Customs, Excise and Gold Tribunal - Mumbai
Atlantic Spinning & Weaving Mills Ltd. ... vs Commissioner Of Central Excise And ... on 2 November, 2001
Equivalent citations: 2002(145)ELT324(TRI-MUMBAI)
JUDGMENT G.N. Srinivasan, Member (J)
1. The present appeals have been filed against the decision of the Collector of Customs & Central Excise, Goa, made in Order-in-Original No. 13/C/C.EX/GOA/94 dated 30.9.1994 whereunder he had confirmed the demand of duty of Rs. 72,33,351.90. He also imposed penalty on the assessee of Rs. 20 lakhs under Rule 173Q(i) of the Central Excise Rules. By the said order, he also imposed a penalty on the director of the assessee company, Shri V.K. Jain, of Rs. 5 lakhs under rule 209A of the Central Excise Rules against which an Appeal E/4263/95 was filed.
2. Shri V.K. Jain who has filed the said appeal No. E/4263/95 had availed KVSS and Form No. 3 was issued by the designated authority on 11.5.1999. Hence this appeal stands dismissed as withdrawn.
3. The assessee appellant in Appeal E/4262/95 is a manufacturer of various types of yarn falling under chapters 52 and 55 of the CETA, 1985. The appellant procured one of the raw materials called sub-standard polyester fibre. One of the suppliers of sub-standard synthetic fibre was Reliance Industries ltd., Patalganga. The appellant also procured viscose staple fibre. They produced yearn by blending the 'sub-standard polyester fibre and viscose staple fibre. The appellant classified this yarn under heading 5505 as yarn of viscose staple fibre not containing polyester staple fibre. A show cause notice dated 25.1.1991 running to 48 pages was issued charging the appellants that they have suppressed use of polyester staple fibre and that the yarn produced by them should be classified under heading 5506 as yarn of viscose staple fibre containing polyester staple fibre. Paragraph 15 of the show cause notice reads as follows:-
"15. From the above facts it appears:
(a) M/s. ASWML were manufacturing yarn of artificial staple fibre containing synthetic stale fibre namely polyester staple fibre and in which the proportion of the polyester staple fibre was more than 40% by weight of the total fibre content classifiable under Ch.Sub-H. No. 5506.21 and clearing the same as yarn of artificial staple fibre not containing synthetic staple fibre classifiable under Ch. Sub-H. No. 5505.41 to 5505.43 upto 19.3.90 and under S.H. 5505.00 w.e.f. 20.3.90.
(b) They were clearing yarn of artificial staple fibre containing synthetic staple fibre namely polyester staple fibre in which the proportion of polyester staple fibre was less than 40% by weight of the total fibre content classifiable under Ch.Sub. H.No.5506.29 as yarn of artificial staple fibre not containing synthetic staple fibre classifiable under Ch.S.H. No. 5505.41 to 5505.43 upto 19.3.90 and under S.H. 5505.00 w.e.f. 20.3.90.
(c) They were clearing yarn of synthetic staple fibre that is to say polyester staple fibre in which the proportion of polyester staple fibre was less than 70% classifiable under Chapter Sub-heading No. 5504.22 or 5504.29 as yarn of artificial staple fibre not containing synthetic staple fibre.
(d) They were clearing yarn of synthetic staple fibre (i.e. polyester staple fibre 100%) falling under chapter heading No. 55.04 of CETA, 1985 as yarn artificial staple fibre not containing synthetic staple fibre.
(e) They have misdeclared the counts of yarn cleared as artificial staple fibre yarn not containing synthetic staple fibre, in addition to mis-declaration stated in para (a), (b) and (c) above.
(f) They have removed yarn without properly accounting its production and clearances in the statutory records, i.e. they have accounted and removed polyester viscose blended yarn as S.F. viscose yarn.
(g) In order to suppress the use of polyester staple fibre in the manufacture of yarn of artificial staple fibre containing synthetic staple fibre, the polyester staple fibre was shown to have been purchased in the name of M/s. SPPL and M/s. DSPL and stored in M/s. GSPL at times.
(h) To suppress the production and clearance of polyester viscose staple fibre blended yarn and to evade payment of appropriate duty leviable thereon, they have manipulated C.Ex. gate passes by showing different description and duty paid original and other copies of the gate passes."
4. Replies were filed. Written submission on the matters were also submitted on 12.9.1994. The facts reveal that the department relied on the Chemical Examiner's report which was relied upon in the show cause notice. The impugned order indicates the perusal of relevant test memos and the test report indicated that at the material time investigation officers had neither asked for the nature of the synthetic fibre (staple or non-staple) in the yarn nor was it indicated in the test report. The record of cross examination of the Chemical Examiners did not show about the length and denierage of the fibre contained in the yearn samples was asked nor did the examination reveal about the conduct of such an exercise by the Chemical Examiner. The adjudicating authority in the impugned order came to the conclusion that the assessee did not deny the use of polyester fibre but the assessee only contested allegation of use of staple fibre and the reliance on the said test report to prove exact composition of the yarn for the purpose of classification under heading 5505 or 5506 was not conclusive. Therefore the adjudicating authority adopted the alternative way of evaluating the evidence. He relied upon the purchase of the raw materials from Reliance Industries and ICI. The adjudicating authority in paragraph 6.8 of the order dealt with the study of manufacturing process of fibre, method of accountal for storage, sale method of testing the quality of fibre, classification of various types of fibre by the suppliers and came to the conclusion that the classification of fibre as sub-standard or second grade did not depend only on the length and denierage of the fibre. He relied on the test report of the laboratories of Reliance Industries that certain bales of polyester fibres were categorised a sub-standard even though the fibre length was uniform. He relied heavily on the inspection done by him in the Reliance office by RGI production etc. The inspection done by him in the Reliance office and ICI office was some time in 1993. Raw materials admittedly were purchased in the years 1988-90. On the basis of the evidence he confirmed the demand and passed the impugned order. Hence the present appeal.
5. S/Shri v. Sridharan, Advocate along with Shri R. Nambirajan, Advocate, appeared for the appellants and Shri T.D. Bodade, learned DR, appeared for the department.
6. As stated earlier, V.K. Jain's appeal, Appeal E/4263/95, has already been disposed of under KVSS. The appellant during the course of hearing has conceded the case in respect of duty on account of blend variation i.e. Rs. 18,455.64, duty on account of 100% blend Rs. 34,072.92 and liability in respect of duty on account of forged documents Rs. 2,87,465.53. In these three matters the appellant concedes. Therefore, appeal in respect of the same is dismissed.
7. Learned counsel, in substance, put the contention before us that the adjudicating authority namely the Collector gave up the evidence of the departmental Chemical Examiner's report which was relied upon in the show cause notice. Learned counsel states that the Collector came to the conclusion that the yarn in question was manufactured by using polyester staple fibre by relying on evidence which is not relevant and fresh evidence in the form of his visit to the manufacturing unit of the two raw material suppliers nearly three years after issue of the show cause notice and after four years from the last date of the period for which the demand has been raised. The period in dispute in this case is from February 1988 to August 1990. Learned counsel stated that the question involved in the present case is of classification of yarn on which duty has been demanded. Classification of yarn depends upon the use of polyester staple fibre or not. The question is the department has to prove procurement of polyester staple fibre by the assessee. The further question is about the proof by the department has to prove procurement of polyester staple fibre by the assessee. The further question is about the proof by the department of the usage of uniform length of polyester fibre by the assessee in the manufacture of such yarn. The learned counsel was at pain to show that the evidence relied upon by the Collector in the impugned order did not establish that the yarn on which duty has been demanded was manufactured by the appellant by using polyester fibre of uniform length. He also emphasizes about the statement of some supplier like JCT and ICI showing that the sub-standard polyester fibre supplied by them to the appellant were having varying length. It is therefore emphasized that the department did not discharge the burden of establishing classification of yarn in question under heading 5506. It is also stated that the appellant contemporaneously with the purchase of the raw material had maintained the account that the polyester fibre which they have purchased was not of uniform length. It is stated that the raw material is shown as polyester SS namely sub-standard (from IV register at pages 455 to 484 of the paper book). It is also indicated in the paper book that the assessee had purchased staple fibre of uniform length and accounted in their form IV register, pages 485 to 495. Therefore it is the contention of the assessee appellant that it cannot be specifically stated in clear cut terms that the product manufactured by them would come under tariff heading 5506 as yarn of viscose fibre containing polyester staple fibre. He also relied on the judgment of the Tribunal in the case of CCE v. Priyadarshini Spg. Mills Ltd. 1990 (50) ELT 145 confirmed by the Supreme Court in the case of CCE, Hyderabad v. Priyadarshini Spg. Mills Ltd. 1997 (94) ELT 287. He also relied upon the Board circular following the said decision of the Supreme Court to the effect that the final product manufactured would by yarn under heading 5505 and 5506. He also relied on the judgment of the three member bench of the Tribunal in the case of CCE, Nagpur v. Vardhan Syntex 1991 (37) ECT 542. The learned DR adopts the reasoning given in the impugned order.
8. We have considered the rival submissions. The graveman of the charge as reflected in the sow cause notice has been mentioned in the earlier portion of the order. The crux of the issue is that the final product manufactured by the appellant is claimed by the department as coming within tariff heading 5506. For the purpose, unless the DR is able to show that the final product is manufactured out of polyester fibre of uniform length, it is not possible for us to come to a conclusion that the yarn which was manufactured would come under heading 5506. Tariff heading 55.05 and 55.06 read as under:-
"55.05 Yarn (including sewing thread of artificial staple fibres, not containing synthetic staple fibres.
55.06 Yarn, including sewing thread, of artificial staple fibre containing synthetic staple fibres."
How yarn of viscose staple fibre is manufactured has been fully described in CCE v. Priyadarshini Spg. Mills Ltd. 1990 (50) ELT 145 at 156 in paragraph 13. In the said paragraph there is a reference to a book written by Kirk Othmer Encyclopedia of Chemical Technology 3rd edition Volume 16 pages 106 & 107 which describes Staple fibres as of relatively uniform length. Paragraph 13 of the said judgment is reproduced below:-
"13. A wealth of technical literature has been placed before us on what is meant by "staple" & "staple fibre". At P/409 of Bernard Corbman's "Textiles-fiber to fabrics" (5th Edition) it is mentioned that 'staple is produced in a wide range of deniers and length according to the desired end uses. 'Modern Textiles' by Dorothy Lyle (at page 26) defines staple fibres, natural or man-made as "short lengths measured in inches or a fraction of an inch." In KirkOthmer's Encyclopedia of Chemical Technology 3rd edition Volume 16 Staple fibres find a mention at pages 106 & 107 as of relatively uniform length. "Staple" is defined at page 29 of the Encyclopedia of Textiles by the Editors of American Fabrics & Fashions Magazine (3rd edition) as "fibre in short, controlled lengths cut from continuous filament. Yarns spun from it are known as staple yarns". The Dictionary of Textile Terms (at page 587) defines "Staple" as "from Anglo-Saxon, meaning fixed, not variable" and staple fibre as "filaments of the Cellulosic or man-made groups of fibres which have been cut to the length of the various natural fibers". Marjory L. Joseph's "Essentials of Textiles" at page 31 says that "man-made staple fibers are short fibers cut to the length required for the processing equipment and they are cut for filaments extruded in large bundles called tow." R.W. Moncrieff's "Man-made fibers mentions that "Chopped up fibre to be called staple fibre & staple fibres are very short nearly always just a few inches and same in length in a bale". Heading 55.03 at page 760 & 761 of the Explanatory Notes to the Harmonized Commodity Description & Coding System which covers "Synthetic staple fibres, not carded, combed or otherwise processed for spinning" set out that 'synthetic staple fibres are generally of uniform length which distinguished them from the waste material of Heading 55.05."
In the said judgment extract from various technical books refer to the staple fibre as of uniform length and HSN notes also mentions in the same way.
9. Apart from that in the case before us it is stated in form IV register that the raw materials purchased were of sub-standard. The various pages contained in form IV register have been described in paper book at pages 465 to 484. When there is no evidence of purchase of staple fibre of uniform length how could the authority hold against the assessee.
10. Apart from that it is surprising that the adjudicating authority has rejected the Chemical Examiner's report in his order at paragraph 6.1. When that is the case, he relies on his visit to Reliance Industries, Patalganga and ICI Ltd., at paragraph 6.8 of the order. The visit has been made somewhere in 1994. The period in dispute is from February 1988 to August 1990. Therefore reckoning five years time from 1994 backwards only for certain period, the limitation may be in favour of the department. But, however, one particular fact is that Priyadarshini Spg. Mills Ltd. case of the Supreme Court (94) ELT 287 has referred to in the Board's circular 23/90 dated 1.11.1990 accepting the classification. It is reiterated and emphasized again that in Priyadarshini Spg. Mills Ltd. case, the special bench refers to uniform length i.e. staple fibre of uniform length relying on KirkOthmer's book and other technical books and HSN notes in paragraph 13 thereof. After the Board circular referred to above the department cannot argue to the contrary. When that is the position, we are of the view that the burden cast on the department for classification of the item has not been discharged. We are therefore of the view that confirmation of the demand on that score is not proper. The demand to the extent of Rs. 65,36,941/- which is relating to classification is decided in favour of the assessee. The appeal of the assessee succeeds with regard to classification. As far as demand for Rs. 6,96,410/- is concerned, it is decided against the assessee. As far as the penalty is concerned, in view of the fact that a sum of Rs. 7 lakhs approximately is conceded by the assessee, we would impose a penalty of Rs. 1 lakhs. The confiscation is remitted. Appeal is disposed of in the above terms, with consequential relief.