Customs, Excise and Gold Tribunal - Delhi
Asha Jyoti Spinning Mills vs C.C.E. on 31 August, 1995
Equivalent citations: 1996(81)ELT523(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The brief facts of the case are that on 25-1-1991, the Central Excise Preventive Staff, Ludhiana, visited the factory premises of the appellants herein, who are manufacturers of Acrylic yarn, and recovered 81 gunny bags containing synthetic yarn weighing 4,860 kgs and valued at Rs. 1,45,800/-. In order to confirm the composition of yarn, one representative sample was tested from two local test laboratories and found to be 100% polyester yarn. The partner of the firm tendered a statement on the date of visit, admitting that the yarn was manufactured out of synthetic waste.
2. The yarn was seized on a reasonable belief that it was dutiable under sub-heading 5504.29 of the Central Excise Tariff Act, 1985. The samples were tested by the C.R.C.L., New Delhi and the test report confirmed that the sample is wholly composed of synthetic staple fibre (Polyester). The Additional Collector of Central Excise, Chandigarh confiscated the seized goods with option to redeem the same on payment of fine and also imposed personal penalty. As against this order, the appellants filed an appeal before this Tribunal which, vide its Final Order No. S/133/90-D and No. E/515/90-D, dated 27-6-1990, remanded the case back to the Additional Collector with the direction that he should obtain the re-test report and extend an opportunity of personal hearing to the appellants. Accordingly, the re-test report of the remnant sample was obtained in March, 1992 from the Chief Chemist who confirmed that the sample is wholly composed of man-made synthetic staple fibre of non-cellulosic origin (Polyester) and may be considered as yarn made out of spinable fibres.
3. A copy of the re-test report was sent to the assessees in June, 1992 and personal hearings were fixed subsequently. On 18-10-1992, the appellants sent a letter through their Counsel seeking per mission. to cross-examine the Chief Chemist. This request was turned down by the department's letter dated 30-10-1992 and the case was fixed for final hearing on 13-11-1992. The request for cross-examination was made once again on 4-11-1992 relying upon certain judgments of the Tribunal and of the Gujarat High Court. The Deputy Collector held that since the findings of the Chief Chemist were very clear and categoric and since the request for cross-examination was being made only after fixing personal hearing, the request for cross-examination was nothing but delaying tactics and he passed an ex parte order confirming the duty demand and confiscating the seized yarn with the option of redemption and further imposing a personal penalty of Rs. 50,000/-. The Collector (Appeals) upheld the appeal of the Deputy Collector, holding that the findings of the Chief Chemist are clear and there is no cause to discount the report. Hence this appeal.
4. Sh. K.K. Bassi, learned Counsel for the appellants, submits that the test report dated 30th March, 1992 is vague and ambiguous and does not discuss the relevant parameters for determining whether the material used in the manufacture of the yarn is synthetic staple fibre or waste. He submits that one of the factors relevant for this purpose is yarn length while the Chief Chemist has relied on uniformity in the yarn diameter which is not relevant. He refers to the orders of the Tribunal in the case of C.C.E., Hyderabad v. Priyadar-shini Spinning Mills -1990 (50) E.L.T. 145 (Tribunal) and C.C.E., Nagpur v. Vardhan Syntex and Ors. reported in [1991 (37) E.C.R. 542] where a clear distinction between fibre and waste in the tariff has been recognized and wherein it has been held that uniformity of length and denier are two of the criteria to be applied for determining whether a fibre is staple fibre or waste. He refers to the report dated 22-10-1993 obtained by the appellants from the Silk and Art Silk Mills Research Association (SASMIRA) which is in favour of the appellants (i.e. that the yarn is produced from waste).
5. His next submission is that the order has been passed in violation of principles of natural justice and that the case of the department is based entirely on the report of the Chief Chemist and therefore, it was necessary to permit his cross examination. In this connection, he refers to the orders of the Tribunal reported in 1991 (56) E.L.T. 220 (Tribunal) Raja Imports and Exports v. Collector of Customs, Bombay; and 1988 (38) E.L.T. 362 (Tribunal) Kiran Overseas v. Collector of Customs, Cochin. Lastly, he submits that no fine or penalty is warranted in this case as the appellants were under a bonafide belief that they were manufacturing yarn out of synthetic waste. He therefore, prays that the impugned order may be set aside and the appeal allowed.
6. Replying to the submissions of the learned Counsel, Sh. P.K. Jain, learned DR refers to the orders of the Deputy Collector to drive home his point that several opportunities of personal hearings were granted but were not availed by the appellants and hence they cannot complain of violation of principles of natural justice. Regarding the cross-examination of the Chief Chemist, he contends that no reason was contained in the appellants' request for cross-examination and hence, the Adjudicating Authority was right in denying the request and he relies upon the order of the Tribunal in the case of Leldekar Laminates Pvt. Ltd. v. Collector of Customs [1990 (50) E.L.T. 40] wherein it has been held by the Tribunal that "to call a Technical Expert (Deputy Chief Chemist) during adjudication proceedings is unusual and must be discouraged specially when his advice is clear". The learned DR submits that the report of the Chief Chemist is very clear and detailed and he has applied all the relevant tests to decide whether the yarn sample was made out of synthetic staple fibre or synthetic waste and therefore, there was no need to have allowed the appellants' request for cross-examination. The SASMIRA report was obtained much after the order of the Deputy Collector and in the absence of any evidence that it related to the item under dispute and in the absence of anything on record that a sample tested by Sasmira was drawn in the presence of Excise authorities, it should be disregarded. On the aspect of bona fide belief, his argument is that no manufacturer can take cover under the shelter of bona fide belief as every manufacturer of yarn is expected to know its composition. He therefore, prays that the impugned order be upheld and the appeal rejected.
7. We have carefully considered the submissions of both the sides. Undisputedly, the case of the department for classification of the yarn under Heading No. 5504.29 of the Central Excise Tariff Act, 1985 is based entirely on test report dated 30th March, 1982 of the Chief Chemist, CRCL, New Delhi. The report is as follows :
"Please refer to your letter No. V(Ch-55) 15/23/90, dated 4-1-1991 on the above subject.
Remnant sample received under the cover of letter No. 90-Chem/Retest/89, dated 29-1-1991 from the Chemical Examiner, Central Excise, Central Revenue Control Laboratory, New Delhi was registered here vide Lab. No. CLR-447, dated 29-1-1991 and analysed with the following results:
The sample is single ply white spun yarn having slubs at different intervals. It is wholly composed of man made synthetic staple fibres of non-cellulosic origin (polyester).
Diameter of the fibres used in the yarn are mostly uniform and gret from fused fibres and extraneous matter. In view of the above the sample of yarn under reference may not be considered as yarn made directly from synthetic fibre waste but is made out spinable fibres. Sealed remnant sample is being returned to you separately."
From the above, it appears that the criteria of uniformity of fibre diameter, absence of used fibres and absence of extraneous matter in the yarn have been applied to conclude that the yarn is not made directly from synthetic fibre waste but made out of spinable fibres. A staple fibre is of uniform length and denier as held by the Tribunal in the case of Priyadarshini Spinning Mills (supra). The relevant extract from the Tribunal's order is reproduced below :
"A wealth of technical literature has been placed before us on what is meant by 'staple' and 'staple fibre'. At page 409 of Bernard Corbman's 'Textiles fibre to fabric' (5th Edition) it is mentioned that 'staple is produced in a wide range of deniers and lengths 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 Kirk Othmer's Encyclopdia 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 Encyclopdia 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 manmade groups of fibres which have been cut to the length of the various natural fibres'. Marjory L. Joseph's 'Essentials of Textiles' at page 31 says that man-made staple fibres are short fibres cut to the length required for the processing equipment and they are cut from filaments extruded in large bundles called tow. R.W. Moncrieff 's 'Man-made fibres' 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 pages 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 distinguishes them from the waste material of Heading 55.05.
The note on waste in the HSN is with reference to length of the fibre and length of the fibre is nowhere mentioned in the test reports of samples not containing either the characteristics of waste or containing varying lengths. The lack of homogenity indicates that the fibres are waste. At this juncture it would be pertinent to note that there is no allegation that waste has not been used in the blended yarn and in fact the show cause notice itself mentions that the goods in question contained imported and generated synthetic waste."
8. This judgment has been followed in the case of Vardhan Syntex (supra). The Chief Chemist has applied the test of uniformity of diameter of the yarn. It cannot be said that his report is clear and unambiguous. It was therefore, all the more necessary to have permitted cross-examination of the Chief Chemist. It has been held in a catena of decisions that denial of opportunity to cross-examine witnesses whose statements are relied upon by the department, tantamounts to violation of fundamental principles of natural justice. [See 1991 (56) E.L.T. 220 (Tri.) and [1988 (38) E.L.T. 362 (Tri.). The necessity of cross-examination is further greater in a case like this where the Chief Chemist's report forms the sole plank of the department's case.
9. In the light of the above discussion, we set aside the impugned order, and remand the matter for de novo adjudication to the Adjudicating authority who shall pass fresh orders after permitting the appellants to cross-examine the Chief Chemist and after extending reasonable opportunity of personal hearing to the appellants. The appeal is thus allowed by way of remand.