Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Unknown on 4 August, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT-II
Appeal No.E/1617 & 1618/06
Arising out of OIO No.03/KRB/MP/2006, dt.16.02.06
Passed by: Commissioner of Central Excise & Customs (Appeals), Surat
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant/s M/s. Sumeet Industries Ltd.
Shri Shankarlal Somani
Represented by Shri Anand Nainawati, Adv
Vs.
Respondent/s CCE Surat
Represented by Shri J.S. Negi, SDR CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing:04.08.10 Date of Decision:
ORDER No. /WZB/AHD/2010 Per: Mr. B.S.V. Murthy:
Appellant is engaged in the manufacture of Polypropylene Multi Filament Yarn (PPMF), texturised PPMF yarn, twisted PPMF yarn, PPMF fully drawn yarn etc. The dispute in this case is whether appellants are liable to pay central excise duty on the intermediate goods namely partially oriented yarn of PPMF yarn of 385 deniers used in the manufacture of twisted yarn of 210 deniers. Duty demand of Rs.65,46,595/- has been confirmed against the appellants and a penalty of Rs.14,70,100/- has also been imposed on the appellant company. Further a penalty of Rs.5,00,000/- has also been imposed on the Director, Shri Shankarlal Somani.
2. The learned advocate on behalf of the appellants submitted that the sole ground on the basis of which demand has been confirmed is that the appellants were getting 380 denier PPMF converted to 210 denier PPFY on job work basis from M/s. Gujarat Synthetic Oxide Lakhani Textiles etc. He submits that on this basis it has been held that the goods were marketable and they had shelf life. He relies on the decision of the Honble Supreme Court in the case of Cipla Ltd. Vs. CCE Bangalore reported in 2008 (225) ELT 403 (S.C.) to support his contention that manufacturing activity by itself does not prove marketability and product produced must be a distinct commodity known in common parlance to commercial entities for the purpose of buying and selling. He submits that Revenue has not produced any evidence to support the contention that the product is marketable. Similarly in the case of Cadila Laboratories Pvt. Ltd. CCE Vadodara reported in 2003 (152) ELT 262 (S.C.), Honble Supreme Court had held that no attempt was made to find out whether products were bought and sold in the market, samples were not drawn and the claim of the appellants products are in crude form and are userable and had a shelf life of only a few hours were not verified.
3. The learned DR submitted that in their modvat declaration dated 23.07.96 appellants had declared PPMF (POY) as a final product at Sl. No.1 and Sl.No.2 was textured yarn of PPMF and polyester. Further they had also filed the declaration under Rule 173B and had claimed exemption for PPMF (POY) under Notification No.67/95-CE dated 16.03.95. Since they had claimed exemption for the final product under Notification No.5/99 dated 28.02.99, they could not have claimed exemption in respect of PPMF (POY) of 385 deniers. Further he also submitted that appellants had sent the goods for job work for some time which would show that goods were capable of being sold. He drew our observation to the discussion about process only and the manufacturing process of the Commissioner and submitted that this would clearly show that the process fulfils the definition of manufacture.
4. We have considered the submissions. Before we proceed further it would be worthwhile to reproduce the manufacturing process as outlined by the Commissioner in the impugned order.
PP POY MULTIFILAMENTS YARN PROCESS FLOW Virgin Chips from chips room are carried to amin Silo through a dust separator (to remove dirt, dust and other foreign particles) by suction. From main Silo, chips are conveyed to a similar Silo above extruder through controlled pneumatic conveying system. Colour chips and UV chips are mixed with virgin chips in pre-dedicated proportion through high mixer provided above the extruder for this purpose. Master batches and UV chips are fed to mixer manually through two small Silos (for each line) provided above extruder.
Mixer chips are melted in extruders and carried to a manifold where the melt is distributed in to different channels for different positions.
Through precision gear pumps, melt is extruded through spinnerettes in form of filaments, which are cooled and solidified by the application of cooling air.
Solidified, cool filaments are bound together at the Spin finish guide where Finish oil is applied to the yarn bundle. The oil act as lubricants, anti static agent and gives cohesion to the filaments. After spin finish application, POY yarn is wound on spool (Bobbins) on a high speed winder.
When pre-decided (desired) size of POY is obtained, bobbins are doffed (4 at every position) and kept on trolley.
From there, material is sent for denier, strength elongation and other testing to Quality Control. Q/C department grades the material as per Q.C. testing reports. Graded material is packed in boxes and is ready to be sent for further process.
5. From the above it can be seen that the process starts with virgin chips and ends with PTY of the prescribed denier. The fact that checks for quality control, denier verification, elongation, strength etc. are carried out and the material is packed in boxes and also the fact that earlier the manufacturer was sending it for job work would show that the product has an independent name, character and use. Further in their own declaration under Rule 173B of Central Excise Rules, 1994, Modvat declaration and RT-12 appellants have listed the product for relevant purposes. The only ground canvassed by the appellant in support of the contention is that the department has not proved marketability. It is well settled that it is not necessary to show that goods are marketed as such. What is required to be shown is they are marketable. In the case of Cipla cited by the appellants, the appellants had produced evidence in the form of affidavits and letters from bulk drug dealers to support the contention that BMS manufactured was not marketed. Further in spite of the fact that the matter had been remanded, the department could not get any evidence to ascertain the marketability even though enquiries were conducted. In that case other than the evidence that the drug intermediate was being transported from its factory at Bangalore to its Patalaganga manufacturing facility in drums there was no other evidence. In that case the department had simply relied upon chemical weekly drug directory where also BMS was shown as an intermediate product. In the same decision Honble Supreme Court also observed that it was for the Revenue to prove that the product was marketable or was capable of being marketed. In the case of Cadila Laboratories also Honble Supreme Court observed that the department made no efforts to ascertain whether intermediate products are available in the market and no chemical analysis was conducted. Unlike these two cases, in the present case, the process manufactured would clearly show that the product that emerges after the process has a distinct character, name and use. Further the fact that it was being sent to job worker would show that the product is capable of being marketed. Additional support comes from statutory declarations/return. Once this much evidence has been produced by the department, the burden shifts to the appellants to show that the process of manufacture does not amount to manufacture by showing that the product does not fulfill one of the three requirements. The appellants have simply chosen to claim that department has not produced enough evidence which was not the case in both the decisions cited by the appellants. In view of the above position we find that on merits appellants do not have a case.
6. However when it comes to limitation, we find that the appellants had filed a classification declaration under Rule 173B wherein they had mentioned PPMF yarn and claimed exemption under Notification No.67/95 dated 16.03.95. Further they had also filed declarations for availment of modvat credit on 23.07.96 and there PPMF (POY) was also mentioned. In the RT-12 return also PPMF (POY) figures and also exemption has been claimed under Notification No.67/95 dated 16.03.95. We are unable to appreciate how and where there is suppression and misdeclaration in this case. Department has not conducted any investigation to show that the product is marketable. Therefore if appellants entertain a bonafide belief about the fact that product is not dutiable, they cannot be fault with and the burden to show that appellants had an intention to evade duty and therefore resorted to misdeclaration has to be proved. In this case as per the requirements of statute, appellants have indicated the full details of the products manufactured in all the relevant declarations/returns filed with the department. The Commissioners conclusion that they should not have claimed exemption for captive consumption and on this ground extended period is invocable is somewhat for fetched as regards suppression of facts and misdeclaration with intent to evade duty. Therefore in this case suppression of fact and misdeclaration or fraud or collusion could not have been invoked and therefore the show cause notice issued on 29.09.04 to demand the duty for the period from September 1999 to June 2001 is clearly time barred.
7. Therefore the impugned order is set aside on the ground of limitation and since the demand for duty has been set aside invoking extended period, no penalty can be imposed on any of the appellants. Accordingly, appeals are allowed on the ground of limitation with consequential relief to the appellants.
(Pronounced in Court on ___________________)
(Archana Wadhwa) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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