Customs, Excise and Gold Tribunal - Delhi
Parasrampuria Synthetics Ltd. vs Commissioner Of Central Excise on 7 June, 2002
Equivalent citations: 2002(82)ECC338, 2002(150)ELT399(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this appeal, filed by M/s. Parasrampuria Synthetics Ltd., are whether the Polypropylene filament yarn of 500 denier (PPFY) manufactured by them is chargeable to Central Excise duty and whether the demand of duty is time barred.
2. Shri K.K. Anand, learned advocate, submitted that the Appellants manufacture, inter alia, PPF Yarn of various deniers as well as PPFY draw twisted (DT) and flat twisted yarn of 210 deniers; that during the course of manufacture of yarn of 210 elongation in the range of 300-400% or more; that Northern India Textile Research Association (NITRA) has also opined in its Report dated 18.4.2001 that "This Polypropylene filament yarn sample is a LOY Yarn and its shelf life is very Low as compared to POY yarn."; that these Test Reports clearly show that they were manufacturing LOY which does not attract Central Excise duty; that these reports have been discarded merely on the ground that responsible persons of the Appellants have clearly admitted manufacture of 500 denier yarn and its use in the manufacture of 210 denier without payment of duty by wrongly availing Notification No. 67/95-CE. He also relied upon the Board's Circular No. 16/90-CX-1 dated 23.5.1990 in which the Board, after going through the manufacturing process, has clarified that undrawn yarn at take up stage is stored under certain temperature and humidity condition before they are taken for drawing or draw texturing otherwise undrawn yarn would deteriorate and cannot be used for manufacture of textile for weaving or knitting purpose; that the Board has held that at this stage they are still in the semi-finished stage and are not marketable; that their manufacturing deniers, which is exempted from payment of duty under Notification No. 5/99, they were manufacturing PPFY yarn of 500 deniers which was captively used without payment of duty; that after visit of Central Excise officers of their premises on 3.10.2000, a show cause notice dated 13.12.2001 was issued to them for demanding duty on PPFY yarn cleared during the period July, 1999 to September 2000 and for imposing the penalty. He, further, submitted that yam of 500 deniers comes into existence only at the intermediate stage and it is not marketable; that they have a conventional type of machine which had no infrastructure to provide partially oriented yarn (POY) which is marketable commodity and accordingly PPFY manufactured by them is not marketable and accounted for in RG I only to monitor the wastage; that low oriented yarn manufactured by them is neither bought nor sold in the market because of its very short shelf life; that "The Synthetic and Art Silk Mills" Research Association (SASMIRA) in its Test Report opined that the product has Elongation at break 534 on Day 1,505.6 on Day 3 and 568 on Day 7 and as per Note appended to Test Report Low Oriented Yarn or undrawn yarn have process is similar to the process discussed in paras 3 and 4 of the Circular. He relied upon the decision in the case of Moti Laminates Pvt. Ltd. v. CCE wherein it was held that goods are dutiable only if they are marketable or capable of being marketed. He also mentioned that in Taxation matter there is no estoppels as held by the Supreme Court in Dunlop India Ltd. v. UOI 1983 ELT 1566 (SC) and contended that even after admission by their executives, they can plead non-excisability of the product in question.
3. The learned Advocate also submitted that the entire demand of duty is time barred since all the clearances were as per the classification declarations where it had been specifically mentioned that yarn was being used captively from manufacture of other yarn which were cleared on payment of duty; that they had filed a Technical Write-up With the Department describing the process of manufacture of Polypropylene Filament yam; that they had submitted, under their letter dated 2.7.99, a lay out plan for LOY plant for manufacture of PPFY; that they were also reversing the MODVAT Credit of the duty paid on inputs used in the manufacture of 500 deniers yarn before its clearance which shows their bona fide; that even they were issuing the invoices before removing the yarn in question; that Central Excise officers had visited their factory many a times and as such everything was known to them. He relied upon the decision in the case of Pushpam Pharmaceuticals Company v. CCE, Bombay and in the case of CCE v. Chemphar Drugs and Liniments . He placed reliance also on the decision in the case of Jay Yushin Ltd. v. CCE, New Delhi 2000 (39) RLT 501 (CEGAT-LB) wherein Larger Banch of the Tribunal has held that extended time limit is not applicable in case of availability of Modvat Credit to the assessee himself. He also claimed that they would in any case be eligible to take MODVAT Credit amounting to Rs. 28,75,408 which was reversed by them and as such only a duty of Rs. 4,89,001 would be payable by them. He relied upon the decision in the case of Hindalco Industries Ltd. v. CCE, Allahabad 2001 (44) RLT 148 and J.K. Synthetics Ltd. v. CCE, Jaipur . Finally he submitted that no penalty is imposable on the Appellants at all and that too both under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules; that in any event, the penal action, if any, has to be ordered keeping in view the duty amount finally payable.
4. Countering the arguments, Shri Atul Dixit, learned SDR submitted that the Appellants have adopted the conventional method of spinning the yarn by blowing cool air; that according to Technical Books Luckert, H. Man-Made Fibre Year Book. 1992; Nakajema, T. Advanced Fibre Spinning Technology the melts are pressed through spinnerets at temperatures substantially above the melting point of the starting materials and formed into filaments; the spinning draft imparted immediately after that attenuates their diameter many times over. At the same time, the filaments pass through a blowing duct, followed by a spinning duct with a total length of 4-6 m, which ensures atmospheric solidification and cooling. The filaments are finally bundled into filament yarns or tow, spin-finished, and take-up speeds of 500-2000 m/min in conventional processes or 3000-7000 m/min in high speed spinning. He, further, submitted that except claiming short shelf life, the Appellants have not given any proof that the impugned product is not marketable; that they have to prima facie show that product is not capable of being marketed; that on the other hand they were getting the impugned product from outside before starting their own production which started only in July 1999 which show its marketability; that as per their own admission samples of the impugned products were sent to SASMIRA and NITRA, that SASMIRA had tested the samples on day-1, day-3 and day-7 which shows that it has sufficient shelf life; that NITRA also has only opined that the product's shelf life is very low as compared to POY and has not opined that it has no shelf life. The learned Senior Departmental Representative also referred to RG I maintained by the Appellants to show that the Appellants themselves were keeping the impugned products in stock for many days, which shows that the impugned product has shelf life for more than two days as claimed by them and it is thus capable of being marketed. He also referred to Appellant's letter dated 2.7.99 according to which the product is to be stored in the bonded store room and it is not mentioned that the said storage was under controlled system. He also mentioned that Shri Kailash Chandra Joshi, in his statement dated 29.12.2000, recorded after more than two months of Officers' visit, has admitted that they were purchasing yarn of 500 deniers from the market before July 1999 for manufacturing yarn of 210 deniers; that he also promised to deposit duty on PPFY of 500 deniers as the same was captively used without payment of duty; that Shri Mahesh Chandra Dadhichi, Authorised Signatory, in his second statement dated 16.10.2000 again admitted the mistake in not paying the duty on 500 denier yarn and availing exemption under Notification No. 67/95-CE. The learned SDR also contended that extended time limit for demanding duty is invokable as they had nowhere mentioned in any document filed with the Department about 500 denier yarn manufactured and captively used by them; that accordingly penalty is also imposable on them both under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules.
5. We have considered the submissions of both the sides. The fact of manufacture of 500 denier Poly Propylene yarn and its captive use in the manufacture of 210 denier yams by the Appellant is not in dispute. None of the Test Reports from SASMIRA and NITRA have opined that the yarn in question is having such a short shelf life that it cannot be brought to the market for being bought and sold. For making a product liable to excise duty what is essential is that it should be capable of being marketed. The revenue, in our opinion, have discharged the onus cast on them successfully by showing that the yarn manufactured by the Appellant is kept in stock and used captively after a few days of manufacture by them. Secondly, they were purchasing the yarn of 500 denier from the market before they started manufacturing the yarn of 500 deniers themselves. This has been clearly admitted by Shri Kailash Chandra Joshi, Vice President in his statement dated 29.12.2000. Shri Kailash Chandra Joshi looks after purchase, sale, production accounts and excise matters. He has deposed in his said statement that before the month of July, 1999, the Appellants were purchasing PPF Yarn of 500 deniers from the market. Shri Mahesh Chandra Dedhichi, Authorised Signatory, has also admitted, in his statement dated 16.10.2000, that they were getting 500 denier PPFY from the open market. Accordingly, we hold that the PPF Yarn of 500 denier, manufactured and captively used by them has been proved marketable by the Department. We also agree with the submissions of the learned Senior Departmental Representative about invokability of the extended period of limitation for the purpose of demanding duty as in no document the Appellants have declared about the manufacture of yarn of 500 denier. It has been held by the Supreme Court recently in the case of BPL India Ltd. v. CCE, Cochin 2002 (50) RLT 249 (SC), that extended period of limitation is invokable if the assessee had not disclosed the manufacture of the goods and its removal. The ratio of the decision in the case of Jay Yushin is also not applicable as the situation in the present matter is not revenue neutral as the duty of excise is payable by them even after availing of MODVAT Credit.
6. We, however, find substance in the contention of the learned Advocate that they are eligible to avail of Modvat credit of the duty paid on inputs which have been used in or in relation to manufacture of the impugned goods. It has been settled by many decisions of this Tribunal that if a product, which has been treated as non-excisable or exempted from payment of duty, is subsequently held to be exigible to excise duty, the manufacturer will be eligible to avail of MODVAT credit only subject to the condition of proving duty paid nature of the inputs. In the present matter, the Appellants have reversed the MODVAT Credit at the time of removing the yarn of 500 denier for captive consumption and this averment had not been rebutted by the Revenue. It has been held by the Tribunal in the case of J.K. Synthetics Ltd., supra, that "if subsequently demand on chips is being confirmed, reversal of credit taken on caprolactum was not in Order. Re-credit of the amounts reversed, should be effected and duty on polyamide chips can be discharged against such credit at the option of the Appellants". Similar views were expressed by the Tribunal in the case of Hindalco Industries Ltd., supra. We, therefore, hold that the Appellants are eligible to the MODVAT Credit which has been reversed by them on account of treating PPF Yarn of 500 deniers as non-dutiable. In the facts and circumstances of the case, a penalty in imposable on the Appellants as the yarn in question was removed by them for captive use without payment of duty. However, after taking into consideration the amount of MODVAT Credit available to them, we are of the view that the penalty imposed is quite excessive and there is no warrant for imposing penalty under both the provisions of Section 11AC of the Act and Rule 173Q of the Central Excise Rules. A penalty of Rs. 50,000 will meet the end of justice in the present matter. We accordingly, reduce the penalty to Rs. 50,000 (Rupees Fifty thousands only).
7. The appeal is disposed of in the above terms.