Customs, Excise and Gold Tribunal - Mumbai
Raj Rayon Ltd. vs Commissioner Of Central Excise on 22 September, 2000
Equivalent citations: 2000(72)ECC601, 2001(127)ELT261(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. In the two orders impugned before us, the Commissioner has held that Raj Rayon and Yashasvi Yarn Ltd, the two assessees in appeal before us, were liable to pay duty on the intermingled yarn made by them and confirmed the duty demanded on this score. He has, in addition, confiscated the plant and machinery of these two assessees, imposed penalties on them as well as on Sushil Kumar Kanodia, their common director. These three are in appeal before us.
2. The Commissioner agrees that the process carried out by the assessees is intermingling of yarn. He says, "I find that the unit had manufactured siya silk yarn through the process of intermingling. In the instant case, two single yarns get intermingled by the process of intermingling/air-mangling through air-jet winding machine". He finds that Note 3 to Chapter 54 of the Tariff has been rightly invoked in the notices to show cause. He says that by the process undertaken by the assessee, "the initial forms of the feeder yarn is converted into another form i.e. singly bulk yarn" which he finds to be a process of manufacture covered by the note. He further finds that the changes made in this note in 1999 are clarificatory in nature, and therefore have retrospective application.
3. As we have noted, the Commissioner accepts that the process carried out by the appellant was that of intermingling of yarns by the use of an air-jet. He has, throughout the two orders impugned before us, maintained the distinction between the intermingling of yarn and texturising of yarn by employing an air-jet. He refers in various places to "air texturising or air-mingling" and to "air-texturising/air-mingling yarn". He has nowhere said specifically, nor does he appears to us to say anything that would permit the inference, that air-intermingling is nothing other than air-texturing. We therefore do not feel called upon to determine whether the process carried out by the assessees was air-mingling or air-texturising. The tariff itself has recognised that air-mingling is a process different from texturising. The amendment made to note 3 to Chapter 54 mentions each of these processes separately as amounting to manufacture.
4. The notices demanding duty and proposing penalty were issued in January, 1999 and related to clearance made by the assessee up to December, 1996. The extended period contained in the proviso under Section 11A(1) was invoked by alleging that each of the assessees suppressed that they had manufactured and cleared air-textured yarn. As we have noted, the Commissioner nowhere says specifically that the process undertaken by the assessee amounted to air-texturising nor is it possible to infer from his order this what he intended to say. This alone should be sufficient to say that the extended period would not be available. Apart from this, the fact that it was necessary to include by way of amendment in 1999 of the note itself shows that there was no clear understanding that air-intermingling did not amount to manufacture. The position is somewhat puzzling with regard to air-texturing.
"Texturising" which is nothing other than texturing was a process specified in the note as it stood prior to the amendment. Air-texturing is a process of texturising or texturing yarn by the use of air. It would therefore be covered as a process of manufacture by the note as it stood prior to the amendment. It is not possible for us to see why it was necessary to specifically include air-texturing, and that too, not as a species to texturising but as a process separate from, and therefore independent, of texturising in the note by way of amendment in 1999. Fortunately, we are not required to go into this question. Since air-mingling is separately mentioned from air-texturing or texturising it is accepted by the tariff to be a process distinct from these two. The very fact that it was necessary by the amendment to specify this as a process, shows that it was not generally considered to be such a process prior to the amendment. The assessee, and presumably the department, could reasonably have believed prior to the amendment that it was not a process of manufacture covered by the note. Therefore there is no question of suppression or mis-statement of the assessee. The Commissioner's view that the amendment was retrospective in application being clarificatory does not have any relevance to the question of limitation. The state of mind of the assessee or the department prior to the amendment would not be affected by this fact. That the department itself was under the belief that such air-texturing was not a process amounting to manufacture is made clear in the report which the Chief Commissioner having jurisdiction over the assessees has sent to the Ministry of Finance by the letter dated 3-6-1999 of his Joint Commissioner. In the letter, the Joint Commissioner has communicated to the Ministry the views of the Chief Commissioner that the yarn subjected the air-mingling or air-texturing was being levied to duty from the date of presenting of the budget. It is thus clear that prior to this date the department itself did not consider either of these processes to be manufacture. Therefore the extended period was not available to the department and duty demanded, penalty imposed and confiscation have to be set aside.
5. The appeals are allowed. Impugned order set aside.