Customs, Excise and Gold Tribunal - Tamil Nadu
Sunshine Exports Pvt. Ltd. vs Cce on 16 March, 2004
Equivalent citations: 2004(168)ELT363(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. By this appeal, the appellants are challenging the correctness and validity of the Order-in-Original No. 52/2001 dated 29.11.2001 passed by the Commissioner of Central Excise, Coimbatore. By this order, the Commissioner has confirmed the demands on the basis of investigations carried out by department to hold that the appellants had manufactured and cleared Shrink Proof Fabrics falling under Chapter sub-heading No. 5207.29 of the Central Excise Tariff. The appellants are job workers who had received 100% cotton fabrics from various suppliers for undertaking the processes such as washing, zero-zero processing and starch padding. After processing, the appellants sent back the materials and collected job-charges. The goods were all returned back to the supplier, who is a 100% EOU. The appellant's contention is that they do not have the facility of remanufacture of shrink proof fabrics and in proof of their contention, they had produced a letter dated 18.6.2001 issued by the South India Textile Research Association (SITRA). At the request of the appellants, the officials of SITRA visited the factory and conduct the study. In an unequivocal terms, they have certified that appellants do not have facility to carry out shrink proof process on cotton fabrics. They have stated in the certificate that for the purpose of manufacture of shrink proof fabric, a stenter with four or five chambers are required. On examination of the zero-zero machine which is installed in the appellant's factory the report states that "appellant have not installed the stenter machine and hence there was no process of shrink proofing in terms of definition of "Shrink proofing" appearing in the notification No. 8/96-CE dated 23.7.96 amended from time to time".
2. The notification granted the benefit of exemption to the cotton fabrics processed with the aid of zero-zero machine. However, the notification clearly indicated in Explanation-I that "for the purposes of the woven fabrics of cotton, "calendering" shall include processing of cotton fabrics with the aid of zero-zero machine without a stenter attachment". The appellant's case is that as they have not installed the stenter machine, therefore, they have not manufactured any shrink proof cotton fabrics. They also relied on several test reports which were carried out in the purchasers' factories which had clearly indicated the parameters of shrinkage as given in the notification and was certified that it has not satisfied the same. It was against the parameters laid down terms of guidelines issued by the Board vide their letter F. No. 15/110/64-CX 1 dated 27.4.64 which laid down that shrink proof fabric cotton marketed should have a residual shrinkage to the extent of 1.5% and less. It was stated by the appellants through the test reports produced that the shrinkage was much more than the residual shrinkage in terms of Board's circular. A specific stand was taken that in terms of the said circular, the circular itself had clearly stated that further proof could be adduced by revenue to show that the fabric was actually marketed as shrink-proof fabrics. It was stated that they had not marketed the cotton fabrics as shrink-proof fabrics as the same was cleared to the supplier of raw material. In the absence of any proof of marketability of the item as a shrink-proof, the charges that appellant had manufactured shrink-proof fabric is not sustainable, was the stand taken by appellant. They have further stated that the Board's guidelines issued in the year 1964 had no validity after the introduction of new Central Excise Tariff which came into force from 1.3.1986. The CBEC vide their circular No. 38/38/94-CX.4 dated 27.5.94 had withdrawn the said instructions/guidelines/tariff advices issued in the context of erstwhile First Schedule for interpretation of new Central Excise Tariff. Therefore, it was contended that the Commissioner has based his finding solely on the basis of parameters laid down in the said guidelines issued in 1964 which is totally unsustainable and is violative of principles of natural justice. it was further submitted by the appellants that the Commissioner has relied on certain private documents to arrive at the conclusion that the shrinkage was less than 1.5% in view of certain chemical being used by the appellants during in process as revealed from the registers maintained by the appellants. It was contended that appellants do not have any facility to test he shrinkage and any shrinkage done through any other process than the stenter machine was of no consequence. Further, the shrinkage did not specify the percentage laid down in the said circular. It was also submitted that the Commissioner had himself noted in the order the details of the shrinkage but had over looked the fact that fabric also got elongated and there was shrinkage which was more than the laid down parameter. Therefore, the reliance on private registers is not as per law in terms of the rulings of the Tribunal rendered in the following cases :
1. Ambika Chemicals Vs. CCE Chennai, 2002 (148) ELT 101 (Tri-Chennai)
2. M.M. Dying & Finishing Vs. CCE Chandigarh, 2002 (139) ELT 143
3. Kashmir Vanaspati (P) Ltd. Vs. CCE, 1989 (39) ELT 655
4. CCE Chennai Vs. Dhanavilas (Madras) Snuff Co., 2003 (153) ELT 437
5. T.G.L. Poshak Corporation Vs. CCE Hydrabad, 2002 (140) ELT 187 (Tri-Chennai)
6. Sharma Chemicals Vs. CCE Calcutta-II, 2001 (130) ELT 271
7. M.T.K. Gurusamy Vs. CCE Madurai, 2001 (130) ELT 344
8. UTKAL POLYWEAVE INDUSTRIES (P) LTD. Vs. CCE & CC Bhubaneshwar-I, 2001 (136) ELT 520 (T)
2. The appellants contended that even otherwise the issue was totally covered in their favour as laid down by the Tribunal in the case of Omkar Textile Mills (P) Ltd. Vs. CCE, 1993 (63) ELT 580 (T). It is stated that the Tribunal has gone in great detail in the case of Omkar Textile Mills (Supra) on all aspects of the matter on a similar issue and held that the process carried out through zero-zero machine does not result in bringing into existence shrink-proof cotton fabric and therefore the benefit of notification in question cannot be denied.
3. We have heard Ld. Counsel Shri S. Venkatachalam for the appellants and Ld. SDR Smt. R. Bhagya Devi for the Revenue.
4. Ld. Counsel relied on the entire written submissions filed by them and contentions raised by the party in the appeal memo. He submitted that the Commissioner has not given his finding on various pleas raised by them but has merely proceeded on the private records and lab register/lab test reports said to have been maintained by the appellants to arrive at the conclusion that the residual shrinkage after the processing in their compressive shrinking machine was 1% in warp and 0.5% in weft respectively. There is not evidence placed in terms of 1964 circular of the Board on which basis, the Commissioner has confirmed the demand. He submitted that no evidence is relied by the Commissioner to show that cotton fabric were marketed as shrink-proof material. Therefore, he submitted that relying on the test report and the lab register is of no consequence. He, further, submitted that Commissioner has dropped demands in respect of four show cause notices wherein there was a clear finding that the goods were not shrink-proof cotton fabrics. He had relied on the test results furnished by them. He submitted that the process and not changed, admittedly, even other wise in terms of department's contention. Therefore, the finding recorded by Ld. Commissioner on one aspect of the matter in para-117 which deals with subsequent four sow cause notices is sustainable to the entire case. He submitted that the demands are also time-barred and unsustainble for not having taken into consideration various pleas raised by them with regard to the fact that there was not suppression in the matter and the department was fully aware of all the process carried out by them.
5. Ld. Counsel submitted that the issue is fully covered in their favour in terms of the judgment rendered in the case of Omkar Textile Mills Pvt. Ltd. (Supra) which has not been accepted by the Commissioner on the basis of instructions issued by the Board in the year 1964 which is not applicable to the period in question as the said guidelines/instructions had ben withdrawn. He submitted that the Omkar Textile Mills Pvt. Ltd. case has been confirmed by the apex court and the same is bound to be followed in the present case. He submitted that various statements given by the party are of no consequence as the shrinkage has to be in terms of definition given in the notification and the material should be recognized as shrink-proof material. He submitted that the entire goods were exported and therefore even otherwise nod demands could be confirmed in the matter. He therefore, prayed for setting aside the impugned order.
6. The Counsel also drew our attention to the test results produced by the Chemical Examiner mentioned in the order. He submitted that even the test reports of Chemical Examiner were in favour of the party. The Ld. Commissioner has not looked into these reports which clearly noted that the shrinkage was more than 1.5% and also that the elongation was also noted in the test results which has not been looked into by the Ld. Commissioner. He submitted that the order is unsustainable in law and pleaded that the appeal may be allowed by setting aside the order.
7. Ld. SDR relied on the definition of "Shrinkage" and "Shrink-proof" textile" appearing at page 2856 of S.B. Sarkar's Words & Phrases of Excise & Customs. In both these definitions, the Board's circular of 1964 is relied and wherein the definition of shrinkage has been noted. Ld. SDR relied on the finding given by the Commissioner in paragraphs 102 to 116. She also submitted that as the lab register maintained by the appellants showed that there was shrinkage, was less than 1.5% therefore, in terms of instructions issued by the Board in the year 1964, the item has not be considered as shrink-proof material.
8. Ld. Counsel, further, submitted that the Ld. Commissioner has gone on the basis of chemical process involved in the manufacture of cotton fabric through zero-zero machine. The control of shrinkage is possible in both the chemical process and mechanical process and by combination of both. Therefore, there is not necessity for stenter machine required to be installed for the purpose of achieving the fabric as a shrink-proof one. The have used certain chemicals and the cotton fabric had attained the shrink-proof stage in the textile manufactured by them. Therefore, the citation of Omkar Textile Mills (P) Ltd. (Supra) is distinguishable.
9. On a careful consideration of the submissions, and on perusal of entire records, we notice that the Ld. Commissioner has committed a serious error in proceeding to confirm the demands solely on the basis of instructions given by the Board in the year 1964. The circular clearly indicated that the item should be considered as shrink-proof cotton fabric and it should be marketed as such. The department has not produced any evidence of test of marketability in the present case. It has not been shown that the item was marketed as shrink-proof material. be that as it may, the circular of 1964 is not longer in existence in terms of subsequent withdrawel in the light of the Circular No. 38/38/94-CX. 4 dated 27.5.94. The second ground on which the Ld. Commissioner has proceeded is that the they had used mechanical and chemical processes by which they achieved the shrinkage parameters and the item can be considered as shrink-proof material. It is seen from page 123 of the paper book which a test result certified by the department, the test result has been submitted by the Joint Director of Customs Laboratory, Custom House, Chennai to the Asst. commissioner of C.Ex, Combatore which clearly indicates the analysis results. The report clearly shows that there is expansion and shrinkage in the warp and weft which is more than 1.5% in the specific samples supplied. This evidence along with the evidence of SITRA shows that appellants had not installed the stenter machine which is a requirement for bringing into existence a shrink-proof cotton fabric in terms of judgment rendered in the case of Omkar Textile Mills (P) Ltd. (Supra). The Ld. Commissioner has attempted to distinguish this judgment of the Tribunal, which is confirmed by the apex court, solely on the ground that shrinkage can be achieved through mechanical and chemical processes. This finding is a perverse finding and the Ld. Commissioner has attempted to sideline the ruling of the Tribunal which is applicable on all fours to the present case. The notification clearly applies to a factory which has installed zero-zero machine without a stenter and processes are carried out on cotton fabric. In the present case, the appellant is a job worker and they had carried out processes as required in the notification with the zero-zero machine without a stenter which is a requirement for the purpose of bringing into existence shrink-proof cotton fabric. The appellants have not installed the stenter machine which is an admitted fact from the records of the case. Therefore, the Commissioner's finding that the Omkar Textile Mills case is distinguishable cannot be appreciated. Judicial discipline requires that the Tribunal's judgment which is confirmed by the apex Court ought to have been accepted. Further as contended by the appellants and in terms of the citations produced demands cannot be confirmed solely on the basis of statement of co-workers and private record books in the absence of concrete evidence of installation of stenter machine and evidence of marketability of the cotton fabrics as shrink-proof fabrics. Further more, another infirmity which is noted in the order is that Ld. Commissioner has accepted the test result of the purchaser which clearly indicated that the item is not shrink-proof material. On this basis, he as dropped a portion of the demands. It is not the case of the department that those material which were supplied to those purchasers were alone not shrink-proof and what was supplied to others in which demands have been confirmed is shrink-proof material The process of manufacture is same in the appellant's factory. Therefore, there is clear contradiction in the Commissioner's finding. The finding arrived at in paragraphs 117 & 118 should be applied to rest of the case also. At page 45 of the order, the Commissioner has clearly indicated that the department has not proved through any evidence with regard to four show cause notices to confirm the demands. He has noted about the test reports and showed that fabric processed by the appellant was not a shrink-proof cotton fabrics. He has also noted that the item was not marketed as shrink-proof material. He has dropped demands on subsequent four show cause notices issued after the first show cause notice dated 28.11.2000. He has noted that the later show cause notices rely only on the statement of customers. He has also noted that in all the statements, they requested the appellants to process the cotton fabric according to their requirement within the parameters laid down. However, during examination they had retracted their statements. he has noted that the department did not produce any evidence to show that the samples taken for analysis of composition of fabrics and percentage of residual shrinkage of processed fabrics. He also noted that department also failed to prove that the fabric processed by the appellants is marked or marketed as 'shrink proof fabric'. He has also noted that department has not proved by any record/evidence that the fabrics processed in their compressive shrinking machine has controlled the shrinkage to the extent to be called as "shrink proof fabric' in terms of Board's F.No. 15/110/64-CX 1 dated 27.4.1964. Therefore, in these circumstances, he has held that, it has to be construed that the process has not imparted any lasting character into the fabric. Therefore the exemption under Notification No. 5/99, 6/2000 is eligible to them. He has held that in the absence of such evidence, the benefit of doubt goes to the appellants in all the subsequent show cause notices and he has dropped the demand. However, he very strangely on a different reasoning has confirmed the demands made in respect of first show cause notice. The clearly indicates the perversity in the Ld. Commissioner's mind. When he has noted that the process carried out by the appellant is the same and there was no evidence to sustain four show cause notices, it is surprising to observe why he has adopted a different reasoning to confirm the demand against first show cause notice. This clearly shows his non-application of mind. The appellant's contention that there is clear violation of principles of natural justice and that demands are also time-barred is well taken and it requires to be upheld.
10. The contention of the appellant that no duty liability arises as all the goods processed by them were ultimately exported has also not been examined by the Commissioner. Even other wise, the demands are not sustainable on this count also.
11. It is also observed that revenue has also not challenged the dropping of the demands in respect of four show cause notices which clearly indicates that revenue has accepted that portion of the order. The benefit of said portion of the order should be given to the appellants in respect of first show cause notice also. The impugned order is not sustainable and same is set aside with consequential relief to the appellants. The appeal is allowed.
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