Custom, Excise & Service Tax Tribunal
M/S. Recron Synthetics Ltd vs C.C.E. & S.T. Jaipur-I on 27 September, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI,
COURT NO. III
Date of Hearing: 16.09.13
Date of pronouncement:27.09.13
Appeal No. E/1029/2005-EX[SM]
[Arising out of the Order-in-Appeal No.570-CE/APPL/ KNP/04,dt. 01.10.2004, passed by the Commissioner Central Excise (Appeals), Kanpur].
For approval and signature
Honble Rakesh Kumar Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. Recron Synthetics Ltd. Appellant
Vs.
C.C.E. & S.T. Jaipur-I Respondent
Present: - Sh. B.L.Narsimhan, Advocate, Sh. Hemant Bajaj, Advocate - for the appellant Sh. Davinder Singh, Jt. CDR - for the Respondent Coram : Rakesh Kumar Member (Technical) FINAL ORDER NO: 57769 /2013 Per Rakesh Kumar:-
The facts leading to this appeal are, in brief, as under:-
1.1 The appellant are engaged in manufacture of polyester filament yarn falling under Chapter 54 as well as polyester chips falling under Chapter 39 of the Central Excise Tariff. The polyester chips are manufactured from the basic raw material- DMT, PTA and MEG. Some waste arises in course of manufacture of polymer from DMT, PTA and MEG. Some waste (Chip Waste) also arises in course of manufacture of polymer chips from polymer. Third type of waste arises in course of manufacture of filament yarn from polyester chips. The Waste was being cleared from the factory on payment of duty. The period of dispute in this case is 1994-95 and 1995-96. During this period the appellant in terms of Rule 55 of the erstwhile Central Excise Rules, 1944, were filing quarterly return in Form RT-5 regarding principal raw-material used for manufacture to polyester filament yarn and in those return they were mentioning the generation of various type of waste- polymer waste, chip waste and yarn waste arising at various stages of manufacture of filament yarn from DMT, PTA and MEG.
1.2 The factory of the appellant was visited by the Assistant Director (Cost) of the Central Excise Commissionerate, Allahabad on 08.10.96 in course of which the manufacturing process was studied and various records maintained by the appellant, were scrutinized. On that day itself i.e. 08.10.96, a letter was issued by the Department to the appellant seeking clarification on certain points which were replied by appellant under their letter dt. 15.10.96. Thereafter, on 09.12.96 another letter was issued by the Department seeking further clarification which was replied by the appellant on 12.02.97. On 15.03.99 a Show Cause Notice was issued to the appellant alleging that:-
(a) During 1994-95 and 1995-96, the appellant have not declared the production of 93.683 MT of P.P.Chips (waste) on which the duty of Rs.10,54,331/- is chargeable and since this waste has been cleared clandestinely, this duty is recoverable from the appellant; and
(b) during 1995-96 the appellant have failed to account 35.075 MT of polyester chips which were cleared clandestinely and in respect of which the duty amounting to Rs.5,19,110/- is recoverable from the appellant.
The Show Cause Notice besides demanding duty amounting to Rs. 15,73,441/- also demanded interest on this duty under section 11AB and also sought imposition of penalty on them under section 11AC.
1.3 The above Show Cause Notice was adjudicated by the Additional Commissioner vide order-in-original dt. 20.09.2000 by which the duty demand as made in the Show Cause Notice was confirmed under proviso of section 11A(1) of Central Excise Act, 1944 along with interest on it at the applicable rate under section 11AB and besides this, penalty of equal amount are also imposed on the Appellant under section 11AC of Central Excise Act, 1944.
1.4 On appeal being filed to the Commissioner (Appeals), this order of the Commissioner (Appeals) was upheld by order-in-appeal dt.01.10.2.004 against which this appeal has been filed.
2. Heard both the sides.
3. Sh. B.L.Narsimhan, Advocate, assisted by Sh. Hemant Bajaj, Advocate, learned counsel for the appellant, pleaded that the appellant manufacture polyester filament yarn from the starting raw-material, namely - DMT, PTA and MEG, that the manufacture polyester filament yarn is a two stage process namely the process up to manufacture of the polyester chips and the manufacturing process beyond the chip manufacturing i.e. process of manufacture of polyester filament yarn, that during the course of manufacture of polymer from DMT/PTA and MEG, the polymer waste arises, that during the course of manufacture polyester chips from polymer, chips waste arises, that during the course of manufacture of yarn from chips, the yarn waste arises, that different types of waste i.e. polymer waste, chip waste and yarn waste generated in course of manufacturing process, were being reflected in the RG-1 Register and were also being reflected in RT-5 Returns, that while the polymer waste was being classified under Chapter 55, the chip waste was being classified by them under Chapter 39, that the allegation of the Department is that during 1994-95 & 1995-96, the appellant had produced 94.297 MT and 93.682 MT of P.P.Chips (waste), while in the RG-1 Register, during these years they have recorded the production of only 8.200 MT and 11.961 MT of P.P.Chips (waste) respectively and on this basis duty has been demanded on that is 167.818 MT of polyester chips (waste) that P.P.Chip waste is nothing but polymer waste and this waste of the same quantity is reflected in quarterly RT-5 Return filed during 1994-95 an 1995-96, that the Departments presumption that this waste is different from polymer waste, is incorrect, that the waste referred to in para 4 of the Show Cause Notice has been reflected in the RG-1 Register as well as in RT-5 Returns and had been cleared on payment on duty, that this is clear from the report of the Range Superintendent vide his letter dt. 21.09.04, addressed to Superintendent of Central Excise (appeal), which had been submitted on the directions of the Commissioner (Appeals), that in this letter, the Range Superintendent after verification, had reported that during 1994-95, 94.297 MT of polymer waste and 8.200 MT of chip waste had been generated and had been accounted for in the Central Excise records and similarly during 1995-96, 81.721 MT of polymer waste and 11.936 MT of chip waste had been generated which had been accounted in the Central Excise records, that the P.P.waste mentioned in the Show Cause Notice is nothing but the polymer waste which, as reported in the letter of the Range Superintendent, has been accounted for in the Central Excise records and, hence, there would be no question of demanding duty of Rs.10,54,331/- on alleged clandestine removal of 167.818 MT of P.P.chip, that the duty demand of Rs. 5,19,110/- is on 35.075 MTs of polyester chips alleged to have clandestinely cleared during 1995-96, this demand is based on comparing the closing balance of polyester chips as on 31.3.96 which was 605.665 MT with the closing balance of polyester chips as per the balance sheet for that year i.e. 570.590, that when the closing balance of 605.665 MT is reflected in the RG-1 Register and other Central Excise records and when in the balance sheet for 1995-96, the closing of polyester chips as on 31.3.96, is a lower figure of 570.590 MT, there is no question of clandestine removal of the un-accounted polyester chips, that this difference is on account of moisture, as in RG-1 Register and another records, the weight of chips recorded is of wet chips containing moisture which is slightly higher then the dry chip weight, and that in view of this, the duty demand of Rs.5,19,110/- on alleged clandestine removal of 35.075 MT of polyester chips during 1995-96 is not sustainable.
4. Sh. Davinder Singh, learned Jt. CDR defended the impugned order by reiterating findings of the Commissioner(Appeals) in it and emphasized that so far as the duty demand of Rs. 5,19,110/- on clandestine removal of 35.075 MT polyester chips during 1995-96 is concerned, the same has been correctly upheld in the impugned order as there are serious discrepancies in the record of production and consumption of polyester chips and that as regard the duty demand of Rs. 10,54,331/- on 167.818 MT of P.P. Chip waste is concerned, there are discrepancies between the production of polyester chip waste as recorded in RG-1 Return and the actual weight of polyester chip waste and in this regard he pointed out to the findings of Additional Commissioner in para 7 of the order-in-original.
5. I have considered the submissions from both the sides and perused the records.
6. Coming first to the duty demand of Rs. 5,19,110/- on alleged clandestine clearances on 31.075 MT of polyester chips during 1995- 96, the allegation in this regard in para 6,7 & 8 of the Show Cause Notice are as under:-
Whereas from the investigation, it also appears that the party have failed to reconcile the quantity of 35.075 MT of polyester chips during the year 1995-96. While analyzing the figures relating to polyester chips available in Annexure-4, it has been found as under:-
(a) O.B. of P.P. Chips as on 01.04.95 = 482.859 MT (b) Polyester chips manufacture during 1995-96 = 24174.270 MT (c) Total (a+b) = 24657.129 MT (d) Clearances outside the factory = 704.325 MT (e) Clearances for self consumption in the manufacture of yarns = 23347.139 MT (f) Total (d+e) = 24051.464 MT (g) C.B. as per calculation = 605.665 MT (h) C.B. as as per Balance Sheet = 570.590 MT (i) Differences (g-h) = 35.075 MT
The party were asked to clarify the differences of 35.075 MT of polyester chips but instead of giving any specific reply they have indicated in their reply in Annexure-6 simply as (1) clearances of moisture free Polyester Chips for self consumption in the manufacture of yarn = 23,347.139 MT i.e. 0.15% of the clearances for self consumption. But their reply appears to be unconvincing on the following grounds:-
1. For the purpose of accounting of the stock, the weight recorded against the columns of O.B., manufacture, clearances and closing balance, in respect of Polyester Chips as referred in Annexure-4, were either for wet chips or for moisture free chips. It is not convincing that the weight recorded against O.B. manufacture and closing balances are for the wet chips and only the clearances for home consumptions have been recorded for moisture free chips.
2. Further, if the partys plea of 35.075 MT as moisture content i.e. 0.15% of the clearances figure recorded in Annexure-4 is correct, then such kind of difference had taken place in the account of P.P. of 1994-95 also and the difference of 29.382 MT of P.P. Chips would have existed in 1994-95 by taking into the consideration of 0.15% of moisture content. But the Annexure-IV figure reveal that no such difference has taken place, which is evident from the figures given below:-
(a) O.B. of P.P. Chips as on 01.04.94 = 218.029 MT (b) Production of P.P.chips during 1994-95 = 21010.125 MT (c) Total (a+b) = 21228.254 MT (d) Clearances outside the factory = 1156.125 MT (e) Clearances for self consumption in the manufacture of yarns = 19587.744 MT (f) Total (d+e) = 20743.869 MT (g) C.B. as per calculation as on 31.3.95 = 484.859 MT (h) C.B. as per Annexure-IV = 482.859 MT (i) Actual difference (g-h) = 001.526 MT The difference is negligible in 1994-95.
Therefore, from the above, it appears that in their clarification dt. 12.2.97 i.e. Annexure-6, if in 1995-96, the party have recorded the weight of moisture free P.P.Chips against the clearances for self consumption as per their accounting system then as per said system the weighty recorded in Annexure-4 against the clearances for the self consumption, would have been for the moisture free P.P.Chips and as such the difference of about 29.382 MT would have taken place in the year 1994-95 also. But no such difference has taken place in 1994-95. Therefore, it appears that the party have indicated 35.075 MT against the moisture content in their clarification dt. 12.02.97 i.e. Annexure-6 only with intent to reconcile the account of P.P.Chips during 1995-96. Actually it has not taken place but they have removed it clandestinely without payment of Central Excise duty. Since the party have not recorded the actual production of P.P.Chips and clearances made against captive consumption in their RG-1 Register, the aforesaid fact did not come in the knowledge of the Department and clearances against captive consumption in their RT-12s. 5.1. On perusal of the above para extracted from the Show Cause Notice, it would be clear that the basis of allegation of duty demand of Rs. 5,19,110/- on alleged clandestine clearances of 35.075 of polyester chips during 1995-96 is that while as on 31.03.96 the closing balance of the polyester chips as per the Central Excise records and as per the figures given by them was 605.665 MT, the closing balance of polyester chips as on 31.03.96, as given in the balance sheet of 1995-96, was 570.590 MT. The appellants contention is that this difference is on account of moisture content of polyester chips, as the weight of polyester chips recorded in the Central Excise records is of wet chips, while the weight recorded in the balance sheet is of moisture free chips. Whatever bethe explanation for the difference, one fact which is clear is that the quantity of polyester chips as on 31.03.96 as recorded in the Central Excise record is 605.665 MT which is more than the closing balance as on 31.03.96 mentioned in the balance sheet for 1995-96. The assessees duty liability is on the quantity reflected in their statutory Central Excise records and the question of an un-account clearances would arises only if the figure of production of clearances, as mentioned in the balance sheet of a particular year, is more than that reflected in the Central Excise records. In this case the position is reverse as the closing balance of polyester chips as on 31.03.96 recorded in the Central Excise records on which the duty is supposed to have been paid, is more than the closing balance as on 31.03.96, recorded in the balance sheet. Therefore, in my view the duty demand on the difference between the balance of 605.665 MT in the Central Excise records and the balance of 570.590 MT in the balance sheet without any basis. Therefore the duty demand of Rs. 5,19,110/- on alleged clandestine clearances of 35.075 polyester chips during 1995-96 is not sustainable.
6. Coming to the second component of duty demand of Rs. 10,54,331/- on alleged clandestine clearances of 167.818 MT of P.P. chip waste during 1994-95 and 1995-96, the allegation in this regard as made in para 4 and 5 of the Show Cause Notice is as under:-
Whereas on the basis of the investigations conducted by the team, it appears that the party had produced 94.297 MT and 93.682 MT of P.P. Chips(waste) during 1994-95 and 1995-96 respectively as indicated in Annexure-4 but in RG-1 they have recorded only 8.200 MT and 11.961 MT during 1994-95 and 1995-96. When they were asked to clarify as to why they have recorded only 8.200 MT and 11.961 MT and 93.961 MT as indicated in Annexure-4 during the said period, they submitted a vague reply by stating that the hard waste in RG-1 included polymer waste as shown in RT-5 returns.
Whereas the polyester chips (waste) is different from polymer waste. The polymer waste is known as Hard waste yarn and is a waste of Polyester Filament Yarn classified under Central Excise Tariff heading 55.5.10. The polyester chips(waste) is a waste of polymer chips and is classified under Central Excise Tariff heading 3907.60. Therefore, both the products i.e. polyester chips waste and polymer (waste) are different. The polyester chips waste is many times costlier than polymer waste. Hence it appears that the quantities mentioned in Annexure-4 against the column of production of polyester chips(waste) are undoubtedly for the chips waste manufactured during 1994-95 and 1995-96 and do not contain the production figures of polymer waste i.e. hard waste yarn.
6.1 Thus according to the Department, during 1994-95 and 1995-96 the appellant had produced 94.297 MT and 93.682 MTs respectively of P.P. Chips waste while during these years in the RG-1 Register, they have recorded the production of 8.200 MT and 11.961 MT respectively of P.P. chip waste. The appellants contention is that the figures of 94.297 for 1994-95 and of 93.682 MT for 1995-96 as mentioned in para 4 of the Show Cause Notice are the figures of polymer waste which arises at the stage prior to manufacture of polymer chips and in terms of letter dt. 21.09.04 of Range Superintendent, addressed to Superintendent (appeals) in the office of the C.C.E(Appeals), this waste pertaining to 1994-95 and 1995-96 had been duly accounted in the Central Excise records and RT-5 Returns, that as mentioned in this letter, the chip waste reflected in the RG-1 Register was 8.200 MT in 1994-95 and 11.936 MT in 1995-96 and that the polymer waste and chip waste arises at different stages and as such the polymer waste can not be treated as chip waste. In this regard I find para 4 of the Show Cause Notice extracted above, states that polyester chip waste is different from polymer waste, that polymer waste is known as hard yarn waste and is waste of polyester filament yarn classifiable under heading 5505.10, that polyester chip waste is a waste of polyester chips and is classified under chapter 39 and that, therefore, polyester chip waste and polymer wastes are different and hence the quantity mentioned in Annexure-IV against the production of polyester chip waste is undoubtedly of the chip waste manufactured during 1994-95 and 1995-96 and do not include the production figure of hard yarn waste i.e. polymer waste. However, the appellants contention is that polymer waste though classified under Chapter 55, is not hard yarn waste, but is waste polymer and this waste arises prior to manufacture of polymer chips from the polymer and that the letter dt. 29.10.04 of the Range Superintendent also gives the figures for the year 1994-95 and 1995-96 of the production of yarn waste, polymer waste and chip waste and as per this letter during 1994-95 and 1995-96 the total polymer waste produced and accounted for the Central Excise records was 94.297 MT and 81.721 MT respectively.
7. On going through the records, I find that from very beginning appellants stand has been that there are three types of wastes arising in their plant. The first type of waste is polymer waste which arises at the stage of manufacture of polymer from DMT, PTA & MEG and this waste, though in form of waste polymer, was being classified them under Chapter 55. This waste is not in form of Yarn Waste and can not be called hard yarn waste. Just because it was classified by the Appellant under 5505.10, it will not become Yarn Waste. The second type of waste which arises is at the stage of manufacture of polymer chips from polymer and this waste is recorded as chip waste. The third type of waste is in form of yarn waste which arises at the stage of manufacture of filament yarn from chips. I find that in the ER-5 Returns these three types of wastes were being separately reflected and the letter dt. 21.09.04 of the Range Superintendent also mentions the yarn waste, polymer waste and chip waste separately. In this regard this letter is reproduced below:-
To, The Superintendent (Appeals), Custom & Central Excise, 117/7, Sarvidaya Nagar, Kanpur SUB: Verification of Data of RT-5/RG-1 for the year 1994-95, 1995-96 in respect of Recron Synthetics Limited (Formerly Raymond Synthetics Limited) Allahabad.
M/s. Recron Synthetics Limited, A-10 to A-27, UPSIDC Indl., Area, Naini, Allahabad having Registration No. AABCR1251JXM001 has requested us to verify the data of RT-5/RG-1 for the year 1994-95 & 1995-96 in respect of Chips and Polyester Filament Yarn manufactured in the factory vide their letter No. RSL/EXC/1 dt. 20.09.04.
We have verified the following date from RT-5/related excise records for the year 1995-95 & 1995-96 and we confirm the following goods having manufactured and accounted in central excise records and RT-5 return.
S.N. Description 1994-95 1995-96
1. Total Yarn Waste
(including Soft, Wiry & Duty paid) 488.838 619.272
2. Polymer Waste 94.297 81.721
3. Chips Waste 8.200 11.936
4. Opening Stock of P.P.Chips
as on 01.04.1995 - 482.859
5. Polyester Chips manufactured
During the year - 24174.270
6. Clearance outside the factory
during the year - 704.325
7. Clearance for self consumption in
the manufacture of yearn during
the year. - 23382.212
8. Closing stock of chips as
on 31.3.96 - 570.590
8. Thus the quantities of P.P.waste referred to para 4 of the Show Cause Notice are actually of polymer waste which have been duly accounted for in the Central Excise records. When the very basis for duty demand in para 4 & 5 of the Show Cause Notice vanishes, the impugned order upholding this duty demand, would not be sustainable.
9. In view of the above discussions, the impugned order is sustainable. The same is set aside. The appeal is allowed.
(Order pronounced in the open court on 27.09.13) Rakesh Kumar Member(Technical) S.Kaur 2