Customs, Excise and Gold Tribunal - Delhi
Tirupati Fibres And Indus. Ltd. vs Cce on 20 November, 2000
Equivalent citations: 2001(74)ECC401
ORDER Lajja Ram, Member (T)
1. These are two appeals; one filed by M/s. Tirupati Fibres & Indus. Ltd. (hereinafter referred to as 'M/s. Tirupati'), and the other filed by the Revenue, both being aggrieved with the same order-in-appeal dated 20.10.1999 passed by the Commissioner of Central Excise (Appeals) Jaipur. Both these appeals were heard together and are being disposed of by this common order.
The matter relates to the classification of the yarn doubled with (i) polyester/viscose blended spun yarn and (ii) polyester/viscose filament yarn. The Commissioner of Central Excise (Appeals) had held that the finished doubled yarn obtained in the above manner was classifiable under sub-heading No. 5504.22 or sub-heading No. 5506.21 of the Central Excise Tariff (CET). The Department had sought to classify the yarn in question under sub-heading No. 5504.29 or sub-heading No. 5506.29 of the CET. On this issue of classification, the Revenue has come up in appeal. The appellate authority had also held that the benefit of exemption Notification No. 47/90-CE dated 20.3.1990 was not available to M/s. Tirupati and that the extended period of limitation has been correctly invoked in demanding the Central Excise duty. On this-the benefit of exemption notification and limitation, M/s. Tirupati had filed the appeal.
The Commissioner of Central Excise (Appeals) had set aside the penalty of Rs. 30,000 imposed by the Addl. Commissioner of Central Excise who had adjudicated the matter. This part of the order has also been challenged by the Revenue.
2. Both the appeals were heard together on 5.10.2000 when Shri K.K. Anand, Advocate, appeared for M/s. Tirupati. Shri S.N. Singh, SDR, appeared for the Revenue.
Shri K.K. Anand, Advocate, submitted that on merits the impugned order-in-appeal was in favour of M/s. Tirupati and that without any discussion, the order had been passed against the manufacturer with regard to their entitlement to the benefit of exemption Notification No. 47/90-CE dated 20.3.1990, and the limitation. It was a case of classification dispute and there was no justification for invoking the extended period of limitation. He also submitted that the facts and circumstances of the case did not call for imposition of any penalty which had, according to the learned Advocate, been correctly set aside by the appellate authority. He referred to the Supreme Court decision in the case of CCE v. Decent Dyeing Co. . it was submitted by him that the filament yarn was duty paid and although the manufacturer did not have the duty paying documents, as the goods were purchased from the open market, the burden to prove the duty paid character of the filament yarn was not on the manufacturer. The Department was required to prove non-payment of duty so as to deny the exemption on the doubled yarn produced out of spun yarn and filament yarn. The learned Advocate pleaded that the Department has not been able to discharge the burden cast on them.
Shri S.N. Singh, SDR, referred to the competing tariff entries and submitted that spun yarn was different from filament yarn. He pleaded that the man-made yarn of polyester/viscose blend, doubled with polyester/viscose filament yam could not be classified under sub-heading No. 5504.22 or 5506.21 as the filament yarn was undoubtedly a textile material. According to the learned SDR, the view taken by the appellate authority with regard to the non-eligibility of exemption Notification No. 47/90-CE and the applicability of the extended period of limitation, was correct. It was his plea that penalty was also imposable and the learned Collector of Central Excise (Appeals) had erred in setting aside the penalty amount.
3. We have carefully considered the matter. Three issues for our consideration in these two appeals; one filed by M/s. Tirupati and the other filed by the Revenue, can be broadly categorised as concerning (i) classification, (ii) benefit of exemption notification, and (iii) limitation.
Let us first take up the issue of classification.
M/s. Tirupati were engaged in the manufacture of (i) spun yam of synthetic (polyester) staple fibres, and (ii) spun yarn of artificial (viscose) staple fibres, which also contained synthetic (polyester) staple fibres. Sub-heading No. 5504.22 of the CET covered yarn containing cotton, ramie or artificial (viscose) staple fibre, or any one or more of these fibres (not containing any other textile material), and in which the proportion of polyester staple fibre was less than 70% by weight of the total fibre content. Sub-heading No. 5506.21 of the CET covered yarn containing artificial (viscose) staple fibre and polyester staple fibre (not containing any other textile material), and in which the proportion of polyester staple fibre was more than 40% by weight of the total fibre content. Subheading No. 5504.29 relates to other yarn of synthetic staple fibres in which polyester staple fibre predominated (other than those already classifiable under sub-heading No. 5504.21 and 5504.22). Sub-heading No. 5506.29 covered other yarn of artificial stable fibre containing synthetic staple fibres (other than those already classifiable under subheading No. 5506.21).
M/s. Tirupati only manufactured spun yarn. They did not manufacture filament yarn. The yarn manufactured by M/s. Tirupati was got classified under the above subheading No. 5504.22 and sub-heading No. 5506.21 of the CET.
No duty was paid at this stage before these yarns were used in the factory for doubling with the filament yarns brought from outside.
4. The manufacturer were bringing viscose filament yarn and polyester filament yarn from outside. They had no duty paying documents for the purchase of such filament yarns. The filament yarns were said to have been purchased from the traders in the open market and the traders did not pass on the duty paying documents to M/s. Tirupati. In the Central Excise statutory record in Form IV, no receipt of viscose filament yarn and polyester filament yarn was recorded. What was shown in the record was as if the fibres of viscose and polyester had been received from the market. The fact regarding use of viscose filament yarn and polyester filament yarn was also not declared by the manufacturer in any other Central Excise return/record.
5. The manufacturer was doubling the one ply of spun yarn manufactured by them, on which no duty had been paid, with the one ply of filament yarn brought from outside, in respect of which there were no duty paying documents. The manufacturer paid Central Excise duty on the resultant finished doubled yarn (with one ply of spun yarn and one ply of filament yarn) as spun yarn either under sub-heading No. 5504.22 or sub-heading No. 5506.21 of the CET depending upon the composition of the spun yarn alone, ignoring the presence of the filament yarn (although duty was calculated on the total weight of the doubled yarn including the weight of the filament yarn). The Revenue in appeal before us had reasoned that the man-made yarn of polyester/viscose and viscose/ polyester blend containing polyester/viscose filament yarn were appropriately classifiable under sub-heading No. 5504.29 and 5506.29 respectively, chargeable to higher rate of duty.
6. In Section XI of the CET (that relates to Textiles and Textile Articles), under Section Note 2(A), it is provided as under--
Articles classifiable in Chapters 50 to 55 or in heading No. 58.06 or 59.02 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile material which predominates by weight over any other single textile material.
It is provided in Section Note 2(B)(ii) under Section XI that for the purposes of the above rule in Section Note 2(A), the choice of appropriate heading shall be effected by determining first the Chapter and then the applicable heading within that Chapter, disregarding any materials not classified in that Chapter.
If the classification of a yarn cannot be determined under the above Section Note 2(A) or 2(B) under Section XI of the CET, for the reason that two or more of the various fibres or yarns were equal in weight in such yarn, then it was provided in Section Note 2(C), then such one of those fibres or yarns, the pre-dominance of which would render such yarn fall under the Chapter or Heading which attracts the highest amount of duty payable, shall be deemed to be pre-dominant in such yarn and accordingly such yarn was to be deemed to fall under the applicable Chapter or Heading determined in the above manner.
7. In the doubled in question, one ply of yarn of synthetic (polyster) staple fibres, or yarn of artificial (viscose) staple fibres containing synthetic (polyester) staple fibres, as the case may be, manufactured by M/s. Tirupati, but on which no Central Excise duty had been paid, was doubled with another ply of brought out filament yarn of polyester or viscose for which there were on duty paying documents. The assessee had paid duty on the total weight of the doubled yarn ignoring the presence of polyester or viscose filament yarn for the classification of such doubled yarn, and assuming the whole of the doubled yam consisted of the synthetic (polyester) staple fibre or yam of artificial (viscose) staple fibre containing synthetic (polyester) staple fibres, as the case may be.
8. From exemption Notification No. 53/87-CE dated 1.3.1987, it is seen that it was the understanding of the Legislature that yarn doubled or multifold (manufactured out of yarn falling under Chapters 52, 54 or 55 of the CET), were classifiable under Chapters 52, 54 or 55 of the CET. (Refer serial No. 3 of the Table annexed to Notification No. 53/ 87-CE dated 1.3.1987 at page N-27 of 1987 (28) ELT). Similar position existed in Notification No. 47/90-CE dated 20.3.1990 (which was issued after rescinding of Notification No. 53/87-CE vide Notification No. 87/90-CE dated 20.3.1990). In Notification No. 47/90-CE dated 20.3.1990 yarn doubled or multifold classifiable under Chapters 52, 54 and 55 manufactured out of duty paid yarn falling under Chapters 52, 54 or 55 enjoyed exemption from duty. (Refer serial No. 25 of the Table annexed to Notification No. 47/90-CE dated 20.3.1990 at page N-33 of 1990 (46) ELT).
Reference may also be made to the Bombay-I Trade Notice No. 37(MP) Chapter 55/(1)1986 dated 26.5.1986 which is extracted below--
YARN : CH 50 TO 55 Classification of doubled/folded yarn on pre-dominant principle.
The question of classification of doubled/folded yarn was under consideration. It is now clarified that doubled/folded yarn would be classifiable under one of the Chapters 50 to 55 depending on the pre-dominance of any particular Textile material and that the same is not classifiable an Special yarn under Heading No. 56.06 or articles of yarn under Heading No. 55.08.
F No. V-CH-55 (3) 1/86 (Bombay-I Trade Notice No. 37(MP) CH. 55/(1) 1986 dated 26.5.1986) Note 2(D) under Section XI refers to the expression 'Man-made Fibres'. According to this Section Note synthetic fibres are those which are produced by polymerisation of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivaties, and the artificial fibres are those which are produced by chemical transformation of natural organic polymers (for example, cellulose, casein, proteins or algae) such as viscose, rayon, cellulose, acetate, cupro or alginates.
In the Explanatory Notes to the Harmonized Commodity Description and Coding System (HSN) 'Man Made Staple Fibres' are described as under--
The General Explanatory Note to Section XI should be taken into account in reading the Explanatory Notes to this Chapter.
The Chapter covers the man-made fibres described in the General Explanatory Note to Chapter 54 when in the form of staple fibres (i.e., discontinuous fibres) or of certain filament tow: it also covers the products arising at the various stages of working these fibres or tow, up to and including yarn and woven fabrics. It further includes mixed textile products classified as products of man-made staple fibres by application of Note 2 to Section XI Man-made staple fibres are usually manufactured by extrusion through spinnerets (jets) having large number of holes (sometimes several thousand); the filaments from a large number of spinnerets (jets) are then collected together in the form of a tow. This tow may be stretched and then cut into short lengths, either immediately or after having undergone various processes washing, bleaching, dyeing, etc.) while in the tow form. The length into which the fibres are cut usually between 25 mm and 180 mm and varies according to the particular man-made fibre concerned, the type of yarn to be manufactured and the nature of any other textile fibres with which they are to be mixed. Waste (including noils, yarn waste and garnetted stock) of man-made filaments or staple fibres as also included in this Chapter.
Filament yarn is a man-made fibre yarn made of continuous parallel filaments. (Refer page 234 of Fairchild's Dictionary of Textiles, 6th Edition).
It is clear that filament yarn is a textile material for the purpose of sub-heading No. 5504.22 and Sub-heading No. 5506.21. The Addl. Commissioner of Central Excise who had adjudicated the matter had held that the correct heading where yarns of staple fibre containing a textile material other than those specified against sub-heading Nos. 5504.22 and 5506.21 would be sub-heading No. 5504.29 and sub-heading No. 5506.29.
9. In the case of Aditya Mills Ltd. v. UOI 1988 (37) ELT 471 (SC), M/s. Aditya Mills Ltd. were manufacturing Polyester Spun Yarn which was classifiable under Item No. 18-E of the erstwhile Central Excise Tariff. They were purchasing duty paid rayon filament yarn from outside. They were doubling the duty paid polyester spun yarn with the rayon filament yarn. After referring to a number of precedent decisions in para 6 of their judgment, the Apex Court confirmed the view taken by the Tribunal that the resultant doubled yarn was a separate and distinct item and was taxable under Item No. 68 of the erstwhile CET.
10. In the case of Kiran Spinning Mills v. CCE, Bombay-II , the Tribunal under their order dated 5.5.1987 had held that the process of twisting or doubling two yarn is a process of manufacture as envisaged under Section 2(f) of the Central Excise Act, 1944. The Tribunal referred to a number of precedent decisions to arrive at this considered view. (Refer paras 18 to 27 of the said order dated 5.5.1987).
On the issue of classification, we may also refer to the Tribunal's decision in the case of Dawn Mills Co. Ltd. v. CCE Bombay 1998 (25) RLT 717 (CEGAT). Following the Supreme Court decision in the case of Aditya Mills Ltd. v. UOI , the Tribunal held that the doubling and twisting of two different yarns amounted to manufacture. On proper classification of the doubled yarn consisting of staple fibre and filament yarn in the ratio of 48% polyester and 52% viscose, the Tribunal referred to Section Note 2(A) under Section XI of the Tariff and held the same as classifiable under Sub-heading No. 5506.29 of the Central Excise Tariff.
In the case of CCE, Jaipur v. Banswara Syntex Ltd. , the Supreme Court observed in para 7 of their judgment that "mere doubling or multifolding of the single yarn which is manufactured does not bring into existence a new product. The single yarn which is manufactured is an excisable item and would be subject to duty upon its manufacture."
In the present case doubling was not of the single yarn. Herein one ply of yarn of synthetic (polyester) staple fibre, or yarn of artificial (viscose) staple fibre containing synthetic (polyester) staple fibres, as the case may be, was doubled with another ply of bought out filament yarn of polyester or viscose. Thus, the facts in the present case are distinguishable.
11. On classification, the learned Commissioner of Central Excise (Appeals) had recorded cryptic order without discussing the goods in question, the allegations, submissions, case law etc. He had recorded as under:
I have gone through the case records. I find there is a lot of merit in the submissions made by the appellant on the main issue namely that the finished doubled yarn is falling under tariff heading 5504.22 or 5506.21 as it is not hit by the Exclusion Clause 'not containing any other textile material', in view of the Section Note 2D of Section XI of the Tariff. Consequently, duty has correctly been paid under the aforesaid entries. Imposition of penalty is therefore, not justified and is set aside.
This part of the order had been appealed against by the Revenue.
12. We consider that it will be in the interest of justice if the matter is re-examined by the jurisdictional Commissioner of Central Excise (Appeals) in the light of our above analysis. The jurisdictional Commissioner of Central Excise (Appeals) should provide an opportunity to both the sides, and both the sides will be at liberty to deal with the analysis made by us above. After hearing both the sides, he will pass a speaking appeal able order as per law. He will also go into the question of penalty after determining the classification.
13. Thus, the appeal filed by the Revenue is allowed by way of remand.
14. Now we take up the question regarding the eligibility of exemption and limitation.
The Commissioner of Central Excise (Appeals) with regard to the entitlement to exemption Notification No. 47/90-CE., and the time bar had recorded as under:
As regards entitlement to exemption Notfn. No. 47/90-CE, I degree with the Adjudicating Authority that the same is not available for the reasons referred to above for its denial. On the question of time bar, I also agree with the finding of the Adjudicating Authority that the Show Cause Notice has correctly invoked the extended time limit. However, in view of my findings on the main issue the penalty is set aside. Accordingly, the impugned order is modified to the above extent.
This part of the order has been challenged by M/s. Tirupati.
15. Under Notification No. 47/90-CE dated 20.3.1990, yarn double or multifold falling under Chapaters 52, 54 and 55 of the CET when manufactured out of yarn falling under Chapter 52, 54 or 55 of the CET, on which the appropriate duty of excise has already been paid, attracted NIL rate of duty. (Refer serial No. 25 of the Table annexed to Notification No. 47/90-CE dated 20.3.1990 at page N-33 of 1990 (46) ELT).
16. M/s Tirupati had not paid any Central Excise duty on the yam manufactured by them before it was issued in the manufacture of doubled yam. The adjudication authority had recorded as under:
Admittedly, the assessee has not paid duty on the polyester/viscose blended yarn manufactured in their factory by doubling/multifolding the same.
The filament yarn brought from outside was without the cover of duty paying documents.
Thus the benefit of Notification No. 47/90-CE has been correctly denied to them by the Commissioner of Central Excise (Appeals).
17. Filament yarns received from outside were recorded in the raw material receipt register as "filament". Filament is not the same as filament yarn. Filament is a fibre from which the filament yarn could be made. In the Fairchild's Dictionary of Textiles, 6th Edition, at page 234 'Filament' and 'Filament Yarn' are defined as under--
Filament: A fibre of indefinite or extrime length, e.g., silk filament, which runs from 300 to 1400 yards (270 to 1280 m) and more in length: the extreme length of filament permits their being used in yarn without twist or with very low twist, and they are generally made into yarn without out the spinning operation required of the shorter staple fibres, such as wool, cotton, man-made fibre staple. Yarns made of filaments are usually smoother than yarn made of staple.
Filament Yarn : A man-made fibre yarn made of continuous parallel filaments. Usually a fine, smooth yarn. For generic classifications of filament yarn types and yarn effects see : Color Blend, Inter-textured Yarns, Mirror-effect Yarns, Multiplex Yarns, Multi-process Yarns, Single-process Yarns, Space Dyeing, Trilobal, Wireform.
18. Thus the description given by the assessee even in the raw material receipt register was mis-leading and incorrect. In Form IV account maintained for Central Excise purposes, the filament yarns were recorded as fibres of viscose and polyester. In the Central Excise Tariff, fibres were classified separately from the filament yarn. Synthetic staple fibres were classifiable under Heading No. 55.01 and artificial staple fibres were classifiable under Sub-heading No. 55.02. On the other hand, synthetic filament yarn were described in heading No. 54.02 and 54.03, while artificial filament yarns were covered by heading No. 54.04 and 54.05. This description was also fallacious.
19. Shri O.P Sanwalke, Finance Manager of M/s. Tirupati in his statement recorded on 18.12.1990 under Section 14 of the Central Excise Act, 1944 had admitted that they had not declared the use of filament yarn to the Central Excise Department. He has stated as under:
Although the filament yarn (polyester and viscose) purchased is duty paid but since we do not purchase directly from manufacturers, we do not get duty paying documents along with receipt of materials. Therefore, we have not declared this to the Department and accounted for the same along with polyester staple fibre and viscose staple fibre in Form IV Register.
20. It is clear from the facts and circumstances of the case that M/s. Tirupati knew that as what they were describing as fibre was in fact filament yarn. They had not declared the use of filament yam in the production of doubled yarn.
21. Under Section 11-A of the Central Excise Act, where any duty of excise has not been paid by reason of suppression of facts, a show cause notice could be served on the person concerned within five years from the date on which the monthly return in respect of the goods in question was required to be filed.
What is "suppression of facts" for the purposes of proviso to Section 11-A of the Act, will depend on the specific circumstances of each case. In the case of Jaishri Engineering Co. (P) Ltd. v. CCE (SC), the Hon'ble Supreme Court had observed that whether there was any fraud, collusion, wilful mis-statement or suppression of facts for the Department to justify claim of duty beyond the period of six months, was question of fact. The Supreme Court had further observed that the fact that the Department visited the factory of the appellants and they should have been aware of the production of the goods in question, were no reason for the appellants not to truly and properly describe those goods. It was further added that having come to the conclusion that there was deliberate suppression or wrong statement it follows automatically that the Tribunal was justified in upholding the imposition of penalty.
In the facts and circumstances of the case, following observations of the Hon'ble Supreme Court in para 14 of their judgment in the case of Madras Petro-Chem Ltd. v. CCE Madras 1999 (108) ELT 611 (SC) are also relevant--
14 The proposition of law as laid down is not in dispute. We find in the present case as aforesaid, a clear finding was recorded that the petitioner was aware and was obliged to file RG1 Register, gate passes and also of clearances in the RT 12 returns by disclosing the particulars which was not done in the present case. The finding recorded in this case, especially in the background that this was a case of self-removal procedure in which there is obligation cast on the assessee to make proper and correct declaration and entries in the production register RG1. Further finding was that it was not by inadvertence. There could be no other inference if it was not by inadvertence, then deliberate, then it is not in the realm of inaction of the assessee but with the objective of a gain, which in other words would be conscious withholding of the information. Thus unhesitantly we conclude, on the facts of this case, proviso to Section 11 would be applicable, hence, show cause notice is held to be within time.
22. Thus both with regard to the entitlement to exemption Notification No. 47/90-CE, and the time bar, we find that the order recorded by the Commissioner of Central Excise (Appeals) in the present proceedings is valid and does not call for any interference.
23. Accordingly, the appeal filed by M/s. Tirupati is rejected.
24. As a result, the appeal filed by the Revenue is allowed by way of remand and the appeal filed by M/s. Tirupati is rejected. Both these appeals are disposed of in the above manner.