Custom, Excise & Service Tax Tribunal
M/S. Uniworth Textiles Ltd vs C.C.E. Raipur on 28 April, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/1522/2006-Ex[DB]
[Arising out of Order-In-Original No. Commissioner/RPR/11/2006 dated: 06.02.2006 passed by CCE Raipur]
For approval and signature:
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
Honble Mr. R. K. Singh, 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. Uniworth Textiles Ltd. ...Appellant
Vs.
C.C.E. Raipur Respondent
Appearance:
Mr. Rupesh Kumar (Advocate) for the Appellant Mr. Govind Dixit DR for the Respondent CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial) Honble Mr. R. K. Singh, Member (Technical) Date of Hearing/ Decision.28.04.2016 Final Order No. 51701/2016 Per R. K. Singh:
Appeal has been filed against the Order-in-Original dated 6.2.2006 in terms of which Central Excise duty demand of Rs. 25,63,536/- has been confirmed along with penalties. The brief facts of the case are as under:
The appellant is a 100% EOU manufacturing all wool fabrics and other blended fabrics falling under chapters 50, 51 and 55 of Central Excise Tariff. It obtained permission from the Assistant Commissioner for sending grey fabrics for job work to convert the same into finished fabrics and to bring the same from the job workers premises or export the same there from (from the premises of job workers). It had sent 164 consignments under job work challans during the period 28.08.2003 to 09.12.2003 and were issued a SCN demanding Central Excise duty of Rs. 7,59,14,083/- on the ground that the goods sent under the said 164 challans were not received back within 90 days nor was any evidence submitted of the said goods having been exported from the job workers premises. The primary adjudicating authority vide the impugned order held that the goods sent for job work under the said 164 challans were either exported from the job workers premises or were received back except that the quantity received back was short by 7734.79 meters, and therefore, the duty was recoverable on the said quantity short received and consequently the impugned order confirming the demand was passed.
2. Ld. Advocate for the appellant has contended that:
* The entire quantity of goods sent to job worker under 164 challans was either exported from the job workers premises or received back after processing/job work.
* The adjudicating authority has taken note of the verification report submitted by the Assistant Commissioner, Central Excise Division Raipur submitted vide his letters dated 25.01.2006 and 30.01.2006 wherein he certified that the appellant fail to receive back the goods in question within 90 days, and that there was a shortage of 7734.79 meters in the quantity received back due to shrinkage.
* The verification report itself stated that the shortage was because of shrinkage during job work and the shrinkage is approximately 3% only, as the total quantity sent under 164 challans was 229050.60 meters and therefore question of recovering duty on such shortage should not arise.
* Textile Committee in its report dated 09.05.2008 submitted on 11.12.2015 based on a study of shrinkage of various types of fabrics manufactured by the appellant opined that the shrinkage would be in the range of 2.01% to 8.49% and thus, the shrinkage found in the case of the appellant was rather on the lower side of the range.
3. The Ld. DR on the other hand argued that on the previous hearing the appellant was required to submit evidence of the reasonable shrinkage which takes place during the job work on such fabrics and agreed that the appellant had since submitted Textile Committee Report showing the extent of shrinkage in respect of such fabrics.
4. We have considered the contentions of both sides.
5. It is seen that the entire demand pertains to the shortage of 7734.79 meters of fabrics which was noticed when the fabrics cleared under 164 challans was received after job work. We find that this shortage is approximately 3% of the total quantity of fabrics sent for job work and as per the report dated 09.05.2008 of the Textile Committee, Ministry of Textile, Export Promotion and Quality Assurance Division, Nagpur, submitted by the appellant on 11.12.2015 the shrinkage in the fabrics of the type sent for job work under the said 164 challans ranges from 2.01% to 8.49%. Thus, the shrinkage in the present case is well within the reasonable range. Even otherwise, it is observed that the Assistant Commissioner Central Excise Division, Raipur in his report vide letters dated 25.01.2006 and 30.01.2006 to the adjudicating authority categorically stated that the said shortage was a result of shrinkage of the fabric during job work. This clearly implies that the shortage was not a consequence of any diversion of grey fabrics sent for job work. Given the very fact that the fabric was subjected to job work of such nature which results in shrinkage of fabrics, the total quantity which would be received after such job work would always be less than the quantity sent in terms of area of the fabrics. This, in turn, implies that there was no illegal diversion and the entire fabrics which was sent for job work under 164 Challans was either received back or exported after the completion of job work thereon. We find that the adjudicating authority does not question these facts, and so we are rather surprised to note that in spite of acknowledgment that the shortage was as a result of shrinkage during the job work, the adjudicating authority concluded that the noticee is liable to pay duty on 7734.79 meters of fabrics short received due to shrinkage.
6. In the light of the above analysis it is evident that there has been no illegal diversion of the goods sent for job work and the goods sent for job work were duly processed by the job workers and the resultant product (i.e. the processed fabrics) was either exported or sent back to the appellant; indeed there is no allegation of illegal diversion either. Therefore, there is no question of recovery of any differential duty on the shrinkage in this case. As a result, the impugned demand is not sustainable. When the impugned demand itself is not sustainable, the question of penalty in relation thereto under Rule 25 of Central Excise Rules, 1944 would not arise.
7. As regards the penalty of Rs. 5 lakh imposed under Rule 25 for contravention of the provisions of Notification 52/2003-Cus dated 31.03.2003 and Notification 22/2003 date 31.03.2003, we would like to observe that the foremost consequence of contravention of provisions of an exemption notification is denial of benefit thereof. We find that the adjudicating authority has allowed benefit of the said notification to the appellant. It means that the so called contravention of the provisions of the said notifications were treated to be so insignificant as not to result in denial of the benefit thereof. In these circumstances, to impose penalty for the said contravention of the provisions of the said notifications cannot be called reasonable by any stretch of imagination.
7. In the light of analysis above, the impugned order is not sustainable and the same is set aside. The appeal is allowed.
(Dictated and pronounced in the open court)
(R. K. Singh) (S. K. Mohanty)
Member(Technical) Member (Judicial)
Neha
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E/1522/2006-Ex[DB]