Customs, Excise and Gold Tribunal - Delhi
Oswal Knit India Ltd. vs Commissioner Of C. Ex., Chandigarh-I on 7 January, 2002
Equivalent citations: 2002(141)ELT213(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. Heard.
2. It has not been disputed before us that the case of the appellants on the question of limitation is fully covered by the two judgments of the Tribunal rendered in Pee Jay Apparels (P) Ltd. v. CCE, Chandigarh (Final Order No. 134/2001-D, dated 27-4-2001) [2001 (135) E.L.T. 842 (T)] and R.N. Oswal Hosiery Factory v. CCE, Chandigarh (Final Order No. 179/2001-D, dated 10-9-2001) [2001 (138) E.L.T. 1092 (T)]. Therefore, we allow the total waiver of pre-deposit of duty and penalty amount, as detailed in the impugned order of the Commissioner, under appeal, to the appellants.
2. With the consent of both the sides, we proceed to decide the appeal of the appellants on merit.
3. The facts leading to the filing of the present appeal may briefly be stated as under :-
The appellants are engaged in the manufacture of woollen hosiery knitwears. On 14-5-96 the preventive staff of Central Excise visited their factory premises. They recorded the statement of Dinesh Gupta, Director of the appellants company regarding process of manufacture. Shri Dinesh Gupta disclosed in his statement to the officers that they were purchasing woollen yarn on cones as well as in straight reel hanks from M/s. Punjab Wool Combers Ltd. and M/s. Punjab Worsted Spg. Mills. He further disclosed that the yarn received in plain straight reel hanks was converted into cones on power operated winding machine before being put to use on the knitting machines. After examining the record regarding sale of the goods during the period 1-3-95 to 31-3-96 and on completion of investigation, the appellants were served with show cause notice dated 8-11-99 vide which they were called upon to pay central excise duty on cones converted by them from straight reel hanks yarn and then used in the manufacture of final products as conversion of cones from straight reel hanks amounted to manufacture in terms of Note 3 appended to Chapter 51 of the CETA w.e.f. 16-3-95. The appellants, however, contested the correctness of the notice and denied their liability to pay duty as demanded therein. They denied that conversion of cones from straight reel hanks yarn amounted to manufacture. The Commissioner who adjudicated the show cause notice did not accept their version and confirmed the demand of Rs. 25,71,400/- with equal amount of penalty under Section 11AC read with Rule 173Q of the Rules on them through the impugned order.
4. The learned Counsel has not seriously congested the findings of the Commissioner that conversion of cones from straight reel hanks yarn amounted to manufacture in terms of Note 3 appended to Chapter 51 of CETA w.e.f. 16-3-95 in view of the law laid down by the Tribunal in Nahar Spinning Mills Ltd. v. CCE, Chandigarh [2000 (121) E.L.T. 400].
5. However, the Counsel has vehimently contested the duty demand raised through the show cause notice dated 8-11-99 on the question of limitation. According to the Counsel/ the demand is apparently barred by time, it pertains to the period 1-4-55 to 31-3-96 while show cause notice was issued only on 8-11-99 and that the extended period of limitation in terms of proviso appended, to Section 11A(1) of the Act could not be invoked for want of any specific allegations and evidence to establish, that there was any fraud, mis-representation or concealment of facts by the appellants. In support of his contention/ the Counsel has placed reliance on the ratio of law laid down in two identical cases namely Pee Jay Apparels (P) Ltd. v. CCE, Chandigarh (Final Order No. 134/2001-D, dated 27-4-2001) [2001 (135) E.L.T. 842 (T)] and R.N. Oswal Hosiery Factory v. CCE, Chandigarh (Final Order No. 179/2001-D/ dated 10-9-2001) (2001 (138) E.L.T. 1092 (T)], wherein on similar allegations, the duty demand was raised on the cones and the same was held to be time barred.
6. On the other hand, the learned SDR has not been able to contest this contention of the learned Counsel on any ground.
7. We have also gone through the record and heard both the sides.
8. Admittedly, the appellants are engaged in the manufacture of woollen hosiery knitwears. Their factory premises were visited by the officers of preventive staff of the central excise on 14-5-96. They recorded the statement of Shri Dinesh Gupta, director of the Appellant-company who was present there at that time wherein he made clean breast of the facts regarding process of the manufacture of the woollen hosiery knitwears from plain straight reel hanks yarn. He, in clear terms stated that yarn received in plain straight reel hanks was converted into cones on power operated winding machines before being put to use in the manufacture of final products i.e. woollen hosiery knitwears. Therefore, the officers of the preventive staff of the Central Excise on the date of their visit came to know about the manufacture of cones from plain straight reel hanks yam and the captive use of those cones by the appellants in the manufacture of woollen hosiery knitwears. There was no suppression/concealment of material facts by them from the visiting officers.
9. Moreover, even otherwise, there is no material on record to suggest that non-payment of duty on cones by the appellants was on account of any fraud, collusion, wilful mis-statement or suppression of facts with intent to evade payment of duty. It is not the case of the Revenue that Dinesh Gupta, Director of the Company made any mis-statement of the facts. Even in the show cause notice, it has not been so averred.
10. In Collector of Central Excise v. H.M.M. Limited - [1995 (76) E.L.T. 497], the Apex Court has observed that no inference of intention to evade payment of duty on the part of the assessee can be drawn automatically for invoking extended period of limitation. The show cause notice must contain an averment to that effect pointing our specifically as to which of the various commissions or omissions stated in the proviso to Section 11A(1) of the Act, had been committed by the assessee. Similarly, in CCE, Hyderabad v. Chemphar Drugs & Liniments, Hyderabad [1989 (40) E.L.T- 276 (S.C) = 1989 (21) ECC-66], the Apex Court has reiterated this very view and observed that something positive other than mere inaction or failure on the part of the manufacturer or producer, conscious or deliberate withholding of information which the manufacturer knew otherwise, has to be proved before he can be saddled with liability beyond the period of six months under proviso to Section 11A(1) of the Act.
11. In the instant case, no specific act or omission allegedly committed by the appellants deliberately and wilfully with intent to evade duty on cones has been specifically alleged in the show cause notice or proved otherwise on record. Woollen hosiery goods manufactured by the appellants remained exempt from duty upto the year 2000. The appellants were not required to file any declaration under Rule 174 of the Rules or a classification list under Rule 173(b) of the Rules. Shri Dinesh Gupta, as observed above, as far back as on 14-5-96, categorically disclosed to the officers of the central excise at the time of their visit to the factory that yarn received in straight reel hanks firstly was converted into cones on power operated winding machines before being put to use in the manufacture of final product. There is nothing on the record to suggest if at that time the officers who recorded his statement, ever disclosed to him verbally or in writing that cones so manufactured were excisable. Therefore, it can be safely inferred that the appellants were working under the bona fide belief that those cones were not excisable.
12. Therefore, keeping in view all the above referred facts, circumstances and the law laid down by the Apex Court in the above referred cases, the provisions of proviso appended to Section 11A(1) of the Act, for raising demand beyond the period of six months, could not be legally invoked. The Tribunal in almost identical facts and circumstances wherein duty demand was raised on the cones from the manufacturers of the woollen hosiery products, for a period beyond six months under proviso to Section 11A(1) of the Act, in the cases of M/s. Pee Jay Apparels (P) Ltd., and M/s. R.N, Oswal Hosiery Factory, (Supra) had observed that the demand was hit by limitation as the said provisions for want of any material to prove fraud, collusion, wilful mis-statement/suppression of facts with intent to evade, were not invocable against the assessees. The ratio of law laid down by the Tribunal in these two cases is on all fours and very aptly covers the case of the appellants.
13. In the light of the discussions made above, it must be held that duty demand for the period from 1-3-95 to 31-3-96 raised from the appellants through the show cause notice dated 8-11-99, is time barred and as such, is set aside.
14. It has been also not disputed before us by the learned SDR that no penalty under Section 11-AC of the amount equal to that of duty, could be legally imposed on the appellants, as this Section was brought on the Statute only through Section 76 of the Finance (No. 2) Act, 1996 w.e.f. 28-9-96. The duty period in the present case is prior to that being from 1-3-95 to 31-3-96. This Section did not had retrospective effect. Therefore, the penalty imposed on the appellants under this Section 11AC of the Act, cannot be legally sustained and is set aside.
15. In view of the discussions made above, the impugned order of the Commissioner under appeal dated 19-9-2001 is set aside in entirety. The appeal of the appellants is allowed with consequential relief, permissible under the law.