Custom, Excise & Service Tax Tribunal
Mohan Textiles vs Cce Mumbai - V on 30 August, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH, MUMBAI
Excise Appeal No. 1378 of 2011
(Arising out of Order-in-Appeal No. M-V/RKS/18/2011 dated 09.06.2011 passed by
the Commissioner of Central Excise (Appeals), Mumbai-I.)
M/s Mohan Textiles ........Appellant
17-A, Jay Shivam Co. Operative
Hsg. Soc. Ltd., Subhash Lane,
Malad (E), Mumbai - 400 051
VERSUS
Commissioner of Central Excise, ........Respondent
Mumbai-V
5th Floor, Utpad Shulk Bhavan, Plot No. C-24,
Block E, Bandra-Kurla Complex,
Bandra (East), Mumbai - 400 051
APPERANCE:
Shri R V Shetty, Advocate for the Appellant
Shri Sanjay Hasija, Superintendent, Authorised Representative for the
Respondent
CORAM:
HON'BLE MR. C J MATHEW, MEMBER (TECHNICAL)
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
ORDER NO. A/86528/2019
Date of Hearing: 14.05.2019
Date of Decision: 30.08.2019
E/1378/2011
2
PER: DR. SUVENDU KUMAR PATI
Denial of SSI exemption to the appellant in confirming change
of classification of the products by the Commissioner (Appeals) in
appeal No. E/1378/2011 is assailed in this appeal.
2. Facts of the case that has given rise to the present appeal is as
follows.
2.1 Appellant was dealing in textile fabrics used for industrial
applications such as filtration purpose. The manufacturing of goods
were made through job worker and appellant was clearing the same
by availing exemption benefit available for SSI units under Chapter
Heading 59.11 vide Notification No. 08/03-CE dated 01.03.2003.
The further case of the appellant is that after crossing the exemption
limit, it had applied and obtained Central Excise registration and
started paying Central Excise duty during the period under dispute
i.e. from October, 2003 to March, 2004.
2.2 Appellant was found to have cleared the goods without
payment of excise duty by the Departmental Authorities and
accordingly show-cause notice was issued to it demanding
differential duty amounting to ₹8,75,629/- by denying benefits of SSI
exemption vide Notification No. 08/2003-CE dated 01.03.2003 on the
alleged ground that the goods dealt by the appellant fell under
Heading 54.06 of Central Excise Tariff Act and not under Heading
59.11. Appellant objected the same by filing reply to the show-cause
notice, matter was adjudicated upon, duty demand along with
E/1378/2011
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interest and penalty under various provisions of Central Excise Act,
namely equivalent penalty under Section 11AC of the Central Excise
Act, 1944 read with rule 25 of the Central Excise Rules were imposed
on the appellant who unsuccessfully contested the same before the
Commissioner (Appeals) and approached this forum for effective
remedy.
3. In the memo of appeal and during course of hearing of the
appeal, learned Counsel for the appellant Mr. R V Shetty submitted
that learned Joint Commissioner had wrongly equated the product
"Synthetic Woven Fabrics" with wearable product but it was meant
for industrial and technical use since barring cotton yarn and silk
yarn, all others yarn are synthetic or artificial and not meant for
clothing purposes. His findings were based on the erroneous
interpretation of the Board's Circular No. 48/2/97-CX dated
17.04.1997 as by no stench of imagination, it can be inferred that
because appellant had not included fabric covered under Chapter 59
in their registration, which was done subsequent to these clearance
of products under dispute, it was not entitled to the benefits of SSI
exemption available for goods cleared under Chapter 59.11. Learned
Counsel for the appellant further submitted that the appellant had
produced buyers certificate before the lower Authorities to justify
that the goods were meant for industrial/or technical purposes and
Board Circular dated 17.04.1997 read with Chapter note 7 of Chapter
59 provide absolute clarity in the matter, which was not considered
by the Adjudicating Authority, since the same circular is not
E/1378/2011
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applicable in the appellant's case, as it differs in description of the
fabrics cleared by the appellant and therefore, classification under
Chapter 59.11 was correct. Though not accepting the findings of the
learned Appellate Authority, the learned Counsel for the appellant
argued that even if the goods are to be treated as goods covered
under Chapter 54.06 still then, appellant was entitled to CENVAT
credit @ 60% of its value that would reduce the duty demand
considerably after availing CENVAT credit to the tune of
Rs.5,53,293/- in view of Circular No. 759/75/2003-CX dated
30.10.2003 which permits clearance of unprocessed fabrics
manufactured on job work basis for availment of CENVAT credit
under Rule 2H of the CENVAT Credit Rules. Learned Counsel for the
appellant also submitted that the demand is time barred since show-
cause notice was issued on 17.04.2006 for the period from April,
2003 to July, 2004 despite any specific allegation of suppression,
which cannot also be made in view of the fact that appellant had
intimated in writing regarding its classification of the product and
availment of SSI exemption to the Department, which is noted by
the Commissioner (Appeals) in his order for which he prays to set
aside the order passed by the Commissioner (Appeals).
4. In response to such submissions, learned Authorised
Representative for the respondent-department Shri Sanjay Hasija,
Superintendent supported the reasoning and rationality of the order
passed by the Commissioner (Appeals) and in citing the decision of
Hon'ble Bombay High Court passed in the case of Commissioner of
E/1378/2011
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Customs (Exports), Mumbai v. Surbhit Impex Pvt. Ltd. reported in
[2012 (286) ELT 500] and in the case of M/s Anuradha Processors v.
Commissioner of Central Excise, Thane reported in 2007 (213) ELT
350 (Tri.-Mumbai) that in a similar dispute of classification, specially
in M/s Anuradha Processors case the Tribunal itself had clarified the
processed fabrics are classifiable under Chapter 54 and not under
Chapter 59 of the Central Excise Tariff Act for which he sought no
interference by the Tribunal in the order passed by the Commissioner
(Appeals).
5. Heard from both sides at length and perused the case record.
It is observed that learned Commissioner (Appeals) had given his
findings on classification primarily on the ground that Heading 5911
is a residual entry and covers goods which cannot be classified under
any of the Headings of Section XI of the Central Excise Tariff Act,
1985. The said Heading covers textile products and articles for
technical use which would indicate that woven fabrics should be
subjected to some process to convert fabric into textile product and
articles for technical use, which was found absent in the case of the
appellant's product. Rejecting the contention of the appellant that it
had earlier intimated to the department regarding manufacturing of
woven fabrics of Synthetic Filament Yarn falling under Chapter 5406
vide its letter dated 29th April 2004 and the certificate issued by the
buyers concerning use of woven fabrics for industrial application, he
opined that nowhere appellant had pleaded that Synthetic Woven
Fabrics were intended for industrial purpose and basing on the
E/1378/2011
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statement of witness, primarily on the statement of proprietor Mr.
Hrishikesh Mimani that they had mistakenly classified the product
under Chapter 59 instead of Chapter 54, he confirmed the findings in
the Order-in-Original that SSI exemption was not available to the
appellant for which appropriate duty demand along with interest was
made. Further, learned Commissioner (Appeals) had also confirmed
the invocation of extended period and imposition of equivalent
penalty by holding that since proprietor had admitted to have mis-
declared the product, there was ill intention on the part of the
appellant to evade duty.
5.1 As appears from the Chapter note to Heading 59.11, the
product under dispute should be meant primarily for technical use
and in few cases, for industrial uses and that is the final stage after
which no further processing was suppressed to be done to make the
product fit for technical use, since it is last Chapter Heading in that
Chapter. However going by the certificate issued by the buyers, it is
apparently clear that they were using the product making tailor made
filter bags to be used in chemical and pharmaceutical plants. As
woven fabrics are subjected to further processing to make it fit for
technical uses, we have no hesitation to go with the findings of the
learned Commissioner (Appeals) that synthetic woven fabric is
classifiable under Chapter 54.06 and not under Chapter 59.11 to
make the appellant entitled for SSI exemption under Notification No.
08/03-CE dated 01.03.2003.
E/1378/2011
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5.2 Assertion of appellant that it was not the manufacturer since
manufacturing was done on job work basis was rightly rejected by
the Commissioner (Appeals) in invoking Rule 12B of the Central
Excise Rules, 2002 that was inserted vide Notification No. 24/2003-
CE (NT) dated 25.03.2003, whereby the appellant was to be treated
as assessee for all Central Excise purposes. However, the claim of
the appellant that even if the products is classified under Chapter
54.06, then also the appellant was eligible for CENVAT credit as well
as redetermination of assessable value in the light of Hon'ble
Supreme Court judgement in the case of CCE, Delhi Vs. Maruti Udyog
Ltd. reported in [2002 (141) ELT 3 (S.C.)] and the Board Circular No.
803/36/2004-CX dated 27.12.2004. That aspect was not dealt in the
Order-in-Appeal that would have made the appellant eligible to avail
and utilise the CENVAT credit to the tune of Rs.5,53,293/- + thereby
substantially reduced the duty liability.
5.3 Be that as it may, the crux of the issue lies in the fact of
invocation of extended period for raising duty demand for the period
from April, 2003 to July, 2004. Admittedly show-cause notice was
issued on 17.04.2006 which was not within the normal period
prescribed at the relevant time and the learned Commissioner
(Appeals) had confirmed the justification of invocation of extended
period by observing that proprietor had admitted that they had
misclassified the product and therefore a clear case of suppression
was established against the appellant, contrary to his own
observation and acknowledgement in the order itself that vide its
letter dated 29.04.2004 appellant had informed to the department
E/1378/2011
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that it was claiming benefit of exemption Notification No. 08/2003-CE
dated 01.03.2003 and was engaged in the manufacture of woven
fabrics of synthetic filament yarn falling under Chapter 5911.
Further as found from the Order-in-Appeal in para 5A(ii) the
proprietor had stated in his statement dated 17.01.2006 that they
"mistakenly" classified the product under Chapter 59 instead of
Chapter 54. This being the facts on record and in view of the
decision reported in [2011 (274) ELT 468 (Tri.- Ahmd.)] whereby this
Tribunal had held that claim of wrong classification or benefit of
notification by itself is no suppression, we are of the view that no
case of suppression of facts to evade duty is made out to justify
imposition of duty liability against the appellant to invoke extended
period though no error is noticed in the Order-in-Appeal in respect of
classification of the product cleared by the appellant. Hence the
order.
ORDER
6. The appeal is allowed and the order passed by the Commissioner of Central Excise (Appeals), Mumbai-I. vide Order-in-
Appeal No. M-V/RKS/18/2011 dated 09.06.2011 is hereby set aside.
(Order pronounced in the court on 30.08.2019) (Dr. Suvendu Kumar Pati) Member (Judicial) (C J Mathew) Member (Technical) Prasad