four Lakhs Forty One Thousand Five
Hundred and Ninety Five only) for the period April 2000
to March 2001 and order the recovery from them under
Section 11A of Central Excise Act, 1944.
5 E/86129,86130,86131,86132,86153,
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4) I impose penalty of Rs 38,24,41,595/-/- (Rupees Thirty
Eight Crore Twenty Four Lakhs Forty One Thousand Five
Hundred and Ninety Five only) on them under Rule 25 of
Central Excise Rules, 2002 read with section 11AC of
Central Excise Act, 1944.
5) I order recovery of interest at appropriate rate on the
duty confirmed at Sr No (3) above, from them under the
provision of Section 11AB of the Central Excise Act,
1944.
(B) In respect of Show Cause notices mentioned at (Sr
No 1 to 32) of Table at Para No 12, covering the period
from April 2001 to June 2001:-
1) I hereby reject the declaration No 1/2000-01 dated
8.5.2000 filed under Rule 173B of the Central Excise
Rules, 1944 by M/s KSF (PYU)
2) I hereby disallow the exemption benefit under
notification 6/2000-CE dated 1.3.2000 as claimed in
declaration No 1/2000-01 dated 8.5.2000 under Rule
173B of the Central Excise Rules, 1944 by M/s KSF
(PYU)
3) I hereby confirm the demand of Central Excise duty
totally amounting to Rs 23,74,27,559/- (Rupees Twenty
Three Crore Seventy Four Lakhs Twenty Seven
Thousand Five Hundred and Fifty Nine only) for the
period April 2001 to June 2001 and order the recovery
from them under Section 11A of Central Excise Act,
1944.
4) I impose penalty of Rs 23,74,27,559/- (Rupees Twenty
Three Crore Seventy Four Lakhs Twenty Seven
Thousand Five Hundred and Fifty Nine only) on them
under Rule 25 of Central Excise Rules, 2002 read with
section 11AC of Central Excise Act, 1944.
5) I order recovery of interest at appropriate rate on the
duty confirmed at Sr No (3) above, from them under the
6 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
provision of Section 11AB of the Central Excise Act,
1944.
(C) In respect of Show Cause notices mentioned at (Sr
No 1 to 32) of Table at Para No 12, covering the period
from July 2001 to March 2003:-
1) I hereby reject the declaration No 1/2000-01 dated
8.5.2000 filed under Rule 173B of the Central Excise
Rules, 1944 by M/s KSF (PYU)
2) I hereby disallow the exemption benefit under
notification 6/2000-CE dated 1.3.2000 as claimed in
declaration No 1/2000-01 dated 8.5.2000 under Rule
173B of the Central Excise Rules, 1944 by M/s KSF
(PYU)
3) I hereby confirm the demand of Central Excise duty
totally amounting to Rs 1,67,28,69,806/- (Rupees One
Sixty Seven Crore Twenty Eight Lakhs Sixty Nine
Thousand Eight Hundred and Six only) for the period
July 2001 to March 2003 and order the recovery from
them under Section 11A of Central Excise Act, 1944.
4) I order recovery of interest at appropriate rate on the
duty confirmed at Sr No (3) above, from them under the
provision of Section 11AB of the Central Excise Act,
1944.
5) I impose penalty of Rs 1,67,28,69,806/- (Rupees One
Sixty Seven Crore Twenty Eight Lakhs Sixty Nine
Thousand Eight Hundred and Six only) on them under
Rule 25 of Central Excise Rules, 2002 read with section
11AC of Central Excise Act, 1944.
(D) I impose penalty of Rs 1,00,000/- (Rupees One Lakhs
only) on each noticee at Sr No (5) to (9) i.e. (5) Shri Singhvi, G
M Sr President, (6) Shri S B Kamath Sr Vice President (7) Shri G
M Jain, Vice President (Fin) (8) Shri D B Roongtha, Factory
Manager (9) Shri R S Dhand, Vice President (Marketing
Processed Yarn) of the impugned Show Cause Notice, under Rule
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86154,86155,86156,86157/2014
209A of the Central Excise Act, 1944/ Rule 26 of Central Excise
Rules, 2002 as applicable at relevant time of the SCN period.
2.1 Appellants (M/s Konkan Synthetic Fibers (KSF) (Prop
Century Enka Ltd) having Central Excise Registration No KSF-
BOM-III/PNL-II/MHD/47/92 for manufacture of partially oriented
yarn 9POY) and different types of processed yarn (PY) falling
under Chapter sub heading 5402.32, 5402.43, 5402.52 of
Central Excise Tariff Act, 1985 respectively in the single
composite plant. They availed MODVAT/ CENVAT Credit and paid
the Central Excise duty advalorem.
2.2 The requested for bifurcation of their existing unit into two
units for implementing, product management concept policy and
requested separate Registration on the basis of information
provided by them and as requested the existing manufactory of
appellant at C-51, MIDC, Mahad registered under Central Excise,
was altered by constructing a suitable compound wall and in/ out
gate. The existing Central Excise Registration was amended was
amended in name of KSF (PYU) and a new Central Excise
Registration was given to KSF (POY) with effect from
26.04.2000.
2.3 M/s KSF (PYU) filed a classification declaration as per Rule
173B of the Central Excise Rules, 1994 claiming the benefit of
exemption under Notification No 6/2000-CE dated 1.03.2000 (Sr
No 114) as per which the duty on "texturized yarn" classifiable
under Heading No 5402.42 was specific rate, subject to condition
that the manufacturer of the goods is an independent processor
and does not have facilities of manufacture of POY in their
factory (including plants and machinery). They also claimed
specific rate of duty as per the entry at Sr No 134 of same
notification in respect of processed yarn classifiable under
heading 5402.32 & 5402.52.
2.4 Investigations undertaken revealed that the claim of the
appellants that they have bifurcated their manufactory into two
separate manufacturing facilities, was bogus, and the so called
alterations made was found to be only on paper and did not exist
8 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
in reality. Even the reasons cited, for constructing a boundary
wall for bifurcation of the existing unit were mis-represented/
mis stated with the intention to avail the inadmissible benefit of
exemption claimed.
2.5 The goods produced at facility of KSF(PYU) and KSF (POY)
were sold through the depot of Century Enka Limited (CEL)
situated all over India. Earlier also the selling pattern was same.
On the examination of the confidential sales policies issued by
CEL, it transpired that
they were recovering Central Excise Duty @ 36.8 from the
their customers on sale of goods produced at KSF (PYU)
while they were paying excise duty at specific rate of Rs
2.87 per kg and Rs 10.35 per kg for texturized flat yarn
and dyed yarn.;
CEL was also manufacturing and clearing processed yarn
after paying duty @ 36.8% from their factory at Pune, and
were paying duty at specific rate of Rs 2.5 per kg on same
when cleared from their facility at Mahad. However they
were recovering the duty @ 36.8% in respect of all the
sales effected from depot irrespective of the fact whether
they have been cleared on payment of duty @Rs 2.5 per
Kg from Mahad or @36.8% from Pune.
The sale policy of recovering the duty @ 36.8% continued
even after the so called bifurcation.
2.6 Since there was only one central sales policy of M/s CEL
and the goods produced by processed yarn product group of
erstwhile KSF (Prop M/ CEL) and the goods produced by the so
called new site created on the basis of same product group in
the name of KSF(PYU) being the same, it appeared that old and
new stock of such goods was sold at same price through depot of
CEL as per the sales policy. The old stock was cleared on
payment of duty at the rate of 36.8%, whereas new stock was
cleared at specific rate in terms of notification 6/2000-CE dated
01.03.2000. Thus fraudulent intentions to evade payment of
9 E/86129,86130,86131,86132,86153,
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duty, by claiming themselves to be independent texturizer was
quite evident.
2.7 The fact that artificial bifurcation done was only on paper
and unit continue working as one composite unit, is evident from
the following:
Prior to 26.04.2000.for Sales Tax Department, KSF (Prop
CEL) Mahad was functioning as single unit engaged in
manufacturing of POY and Processed Yarn. Accordingly, it
was registered with the Sales Tax Department in the same
name and for the place of business "C-61 MIDC Mahad".
Even after bifurcation into two units, no change was
incorporated in the sales tax registration. Since these two
units were working under "Packaged Scheme of Incentive",
separate registration was needed for each unit but was
never taken. Thus the manufacturing site at C-61 MIDC
Mahad, continued to function as KSF even after bifurcation.
They also filing monthly sales tax returns in name of KSF
only through CEL, Pune.
For SICOM Ltd (State Investment Corporation of
Maharashtra) which had issued them eligibility certificate
for tax exemption of Rs 86.23 crores vide F No Fine (1)
1993/Exemption/EC-3701 dated 18.07.1998, they
continued to function as single unit prior and after
26.04.2000.
Income Tax PAN for the two bifurcated units continued to
be the same as was used earlier by KSF (Prop CEL). Also
for TDS, the account number allotted to KSF (Prop CEL)
remained the same for the so called two separate units.
2.7 Thus it appeared that KSF Prop CEL) who were not entitled
to the benefit of exemption under Notification No 6/2000-CE, dtd
01.03.2000 prior to 26.04.2000, with the intention to avail the
benefit of this notification, mis declared to Central Excise and
obtained two separate registrations for the two sections of the
same factory and claimed status of independent texturizer, not
having facility for manufacture of POY in the factory (including
10 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
and machinery). Thus they have fraudulently evade payment of
duty to the tune of Rs 38,24,41,595/- during the period April
2000 to March 20011. Accordingly a show cause notice bearing F
No V/Adj(SCN)15-159/2001/MVIII dated 30.05.2001 for the
period from April 2000 to March 2001 was issued to them asking
to show cause as to why:
i. The declaration No 1/2000-01 dated 8.05.2000 filed under
Rule 173B of Central Excise Rules, 1944, by M/s KSF (PYU)
should not be rejected.
ii. Benefit under Notification 6/2000 dated 1.3.2000 as
claimed in declaration No 1/2000-01 dated 8.5.2000 u/r
173B ibid, filed by M/s KSF9PYU) should not be denied to
them.
iii. Central Excise duty amounting to Rs 38,24,41,595/-
(Rupees Thirty Eight Crore Twenty Four Lakhs Forty One
Thousand Five Hundred and Ninety Five only) should not
be demanded and recovered from them u/s 11A of CEA,
1944.
iv. Penalty should not be imposed on them under Rule 173Q
of CER 1944 read with section 11AC of CEA, 1944.
v. Interest should not be demanded and recovered from them
under the provisions of Section 11AA of CEA, 1944 and Sec
11AB of CEA, 1944.
vi. Land, building, Plant and machinery or any other thing
used in connection with manufacture, production, storage,
removal or disposal of such goods should not be
confiscated under the provisions of Rule 209 of Central
Excise Rules, 1944
Penalty under rule 209A of Central Excise Rules, 1944 was also
proposed on other noticees.
2.8 Subsequently periodic show cause notices as detailed
below were issued to the appellants, demanding duty short paid
by them.
11 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
S SCN No Date Amount Period
No
1 V/Adj (SCN) 15- 23.11.01 9324997 01.04.01 to
503/M VII/01
05.04.01
2 V/Adj (SCN) 15- 27.12.01 9335519 06.04.01 to
534/2001/MVII
10.04.01
3 V/Adj (SCN) 15- 27.12.01 8706184 11.04.01 to
535/2001/MVII
13.04.01
4 V/Adj (SCN) 15- 27.12.01 7349010 14.04.01 to
536/2001/MVII
16.04.01
5 V/Adj (SCN) 15- 27.12.01 9353561 17.04.01 to
537/2001/MVII
18.04.01
6 V/Adj (SCN) 15- 27.12.01 7289656 19.04.01 to
538/2001/MVII
20.04.01
7 V/Adj (SCN) 15- 27.12.01 5256257 21.04.01 to
539/2001/MVII
22.04.01
8 V/Adj (SCN) 15- 27.12.01 8811753 23.04.01 to
540/2001/MVII
24.04.01
9 V/Adj (SCN) 15- 27.12.01 8539632 25.04.01 to
541/2001/MVII
27.04.01
10 V/Adj (SCN) 15- 27.12.01 9281837 28.04.01 to
542/2001/MVII
30.04.01
11 V/Adj (SCN) 15- 28.05.02 8643306 01.05.01 to
84/2002-03
04.05.01
12 V/Adj (SCN) 15- 28.05.02 7135205 05.05.01 to
85/2002-03
08.05.01
13 V/Adj (SCN) 15- 28.05.02 7797322 09.05.01 to
86/2002-03
11.05.01
14 V/Adj (SCN) 15- 28.05.02 7871105 12.05.01 to
87/2002-03
15.05.01
15 V/Adj (SCN) 15- 28.05.02 6345687 16.05.01 to
88/2002-03
16.05.01
16 V/Adj (SCN) 15- 28.05.02 5506674 17.05.01 to
89/2002-03
18.05.01
17 V/Adj (SCN) 15- 28.05.02 7821409 19.05.01 to
90/2002-03
23.05.01
12 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
18 V/Adj (SCN) 15- 28.05.02 7130691 23.05.01 to
91/2002-03
24.05.01
19 V/Adj (SCN) 15- 28.05.02 5398095 25.05.01 to
92/2002-03
31.05.01
20 V/Adj (SCN) 15- 29.05.02 2932484 01.06.01 to
95/2002-03
02.06.01
21 V/Adj (SCN) 15- 29.05.02 7588846 03.06.01 to
96/2002-03
03.06.01
22 V/Adj (SCN) 15- 29.05.02 6828973 04.06.01 to
97/2002-03
04.06.01
23 V/Adj (SCN) 15- 29.05.02 8736930 05.06.01
98/2002-03
24 V/Adj (SCN) 15- 29.05.02 8290292 06.06.01 to
99/2002-03
09.06.01
25 V/Adj (SCN) 15- 29.05.02 7434310 10.06.01
100/2002-03
to13.06.01
26 V/Adj (SCN) 15- 29.05.02 8797224 14.06.01 to
101/2002-03
16.06.01
27 V/Adj (SCN) 15- 29.05.02 7666739 17.06.01 to
102/2002-03
20.06.01
28 V/Adj (SCN) 15- 29.05.02 7333269 21.06.01 to
103/2002-03
22.06.01
29 V/Adj (SCN) 15- 29.05.02 3383396 23.06.01 to
104/2002-03
23.06.01
30 V/Adj (SCN) 15- 29.05.02 5793224 24.06.01 to
105/2002-03
26.06.01
31 V/Adj (SCN) 15- 29.05.02 7349958 27.06.01 to
106/2002-03
28.06.01
32 V/Adj (SCN) 15- 29.05.02 7700113 29.06.01 to
107/2002-03
30.06.01
33 V/Adj (SCN) 15- 01.08.02 677336512 July 01 to
170/2002-03
Mar 02
34 V/Adj (SCN) 15- 02.05.03 792483678 Apr 02 to
68/2002-03
Dec 02
35 V/Adj (SCN) 15- 06.02.04 203049616 Jan 03 to
324/Raigad/03-
04 Mar 03
13 E/86129,86130,86131,86132,86153,
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2.9 All the show cause notices have been adjudicated by the
Commissioner as per the impugned order referred in para 1,
supra.
2.10 Aggrieved by the impugned order of Commissioner,
Appellants have filed these appeals.
3.1 In their appeal appellants have challenged the impugned
order stating as follows:-
i. Two separate registrations after Bifurcation of the unit
granted on 26.04.2000, were revoked by the Deputy
Commissioner vide his order in original dated 25.05.2001.
Against the order revoking the two registration, appellants
filed an appeal before Commissioner (Appeal) which was
allowed by the Commissioner (Appeal) vide his order in
appeal dated 09.08.2001 in their favour holding that two
registrations were correctly granted. Against the order of
Commissioner (Appeal) revenue filed the appeal to CESTAT
which was dismissed by tribunal vide its order as reported
at [2004 (171) ELT 494 9T-Mum)]. The appeal filed by
Revenue against the order of CESTAT bearing Central
Excise Appeal No 39/2005 was dismissed by the Hon'ble
Bombay High Court vide its order dated 14.06.2013. Thus
the issue of bifurcation of the unit and grant of two
registrations has attained finality and could not have
reopened in the subsequent proceedings.
ii. It was not proper on the part of Commissioner to hold that
they cannot be treated as an independent processor. The
definition of an independent texturizer is a person who
does not have the facility in his factory including plant and
machinery for producing POY. They in relation to their
factory at KSF (PYU) are an independent texturizer and
from the phrase used in the exemption notification
6/2000-CE, the benefit of that notification could not have
been denied to them.
iii. In the impugned order commissioner has erroneously
taken the sales value as assessable value for
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determination of the duty short paid. Commissioner should
have allowed the deductions claimed and set out in the
Chartered Accountant Certificate submitted by them. They
had submitted voluminous and adequate documents for
claiming the deductions Commissioner should have
considered the same and determined the assessable value
after taking into account the deductions claimed.
iv. In the impugned order it has been observed that they were
taking CENVAT credit on the inputs used in the
manufacture of final products even after 26.04.2000 and
therefore were not entitled to the benefit of the notification
No 6/2000-CE dated 1.03.2000. The input credit was taken
in respect of the inputs used in manufacture of an
altogether different product viz Nylon Filament Yarn on
which they had paid full applicable excise duty without
availing any Exemption.
v. Since they had not done anything to evade payment of
duty penalty imposed on them cannot be justified.
4.1 We have heard Shri D B Shroff, Sr. Advocate, Shri Prakash
Shah, Shri Prasad Paranjape and Shri Mohit Raval, Advocates for
the Appellants and Shri V K Singh, Special Counsel for the
revenue. Both the sides have also filed written submissions
which have been taken on record.
4.2 In their submissions and during the course of arguments,
learned advocates appearing on behalf of Appellants submitted
while reiterating the submissions made in appeal as follows:-
The issue of bifurcation of their one factory into to
factories has already been adjudicated by the Hon'ble
Tribunal in their favour and hence is not res-integra. This
fact is not disputed by the revenue. In the said order the
referred to para 6, wherein it has been held that two
premises clearly constitute two totally separate factories
which have been registered separately;
The contention that Appellant had facility of producing
POY, and, therefore they are not entitled to the benefit of
15 E/86129,86130,86131,86132,86153,
86154,86155,86156,86157/2014
the Notification No 6/2000-CE also proceeds on the basis
that there was one factory which has been negatived.
The contentions raised for holding that the factory was one
in present case, are the same as were in the order
Considered by the Commissioner (Appeal) and Tribunal
earlier. Commissioner (Appeal) and Tribunal has after
considering those contentions held that there were two
separately registered factories.
As per the ground plan there was Separate Gate for each
factory and they had made application to Joint Director
Industrial Safety and Health on 20.04.2000 for
modification of existing factory license.
Reliance placed on the "Explanatory Memorandum to
Budget Changes 2000-01" and the decision of tribunal in
case of Dhampur Sugar [2001 (129) ELT 73 (T-Del)] {the
appeal filed by the revenue against the tribunal order was
dismissed by the Apex Court as reported at [2007 (216)
ELT A 23 (SC)] do not advance the case of revenue. In
case of Rollatainers Ltd [2004 (170) ELT 257 (SC)] it has
been specifically held that merely because both factories
are located in the same premises will not lead to the
inference that both factories are one and same.
The decision of Hon'ble Apex Court in case of Grauer &
Weil (India) Ltd 1994 (74) ELT 481 (SC) is distinguishable.
In case of Bhilosa Industries Private Ltd [2015 (317) ELT
283 (T-Ahmd)], Ahmedabad bench has while considering
the expression "in his factory" in the same notification
state that, will mean the factory of manufacturer and the
same factory.
In case of Amaravathi S V Paper Mill Ltd [2010 (256) ELT
679 (SC)], same notification was considered by the
Supreme Court and the appeal filed by the revenue in
similar sets of fact was dismissed.;
Tribunal has in case of Bansi Paper Mills Pvt Ltd. [2014
(306) ELT 650 (T)] held that contention of the Revenue
that merely because there was no separate registration
16 E/86129,86130,86131,86132,86153,
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there was no separate factory is devoid of merit. Similar
view has been taken in case of Sintex Industries Ltd [2013
(287) ELT 261 (Guj.)], Rajalakshmi Paper Mills Ltd [2005
(179) ELT 161 (Tri.-Chennai)] and Vardhman Spinning an
General Mills Ltd [2000 (115) ELT 94 (Tribunal)]
Decision of the Hon'ble Bombay High Court in case of
Swadeshi Dyeing & Bleaching Mills (P) Ltd [1989 (41) ELT
224 (Bom)] is clearly distinguishable.
Section 13 of General Clauses Act, 1987 relied upon by the
revenue is totally irrelevant.
Extended period of limitation is not available for making
the demand. No interest under Section 11AB or penalty
under Section 11AC can be imposed.
Quantification of duty as done by the commissioner cannot
be sustained. The assessable value should be determined
by the commissioner after allowing the admissible
deductions. While Commissioner has taken the gross sales
value from the certificate of Chartered Accountant
submitted by them, he has ignore the admissible
deductions in the same certificate for arriving at the
assessable value.
As per the certificate of the chartered Accountant the
average assessable value was as follows:
o 1.04.2000 to 31.3.2001 Rs 89.85 per Kg
o 1.04.2001 to 31.03.2002 Rs 85.53 per kgs
o 1.04.2002 to 31.03.2003 Rs 81.51 per kgs.
Commissioner has determined the assessable value for the
year 2001-02 by adopting highest rate of Rs 225/- per kg
from the sales policy of Appellant and thereafter added Rs
40/- per kg towards special shed. Assessable value for
year 2002-03 was also determined on similar lines. This
method of determination of assessable value is not
tenable, as the assumption made by the Commissioner
that all the yarn was cleared on highest price with special
shed is not correct. The average calculation made in the
certificate of chartered accountant is based on the actual
17 E/86129,86130,86131,86132,86153,
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sale price which is correct and most reliable method for
determining the assessable value.
Deductions on account of Central Sales Tax and Textiles
Cess which are admissible have been disallowed without
assigning any reason except that no documents were
produced.
The benefit of cum duty price too should have been
allowed to them after taking into account the excise duty
payable @36.8% as has been claimed by them to be
inclusive in the sales price and sought to be recovered by
revenue.
In case the benefit of exemption under notification is to be
denied to them, then benefit of CENVAT Credit of duty paid
on inputs should be given to them. Earlier the same was
not availed by them as they claimed exemption under
Notification No 6/2000-CE.
4.3 Arguing for the revenue and in his submissions, learned
special counsel submitted that-
The issue in these appeals is in respect of exemption as
per notification No 6/2000-CE, Sr No 114 and 134. Subject
to the conditions specified this notification prescribed-
o At Sr No 114, duty @ Rs 2.50 per kgs on texturized
yarn manufactured by an independent texturizer who
does not have facility in his factory (including plant
and equipment) for producing partially oriented yarn
(POY) of polyester;
o At Sr No 134, duty @ Rs 9 per kg on dyed, printed,
bleached or mercerised yarn, whether single,
multiple(folded) or cabled. Manufactured in a factory
which does not have the facilities (including plant
and equipment) for production of single yarn.
M/s KSF (Prop CEL) was engaged in manufacture of
partially oriented yarn (POY) and different types of
processed yarn including Polyester Texturized yarn in a
single composite plant having two sections-
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o one for manufacture of partially oriented yarn (POY)
o Other for manufacture of texturized yarn.
Almost all POY manufactured in POY section was sent to
texturizing section for texturization. All the texturized yarn
was then cleared on payment of Central Excise duty @
36.8% advalorem (16% Adv + 16 % Adv + 15% Addl
duty).
Notification No 6/2000-CE dated 01.03.2000, referred
earlier granted exemption subject to certain conditions.
This notification was rescinded by Notification No 10/2001-
CE, but exemption continued as per Sr No 126 & 131 in
Notification No 3/2001-CE dated 01.03.2001. This
notification got rescinded vide Notification No 13/2002-CE
dated 01.03.2002, again the exemption continued as per S
No 121 & 126 of Notification No 6/2002-CE dated
01.03.2002. The conditions for allowing the exemption
remained unchanged in the these notifications.
At the time of issuance of exemption Notification No
6/2000-CE, Central Government has vide "Budget Changes
2000-01, under heading "Man Made Filaments (Chapter
54), Para 3 stated, that this exemption was issued to
provide concessional duty to independent texturizers who
do not have facility to manufacture partially oriented yarn
of polyester in their factory.
M/s KSF (Prop CEL) Appellants, requested for bifurcation of
their existing plant into two parts by erecting a wall
between two section and on 16.03.2000 requested for
grant of two separate registrations in name of KSF (PYU)
and other in name of KSF (POY). Accordingly on
26.04.2000 the existing registration was changed in the
name of KSF (PYU) and one more registration given under
name of KSF (POY).
Thus from 26.04.2000, KSF (PYU) started clearing the
Texturized Yarn on payment of Central Excise Duty @ "Rs
2.50 per kg + Additional Central Excise Duty @ 15%" by
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claiming the benefit of exemption at Sl No 114 of the said
Notification.
Two registrations granted by the department on
26.04.2000 were revoked by the Deputy Commissioner
Mahad Division as per his order No M-VII/MHD/09/2001
dated 25.05.2001 and restored the position as it existed
prior to 26.04.2000. Appellant to the matter to
Commissioner (Appeal) who allowed the appeal filed by
them and set aside the order of Deputy Commissioner.
Revenue carried the matter to tribunal, the appeal filed by
revenue was dismissed by tribunal vide order No A/616-
624/2004-WZB/C-I dated 24.03.2004. Revenues appeal
against the tribunal order was dismissed by Bombay High
Court on account of delay in filing the appeal.
The issue involved in the present case is for denial of
benefit of exemption under Notification No 6/2000-CE as
claimed by the Appellants and is not the same as the issue
decided by the Tribunal in its order dated 24.03.2004,
where the issue was in relation to revocation of two
registrations granted.
Admittedly on 01.03.2000, M/s KSF were not an
independent texturizer as they had the facility to
manufacture POY in their factory at Mahad and hence not
entitled to the benefit of the Notification No 6/2000-CE
dated 01.03.2000.
In order to claim the benefit of exemption under the said
Notification, appellants bifurcated the unit into two KSF
(PYU) and KSF(POY) and obtained separate registration
with effect from 26.04.2000. As per the appellants they
are two separate registered entities from that date and
hence separate factory, for the purpose of said notification.
Thus KSF (PYU) qualifies to be "independent texturizer"
from that date and entitled to the benefit of exemption
under the said notification.
It is settled position in law that what cannot be done
directly cannot be done indirectly.
20 E/86129,86130,86131,86132,86153,
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Tribunal has in case of Dhampur Sugar [2001 (129) ELT 73
(T-Del)] specifically held that having multiple registrations
under Central Excise, will not make a single factory,
multiple factory. Appeal filed by the revenue was
dismissed by the Apex Court as reported at [2007 (216)
ELT A 23 (SC)]
The term factory has been defined by Section 2(e) of the
Central Excise Act, 1944. The terms "premises" &
"precincts", used in Section 2(e) have not been defined .
However in case of Grauer and Weil (India) Ltd [1994 (74)
ELT 481 (SC)], Hon'ble Apex Court while interpreting the
phrase "any premises including the precincts thereof"
used in section 2(m) of Factories Act, 1948, held that was
wide enough to include all buildings with its surroundings
which form part of one unit. Then court went on to hold
that two units belonging to same company, situated on a
common plot of land, goods manufactured by one unit
forming input of the other unit and their removal from first
unit shows as for "captive consumption", having common
power and water connections, common payments for these
facilities, common payments to workers, common delivery
challans and common stock register and store keeper -
Both units treatable as one `factory'.
Reliance is also placed on the decisions as follows, wherein
it has been held in similar circumstances that there were
not two but a single common factory.
o Swadeshi Dyeing & Bleaching Mills (P) Ltd [1989
(41) ELT 224 (BOM)]
o Mukerian Papers Ltd [2015 (330) ELT 533 (T-Del)]
The benefit under Notification No 6/2000_CE, was
admissible to "independent texturizer who did not have the
facility in his factory (including plant and machinery) for
producing partially oriented yarn 9POY) of Polyesters. It is
on record that M/s Century Enka Ltd Proprietor of M/s
KSF(PYU) and M/s KSF (POY), apart from having facility to
manufacture POY in their Mahad KSF (POY) plant, were
21 E/86129,86130,86131,86132,86153,
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having factories at Pune and Baruch were they were
manufacturing POY. The term factory used in the
notification no 6/2000-CE, should mean any of the
factories of the manufacturer as "legal entity" as per
Section 13 of General Clauses Act, 1897.
In case of Dilip Kumar & Co [2018 (361) ELT 577 (SC)],
Hon'ble Supreme Court has held that exemption
notification should be interpreted strictly and any
ambiguity in the notification should be interpreted in
favour of revenue.
Reliance placed by the appellants on the decisions in case
of Rollatainers Limited [2004 (170) ELT 257 (SC)],
Amaravathi S V Paper Mills Ltd [2010 (256) ELT 679 (SC)]
& Bansi Paper Mills Pvt Ltd [2014 (306) ELT 650 (T-Mum)]
is erroneous as these decisions are clearly distinguishable
Reliance placed by the Appellants on the decision in case
of Bhilosa Industries Pvt Ltd [2015 (317) ELT 283 (T-
Ahmd)] is erroneous because the said decision besides
being distinguishable on facts is an order in sub silentio.
Also appeal against this order has been admitted by the
Apex Court
The decision of tribunal in case of appellant, holding that
"two premises in question clearly constitute two separate
factory", was not the issue before the tribunal. There is no
discussion in the order on this issue and event the
definition of factory as per Section 2(e) of Central Excise
Act, 1944 has been considered . Hon'ble Supreme Court
has in case D J Malpani [2019 (366) ELT 385 (SC)] has
held that "Salmond on Jurisprudence Twelfth Edition p.15h
states that a decision held is not binding since it was
decided "without argument, without reference to the
crucial words of the rule, and without any citation of
authority", therefore, would not be followed. The author
also states that precedents sub silentio and without
arguments are of no moment.". Thus that decision has no
binding precedentiary value.
22 E/86129,86130,86131,86132,86153,
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He re-iterates the findings in the order of adjudicating
authority on issues of limitation, valuation, interest and
penalty.
5.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments
on appeal.
5.2 Following issues need to be determined by us in the
present appeals:
i. Whether the benefit of exemption under Notification No
6/2000-CE dated 1.03.2000 is admissible to the appellant
post 26.04.2000.
ii. Valuation of the goods cleared by the appellant.
iii. Whether appellants have mis-declared, mis-stated to
wrongly avail the benefit of exemption notification.
iv. Whether interest on the demand made can be sustained.
v. Whether penalties are imposable on appellant.
vi. Whether penalties are imposable on four functionaries in
the unit.
5.3 Whether the benefit of exemption under Notification
No 6/2000-CE dated 1.03.2000 is admissible to the
appellant post 26.04.2000, the date from which they
obtained two Central Excise Registrations by bifurcating
their existing facility into two units.
5.3.1 Relevant excerpts from the Notification No 6/2000-CE
dated 01.03.2000 are reproduced below:
In exercise of the powers conferred by sub-section (1) of section
5A of the Central Excise Act, 1944 (1 of 1944), the Central
Government, being satisfied that it is necessary in the public
interest so to do, hereby exempts excisable goods of the
description specified in column (3) of the Table below or
specified in column (3) of the said Table read with the concerned
List appended hereto, as the case may be, and falling within the
Chapter, heading No. or sub-heading No. of the First Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter
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referred to as the Central Excise Tariff Act), specified in the
corresponding entry in column (2) of the said Table, -
from so much of the duty of excise specified thereon under
the First Schedule to the Central Excise Tariff Act, as is in
excess of the amount calculated at the rate specified in the
corresponding entry in column (4) of the said Table; and
from so much of the Special duty of excise leviable there
on under the Second Schedule to the Central Excise Tariff
Act, as is in excess of the amount calculated at the rate
specified in the corresponding entry in column(5) of the
said Table,
subject to the relevant conditions specified in the Annexure to
this notification, and referred to in the corresponding entry in
column (6) of the said Table. Provided that in respect of S. No.
65 of the said Table, nothing contained in this notification shall
apply on or after the first day of April, 2000. Explanation.- For
the purposes of this notification, the rates specified in columns
(4) and (5) of the said Table are ad valorem rates, unless
otherwise specified.
Table
S. Chapter Description or goods Rate Rate Conditi
No. or under under on No.
heading The The
no. or First Second
sub- Schedul Schedu
heading e le
No.
114 54.02 Texturised yarn Rs. 2.50 Nil 17A
(including draw per kg.
twisted and draw
wound yarn) of
polyesters
manufactured by an
independent texturiser
who does not have the
facilities in his factory
(including plant and
equipment) for
producing partially
oriented yarn (POY) of
polyesters falling
under sub-heading No.
5402.42
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134 5402.31, Dyed, printed, Rs. 9 Nil 22
5402.32, bleached or mercerised per kg.
5402.39, yarn, whether single,
5402.41, multiple (folded) or
5402.42, cabled, manufactured
5402.43, in a factory which does
5402.49, not have the facilities
5402.51, (including plant and
5402.52, equipment) for
5402.59, producing single yarn
5402.61,
5402.62,
5402.69,
5403.20,
5403.31,
5403.32,
5403.33,
5403.39
5403.41,
5403.42
or
5403.49
Condition
17A If-
(i) Manufactured out of yarn falling under sub-heading No.
5402.42 of the First Schedule on which the appropriate
duty of excise under the First Schedule, the special duty of
excise leviable under the Second Schedule to the Central
Excise Tariff Act, or as the case may be, the additional July
leviable under the Customs Tariff Act, 1975, has already
been paid; and
(ii) no credit of duty paid has been taken under rule 57AB or
rule 57AK of the Central Excise Rules, 1944.".
22. If,-
(i) manufactured out of textured or draw-twisted yam, falling
under Chapter 54 of the First Schedule on which the
appropriate duty of excise under the First Schedule, the
special duty of excise leviable under the Second Schedule
to the Central Excise Tariff Act or as the case maybe, the
additional duty leviable under the Customs Tariff Act, 1975
has already been paid; and
(ii) no credit under rule 57AB or 57AK of the Central Excise
Rules, 1944 has been availed in the process of dyeing,
printing, bleaching or mercerising in the manufacture of
dyed, printed, bleached or mercerised yam.
5.3.2 Plain reading of the S No 114 in the above notification, will
show that the exemption under the said entry is available, only
to independent texturizer who does not have the facilities in his
factory (including plant and equipment) for producing partially
oriented yarn (POY) of polyesters falling under sub-heading No.
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5402.42. The word independent texturizer has not been defined
in the said notification. As per the appellants because the
registrant who has claimed the benefit of the exemption, do not
have facility in the same factory to produce the Partially Oriented
Yarn, he will qualify as an independent texturizer for the purpose
of said notification. They have further referred to the definition
of "Independent Texturizer" as per explanation to sub-rule 3(b)
of Rule 57AG of Central Excise Rules, 1944, which read as
under:
"Explanation: For the purposes of this sub rule, "independent
texturizer" means a manufacturer engaged in the manufacture of
texturized yarn (including draw-twisted or draw-wound yarn) of
polyesters falling under heading No 5402 of the said First
Schedule, and who does not have the facility in his factory
(including plant and machinery) for manufacture of partially
oriented yarn of polyesters falling under sub-heading No
5402.42 of the said First Schedule."
The explanation referred by the appellant states the same as has
been stated in the notification and do not add any value to the
argument of the appellants.
5.3.3 The entire case of the appellant hinges around the
interpretation of the phrase "independent texturizer who does
not have the facilities in his factory (including plant and
equipment) for producing partially oriented yarn (POY) of
polyesters". Appellants have heavily relied on the decision of the
Apex Court in the case of Rollatainers Ltd, to argue that after
bifurcation and grant of two separate registrations, both KSF
(PYU) and KSF (POY) are two separate factories, and hence they
should be considered independent of each other. Thus the KSF
(PYU) being independent texturizer, having no facility to
manufacture partially oriented yarn in its factory, is eligible for
the exemption available under the notification. They also rely on
the decision of tribunal in their own case wherein, tribunal has
upheld the order of Commissioner (Appeal) setting aside the
order of Deputy Commissioner revoking the twin registrations
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granted to them. They state that in view of the said decision, the
issue is no longer res-integra and should be decided following
that order. In the said decision tribunal has stated:-
"4.The reference made to common sales tax registration is not
relevant as under the sales tax provisions, only a single tax
registration is required for each State even if there are separate
factories.
5.As regards violation of Rules 43, 44 or 45 invoked in the show
cause notice, we agree with the respondents that none of these
Rules have been contravened. Rule 43 refers to notice to be
given by manufacturer who intends to manufacture excisable
goods for the first time. This rule is not attracted in the present
case where the respondents have been carrying on manufacture
of POY for a considerable period of time. It is also pertinent to
note that from 26-4-2000 when a new registration certificate
was granted for the POY unit, declarations under Rule 173B and
Rule 173C as well as RT 12 returns had been accepted from both
the units. As regards Rule 44 and Rule 45, they are also not
applicable as it has not been shown that at any point of time, the
respondents were directed by the Commissioner to comply with
any directions as required under the above mentioned two Rules.
6.The submission of the Revenue that KSF is only a
manufacturing division of the respondent company and is not a
person eligible to apply for registration and therefore the
application under Rule 174 is not valid in law, cannot be
accepted. The letterhead of the erstwhile KSF itself states "M/s.
Konkan Synthetic Fibres (Prop. CEL)". The application states that
M/s. KSF are a Division of M/s. Century Enka Ltd. Further
application for L. 4 licence in 1989 was made by erstwhile M/s.
KSF and in 1992 when Central Excise registration was required
instead of licence, it was the erstwhile KSF that made the
application and was also granted Central Excise Registration. At
no point of time did the Excise Authorities raise the issue that a
Division of a company could not make such application. It is also
to be noted that the respondents company had given Power of
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Authority to the Factory Manager Shri D.B. Roongtha to enable
to apply for all licences etc. for Century Enka Ltd.
7.The two premises in question clearly constitute two totally
separate factories which have been separately registered. In the
case of CCE v. Broach Textile Mills Ltd. [1998 (79) ECR 411], the
Tribunal has held that the registration cannot be denied to
separately registered premises, which function as two different
factories. The contention of the Revenue that the respondents
put up a fence for creating the new factory for the sole purpose
of wrongly availing the benefit of Notification No. 6/2000 and
therefore, the respondents' request for separate registration
should not have been considered, is not tenable as we have
already noted that the respondents have decided to undertake
the exercise of separation of factory in Feb. 2000 itself in order
to achieve certain efficiencies by creating separate product
groups, although the application was filed after the issue of
Notification No. 6/2000, and all aspects have been considered by
the authorities before granting separate registration for KSF
(POY) and amending the existing registration already granted in
favour of KSF (PYU) in April, 2000. The point raised that in
respect of the Pune factory the respondents' application for
separate registration had been rejected, is a new ground which
neither raised in the show cause notice nor in the order of the
Dy. Commissioner and the factual position is that in Pune, there
was only one building and, therefore, the factory could not be
segregated and after the rejection of the application for separate
registration, the Pune Unit was closed down in January, 2000.
Besides, this is not a relevant aspect for the purpose of the issue
involved in the present case. All the relevant aspects have been
considered by the lower Appellate Authority in his order and it is
therefore, not correct on the part of the Revenue to suggest that
the Commissioner (Appeals) has not recorded his finding on all
the arguments put forth before him."
From the entire order of tribunal reproduced it is evident that the
issue for consideration before the tribunal in that decision was
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not the admissibility of the exemption claimed under notification
No 6/2000-CE, but was limited to grant of twin registration to
the bifurcated premises. The issue of admissibility to notification
in our view if not examined by the tribunal in that decision, then
it cannot be an authority on that issue. A three member bench
Hon'ble Supreme Court has in case of D Malpani [2019 (366)
ELT 385 (SC)] held as follows:
"19. In this case, the CESTAT decided against the assessee
relying on Panchmukhi (supra). The case of Panchmukhi (supra)
was apparently decided not after a discussion on facts and law
but because the counsel for the revenue submitted that the
matter is covered by the decision in Tata Iron & Steel (supra)
and the counsel for the assessee "was not in a position to
dispute this legal position". The judgment in Panchmukhi (supra)
has little precedential value. The point whether Dharmada
involved in Panchmukhi (supra) and the surcharge held as price
in Tata Iron & Steel (supra) were identical and liable to be
included in the transaction value passed sub silentio. Salmond
on Jurisprudence Twelfth Edition p.15h states that a decision
held is not binding since it was decided "without argument,
without reference to the crucial words of the rule, and without
any citation of authority", therefore, would not be followed. The
author also states that precedents sub silentio and without
arguments are of no moment. This is enough reason for not
treating the decision in Panchmukhi (supra) as a binding
precedent."
5.3.4 Now coming to the phrase ""independent texturizer who
does not have the facilities in his factory (including plant and
equipment) for producing partially oriented yarn (POY) of
polyesters". In case of Dhampur Sugar Mills [2001 (129) ELT 73
(T-Del)], following was held:
4. We have considered the submissions of both the sides. As
per Section 2(e) of the Central Excise Act "factory" means any
premises, including the precincts thereto, wherein or in any part
of which excisable goods other than the salt are manufactured,
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or wherein or in part of which any manufacturing process
connected with the production of these goods is being carried on
or is ordinarily carried on. It has not been disputed by the
Revenue that all the three plants manufacturing different
excisable goods are situated in the same premises. The Revenue
is treating them as different factory only on account of
appellants taking three registrations under Rule 174 of the
Central Excise Rules. The number of registrations, in our view,
will not decide the number of factories unless and until they are
situated in different premises. It is very clear from the definition
of the term "factories" that all the three units will be regarded as
one factory as all the excisable goods are manufactured in the
same premises. Similar views were expressed by the Appellate
Tribunal in the case of J.K. Synthetics Ltd. (supra) wherein it
was held that as two units fall within the same premises within
one boundary wall encircling the entire area of the land allotted
to the appellants in the industrial area the appellant is entitled to
obtain one consolidated licence for the manufacture of its goods
within its factory complex as the object behind the grant of
consolidated licence is that any person manufacturing different
excisable goods within one factory area is entitled to obtain one
licence instead of different licences for different commodities.
The decisions relied upon by the learned SDR are not applicable
as the facts are different. In Devidayal Electronics case the
Bombay High Court was interpreting the term "Industrial Unit".
In fact in the said case it was observed by the Bombay High
Court that as the Notification uses the word "factory and it uses
the word industrial unit, it must, therefore, be assumed that the
words were intended to bear different meanings." Put differently
the words "Industrial Unit" must mean something other than
"factory". Similar was the situation in the case of Dhampur
Sugar Mills, 1998 (26) RLT (669). Accordingly we hold that the
benefit of Notification No. 67/95 is available to the Appellants as
the excisable goods have been used in the factory of
manufacture only. Both the appeals are thus allowed."
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This order of Tribunal has been affirmed by the Apex Court as
reported at [2007 (216) ELT A23 (SC)]. As per the ratio laid
down by this decision, the concept of factory under Central
Excise has been delinked from the Registration granted. It has
been held that there can be more than one registration within
the same factory. Counsel for the Appellant submitted that Apex
Court in the case of Rollatainers, has taken a contrary view.
Hon'ble Apex Court has in case of Rollatainers, held as follows:
8. Simply because both the factories are in the same premises
that does not lead to the inference that both the factories are
one and the same. In the present case, from the facts it is
apparent that there is no commonality of the purpose, both
the factories have a separate entrance, there is a passage
in between and they are not complimentary to each nor
they are subsidiary to each other. The end product is also
different, one manufactures duplex board and the other
manufactures paper. They are separately registered with
the Central Excise Department. The staff is separate, their
management is separate. It is also not the case of
revenue that end product of one factory is raw material
for the other factory. From the above facts it is apparent
that there is no commonality between the two factories,
both are separate establishments run by separate
Managers though at the apex level it is maintained by the
appellant company. There are separate staff, separate
finished goods. Simply because both the factories may
have common boundaries that will not make it one
factory. Accordingly, we are of the opinion that the view taken
by the Tribunal does not appear to be well-founded and likewise,
the view taken by the Commissioner, Central Excise.
Accordingly, we allow both these appeals, set aside the order of
the Tribunal passed on June 7, 2002 as well as the order passed
by the Commissioner, Central Excise, New Delhi-III on
September 28, 2001 in both the appeals. No order as to costs.
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As is evident from the above para the case of Rollatainers is
distinguishable on more than one count from the case of
Dhampur Sugar and the facts in present case. The undisputed
facts in the present case are:
i. The managerial control, administrative control and overall
control of M/s CEL remains unchanged even after
26.04.2000
ii. The CST registration is in the name of M/s CEL and is
common to both the sites.
iii. Income Tax PAN given to parent company is used by both
KSF 9PUY) and KSF (POY) which was position prior to
26.04.2000
iv. Stock statement submitted to for the purposes of credit
facility and obtaining loan is in the name of M/s CEL and is
common both and after bifurcation.
v. Centralized Purchasing, Centralized Marketing, Depot and
consignment agents are common even after bifurcation.
vi. MIDC confirmed that possession of the plot C-61, MIDC
Mahad continues to be in the name of KSF (Pro CEL),
Mahad, both before and after bifurcation. Both the units
have common address.
vii. Common electricity, water connection and common
effluent treatment plant.
viii. Common factory manager for both the units even after
bifurcation without any change in salary.
ix. Mess and Canteen facilities are common.
x. Utilities such as compressed air, steam, air conditioning,
intercom, firefighting system etc are common.
xi. No change in staff strength after bifurcation.
xii. Shri D B Roongtha, Factory manager at Mahad admitted in
his statement that there was no change in working of two
sections/ sites after bifurcation.
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xiii. KSF (POY) supplies entire production of POY
(Heading No 5402.42) to KSF (PYU) section which
was the same position even prior to bifurcation.
5.3.5 Thus the interdependence of the two units as the entire
raw material i.e. POY for KSF (PYU) was being supplied from KSF
(POY), completely distinguishes the present case from that of
Rollatainers. In case of Grauer and Weil [1994 (74) ELT 481
(SC)] Hon'ble Apex Court held as follows:
"10. The Tribunal also in its turn, re-appraised the relevant
materials and concurred with the finding of the Collector with the
following observations :
"Here, the appellants were engaged in the manufacture of
sodium bichromate, a vital input for manufacture of chromic acid
and using it as such. How the two activities can be said to be
independent of each other passes our comprehension, especially
considering the other features of the case, i.e. common water
and power connections, common payments for these facilities,
common payments to workers, common delivery challans, etc.
This is not, therefore, a case in which it can be said that the
activities in the chromic acid section were not connected with but
were totally independent of the activities in the rest of the
premises."
11. From a bare perusal of the definition of factory under
Section 2(m) of the Factories Act, it is patent that if on any
premises including the precincts thereof ten or more workers are
working or were working on any day of the preceding twelve
months, and in any part thereof a manufacturing process is
being carried on with the aid of power it would be a factory.
Ordinary, meaning of the word `premises' is a piece of land
including its buildings or a building together with its grounds or
appurtenances and precincts mean the areas surrounding a
place. The words "any premises including the precincts thereof"
under Section 2(m) are therefore wide enough to include all
buildings with its surroundings which form part of one unit. If
therefore in such an area ten or more workers are working and
33 E/86129,86130,86131,86132,86153,
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in any part thereof manufacturing process is being carried on
with the aid of power it would be a factory within the meaning of
Section 2(m).
12. Since both the Collector and the Tribunal have recorded
their respective findings as quoted above, taking into
consideration all relevant facts and relevant factors in the light of
the above definition of factory, no exception can be taken to the
same. The first contention of the appellants therefore fails."
In our view the facts of case are more akin to the case of Grauer
and Weil referred above and applying the ratio of the said
decision we are of the view that though there are two
registrations the factory continue to remain one. The same view
has been expressed by the Bombay High Court in case of
Swadeshi Dyeing and Bleaching Mills (P) Ltd [1989 (41) ELT 224
(Bom)] and tribunal in case of Mukerian Papers Ltd [2015 (330)
ELT 533 (T-Del)].
5.3.6 In case of Amaravathi S V Paper Mills Ltd [2010 (256) ELT
679 (SC)] Hon'ble Apex Court was dealing with the situation
where there was no interdependence or interlinking of the
production process. Thus Hon'ble Supreme Court held as follows:
"4.From a bare reading of the afore-extracted paragraph of the
order passed by the Commissioner, which has been affirmed by
the Tribunal, it is manifest that both the authorities below have
found as a fact that both the units had the requisite equipment
for manufacture of paper starting from the stage of pulp to the
final stage of the end product i.e. paper. The finding is a pure
question of fact and is not put in issue by the revenue. That
being so, the impugned order does not give rise any question of
law. Resultantly, the appeal deserves to be dismissed. We order
accordingly with no order as to costs."
Similarly the other decisions relied upon by the appellants in
case of Bansi Pulp and Paper Mills Pvt Ltd [2014 (306) ELT 650
(T-Mum)].
34 E/86129,86130,86131,86132,86153,
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5.3.7 Now coming to the phrase "independent texturizer" used in
the Notification No 6/2000-CE, we are of the view that
independent texturizer, is a person (legal or natural) who
procures the partially oriented yarn from the open market and
then clears the texturized yarn after texturizing the same. We
are holding this view because the phrase "independent
texturizer" used in the notification is followed by the phrase "who
does not have the facilities in his factory (including plant and
equipment) for producing partially oriented yarn (POY) of
polyesters", which implies that he has no facility to produce the
partially oriented yarn. Thus procurement of the partially
oriented yarn which is the raw material to start with for him can
be only by way of purchase. Undisputedly KSF(PUY) and KSF
(POY) are having common sales tax registration and PAN and are
proprietorship concerns of M/s CEL, before and after bifurcation.
The interpretation put by the tribunal in case of Bhilosa
Industries Pvt Ltd [2015 (317) ELT 283 (T-Ahd)] was in respect
of the phrase which was not identical to the phrase which we are
interpreting. The phrase being interpreted by the tribunal in that
decision was "Yarns procured from outside and subjected to any
process other than texturising, by a manufacturer who does not
have the facilities in his factory (including plant and equipment)
for manufacture of yarns or textured yarn (including draw
twisted and draw wound yarn) of Heading 54.02 or 54.03." The
phrase interpreted was "his factory" i.e. the factory of
manufacturer. In our view said decision is distinguishable, in
view of the use of word "independent" to qualify the "texturizer",
in the notification under consideration. In our view if the phrase
is considered as a whole then we find that word "independent"
qualifies the "texturizer" and not the factory. So if the texturizer
is procuring the "partially oriented yarn" from any of his factory
then he will not qualify to be an "independent texturizer". Thus
the benefit of exemption cannot be admissible to him.
5.3.8 The principle of strict construction of an exemption
notification has been time and again been emphasized by the
Hon'ble Apex Court. Again emphasizing the same in case of Dilip
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Kumar & Co [2018 (361) ELT 577 (SC)], a five member bench of
the Hon'ble Supreme Court stated the law as follows:
"52. To sum up, we answer the reference holding as under -
(1) Exemption notification should be interpreted strictly; the
burden of proving applicability would be on the assessee to show
that his case comes within the parameters of the exemption
clause or exemption notification.
(2) When there is ambiguity in exemption notification which is
subject to strict interpretation, the benefit of such ambiguity
cannot be claimed by the subject/assessee and it must be
interpreted in favour of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all
the decisions which took similar view as in Sun Export case
(supra) stands overruled."
5.3.9 Thus in view of our discussion as above we are of the view
that the benefit of the exemption notification 6/2000-CE and its
successor notification will not be admissible to the appellants.
5.4 Valuation of the goods cleared by the appellant
5.4.1 Appellant have in their appeal and during the course of
argument challenged the valuation adopted by the
Commissioner, for determining the duty short paid by them.
Rejecting their plea on valuation, the Commissioner has in his
para 44 and 45 of his order held as follows:
"44. As regards the aforementioned plea of the noticee, I find that
the demand in the impugned SCNs has been computed based on
the chartered Accountants Certificate dated 27.04.2001 produced
by the noticee. The assessable value in terms of section 4 of the
Central Excise Act, 1944 and the valuation of the Rules thereof, has
been considered as per the declared value in the C.A. Certificate.
However, the deduction claimed on account of quality discount &
rebate/cash discount, the noticee failed to adduce any documentary
evidence to claim that these deductions are in the nature of normal
trade discounts. Accordingly, I reject their claim in the matter.
Similarly, apart from a bald claim they have not produced any
documentary evidence to substantiate their claim that Textile
Committee Cess has been paid and that it is in the nature of
36 E/86129,86130,86131,86132,86153,
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permissible deduction in terms of section 4 of the Central Excise
Act, 1944. In the absence of such evidence, their claim to deduct
the same from the assessable value cannot be accepted and is
hence rejected.
45. As regards, their plea that the excise duty @36.80% adv, is
required to be deducted from the assessable value, it is seen that
the goods produced by KSF (PYU) &KSF(POY) were sold through
depot of CEL situated allover India. The goods of the erstwhile unit
were also sold through same mode, and M/ s CEL who were selling
the goods manufactured at different manufacturing sites/divisions
through depot, were regularly issuing a confidential document
namely sales policy which indicated the rate per kg for all the
qualities of yarn produced and sold by CEL. It also indicated the
scheme of various discounts to be given to customers. On closer
examination of these sales policies issued regularly from time to
time by CEL, it was mentioned conspicuously that the prices (Rs.
per kg.) are inclusive of Central Excise duty @ 36.8%. Thus, the
same are found to be conclusive evidence to consider that CEL were
recovering the Central Excise duty@ 36.8% from the customers on
sale of goods produced at KSF(PYU) at Mahad, and in actual they
were paying Central Excise duty at specific rate of Rs.2.87 per kg,
and Rs.10.35 per kg, for texturized flat yarn and dyed yarn
respectively during the relevant period.
45.1 In this regard, I further place reliance on the statement dated
14.05.2001 recorded under section 14 of Central Excise Act, 1944,
of Shri R. S. Dhand, (Vice President Marketing) of M/s Century Enka
Ltd, wherein, he inter-alia, admitted that as per their sales policy
they were charging Central Excise duty @36.80%, but the actual
payment made is @ Rs. 2.5 per kg + additional duty 15% in respect
of goods cleared from the noticee company at Mahad. Thus, 'it
clearly indicate that the price charged to customers during the
relevant period was inclusive of duty @36.80% adv, where as they
were paying Central Excise duty @ Rs. 2.5 per kg + 15% additional
duty. Similar confessions have also been made by Shri G. M.
Singhvi, President, Marketing of M/ s Century Enka Ltd, vide his
statement dated 12.05.2001 recorded under section 14 of Central
Excise Act, 1944. The relevant portion of his statement dated
12.05.2001 is re reproduced as under:-
"Q.21. you are now shown the invoice, payment details in respect
of depot invoice no. 54QQj000370 dated 06.04.2001, and
corresponding factory invoice number 17 dated 03.04.2001 and
sales policy no.PFY j2001-2002jCR-04. In the sales policy the prices
are inclusive of 36.8%, which is Rs. 120 per kg. and according to
37 E/86129,86130,86131,86132,86153,
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payment details; it is recovered from the customers. However, in
the invoice number 17 dated 03.04.2001, the Central Excise duty
paid Rs. 2.5 per kg, plus additional duty @15%. Are you agree that
the above facts are correct."
"I have seen above papers. Above statements are correct.
However, detailed explanation can be provided by V.P.
(Marketing). Mr. R. S. Dhand, I have put my signature on above
documents, in token of having seen the same."
45.2 Thus, it is evident that the noticee have paid Central Excise
duty @ Rs. 2.50 per kg + 15 % additional, whereas in actuals they
have charged and collected from their customers such duty @
36.80% adv, and hence their claim to deduct Central Excise duty
@36.80% adv is not acceptable."
5.4.2 We are not in agreement with the approach made by the
Commissioner in rejecting the deductions claimed by the
appellants for determining the assessable value from the sale
value at depot. Commissioner should have considered and
allowed the admissible deductions from the sale value for
determination of assessable value. While doing so Commissioner
should have taken into account the order of the Hon'ble Apex
Court in case of Bombay Tyre International [1983 (14) ELT 1896
(SC)] and Madras Rubber Factory [1995 (77) ELT 433 (SC)] and
other decisions of Apex Courts on the subject, and affirmed in
case of Purolator India Ltd {2015 (323) ELT 227 (SC)] in
following words:
"25. This judgment does not in any manner deviate from the
settled legal position so far as cash discounts are concerned as
has been laid down in Union of India v. Bombay Tyre
International (supra) and Government of India v. MRF (supra).
In fact, as has been pointed out earlier, this judgment did not
concern itself with the "price" of excisable goods that must be
ascertained only at the time of removal from the factory gate.
Since this Court was only concerned with whether or not certain
amounts by way of sales tax were or were not to be deducted
from "price", the said judgment has little application to the facts
of the present case."
38 E/86129,86130,86131,86132,86153,
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5.4.3 Hence for the determination of the correct assessable
value and the quantum of duty short paid or evaded, the matter
needs to be remanded back to the Commissioner.
5.5 Whether appellants have mis-declared, mis-stated to
wrongly avail the benefit of exemption notification.
5.5.1 By bifurcating the existing unit, to claim the benefit of
exemption notification, appellant have created a colorable
instrument, a façade to evade the payment of legitimate central
excise duty.
5.5.2 In case of McDowell & Company Ltd [1985 SCC (3) 230], a
five member bench of Hon'ble Supreme Court has unequivocally
discouraged the use of such colorable instruments for the
purpose of tax evasion. Justice Rangnath Misra speaking for the
majority stated as follows:
"Tax planning may be legitimate provided it is within the
framework of law. Colorable devices cannot be part of tax
planning and it is wrong to encourage or entertain the belief that
it is honorable to avoid the payment of tax by resorting to
dubious methods. It is the obligation of every citizen to pay the
taxes honestly without resorting to subterfuges.
On this aspect one of us, Chinnappa Reddy, J. has proposed
separate and detailed opinion with which we agree."
In the same decision, Justice O Chinappa Reddy, laying down the
foundation of the above principle spoke as follows:
"We think that time has come for us to depart from the
Westminister principle as emphatically as the British Courts have
done and to dissociate ourselves from the observations of Shah,
J. and similar observations made elsewhere. The evil
consequences of tax avoidance are manifold. First there is
substantial loss of much needed public revenue, particularly in a
welfare state like ours. Next there is the serious disturbance
caused to the economy of the country by the piling up of
mountains of black money, directly causing inflation. Then there
is "the large hidden loss" to the community (as pointed out by
39 E/86129,86130,86131,86132,86153,
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Master Sheatcraft in Modern Law Review 209) by some of the
best brains in the country being involved in the perpetual war
waged between the tax-avoider and his expert team of advisers,
lawyers and accountants on one side and the tax-gatherer and
his perhaps not so skilful, advisers on the other side. Then again
there is the 'sense of injustice and inequality which tax
avoidance arouses in the breasts of those who are unwilling or
unable to profit by it'. Last but not the least is the ethics (to be
precise, the lack of it) of transferring the burden of tax liability to
the shoulders of the guideless good citizens from those of the
'artful dodgers'. It may, indeed, be difficult for lesser mortals to
attain the state of mind of Mr. Justice Holmes, who said, "Taxes
are what we pay for civilized society. I like to pay taxes. With
them I buy civilization." But, surely, it is high time for the
judiciary in India too to part its ways from the principle of
Westminister and the alluring logic of tax avoidance. We now live
In a welfare state whose financial needs, if backed by the law,
have to be respected and met. We must recognize that there is
behind taxation laws as much moral sanction as behind any
other welfare legislation and it is a pretence to say that
avoidance of taxation is not unethical and that It stands on no
less moral plane than honest payment of taxation. In our view,
the proper way to construe a taking statute, while considering a
device to avoid tax, is not to ask whether the provisions should
be construed literally, or liberally, nor whether the transaction is
not unreal and not prohibited by the statute, but whether the
transaction is a device to avoid tax, and whether the transaction
is such that the judicial process may accord its approval to it. A
hint of this approach is to be found in the judgment of Desai, J.
in Wood Polymer Ltd. v. Bengal Hotels Limited [40 Company Cases, 597] where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.
It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the 40 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction."
5.5.3 The letter filed for seeking twin registration and as recorded in the tribunal order as reported in case of G S Singhvi [2004 (171) ELT 494 (T-Mum)], is reproduced below:
"Subject : Request for Registration u/r 174 of Central Excise Rules Konkan Synthetic fibres is a division of M/s. Century Enka. Ltd. (CEL), a company registered under The Companies Act, 1956 and are engaged in the manufacture of Polyester Filament yarn required for textile operations for the last more than ten years.
We have kept pace with the development of the PFY industry and the emergence as also greater use or value added products and have accordingly established facilities not only for manufacture of PFY but also for value added products viz. Texturised Yarn, Draw Twisted/Draw Warper Yarn, Dyed Yarn, etc. CEL is a multi locational company manufacturing variety of products which are briefly given below :
Location/Site Name of the Products
unit/division manufactured
Pune (Century Enka POY. PFY. NIC
Ltd.)
Mahad Konkan Synthetic POY. PFY
fibres;
Bharuch Rajshree Polyfil Chips POY
The corporate office for all the three location is at Pune site, the production and marketing of the products manufactured at various location is generally under the control of the Managers/CEOs who are in charge of each site location. This was a natural fallout of the fact that each site/location was separately 41 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 developed at different points of time. However, we now find that this is an inefficient way of managing our business. The market for POY and the market for value added products is different and different strategies are required to address the market. Production and planning have to be altered in the light of what the market requires. It has therefore been decided to revamp the traditionally followed management structure and replace the same with concept of Product Group management which is widely practiced by many good companies. Under the Concept, it is the product which is the main theme and not the location/site.
Accordingly certain types of products manufactured at all the three sites were brought under one management group which was responsible for all the functions i.e. Production, Marketing, Finance, Administration, Purchase, etc., relating to those products.
The different product groups formed out of various products manufactured at above said three sites are as below:
Product Group Products manufactured at
Name different sites
POY Chips, POY
Textile Yarn PFY. NFY (Processed yarn)
(Processed Yarn)
Industrial Yarns Industrial Yarn and fabric
Implementing the Product Group concept at Mahad site was becoming difficult since the very few number of High Speed Spinning (USS) Machines resulted in a limited capacity for producing POY. However, to ensure smooth changeover to Product Group concept, initially an exception was made so that the HSS machine and its product POY was continued to be managed by the Product Group - Textile Yarn. Due to difficulties, we have not been successful in achieving the basic objective of the Product Group concept in the true sense. As, by now the product groups are functioning smoothly, in order to conclude the changeover and to further consolidate the new management structure, it has now been decided to hand over the total 42 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 control/management of the HSS machines at Mahad to the Product Group - POY. This will not only enable the Product Group to function more effectively but also give much needed focus to the two separate product groups at Mahad site. This will also in the long run, enable the two product groups to consolidate, expand and grow in their respective areas. For achieving this to the best possible extent and to give greater flexibility and more freedom in decision making, manufacturing as well as marketing of its products and to have stricter cost controls, it has been decided to completely segregate these two units by a suitable compound as well as a separate In/Out gate with independent administrative setup.
This will practically segregate the sites with separate piece of land, buildings, manufacturing machines and utility services except very limited areas of services like ETP, compressed air, etc. for which adequate transfer pricing mechanics will be put in place so that appropriate cost of such services provided by one unit will be chargeable to the other.
As a part of this process, taking a separate excise registration becomes imperative and therefore we are submitting herewith our application in Form R1 for registration of the new unit in name and style of KONKAN SYNTHETIC FIBRES - POY UNIT. The ground plan with detailed write up about manufacturing process, is enclosed.
Simultaneous to granting new registration, you are also requested to modify the ground plan of existing unit by deleting the areas now transferred to new unit and also adding the words "Processed Yarn Unit" after the present name which will now stand modified as KONKAN SYNTHETIC FIBRES - PROCESSED YARN UNIT.
We would also like to add that presently our products attract ad valorem excise duty @ 36.8% and we avail MODVAT/CENVAT' credit on inputs as well as capital goods used by us. After segregation, the product of new unit - POY will attract excise duty @ 36.8% ad valorem and will continue to avail CENVAT 43 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 credit as at present. There will be no backward movement of material from the Processed Yarn Unit to POY Unit. All the clearances from the POY Unit including the requirements if any, of Processed Yarn Unit will be made, only after payment of applicable excise duties. The products of the other unit - Texturised and Draw Twisted/Draw Warper Yarn will be chargeable to a specific duty @ Rs. 2.87/kg. Dyed Yarn will be chargeable to a specific duty of Rs. 10.35/kg and Twisted yarn manufactured out of duty paid Textured or Draw Twisted (Processed) Yarn will be continued to be exempted. Further in view of the applicability of specific duties, the Processed Yarn unit will not be availing CENVAT credit either on inputs or on capital goods.
You are therefore requested to grant us the registration at an early date .We will be pleased to provide you any further information in this regard."
5.5.4 The contents of letter are self explanatory and clearly show that appellants have in garb of the "product management", sought to create a colorable instrument a façade in name of product management group for evading the payment of legitimate duty due. The intention of the appellant is also clear from the fact that they had been selling the said goods from their depots by charging the duty @ 36.8% ad valorem instead of the duty actually paid by them after bifurcation. They never declared the pricing mechanism to the department at the depot at the time of seeking an amendment in registration hence they had misstated the facts with the intention to evade payment of duty and hence in our view extended period of limitation has been correctly invoked against the appellants in the present order. Commissioner has in para 47.2 of his order held as follows:
"47.2 Therefore, these acts of commission and omission on the part of all the Noticee have resulted in short payment of Central Excise duty of Rs.38,24,41,595j-during the period April 2000 to March 2001 as demanded under SCN dated 30.05.2001, and is recoverable from them in terms of proviso to Sec 11 A (1) of 44 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 Central Excise Act, 1944, read with Rule 9(2) and Rule 173B of Central Excise Rules, 1944. In support, I am inclined to rely on the decision of the Tribunal in case of Alaska Tyres (P) Ltd Vs CCE New Delhi [2002 (145) ELT 329 (Tri)], wherein it has been held that "it is for the noticee to disclose the true facts regarding their manufacturing activity to the _ department and the noticee cannot take advantage of the fact that the Excise Department had been visiting their unit in order to resist the invocation of larger period. In another judgment of M/s. Jaishri Engg Co. Pvt. Vs CCE [1989(40)ELT 214(SC)] the Honourable Supreme Court has held that "the fact that Department visited the factory of appellant and they should have been aware of the production of goods in question, were no reason for the appellant to truly and properly describe these goods". Further the intention to evade duty has at time to be inferred by the act of parties, because is done by stealth and it is not always possible for the department to establish evasion with documents that conclusively show the intention to evade duty. 'Following the ratio of above said decisions of Honorable Supreme Court & CESTAT, I find that the element of suppression with intention to evade payment of duty exist in the present case and it has been substantially expend in para 31.2 to 32 above, hence, I am inclined to hold that the extended period to demand duty has correctly been invoked in the impugned notice and the impugned SCN is not barred by the limitation."
5.6. Whether interest on the demand made can be sustained.
5.6.1 Since we have held in the favour of demand of duty the demand of interest will follow as have been held by the Hon'ble Bombay High court in case of P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)]. Hon'ble Bombay High Court has stated as follows:
"10.So far as interest u/s. 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the Official Gazette from time to time. There would be discretion, if 45 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 at all the same is incorporated in such notification in the gazette by which rates of interest chargeable u/s. 11AB are declared.
The second aspect would be whether there is any discretion not to charge the interest u/s. 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied/short paid/non-levied/unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of sub-section (1) of Section 11, which runs thus :
"Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub- section (2) or has paid the duty under sub-section (2B) of Section 11A, shall in addition to the duty be liable to pay interest at such rate ........"
The terminal part in the quotation above, which is couched with the words "shall" and "be liable" clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier. Upon reading Section 11AB together with Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional."
5.6.2 Similar views have been expressed in the following decisions:
a) Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)]
b) TCP Limited [2006 (1) STR 134 (T-Ahd)]
c) Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)]
d) Ballarpur Industries Limited [2007 (5) STR 197 (T-Mum)] 5.7 Whether penalties are imposable on appellant.
46 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 5.7.1 We have held that appellants have by way of omission and commission, contravened the provisions of Central Excise Act, 1944 and the Rules made there under with the intention to evade payment of duty. Commissioner has in para 49 and 49.1 held as follows:
"49. These acts of commission and omission of all the Noticees as Sr.No.1 to 9 have resulted in short payment of Central Excise duty totally amounting to Rs.2,29,27,38,960/ - covering the period April 2000 to March 2003 and is recoverable from them. I find that the investigations carried out clearly established that it was with only one intention of taking undue benefit and evading payment of Central Excise duty, all the said notices have indulged in above acts of commission and omission and as such proviso to Section 11A(1) is clearly invokable in this case. The said differential duty short paid is therefore recoverable along with interest from them in terms of Sec 11A and 11M/ 11AB of Central Excise Act, 1944 read with Rule 9(2) read with Rule 173 B of CER, 1944 during relevant period as mentioned in the respective SCNs.
49.1 As regards the noticees at Sr. No. 1 to 4, I find that they have contravened the provisions of Rule 9, 49, 173B, 174, 173 F and 173G of C.Ex., Rules,1944andRule 6,8 and 11 of Central Excise Rules, as applicable during the respective period as proposed in the respective SCN, with an intent to evade payment of Central Excise duty and as such rendered themselves liable for penal action under section 11AC of CEA, 1944 read with Rule 173Q of CER,1944 and Rule 25 of CER,2002forthe respective period as applicable."
5.7.2 Hon'ble Supreme Court has in case of Rajasthan Spinning and Weaving Mills {2009 (238) ELT 3 (SC)] laid down the law as follows:
"18. One cannot fail to notice that both the proviso to sub- section 1 of Section 11A and Section 11AC use the same expressions : "....by reasons of fraud, collusion or any wilful mis- statement or suppression of facts, or contravention of any of the 47 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 provisions of this Act or of the rules made thereunder with intent to evade payment of duty,...". In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2) there is a legally tenable finding to that effect then the provision of Section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a finding in the order passed under Section 11A(2) there would be no application of the penalty provision in Section 11AC of the Act. On behalf of the assessees it was also submitted that Sections 11A and 11AC not only operate in different fields but the two provisions are also separated by time. The penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC.
23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides."
5.6.3 In view of the above we uphold the order of Commissioner to the extent of imposing penalties under Rule 173Q of the Central Excise Rules, 1944 or Rule 25 of the Central Excise Rule 2002 as the case may be read with Section 11AC of the Central Excise Act, 1944. However the quantum of penalty needs to be 48 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 redetermined after determination of actual duty evaded by the appellants.
5.8 Whether penalties are imposable on four functionaries in the unit.
5.8.1 Commissioner has in para 50 and 50.2 of his order recorded as follows:
"50. In his statement dated 27.02.2001, recorded under section 14 of the Central Excise Act, 1944, Shri D.B. Roongtha, admitted that, as per the direction of Shri G.M. Jain, Vice President(Fin), he filed the application dated 16.03.2000 for separate registration of units. He was aware that there was no physical shifting of machines and also there was no change in the overall managerial, administrative, financial and other control of M/ s. CEL, over erstwhile KSF vis- a-vis the bifurcated units of KSF during the segregation of the units and such separate registrations were sought to implement concept of product group management. Similarly, in his statement dated 05.03.2001 recorded under Section 14 of Central Excise Act, 1944, Shri G.M. Jain, Vice President (Fin) of M/s. CEL, admitted that obtaining such separate registration was a collective decision of body of Senior Executives including product group heads viz Shri G.M. Singhvi, Sr. President, Shri S.B. kamath, Sr. Vice President (P.G. Textile), Shri M.N. S. Rao, Sr. Vice President (POY Section) and he himself. Similarly, Shri S.B. Kamath, Sr. Vice President, vide his statement dated 15.03.2001 recorded under section 14 of the Central Excise Act, 1944, also admitted that he was involved in obtaining separate registration for units to implement concept of product group management. This apart, I find that Shri G.M. Singhvi, Sr. Vice President and Shri RS. Dhand, vide their statements dated 12.05.200i and dated 14.05.2001 respectively admitted that they were charging collecting Central Excise duty @ 36.80% adv. From their customers where as they were actually paying duty to the Govt. Exchequer at specific rate of Rs. 2.87 per Kg. they have also admitted that they were involved in formulating a decision to bifurcate the unit based on the so called product group management concept.
49 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 50.2 Thus, from the above, I find that filing of application dated 16.03.2000 is a mere attempt to avail undue benefit of the notification 6/2000-CE dated 01.03.2000, despite of the knowledge that the composite unit still continue to exist and being operated under the single and overall management of M/s. CEL for all the purpose. Thus, noticees at Sr. No. (5) to (9) are aware of the facts of the case and have activity participated in bifurcation of existing registered premises of noticee company at Mahad, and by these acts and by claiming the benefit of Notification No. 6/2000 C. Ex., dated. 1.3.2000, which they knew that it was not due to them, had willfully mis-declared the facts with in intent to evade payment & duty by the noticee company and as such rendered themselves liable for penal action under Rule 209 (A) of Central Excise Rules, 1944 and Rule 26 of CER, 2002 as applicable during the respective period as proposed in the respective SCNs."
5.8.2 In view of the specific finding recorded by the Commissioner, to the effect that the four functionaries were instrumental and in knowledge of the entire façade being created to evade payment of duty we uphold the penalties imposed on these functionaries. However, the quantum of penalty needs to be re-determined after ascertaining the duty evaded.
5.9 CENVAT/ MODVAT Credit 5.9.1 Appellant have in their submissions stated that for claiming the exemption under Notification 6/2000-CE and its successor notifications they had not availed the benefit of CENVAT/ MODVAT credit in respect of the inputs received by them as per the condition specified for availing the exemption. If the benefit under that notification is not admissible to them then they should be allowed the benefit of CENVAT credit of duty paid on the inputs.
5.9.2 We do not have any hesitation in holding that the benefit of CENVAT/ MODVAT credit in respect of the duty paid on the inputs used by them in manufacture of finished goods was admissible to them if they had not cleared the goods by availing the benefit of exemption under Notification No 6/2000-CE and its 50 E/86129,86130,86131,86132,86153, 86154,86155,86156,86157/2014 successor notifications. However the benefit of CENVAT/ MODVAT credit can be allowed only on establishing the claim to such credit by way of production of requisite documents before the adjudicating authority.
5.9.3 Since the matter is being remanded for re-determination of the value and quantum of duty short paid by the appellants, appellants may make the claim towards admissible CENVAT/ MODVAT credit before the adjudicating authority in remand proceedings, who will consider the claim and allow the admissible CENVAT/ MODVAT Credit.
6.1 Appeal No E/86129, 86130, 86131, 86132, 86153, 86154, 86155, 86156 & 86157/2014 are partially allowed and the matter remanded back to the adjudicating authority for re- determination of assessable value, admissibility of MODVAT/CENVAT credit, quantum of duty evaded and imposition of penalty consequent to the redetermination of the duty evaded. Since the matter is quite old the adjudicating authority should in remand finalize the matter within six months from the date of receipt of this order and after following the principles of natural justice.
(Order pronounced in the open court on 20.12.2019) (Dr. D.M. Misra) Member (Judicial) (Sanjiv Srivastava) Member (Technical) tvu