Customs, Excise and Gold Tribunal - Delhi
M/S. Scan Synthetics Ltd. vs Cce, Jaipur on 3 July, 2001
ORDER
1. The above application for waiver of pre-deposit and stay of recovery of duty and penalty arises out of the order of the Commissioner of Central Excise by which he has confirmed duty demand of Rs.1,00,87,271 (Rs.87,71,865 BED and Rs.13,15,406 AED) on texturised crimped grey yarn manufactured and captively consumed by the applicant in the manufacture of dyed yarn during the period from 1995-96 to 1997-98 (dyed yarn was cleared at nil rate of duty in terms of Notification 35-95 dated 16.3.95, 4/97 dated 1.3.97 and 34/97 dated 6.6.97. In addition penalty of Rs. 50 Lakhs under Rule 173Q of the Central Excise Rules, penalty of Rs. 53,08,680 has been imposed under section 11AC and interest of Rs. 53,08,680 has been levied under section 11AB of the Act for the period 28.9.96 to 31.3.98. The ground for the demand is mis-declaration of the assessable value of grey texturised/crimped yarn used captively - it is the case of the Department that the assessees had cleared the yearn and declared the value thereof the deducting certain amount shown to represent dyeing charges from the price of texturised dyed yarn, while the scrutiny of their records revealed that the cost of texturised dyed yarn sold by the assessee was much higher than that of the costs of texturised grey yarn captively consumed. Accordingly, cost audit of the accounts was conducted under Section 14A of the Central Excise Act from which it was established that the assessable value of the grey yarn was mis-declared.
2. We have heard Shri Joseph Vellapally, Learned Senior Counsel, who contends that since a normal price was available for the goods, it is section 4(1)(a) of the Act which is attracted and the question of applying section 4(1)(b) which provides that where normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof may be determined in such manner as may be prescribed, does not arise. Therefore, the Department has erred in applying section 4(1)(b) read with Rule 6(b) of the Valuation Rules, 1975. He submits that normal wholesale price available for texturised yarn under section 4(1)(a) has not been assailed by the Department on the ground that it was vitiated price and, therefore, normal price at which the applicants sold the texturised yarn should have been made applicable to textures yarn captively consumed by the application the manufacture of dyed yarn also. He submits that the show cause notice has proceeded on the basis that the applicants declared assessable value of grey nylon/polyester yarn lower than the cost of manufacture of such yarn, but the finding in the impugned order in that the applicant depressed the price of the grey yarn and split the price of grey yarn on the lower side and showing dyeing charges on the higher side, with intent to evade payment of duty of grey yarn, and therefore the order has proceeded on a basis not contained in the show cause notice thereby resulting in loss of opportunity to the applicants to defind themselves property against this finding. Further, he submits that the demand is barred by limitation as invoices of both the captively consumed texturised yarn and yarn sold to independent customers form part of the assessment documents and those invoices were enclosed with the monthly R.T. 12 Returns filed with the Department and coprarison of the invoices would clearly show that they had been discharging duty on captively consumed textured yarn on the basis of the sale price of the texturised yarn only. He submits that the applicants have made out a strong prima facie case for waiver on merits as well as on limitation and therefore prays for dispensation with the requirement of pre-deposit and stay of recovery of the amounts involved.
3. Opposing the prayer, Learned SDR draws our attention to the cost audit report wherein the value of texturised grey yarn declared for the purpose of assessment has been challenged, and to the show cause notice which contained clear averment that the correct assessable value of grey yarn was suppressed and mis-declared. he therefore submits that it is not correct on the part of the applicant to plead that the assessable value of grey yarn was accepted and approved by the Department. He submits that both the notice and the order proceeded on the basis of suppression of the correct assessable value and, therefore, the impugned order has not travelled beyond the show cause notice. Lastly he submits that R.T. 12 Returns, D3 intimation, permission in terms of Section 173H for retention of duty paid goods for use in manufacture of other goods in their factor y itself etc. will not bring out that the real price of grey yarn has been depressed. Therefore, the reliance on these documents by the applicant in support of their argument that the demand is time barred do not really help them. On the other hand, Learned DR submits that the value of the goods was required to be declared under Section 4 where the goods were used for captive consumption and they were required to file costing data under Rule 173C as no factory gate price was available for grey yarn because sold only dyed texturised yarn in the course of whole sale trade. Costing of the product was suppressed which clearly attracted the period of limitation. He therefore justified the duty demand and the penalty.
4. We have carefully considered the rival submissions. The issue on merits is highly contentious. The question as to whether the provisions of section 4(1)(a) or section 4(1)(b) of the Act are attracted to the facts of the case is a question that will be addressed by us when the appeal is taken up for final hearing and not at this interim stage. The issue of time bar is also debatable, and linked with the issue on merits and cannot be view ed de hors the main issue. In these circumstances, the applicant cannot be said to have made out a strong prima facie case for total waiver. Having regard to the overall facts and circumstances were direct pre-deposit of Rs.25 Lakhs towards duty and Rs.5 Lakhs towards penalty within a period of 8 weeks from today. On such deposit, pre-deposit of balance duty and penalty shall stand waived and recovery there of stayed pending the appeal. Failure to comply with this direction shall result in vacation of stay and rejection of appeal without prior notice.
Compliance to be reported on 20.9.2001.