Custom, Excise & Service Tax Tribunal
M/S. Uniworth Ltd vs Cc & Ce, Raipur on 22 January, 2015
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI
Date of Hearing/decision: 22.01.2015
Excise Appeal No. 647 of 2006-EX(DB)
[Arising out of Order-in-Original No. Commissioner/RR/47/2005 dated 28.11.2005 passed by the Commissioner of Customs & Central Excise, Raipur ]
M/s. Uniworth Ltd. Appellant
Vs.
CC & CE, Raipur Respondent
For approval and signature:
Honble Shri Rakesh Kumar, Member (Technical) Honble Shri S.K. Mohanty, Member (Judicial) 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? Appearance: Rep.by Shri A. H. Hidayatullah, Sr. Advocate and Shri Karsih Kesh Jha, Advocate for the appellant. Rep. by Shri M. S. Negi, DR for the respondent.
Coram: Honble Shri Rakesh Kumar, Member (Technical) Honble Shri S.K. Mohanty, Member (Judicial).
Final Order No.50934/2015 dated: 22.01.2015 Per Rakesh Kumar:
The facts giving rise to this appeal are, in brief, as under:-
1.1 M/s. Uniworth Ltd. (Wool Division) located at Plot No.923-945 Urla, Growth Centre, Industrial Area, Raipur, (hereinafter referred to as UL) are a 100% EOU engaged in the manufacture of all wool worsted, polywool worsted and wool silk yarns falling under sub-heading 5107.11, 5509.50 and 5107.12 respectively, for export. In the same compound, there was another unit of the same group M/s. Uniworth Textile Ltd., (hereinafter referred to as UTL), which is also a 100% EOU engaged in the manufacture of fabrics for export. The stock taking of the raw materials as well as finished goods of the first unit, UL was conducted by the jurisdictional central excise officers from 13.06.2000 to 16.06.20000 and the similar stock taking of the stock of raw materials and finished goods in respect of UTL was conducted on 17.06.2000. In course of stock taking of UL a shortage of 73.904 MTs. was found in the stock of All wool worsted Yarn. The duty involved on the yarn found short was Rs.64,14,172/-. Besides, this, was also shortage of 1.6 MT of wool waste on which the duty involved was Rs.12,564/-. The stock taking had been conducted under Panchnama and the shortage was duly noted in the Panchnama. However, in course of stock taking of UTL on 17.06.2000, stock of wool yarn of 73.904 MTs was found in excess of their recorded balance.
1.2 At the time of stock taking of UL, statement of Shri D.K. Kothari, General Manager of UL was recorded on 16.06.2000 and in that statement on being asked about shortage of 73.905 MTs of yarn in UL, he stated that this yarn had been shifted to godown of UTL as the yarn was moth and mildew affected. However, subsequently, the Department being of the view that the yarn, which was found short in the factory of UL is different from the excess quantity of yarn, found in the factory of UTL issued a show cause notice dated 8.6.2001 to UL for recovery of the central excise duty amounting to Rs. 64,14,172/- on alleged shortage of 73.904 MTs of yarn and also demand of duty of Rs.12,564/- on alleged shortage of 1.603 MTs of wool waste along with interest thereon under Section 11 AB of the Central Excise Act, 1944 and also for imposition of penalty on them under Section 11 AC. This show cause notice was adjudicated by the Commissioner vide order-in-original dated 28.11.2005 by which the above mentioned duty demand totalling Rs.64,26,736/- as made in the show cause notice was confirmed against UL along with interest thereon under Section 11 AB and besides this, penalty of equal amount was imposed on them under Section 11 AC.
1.3 Against this order of the Commissioner, this appeal has been filed.
2. Heard both the sides.
3. Shri A. Hidayatullah, Sr. Advocate, ld. Counsel for the appellant, pleaded that there was no shortage of any yarn in the factory of UL that the shortage of yarn found in the factory of UL almost matches with the excess quantity found in the godown of UTL that the appellant in this regard under their letter dated 5.4.2000 addressed to the Dy./Asstt. Commissioner, Central Excise, Raipur had informed that they had identified and sorted out approx. 75 MT of the moth & mildew affected finished goods (sub standard quality consisting of All Wool Yarn, Poly Wool Yarn and other mix Yarn) and decided to keep it separately, so that other yarn do not get affected and spoiled, that this letter had been received in the office of the Asstt. Commissioner, as is clear from the record of the office of the Asstt. Commissioner and that besides this, Shri D.K. Kothari, General Manager of the Unit on being questioned about the shortage in UL on 16.06.2000 in his statement recorded under Section 14 of the Act had explained that there is no shortage and that the quantity of 73.904 Mts. of yarn, which was not found in the factory of UL had actually been shifted to the godown of UTL, that the appellant in their reply to the show cause notice had mentioned the statement dated 16.06.2000 of Shri D.K. Kothari, General Manager and also their letter dated 5.4.2000 to the Asstt. Commissioner, but absolutely no finding has been given by the Commissioner on these points, that the statement dated 16.06.2000 of Shri D.K. Kothari, General Manager was not even relied upon and supplied to the appellant, that during the period of dispute, both the units UL and UTL being 100% EOU were under physical control and the office of the Central Excise officers was located in the factory compound itself, that such big quantity of yarn cannot be shifted clandestinely from one unit to the another unit, that too overnight, that in view of this, the alleged shortage of 73.904 MT of Yarn in the Unit of UL is not real shortage, as the goods had been shifted to the godown of UTL for the reasons as disclosed by the appellant to the Department under their letter dated 5.4.2000, that as regards the alleged shortage of 1.603 MTs. of wool waste involving duty of Rs.12,564/- the wool waste being hygroscopic in nature tends to gain weight on account of absorption of moisture and this shortage may be due to wrong recording of weight and that in view of this, the impugned order is not correct.
4. Shri M. S. Negi, ld. Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner in the impugned order and pleaded that while in the Unit of UL shortage of 73.904 MTs. was in respect of All Wool worsted yarn, All wool dyed yarn, Poly wool worsted yarn, poly wool dyed yarn, wool silk yarn and wool silk dyed yarn, etc. and there was absolutely no remark in the RG-1 Register about this yarn being damaged or moth and mildew affected, that the yarn found in the premises of UTL was mainly mixed yarn and hence, the appellants plea that the goods found short in UL had actually been shifted to UTL and as such the shortage alleged in the factory of UL was not the genuine shortage, is not correct. He also pleaded that there is no explanation for shortage of 1.603 MTs. of waste even if the appellants argument that the wool being hygroscopic in nature tends to gain weight on account of absorption of moisture is accepted, as it would not explain the shortage as the stock taking had been conducted in June, 2000 during the monsoon period. As regards the appellants letter dated 5.4.2000 intimating the Department about shifting of some damaged yarns to the godown of UTL he pleaded that this is only a letter seeking permission and it had not been followed-up by them and as such, no permission had been granted by the Asstt. Commissioner of Central Excise for such shifting. He also mentioned that Shri D.K. Kothari, General Manager in his statement dated 16.06.2000 has stated that due to oversight, he could not intimate to the Department about the shifting of the yarn to the godown of UTL. Shri Negi, ld. DR also referred to the statement of Shri D.K. Kothari, General Manager recorded on 29.05.2001, referred to in para 4.1 of the impugned order, wherein, he admitted that shortage of 73.904 Mts. in the stock of yarn and shortage of 1.603 MTs. in the stock of waste in the factory of UL and that it is this statement which had been relied upon by the Commissioner. He, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records.
6. It is not disputed that the factory of UL and the factory of UTL, both 100% EOUs, are located in the same compound. In this appeal, we are concerned with the alleged shortage in the factory of UL which was detected in the course of stock taking done from 13.06.2000 to 16.06.2000. According to the Department, there was shortage of 73.904 MTs. in the stock of various yarns and shortage of 1.603 MTs. in the stock of wool waste. The allegation of the Department is that this quantity of yarn and waste has been clandestinely removed without payment of duty. The appellants contention, however, is that while the shortage of 1.603 MTs. of wool waste is due to wrong recording of the weight as wool, being hygroscopic in nature, tends to gain weight on account of absorption of moisture, the shortage of 73.904 MTs. in the stock of other different type of yarn is not genuine shortage, is this quantity of yarn, being affected due to moth and mildew, had been shifted to the godown of UTL wherein this quantity had been found and this fact had been intimated to the Department under the appellants letter dated 5.4.2000 and it had also been stated by Shri D.K. Kothari, General Manager in his statement dated 16.06.2000.
7. While in the factory of UL shortage of 73.904 MTs. had been found, in the factory of UTL there was excess stock of 73.904 MTs. of mixed woollen yarn and as such, we are of the view that the alleged shortage in the factory of UL matches with the excess found in the factory of UTL. We also take note of the fact that the appellant under their letter dated 5.4.2000 addressed to the Asstt. Commissioner had intimated that they have identified about 75 MTs. of moth and mildew affected wool yarn and have decided to store it separately so that the other yarn do not get affected and that they intend to shift the same to other 100% EOU. UTL which is adjacent to premises of UL. This letter bears the stamp of the office of the Asstt. Commissioner and the receipt of this letter as such is not disputed. It is also seen that on 16.06.2000, the statement of Shri D.K. Kothari, General Manager had been recorded under Section 14 of the Central Excise Act, 1944 and on being questioned about shortage, had stated that this yarn has been shifted to another godown, as the yarn was damaged and moth eaten and as such, it is not the shortage. We find that this statement of Shri D.K. Kothari has neither been relied upon in the show cause notice nor the appellant had been supplied a copy of the same and instead another statement dated 29.05.2001, which had been relied upon. Though in the reply to the show cause notice and at the time of personal hearing, the appellant had referred to the statement dated 16.06.2000 of Shri D.K. Kothari, General Manager and about their intimation dated 5.4.2000 to the Asstt. Commissioner, no finding had been given by the Commissioner in respect of statement dated 16.06.2000 of Shri D. K. Kothari. With regard to the letter dated 5.4.2000, though the Commissioner acknowledges that such a letter had been received, he has observed that this was only a request for seeking of permission and as such, no permission has been granted. We do not accept this conclusion as once the letter regarding shifting of about 45 MTs of yarn to the godown of UTL had been received by the Assistant Commissioner, he should have responded as to whether he allows the shifting or not. We also find that the Commissioner in para 13 of his order has acknowledged that both the units were under physical control. If this is so, when the appellant had informed vide their letter dated 5.4.2000 about their intention of shifting about 175 MTs. of damaged yarns to the unit of UTL and this letter had been received in the central excise officer, it was for the central excise authorities to clarify this aspect. In view of this, we hold that the alleged shortage of 73.904 MTs. in the stock of yarn in the premises of UL was not the genuine shortage and as such, the duty demand and imposition of penalty on that count is not sustainable.
8. As regards the shortage of 1.603 MTs. of wool waste, this shortage is not denied and the explanation given by the appellant is that the same may be due to wrong recording of weight of the wood waste, as the wool being hygroscopic in nature tends to gain weight on account of absorption of moisture. But in our view, this explanation does not explain the shortage, as the stocktaking in the factory had been done during monsoon period in the month of June, 2000 when there is no question of yarn losing weight. In view of this, the duty demand of Rs.12,564/- on the shortage of 1.603 MTs. of wool waste is upheld.
9. In view of the above discussion, only duty demand of Rs.12,564/- in respect of the shortage of 1.603 MTs. of wool waste is upheld and the remaining order is set aside. The appeal stands disposed of as above.
(Rakesh Kumar) Member (Technical) ( S.K. Mohanty) Member (Judicial) Ckp 1