Customs, Excise and Gold Tribunal - Delhi
M/S. Ganganagar Sahkari Spg. Mills Ltd. vs Cce, Jaipur on 4 May, 2001
ORDER
G.R. Sharma
1. In the impugned order the Ld. Commissioner held that the Hon'ble Madras High Court in the case of Bojaraj Textile Mills Ltd.reported in 1990(45)ELT.559 after examining the matter held that the test result of the sample will apply till drawal of the next sample. It was further held "It must be remembered that the Department cannot be expected to take sample every day and for every bale. A sample is taken periodically at regular intervals and the test result of such a sample is taken to govern production of yarn till the next drawal of the sample. Therefore, the contention that the sample was taken on 30.12.75 and assessment may be made only in respect of the stock available on that date, when the sample was taken, and, on the basis of Chemical Examiner's report for that sample, goods manufactured in future could not be levied the same rates, cannot be accepted as a ground for interference in the order of the Single Judge".
Being aggrieved by this order, the appellants have filed the captioned appeal.
2. The facts of the case in belief are that the appellants are engaged in the manufacture of cotton yarn. The Department noticed that the appellant during the period from 15.12.92 to 9.5.93 claimed that the count of yarn was 25s on which concessional rate of duty in terms of Notification No.No.23/92 dt.1.3.92 and notification No.31/93 dt. 28.3.93 were applicable whereas the result of test conducted on the sample drawn by the Departmental authorities when tested by the Chemical Examiner showed that the count of yarn was 26.3s which attracted the higher rate the duty. It was, therefore, alleged that the appellants had evaded Central Excise Duty amounting to Rs. 81,097/- on 2,50,135 kgs. of cotton yarn. Accordingly, a SCN was issued to the assessee asking him to explain as to why duty should not be demanded and why penalty should not be imposed. In reply to the SCN, the assessee submitted that copy of the sample retained by them was sent to Northern India Textile Research Association, Ghaziabad who reported that the count of the yarn was 25.56s. It was contested by the assessee that a tolerance limit of 5% was applicable. In the result, the assessee requested for retest of the sample. On retest of the sample the count of the yarn was found to be 26.5s. The Asstt. Commissioner, therefore, confirmed the demand and also not only imposed penalty but asked the assessee to pay interest also. When the assessee filed an appeal before the Ld. Commissioner (Appeals), the Ld. Commissioner confirmed the demand for duty the demand for interest and reduced the amount of penalty of Rs. 2 lakhs.
3. Arguing the case Shri K.K.Anand, Ld. Counsel appearing for the appellant submits that in the instant case the sample was drawn from a particular lot and therefore, the result of the test of the sample should be applicable only to that lot and not to a number of lots spread over a period of time. Ld. Counsel also submitted that the sample was tested by a reputed organisation which showed that the count of the yarn was 25.56 which was within the permissible limit.
Ld. Counsel, therefore, submitted that the demand is not sustainable in law. and the question of payment of Interest under Section 11AB did not arrive.
Lt. Counsel also submitted that the Department appropriated in the meantime certain amounts of money which may be adjusted if the demand is confirmed.
Ld. Counsel also submitted that the fact remains that in the two tests conducted by the Department, the count was found to be 26.53s and 26.5s and thus, there was a variation. He submits that when they got the sample with them tested, they were informed that the count was 25.56s. Since variation in the count is normal phenomenon, therefore, the penalty imposed is too harsh. He, therefore, prayed that the penalty amount may be reduced in the case the demand is confirmed.
4. Shri R.C.Sankhla, Ld. DR appearing for the respondent Commissioner submits that the sample was taken from a lot. He submits that samples are taken periodically; that it was not possible to take sample for each bale at each time. Samples are taken after sometime. He, therefore, submits that the contention of the applicant that the results of test should be made applicable to that particular bale from which it was take is not practical nor acceptable. He referred to the decision of the Hon'bel Madras High Court in the case of Bojraj Textile Mills reported in 1990(45) ELT.559. He also referred to the decision of the Hon'bel Madras High Court in the case of M/s. Rmalinga Choodambikai Mills Ltd. vs. Govt. of India & Others reported in 1984(15) RLT.407. In support of his contention that samples can only be taken at intervals.
On the question of test results Ld. DR submitted that sample taken in the presence of the representative of the assessee was tested and when a request of retest was made that was retested and therefore, the question of not relying on the test result by the Department from the Chemical Examiner did not arise. He submitted that reliance on the test result by the Chemical Examiner is correctly placed and may be accepted.
In regard to reduction in penalty, Ld. DR submits since duty was evaded and since the assessee is having a laboratory where tests are conducted, they should have conducted proper test and paid duty correctly. He submits that since the demand is supported by the fact that the count of yarn was higher, no case is made out by the appellant for reduction in penalty.
5. On careful consideration of the submissions made by both the sides, we find that the count of the yarn as determined by the Chemical Examiner is correct as the sample on retest was found to be more or less equal to earlier test and higher than that determined by the NITRA. Thus, having regard to the fact of the case law cited by the Department, we hold that the demand has been correctly computed and is sustainable in law.
6. Ld. Counsel for the appellant submitted that some amount has already been appropriated by the Department. If, that be so, that amount may be adjusted in the demand.
7. In so far as charge of interest is concerned, Ld. Commissioner has not dropped the question of charging interest. We do not see any reason to with this finding of the Ld. Commissioner (Appeals). Interest is not chargeable in the infant case. Therefore the demand of interest is quashed.
8. In so far as reduction in penalty is concerned, we find that dispute is in determination of the count of the yarn. We find that there is slight variation in the count of the yarn which was subjected to test twice. Looking to this fact, we find that penalty still continues to be higher. In the circumstances, the same is reduced to Rs. one lakh.
9. The appeal is disposed of in the above terms.