Customs, Excise and Gold Tribunal - Mumbai
Hemson Textile Processors And 6 Ors. vs Commissioner Of Central Excise on 21 February, 2000
Equivalent citations: 2000(68)ECC653, 2000ECR80(TRI.-MUMBAI), 2001(137)ELT1154(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. Section 3A of the Central Excise Act, 1944 and Notification No. 36/98-CE dated 10.12.98 read with Rule 96ZQ provide for Scheme of payment of Excise Duty on the capacity of production of Textile Fabrics by independent processors. The capacity is determined by following the provisions of the Hot-Air Stenters Independent Textile Processors Annual Capacity Determination Rules, 1998. Briefly stated the Rules require an independent processor to make a declaration as to the number of Hot-Air Stenters installed in the factory and number of chambers in each stenter, apart from other relevant details. The verification of the declaration is to be caused by the Jurisdictional Commissioner if necessary on consulting a technical authority and the annual capacity of production is to be determined. The explanation to the rule stipulates that where a float drying machine is installed or attached to a stenter for aiding the process of heat setting or drying of the fabrics, it would be taken as one chamber of a stenter.
2. The appellants before us in this batch of appeals today had filed such declarations. The capacity however was assessed at a higher value than was claimed by the appellants in each case. In all the cases the ground on which the higher capacity was determined was the increase in the total number of chambers. In all cases, the reason for redetermining the total number of chambers was the inclusion of the area of the galleries in calculating the area of chambers. In some cases, the increase was on account of the float dryers being equated with the Chambers. These appeals have been filed against this Ex-parte re-determination. Since all the appeals pertain to the same issue, they are being disposed of vide this common order.
3. We have heard Shri K.V. Sahasrabudhe Ld. Consultant for the Appellants and Shri Deepak Kumar for the Revenue.
4. Shri K.V. Sahasrabudhe submits that in all cases, the assessees were not involved with the process of verification, that the Commissioner did not ascertain the views of the assessees before re-determination and that the orders of predetermination suffer from denial of natural Justice to the assessees. Shri Deepak Kumar refers to Section 3A(4) of the Act, and submits that where the assessees were aggrieved by such determination, the law provides for the assessees to file a representation and also provides for the Commissioner to pass appropriate orders. Shri Sahasrabudhe avers that on this being done also there was no reaction from the Commissioner.
5. On merits Shri K.V. Sahasrabudhe claims that the galleries are appended at each end to a hot air stenter. Chambers are equipped with radiators and blowers which blow the hot-air on to the fabric moving through chambers. The hot air travels along the fabric and is exhausted into the atmosphere by way of a pipe attached to the gallery. It is his submission that the gallery is only a device to remove hot air and harmful gases and that it does not in any way participate in the function of the stenter that is to dry a fabric, at the same time ensuring proper width. Shri Deepak Kumar refers to Trade Notice No. 14/94 dt. 4.3.99 issued by the Commissioner of Central Excise Mumbai IV, which is based on Ministry's Letter F. No. 341 /4/99-TRU dt. 27.2.99. In dealing with the question whether galleries and float drying machine should be taken to be chambers of stenters the Trade Notice stipulated as under:
As regards points (iv) and (v), it is clarified that as 'galleries' are installed or attached to the stenter and aid the process of heat setting or drying of the fabrics. These 'galleries' provide heat insulation on either side of the stenter. As per Explanation I to Notification No. 42/98-CE(NT), a float drying machine or any other equipment of a length 3.05 metres installed in or attached to a stenter for aiding the process of heat setting or drying of the fabrics shall be deemed to be one chamber of a stenter and any fraction of such length shall be computed on pro-rata basis. It is thus clarified that they should be taken into account for the purposes of computation of the production capacity and the number of chambers. However, it is clarified that the 'padding mangle' attached to the stenter shall not be taken into account for the purposes of computing the production capacity and the number of chambers, as it has little relation to hear-setting or drying of fabrics. It is also clarified that for purposes of capacity determination, the length of each chamber is to be measured separately, and any additional rail length of the stenter (as a part of the 'galleries') shall be computed as per Explanation I to the Hot-Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998.
He submits that the Commissioner had followed this Trade Notice. He further submits that the Circular or Trade Notice of the Ministry had binding effect on the officers of the Revenue.
6. We have carefully considered the rival submissions.
7. The principles of natural justice require that no assessees should be subjected to a greater burden than has been accepted by him without giving him an opportunity to put across his case. It is true that the procedure prescribed under the rules does not contain any specific provision to that effect but then the requirement to follow the principles of natural justice is omni present, even if not expressly stated.
8. The necessity to hear the appellant is all the more important when there are contested issues which have to be determined. The rules themselves take cognizance of the existence of technical issues arising and suggest consultation with technical authority for this purpose. We find that in each case, the Commissioner proceeded to determine the production on the basis of a verification report given by the Supdt. It is not known whether the Supdt. had associated the assessees with the investigation, but it appears to be unlikely. In each case, the dispute centres around the character of the gallery portion of the stenter. The subject Trade Notice states that the galleries provided insulation. The Ld. Consultant had defined galleries as buffers for removal of hot air and gases. He submits that the galleries do not further the heat setting activity undertaken in the stenter. He submits that as against the overall length of a stenter with five chambers of about 50 feet the width of a gallery is only about 2 feet. He also refers to the certificate of the manufacturer M/s. Harish Textile Engineers Ltd. to the effect that the galleries do not take part in the function of the stenter.
9. The Trade Notice does not refer to any technical authority. Neither side placed on record substantial technical literature to enable us to determine the exact nature of the job performed by the galleries. It is necessary that this enquiry should be conducted in association with an independent expert. There are a number of institutions in Mumbai which employ experts in textile, Chemistry and Engineering. There should be no hesitation for the Commissioner to consult a technical authority from a teaching or a research institution as to the exact contribution made by the gallery.
10. As regards the float drying machine to be considered as a Chamber, the physical proximity thereof to the stenter has to be determined in all cases. This could be done by a joint inspection by the verification authority and the assessee where the factual position could be represented and the assessees signature obtained on the verification report itself which would remove the ground of future disputes.
11. In Appeal No. E/3353/99-Mum there exists an additional issue and that is of the equation of Rollers/Cylindric driers with the chambers. As per Shri K.V. Sahasrabudhe, the rollers are heated from inside and there is no mechanism for passing of hot air which mechanism is used in a float drying machine or in a stenter. It is his case that therefore such rollers would not fall under the phrase "any other equipment" used in the explanation. This particular aspect has not been covered by the Commissioner in defining the phrase "any other equipment". This submission has to be taken into account by the authority determining the issue.
12. Shri K.V. Sahasrabudhe draws our attention to Tribunal Judgment in the case of Sonia Prints Pvt. Ltd. v. Commissioner of Central Excise, New Delhi 1999 (34) RLT 323 (CEGAT) of where in identical circumstances on the ground of denial of natural justice, the Tribunal had remanded the proceedings back to the adjudicating Commissioner. We decide this batch of appeals on the same lines but in addition would direct the respective Commissioners to firstly consult technical experts on the issue whether galleries are parts of stenters and also whether rollers/cylindrical dryers which are machines based on principles other than on which stenters are established could be taken to be 'any other equipment' referred to in the Explanation. They shall also associate the assessees and permit them to place on record technical opinion and extracts from texts in support of their claim. After giving such opportunities the respective Commissioners shall proceed to determine the annual capacity, very clearly giving their reasons.
13. These appeals are allowed by way of remand.