Customs, Excise and Gold Tribunal - Calcutta
West Dinajpur Spinning Mills Ltd. vs Commr. Of C. Ex. on 14 July, 2006
ORDER Archana Wadhwa, Member (J)
1. All the appeals are being disposed off by a common order as the issue involved in all of them is identical. However, for the purpose of detailing of facts, we would take the same from the file of M/s. West Dinajpur Spinning Mills Ltd.
2. After hearing both sides, we find that the dispute in the present appeals relate to the exemption availed by the Spinning Mills in terms of various Notifications issued from time to time (Notification Nos. 4/97-C.E., 5/98-C.E., 5/99-C.E., 6/2000-C.E.). In terms of the said Notifications issued under Section 5(a)(1) of Central Excise Act, nil duty is payable in respect of the goods purchased by a registered Apex Handloom Co-Operative Society. The National Handloom Development Corporation or a State Government Handloom Development Corporation, subject to the condition enumerated therein. For better appreciation, we re-produce the conditions stipulated in the Notification, which are more or less identical.
If the manufacturer produces at the time of clearance a certificate from an authorized officer of the Handloom Co-operative Society, National Handloom Development Corporation (NHDC) or State Government Handloom Development Corporation, as the case may be that the yarn is going to be used only on handloom.
The goods so purchased by aforesaid agencies, the payment for which is to be made by cheque drawn by such Co-operative Society or Corporation, as the case may be, on its own Bank Account
3. As is apparent from the above condition annexed to the Notification, the yarn manufactured by the Spinning Mills is exempted from the payment of duty, if the same is sold to Apex bodies specified in the Notification and such apex bodies make payment for the value of the yam so purchased, by cheque, drawn on its own bank account. Admittedly, the yarn manufactured by the spinning mills was being sold by them to Tantuja and Tantusree, at the price fixed at the Yarn Committee Meeting. Admittedly, Tantuja and Tantusree are Apex bodies established by the State Government as West Bengal Handloom & Powerloom Development Corporation Ltd. The spinning mills (the appellants herein), are undertakings of Government of West Bengal and come under the Administrative control of the Cotton and Small Scale Industry Department, Government of West Bengal. As per the norms fixed by the Government, it is obligatory on the part of the spinning mill to produce at least 50% hank yarn of the total production of the spinning mill so as to save the handloom industry. Such hank yarns are suitable for use in the handloom sector, the Government of West Bengal Cotton and Small Scale Industry department, vide Notification dated 25-2-94, laid down the procedure for selling of yarn as also the process of fixation of price to ensure proper distribution of the same, with an objective to ensure the distribution of such yarn to the million handloom weavers in the unorganized sector mostly located in Rural areas and at remote places. Two Apex bodies Tantuja and Tantusree were established with the sole objective to cater the raw material requirements of rural handloom weavers.
4. There is no dispute in the present appeal that the yarn in question has been sold to Tantuja and Tantusree, who have taken deliveries and have made payments within seven days from the date of receipt of the goods by way of cheques drawn on the said Apex bodies accounts. The requisite certificates have also been produced to the effect that such yarn would be used in the handloom industry.
5. The Commissioner in his impugned order has held that though the payment of the yam in question has been made by Tantuja and Tantusree by way of cheque but the investigation conducted by the revenue revealed that the appellants were holding sale meeting with the Tantuja and Tantusree officers and traders were also invited. Traders were directed to make payment to Tantuja and Tantusree by way of pay order or bank draft and the said Tantuja and Tantusree, after receiving payment from the traders, deduct 1.5% Commission for their services and would make payments to the yarn manufacturers by way of cheque. The Commissioner has concluded that though the sales were being shown as having been made to Tantuja or Tantusree, the same were in fact being made to traders, with the connivance of Tantuja and Tantusree.
As regards second condition of the Notification requiring production of a certificate from an authorized officer of National or State Handloom Development Corporation at the time of clearance from the factory to the effect that such cleared yarn was going to be used in handloom, the Commissioner has observed that the appellants have not taken sufficient care to see that the traders are selling the yam to handloom weavers only. The spinning mill have only produced certificate without ensuring that such yarn is actually being used in the handloom and no steps have been taken by them to the above effect. As such, he has concluded that the second condition is also not satisfied.
6. After hearing both sides, we find that admittedly Tantuja and Tantusree are Apex Handloom Co-Operative Societies and as per Notification issued by the State Government, were required to purchase the yarn from the appellants to ensure their proper distribution. Two conditions of the Notification as regards purchase of goods by the Apex Body and payment by cheque from their own accounts stands satisfied in the present case. Admittedly, there is no direct sale by the spinning mills to the traders, as recorded in the impugned order. The presence of traders in the meeting held for fixation of prices and payment by such traders to the Apex bodies, who in turn made payments to the appellants does not establish that the goods were sold directly to the traders. On the other hand it establishes that the goods were purchased by the Apex body in question, for further distribution to the traders, who further sold the same to the ultimate Handloom weavers, who might be located in the interior of the country having no access to the Apex Body for direct purchase of the goods. In any case, there being no further condition as regards the disposal of the purchased yarn by the Apex body, revenue's anxiety to reach the purchaser of the Apex body and the ultimate purchaser of the yarn is beyond the scope of the notification. The Commissioner has also referred to the fact that the yarn was being lifted from the mill premises even after the sale to the Apex Body was completed. This has been explained to us in terms of the Notification issued by the State Government on 25-2-94. The spinning mills are required to provide services of their godown and storing places so as to avoid extra financial burden on the Apex Body to look for the storage of the purchased yarn somewhere else. This fact, by itself and in the light of the State Government Notification leaves no scope for any adverse inference against the appellants that the goods were being sold by them to other buyers and not to Tantuja and Tantusree.
7. As regards the second condition of the Notification, we find that the appellants have admittedly produced the certificate from the relevant authorities to show that the goods are to be used in the handloom industry. There is no evidence on records to show that the same have been used elsewhere. In fact the Commissioner has observed in his impugned order that it was not possible for the local jurisdictional Central Excise authorities to ascertain the authenticity of such certificate. If that be so, then the certificates are required to be accepted by the revenue. Failure on the part of the revenue to produce any evidence contrary to the certificates cannot be made a ground to hold the certificate to be incorrect.
8. On the contrary the appellants have produced on record the experts opinion in the shape of letters from the members, College of Textile Technology stating that Cotton yarn in cross reel hanks are suitable for handloom industry due to two advantages viz., it can be bleached or dyed in hank form and due to less chance of entanglement during the process. The letter further states that in powerlooms industry the packages normally used are cone and cheese, which are directly wound from the ring bobbins. The quality should be good with adequate strength for use in powerloom industry. The said certificate has been discarded by the Commissioner on the ground that the same does not specifically say that hank yarn cannot be used in powerloom. We find that it is the revenue, who is alleging the use of yarn in powerloom industry and as such, it is for them to prove so. They have failed to produce any evidence to show that the said yarn has been used in powerloom.
9. The applicants have also strongly contended that having produced the certificate to that effect, no further onus is cast upon them by the notification conditions to ensure that the same are actually used in the handloom industry. The appellants having produced certificates issued by the Tantuja and Tantusree for each and every clearance, there was full and complete compliance of the condition. Notification did not require any end use certificate from actual users of the goods. The yarn having been purchased by Tantuja and Tantusree, it was their duty to see the fair distribution of the same to the handloom sector. It is well established by various decisions of the Tribunal that no end use certificate is required to be furnished in the absence of any such requirements built in the notification. Further, the expression "for use" has been interpreted as "intended to be used". Inasmuch the certificate for intended use were issued, and further use of the same being in the hands of Apex body, who are held responsible for distribution, the fact of actual use of the yarn will not effect the appellant's claim to the benefit of the notification. Wherever the legislation intended to impose actual use condition, the same has been specifically introduced in the notification. Such an extraneous condition cannot be imposed by the adjudicating authority.
10. In view of the foregoing, we do not find any reasons to deny the benefit of exemption notification in question to the various manufacturing unit or to impose penalties, either upon them or on Tantuja and Tantusree. The impugned orders are set aside and all the appeals are allowed with consequential relief to the appellants.
11. Inasmuch as the appeals have been allowed on merits, we are not dealing with the appellant's plea of demand being barred by limitation as the same would be only of academic interest.
(Pronounced in Court)