Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Represented By: Shri B.L. Narasimhan, ... on 9 January, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT AHMEDABAD *****
Appeal No.E/392-396/06; E/4306/99 Arising out of OIO No.56/Commissioner(Adjudication)/2005, dt.27.10.05;
OIO No.59/Commissioner(Adjudication)/2005, dt.16.11.05 OIO No.10/Commr/99, dt.26.08.99.
Passed by: Commissioner of Central Excise & Customs (Adjudication), Ahmedabad.
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
Appellant/s: M/s Rupalee Dyg. & Ptg. Works, M/s Rainbow Textile Mills, M/s India Textiles Represented by: Shri B.L. Narasimhan, Adv., Shri Anand Nainavati, CA Respondent/s: CCE Ahmedabad.
Represented by: Ms. M.I.J. Micheal, Jt.CDR CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing : 31.07.08 Date of Decision: 09.01.2015 ORDER No. A/10092-10097/2015 DTD 09.01.2015 Per: Mrs. Archana Wadhwa, Member (Judicial) All the six appeals arising out of two different orders passed by Commissioner are being disposed off together as the issue involved is identical.
2. Briefly, recapturing the facts M/s Roopalee Dyg. & Ptg. Works is a partnership firm engaged in the process of bleaching, dyeing and printing of fabrics on job work basis from 01.09.76 onwards under Central Excise licence, converted under the registration in 1992. They are undertaking such processes on the fabric manufactured by their customers as also by themselves. M/s India Textiles is a proprietary firm which came into existence in or around 1985 and has the facility of bleaching, dyeing & printing without the aid of power or steam. Prior to July96, Notification No.253/82-CE exempted cotton fabric from payment of Basic or Additional Excise Duty in respect of specified finishing processes like padding and clanderng. However, if such specified finishing processes were undertaken in respect of the fabrics manufactured in the same factory, the benefit was not available. As such, M/s Roopalee Dyg. & Ptg. Works was clearing the processed fabric without payment of duty as well as on payment of duty, depending upon whether specified finishing processes have been undertaken by them on the fabric manufactured by them or received from other independent persons on job work basis. Similarly, other proprietary unit M/s India Textile was doing the various finishing processes without the aid of powers on job work basis for M/s Roopalee Dyg. & Ptg. Works as also for other independent persons and was enjoying the exemption. No dispute revolves on the above fact.
3. With effect from 23.07.96, Notification No.8/96-CE was issued amending Sr.No.52.15 of the earlier notification. The benefit was to be extended read with the condition No.17 of the notification. Condition No.17 of the said notification read as under:
(17) The exemption to woven fabric of wool, cotton or woven fabrics of man-made fibres mentioned against reference No.51.6, 52.15 and 55.19 in Column (3) of the said Table contained in this notification shall not apply to such fabrics processed in factory having facilities (including plant & equipment) for carrying out bleaching, dyeing or printing or any one or more of these processes with the aid of power of steam. The effect of the above condition was that if the factory undertaking finishing processes, has a facility for manufacturing processes like bleaching, dyeing & printing etc. with the aid of power, the benefit in respect of such finishing processes would not be extended to them. In as much as the appellant M/s Roopalee Dyg. & Printing Works was having above facility in their factory, the benefit of the notification was admittedly not available to them w.e.f. 23.7.96.
4. However, it is the appellants case that with an intent to avail benefit of above notification, they formed another partnership firm in the name of M/s Rainbow Textile Mills. The machinery already installed in the factory of M/s Roopalee for the purposes of undertaking finishing processes was transferred to separate unit in the name of M/s Rainbow Textile Mills. As per the appellant, the portion owned by M/s Rainbow Textile Mills was already separated by an existing wall from that portion where the process of bleaching, dyeing & printing was undertaken by M/s Roopalee even before 23.7.96. According to them, this portion was between M/s India Textile and M/s Roopalee Dyg. & Ptg. Works and was already segregated. As such, according to the appellant, they became entitled for the benefit of notification and they accordingly, availed the same.
Present demand has been made against them on the ground that there was no complete segregation between M/s Roopalee Dyg. & Ptg. Works and M/s Rainbow Textile Mills and as such the benefit of notification does not become available to them. In as much as we intend to dispose off the appeals on limitation, we refer to the correspondence exchanged by the appellant with their jurisdictional Central Excise authorities, without going into the dispute as to whether there was indeed a wall between M/s Roopalee Dyg. & Ptg. Works and M/s Rainbow Textile Mills.
5. With the coming into existence of M/s Rainbow Textile Mills, the appellant wrote a letter dt.14.10.96 to Supdtt. Central Excise having jurisdiction over their factory. The said letter written by M/s Rainbow Textile Mills is an application for registration of a new unit along with ground plan and partnership deed. Along with the said letter, the appellant also annexed old ground plan of M/s Roopalee Dyg. & Ptg. Works as also a new ground plan of M/s Roopalee Dyg. & Ptg. Works and ground plan of M/s Rainbow Textile Mills along with the deed of partnership. Both ground plans (old as well as new) showed the demarcation between two units. In response to said application by M/s Rainbow Textile Mills, Assistant Commissioner vide letter dt.31.10.96 sought certain clarifications and issued direction to M/s Rainbow Textile Mills to comply with the directions as contained in the said letter. For better appreciation, we reproduce the contents of the said letter.
Please refer to your Letter dt.16.10.96 submitted in this office for registration certificate in the name of M/s Rainbow Textile Mills, Narol, Ahmedabad along with the old ground plan of M/s Roopalee Dyg. & Ptg. Works, new ground plan of M/s Roopalee Dyg. & Ptg. Works, ground plan of M/s Rainbow Textile Mills and zerox copy of partnership deed.
On scrutiny of the papers received under above referred letter, the following discrepancies have been noticed.
(1) The Form R-1 is incomplete in as much as the information in respect of Sr.No.3 to Schedule have not been furnished.
(2) The ground plans submitted are not signed by the proper firms/units.
(3) From the ground plan, it is noticed that both the units i.e. M/s Roopalee Dyg. & Ptg. Works and M/s Rainbow Textile Mills are very adjacent to each other and in the same compound having common main gate.
(4) The information regarding procurement of machinery, supply of electricity and steam has not been disclosed i.e. whether the machineries have been purchased/leased from M/s Roopalee Dyg. & Ptg. Works, whether independent electric meter is installed and independent boiler has been set up in the factory premises of M/s Rainbow Textile Mills. It may incidentally be mentioned here that the ground plan of M/s Rainbow Textile Mills does not show where the boiler is installed.
(5) The ground plan of the newly unit shows that it has three wintch machines and one silicate machine which are prima facie part of the bleaching plant.
In the recent budget, exemption to woven fabrics of cotton when subjected to stantering, calendaring, finishing and zero-zero process (mentioned in R-1 application form) shall not apply to such fabrics processed in a factory having facilities (including plant and equipment) for carrying out bleaching, dyeing or printing or any one or more of these processes with the aid of power or steam.
You are, therefore, requested to please comply the above observations and then approach the jurisdictional Range Supdtt. in the matter of grant of registration under Rule 174 of Central Excise Rules, 1944.
6. In response to the above letter, M/s Rainbow Textile Mills vide their letter dt.05.11.96 clarified the aspect pointed out by Revenue and again sought registration of their factory. It was clarified as under:
3. We have only one main gate. But, we have two entrances to go from Roopalee Dyg. & Ptg. Works to Rainbow Textile Mills. Both the Departments are different. In fact, we have shown the Ground plan of Roopalee and the Rainbow with the Red sign in the plan.
4. The electric supply has different connection because it has different partners. These supply is used for Rainbow Textile Mills. Hence, the partner of Roopalee Dyg. has given the machinery of Rainbow Textile on lease. Even the steam connection of Rainbow Textile is given as lease. Moreover, the lease contract is for machinery enclosed.
5. We have got Hand Screen Department and hence we do silicate process by Hand Silicate Machine. We are doing only finishing works through our machine and we are doing silicate through our silicate machine of our table printed cloth.
We request you to kindly study our points and give registration of our unit as early as possible and oblige.
7. Supdtt., Central Excise vide his letter dt.26.11.96 intimated the said appellant that inspite of clarifications given by them, Assistant Commissioner has not accepted their request for separate registration and the same stand rejected. M/s Rainbow Textile Mills again took up the matter with the Department vide their letter dt.29.11.96 once again clarifying all the aspects and seeking separate registration. It is seen that vide internal communication, Assistant Commissioner of Central Excise of Ahmedabad apprised the Commissioner HQ Ahmedabad about the above fact and observed as under:
The main problem that arises is that as one enters the premises of M/s Roopalee Dyg. & Ptg. Works and M/s Rainbow Textile Mills both appears to be a single unit with absolutely no demarcation whatsoever. Moreover, the fabric being processed in Roopalee Dyg. & Ptg. Works and to be finished at Rainbow Textile Mills is common i.e. cotton fabric. The entry to both the units is also common. The party was suitably guided several times to construct a boundary wall between the two units and have separate gates. However, the party is repeatedly approaching this office for obtaining registration without agreeing to make any alteration in the premises i.e. separating the premises of the unit finishing exempted goods from the adjoining duty paying unit. It was also pointed out to M/s Rainbow Textile Mills that since the processes undertaken by them are exempted, they can file a declaration only and that registration with Central Excise is not essential but they are insisting for the same.
The ground plan of this unit has been verified in view of para 5.3 of Minutes No.03/1995 dt.27.3.95 and the action for not giving the registration number is correct. Please confirm views.
8. It is seen that subsequently a lot of further correspondence was exchanged between appellant and their jurisdictional Central Excise authorities and the appellant subsequently filed declaration with their jurisdictional Central Excise authorities and also reiterated their request for issuance of a separate registration. It is seen that ultimately, a separate registration was granted to M/s Rainbow Textile Mills on 20.4.98. Accordingly, the appellant made all the clearances by availing exemption.
9. The issue required to be decided is that in view of above factual backdrop whether show cause notices issued on 12.3.98 and 18.9.02 for the period Feb.-Sept97 and 20.9.97-23.2.98 are barred by limitation or not. Without going to the factual aspect as to whether M/s Rainbow Textile Mills and M/s Roopalee Dyg. & Ptg. Works are separate factories or not, we find that lot of deliberation was made on the above aspect by the Department and the appellant, and ultimately a separate registration was granted to them in April98. As such, grant of separate registration would show that the entire facts were examined and it is only after satisfying themselves that the same was granted. As is clear from the correspondence reproduced above that initially Revenue entertained a doubt about the separate status of the two factories. Numbers of objections were raised. The same were replied to by the appellant, with an assertion that they have removed the same. When the registration was ultimately granted, it is deemed that the Revenue satisfied themselves about the removal of all the objections initially raised by them and about the separate status of the two factories. As such, it can not be said that the appellants suppressed anything from the department. Subsequent raising of demand by alleging any suppression to the appellant, cannot be sustained. Not only that second show cause notice issued on 18.9.02 for the period 20.9.97 to 23.2.98 is almost after a period of 4= years from the date of issuance of first show cause notice on 12.3.98. The allegations and evidences in both the show cause notices are identical and it cannot be understood as to when first show cause notice was issued by Revenue, how can they make any allegation of suppression or mis-statement against the appellant while issuing second show cause notice on 18.9.02 on the same fact and circumstances, when the entire facts were known to them at the time of issuance of first show cause notice. The law declared by Honble Supreme Court in case of M/s Nizam Sugar Factory Vs. CCE 2006 (197) ELT 465 (SC), lays down that the second show cause notice issued in same circumstances is to be held as barred by limitation. In any case, we find that in view of the entire facts being in the knowledge of Revenue, even first show cause notice dt.12.3.98 is required to be held as barred by limitation. Learned advocate appearing for the appellant has fairly conceded a part of the demand would be within the limitation, but he is not contesting the same on account of small amount.
10. In view of the above, we set aside the demands raised on the above ground on the point of limitation itself (except small portion which would be within period).
11. Apart from the above, we find that small amounts stand confirmed against the appellant on various grounds which are not being disputed by M/s Roopalee Dyg. & Ptg. Works. It is also seen that most of the demands so raised, stand deposited by them even before issuance of show cause notice. While confirming as such other demands we reduce the penalties imposed on the said counts to the extent of 25% of the duty amount. The said duties and penalties required to be paid by the said appellants would be quantified by jurisdictional Central Excise authorities. We make it clear that the penalties would be in respect of other demands only as directed against M/s Roopalee Dyg. & Ptg. Works, which do not stand contested by them.
12. As regards penalties imposed upon M/s Rainbow Textile Mills and M/s India Textiles, we find that the same stand imposed on the issue of non-availability of exemption notification after 23.7.96. As we have already set aside the demand confirmed against and penalties imposed on M/s Roopalee Dyg. & Ptg. Works in respect of the said issue, we find no justification for imposition of penalties on the other two appellants. As such, we allow their appeals.
13. All the appeals are disposed off accordingly.
(Pronounced in Court on ______________________) (B.S.V. Murthy) (Archana Wadhwa) Member (Technical) Member (Judicial) cbb Per: B.S.V. Murthy
14. Since I am unable to agree with the order proposed by my Id. Sister Member (Judicial), I record a separate order.
15. Facts have already been reproduced. However, some elaboration of facts wherever applicable is required and that would be done during the course of this order.
16. Appeals have been filed against three orders of the Commissioner. In the order dt. 27/10/2005, the Commissioner had confirmed demand of duty for the period from 20/9/1997 to 23/2/1998 and had imposed penalties against Roopalee and Rainbow Textile Mills. In the order dt. 16/11/2005, the Commissioner had confirmed demand of duty against M/s.Roopalee for the period from February to September, 1997 and had imposed penalty on all the appellants. In the order dt. 26/8/1999, duty was demanded from M/s. Roopalee in the case of goods cleared by M/s.Roopalee in the name of M/s. Rainbow Textiles. In addition to duty demanded on clandestine removal, there has also been duty demanded being the differential duty on the ground that the fabrics which were cleared did not tally with the description in the invoice and also in respect of shortages. Further goods have been confiscated alslo and penalty has been imposed. However, the Ld. Advocate on behalf of all the appellants submitted that their challenge is mainly against the decision of the Commissioners wherein they had held that Roopalee is not eligible for exemption under Notification No. 232/82 and in respect of duty demanded on the ground that the other two units viz. M/s. Rainbow Textiles and M/s. Textiles did not exist. They are not contesting the issue relating to the excess found and shortage found during the verification, description difference and c consequent confiscation and duty demand on the basis of chemical tests etc.
17. In view of the above, the issues to be decided can be listed as under:-
1. Whether M/s. Rainbow Textiles can be treated as a separate factory during the period covered by the show cause notices and held to be eligible for exemption under Notification No. 8/96. If they are held to be ineligible, whether extended time limit would be applicable or not?
2. Whether M/s. India Textiles can be considered as a separate unit during the period?
18. The reasons for setting up M/s. Rainbow Textiles by the partner of Roopalee and the modalities adopted have already been discussed. The contention of the appellants is that the Department was fully ware of all the facts about the factory and its bifurcation to set up a new unit after issue of the Notification No. 8/96 in view of the correspondence relating to registration going on between the Department and the party. The correspondences between the Department and M/s. Rainbow Textiles are tabulated for better appreciation as under:-
SI.NO.
Date of letter From whom Subject 1 14/10/1996 M/S Rainbow Textiles Application for registration of new unit.2
31/10/1996 Asst. Commissioner Intimation to Rainbow Textiles to take action on the objections raised and approach the Superintendent.3
5/11/1996 Rainbow Textiles Intimation to the Range officer clarifying the points raised by A.C.
4.
29/11/1996 Superintendent of C. Ex.
Request for registration rejected 5 29/11/1996 Rainbow Textiles Submission of further clarifications and request for registration
6. 24/12/1996 Superintendent of C. Ex.
Intimation that clarifications are not acceptable
7. 1/1/1997 Asst. Commissioner Intimation to Commissioner about the request of the party and informing the Commissioner that party need not have to take registration since the goods are completely exempt. Also informs Commissioner that there is absolutely no demarcation and both Rainbow Textiles and Roopalee appears to be a single unit
8. 6/2/1997 A.C., C.Ex.
Informing the Supdt. That instead of rejecting the request for registration, grounds have to be rejected.
9. 7/2/1997 Supdt. Of C.Ex.
Informing the Rainbow Textiles that they have to conform to the requirements already intimated as regards their ground plan.
10. 26/6/1997 Rainbow Textiles Declartion filed claiming exemption.
11. 27/3/1998 Roopalee Submission of revised ground plan to the Supdt. (copy of this letter was not submitted but has been referred to by the Range Officer in his letter dt. 13/4/1998).
12. 13/4/1998 Supdt. Of C. Ex.
Seeks clarification regarding supply of steam sought from Roopalee
13. 20/4/1998 Rainbow Textiles Submission of application for registration to Supdt.
14. 20/4/1998 Supdt., C Ex.
Registration certificate issued From the above table it can be seen that after 7/2/1997 there is no correspondence between the parties and the Department till submission of revised ground plan by Roopalee on 27/3/1998 and revised application for registration submitted by Rainbow Textiles on 20/4/1998.
19. The claim made by the appellants before the Tribunal is that there was already a wall bifurcating the machinery shown to have been leased out to Rainbow Textiles and no changes were made either at the time of application for registration or subsequently and therefore there was no change required. Since the wall was already existing, once the machinery were leased out to a partnership, both the units became separate factories and therefore Rainbow Textiles is eligible for exemption under Notification No.8/96. It is very pertinent to note that till 26/6/1997, the date on which a declaration was filed by Rainbow Textiles claiming exemption, the Department had not been informed that in spite of the rejection of the application made by Rainbow Textiles, Rainbow Textiles had started functioning separately and the fact that the declaration was filed on 26/6/1997 would give an impression that from June, 1997 only appellants started treating Rainbow Textiles and Roopalee as separate factories. Even though appellants had challenged the conclusion of the Commissioner in his order that Rainbow Textiles was not a separate factory, the ld. Advocate for the appellants fairly conceded that if it is to be held that the demand is time barred as claimed by them, they would not contest the fact that Rainbow Textiles was not a separate factory till issue of registration certificate in April, 1998.
20. When the investigation teams visited the premises of Roopalee and India Textiles on 17/18-9-1997 in the presence of panch witnesses and drew panchnama they found several discrepancies. Further the investigation conducted by the Revenue also showed that persons working with Roopalee for years and persons who were getting fabrics processed by Roopalee and transporters thought that they were dealing with Roopalee and the verification of documents and records revealed that in the reality the 3 units were functioning as one. The ld. Jt.CDR made written submissions which brings out all these factors clearly and re-reproduced below:-
1. Two teams of officers carried out searches of the factory premises of Roopalee/India textiles on 17.9.1997. They found several discrepancies as follows.
a. Roopalee was not maintaining any statutory record for blended or MMF fabrics, but only for cotton fabrics, even though there were MMF and blended fabrics present. India Textiles and Rainbow only kept delivery challans and job charge invoices (Para 5 of SCN). They did not keep a lot register or fabric receipt register etc. b. There was a shortage of 32,030 L metres of 100% cotton fabrics c. There was a shortage of 7,166 L mts of Blended Fabrics which were entered in the lot register as cotton fabrics. (These shortages were accepted by Girishbhai Kantibhai Parekh Excise clerk and duty amount was debited) d. There was unaccounted stock of 1,37,576 L mts of cotton fabrics and 1,13,139 L mts of blended fabrics belonging to different lots.
e. Many lots of fabrics lying in stock in the factory premises were of the blended variety, as per subsequent test report, but were recorded as 100% cotton fabrics for which a lower rate of duty was payable.
f. At the time of visit it was found that the premises of Roopalee consisted of four long sheds containing different machinery. On the left of the entrance of the 4th shed was a gali leading to the bleaching ghats owned by M/s Roopalee. On both sides of this lane, printing tables were seen in working condition, these were of India Textiles. Other machinery was found installed and running in the same gali (shown as an inside read on the ground plan) and these were of Roopalee. Also the hand printing tables of India Textiles were found in the same building as winch machines of M/s. Roopalee. The ground plan approved in 1991 showed the same tables as lying outside. Hence both were working in the same area.
g. There was no demarcation on physical verification between Roopalee, so called Rainbow and India Textile. There was no statement by the factory personal of the existence of the third unit in the same premises. There was no sign board or identification of separate premises.
h. Quantity of each lot as mentioned in the lot register was less than the quantity of fabrics of the same lot found on search. It is clear that all the lots of fabrics which were being received were not entered in the lot register and those which were entered were in less qty. then the amounts found.
1. Certain documents were seized at the time of visit, including bills issued by various contractors who had carried out various processes on job contract basis. Some of the seized files contained contractors bills on M/s Rainbow Textile.
a. In the statement of S.M. Patel, dyeing contractor, states that he is only working for Roopalee and no hand processed fabrics have come to him for the last 7 odd years while he was working. Statement of D.W. Amraji, calendaring contractor also confirms the above. The folding contractor, Naresh K Waghela dated 7.1.1998, stated that for the last two and a half years that he was working, he had not done any folding of hand processed fabrics. In case had processing was being done by India Textiles and Rainbow, they were not folded in these premises.
b. Similarly, the grey folding contractory A.P. Rathod states that all folding of grey fabric was for Roopalee only.
c. The transporter, Shir KM Marwadi statement was to the effect that he is the only transporter and that his contract is with Roopalee. He was rainsing bills in 5 different names.
d. A statement of Shri Girish A. Parekh (Para. 32 of SCN) Authorised Signatory of M/s. Roopalee was recorded on 2.3.98. He confirmed that all the machines as listed out in the panchnama were actually installed and used for processing of the fabrics in the factory of M/s. Roopalee.
e. The grey folding contractor bills and finishing contractor bills show that in the same lot a portion of fabric was cleared by Roopalee duly accounted for on payment of excise duty. The remaining quantity of fabrics of the same lot number had been cleared under commercial bills of M/s. Rainbow Textile Mills without payment of duty.
f. The lot register for M/s Roopalee for the year 1997-98 shows the serial numbers of the lots start from 101 onwards. The contractors bills and the dispatch registers contain lot number of less than 100 as having been processed and cleared at the same time from Roopalee. In some cases though the contractors bills show certain lot number has having been processed on behalf of M/s. Rainbow Textile Mills, a portion of the same lot number was cleared on payment of duty from the factory premises of Roopalee.
g. Many bills were raised in the name of Roopalee but subsequently cut, corrected or erased in the name of M/s. Rainbow was shown.
h. Scrutiny of the register at factory gate showed the same lot number of fabrics being repeatedly dispatched consisting of different quantities, whereas only one lot number was shown in the statutory record.
i. Shri Girish K Parikh Authorised signatory of M/s Roopalee recorded his statement on 2.3.1998. He was responsible for maintaining the central Excise records, and confirmed that he entered into statutory records only those lot numbers which he was directed to do and many lots were not entered. He was shown the registers of the security personnel and confirmed them as factual. Even those lots which were not entered into the lot register but dispatched from the factory as per the security register, were processed within Roopalee with the aid of power operated machines as per his statement.
2. Thus, the modus operandi adopted by Roopalee is that though they have processed the entire fabrics received in the factory of M/s Roopalee with the aid of power operated machines, they have bifurcated the records processed fabrics, clearing a minor part under central excise invoices issued by M/s Roopalee under payment of duty and the rest under commercial invoices issued in the name of M/s Rainbow. Their claim for exemption under Notification 23/82 CE is incorrect as actually they were not following the conditions laid down in the exemption notification and merely fulfilling this on paper.
3. M/s. Roopalee has created a dummy unit viz. Rainbow dyeing and Printing which did not have a separate existence physically at the time of Panchnama and visit. The reasons in brief for the above statements are as follows:
i) From the panchnama, during the search of the factory premises of M/s. Roopalee Dyeing on 17/ 18.09.1987, the only machineries found were those of M/s. Roopalee. Even India Textiles had only a few hand printing tables in the galli and grey godown belonging to M/s. Roopalee. There was no signboard nor any dividing line between the divisions to see any difference between India Textile or Roopalee (There is no mention of Rainbow). Therefore it is not correct to hold that there was any dividing wall inside the compound. The site plan approved by Central Excise which was shown to the panchas shows four sheds, an internal lane but no internal wall or division as claimed by the learned advocate during argument. There was no wall inside and no gate. These were constructed later.
ii) The gate register kept by security at the entrance is accepted by Roopalee as including clearances from all there so called processors in the same compound, i.e. Roopalee, India Textiles and Rainbow. There was only one zero zero machine in the premises as per the panchnama. The zero zero machine is used for mercerizing fabric and is an essential process to stop shrinkage before dyeing can be done. If this zero zero machine was on rent to M/s. Rainbow as claimed by M/s. Roopalee, then it would not have possible for M/s. Roopalee to undertake any printing which would require the use of the zero zero machine. However, from the gate register, it is noticed that Roopalee was actually manufacturing and clearing some lots which would have required the use of the said machine.
Sr. No of gate register maintained by security Date Name of buyer/trader Invoice of And date of M/s. Roopalee with date Process undertaken 305 10.05.97 Ashishnd Brother 134/9.5.97 P.L.C.F. 100% machine dyeing weaving patta 336 13.5.97 Poonit Textiles 146/13.5.97 P.L.CF. 100% machine print cloth 452 25.5.97 Vinit Textile 199/25.5.97 P.L.C.F 100% machine print cloth 15.4.97 Kailash Textile 10/15.4.97 P.L.C.F. 100% machine print cloth
iii) Further, the following machines were found in the entire premises; one steam Boiler, there Roller Printing Machines, four Open Stenter machines, two calendaring machines, one zero zero machine, One Polymerisation machine (for mercerising which is an essential step before printing to prevent shrinkage), two Jet Dyeing machine, two Giger Jambow, Sprey, Small Jiger machine, One Drying range, one floor dryer, three winch machines, two pending mengal, one edger, one steam edger etc. Rainbow had no machines of their own. Rainbow in their defence reply dated 9.11.98 stated that they were hand bleaching, hand dying and hand screen printing. The claim is that Rainbow undertook processes on machines rented from Roopalee. Where there is only one boiler and one each zero zero and polymerization machine and these machines were being used by Roopalee for their own work, then how could Rainbow have undertaken any work?
iv) The appellants have not explained the manipulation of bills listed in paragraphs 45, 46, 47,48, 49 and 50 of Show cause notice dated 12.3.1998.
v) It is impossible, as per trade practice, to break up a single lot into different processes or different units. Paragraph 46 of the Show Cause Notice states that though contractors bill show certain lot numbers as being processed on behalf of Rainbow, a portion of the same lots have been cleared on payment of duty from the factory premises of M/s. Roopalee.
vi) There are contractors bills in the name of Rainbow Textiles for processes for which it did not have machinery. The claim is that these were on rent but as explained earlier, all the processes were on machines belonging to Roopalee which were under use by Roopalee. From the contactors bills it is seen that they recorded only apportion of the fabric processed by them in the statutory records, repeated the same lot number many times and cleared without accounting for the lots in the register
vii) According to annexure B to the panchnama dated 17/ 18.9.1997, the worksheet clearly mentions that from serial number 1 to12 of the annexure the quantity mentioned in the lot register was much less than the quantity of the same fabrics of the same lot physically found. Therefore the officers took only that quantity which was in excess of the lot register. This shows that modus that the quantity in the lot register was shown less so that duty would be paid on less linear metres.
viii) The entries at serial nos 13 to 27 of annexure B to the above panchnama shows fabric not entered in the lot register at all but physically present in the factory. It cannot be the case of the notice that these were received on the day of visit as the serial numbers are prior to the present lots serial no 1200 and above whereas the numbers are earlier lot numbers., the intention of not recording the lot numbers is clearly to evade duty. The lot numbers were in a single list without separation.
ix) No statutory records were maintained by Rainbow or India textiles, as is evident from the panchnama.
x) Also from the statements of the various contractors it is clear that they were working only for Roopalee, but in some bills the name of Roopalee was scored out and the name of Rainbow added.
xi) The statement of the transporter is clear that fabric was only transported for Roopalee
xii) The statement of customer Rajan B Shah is that all goods were from Roopalee even though the bills are of Rainbow.
xiii) The folding master in his statement held that no hand printed fabric was received by him for folding.
xiv) The ground plan of the so called Rainbow submitted to the range showed 3 winch machines and one silicate machine which are prima facie part of bleaching plant. Exemption to woven fabrics of cotton once subjected to stentering, calendaring and processes as mentioned in their from R 1 application is not applicable to such fabrics processed in a factory having the facility including plant and equipment for carrying out bleaching, dyeing and printing processes with the aid of power or steam. On the basis of the machinery declared by M./s Rainbow they were not eligible for the exemption for they were in the same premises as Roopalee.
xv) Hand printing and hand bleaching is a time consuming process and it is common knowledge the for 15 hand printing tables, only 1to 1.5 lakh metres can be processed. Against this, the quantitiy of 12 lakh linear metres per month on an average is not feasible. Only roller printing machines is capable of producing a huge quantity. The contention that the benefit of benefits 130/82 and 253/82 should be given to all processed fabrics claimed to have been done by M/s India textile is not tenable.
5. The ground plan filed by M/s Roopalee with the department on 30.12.1991 consisted of two parts, the first part contained the area where various types of power operated machinery were installed and the second part contained the area where different screen printing tables were installed. As per the ground plan, the entire premises (consisting of both the parts) were shown as the premises of M/s Roopalee. However the hand printing operating was in the name of India Textiles and the handprinting tables were to be found in the gali sepratly. Though in the ground plan these two units were shown as separated by a gali there were machinery of both in the gali. Further, it was found that there was no separation by a boundary or wall etc. This shows that the entire factory premises was used by M/s Roopalee and the demarcation between the premises of Rainbow, India textile and Roopalee was only on paper. It is clear that Rainbow and India Textile were not separate /independent factory on 17th 9. 1997.
6. The Central Excise law under Rule 9 holds that no person can manufacture excisable goods without taking registration from Central Excise. In case an application for registration is made and refused, as happened in this case, the company does not have any right to start manufacturing. Hence, an application which is specifically refused by the range supt. means that the unit is not authorized to manufacture any excisable goods. Any goods cleared by them are unlawful and liable to be seized. The premises of Rainbow were not demarcated from the site plan of Roopalee at the time of visit. In the case of Manibhadra Processors vs Additional Commissioner of Central Excise 2005(184) ELT 13 (Bom.) the Honble High Court held that one and the same premises cannot be registered in the name of two different persons.
7. When Rainbow applied for registration, the Range Supt replied vide letter dated 31.10.96 stating, among other points, that the ground plan of the newly created Rainbow shows three winch machines and one silicate machine which are prima facie parts of a bleaching plant. The exemption claimed by them is not applicable to factories having equipment for bleaching with the aid of steam. Further, the ground plan submitted was the same as for India textiles. In letter dated 26.11.1996 the range Superintendent rejected the request for registration. As the registration request was rejected, there could not be an automatic permission to start functioning. The letter of the A.C, Division stating that the party had been advised that they did not need to get registration is only an internal communication, clarifying that a factory carrying out exempted processes need only declare. It is nowhere stated that this would constitute a separate factory. Such an internal letter cannot be held to bind the Department.
8. Between the time to visit when there was no physical separation inside the premises of M/s. Roopalee, and the time when registration was finally granted in 1998, the ground reality is that a separation wall was built. Therefore the situation on the ground had changed, permitting the registration of Rainbow.
9. From the evidences given above, which from part of the SCN and the documents attached to the Paper books, it is clear that the claim of M/s Roopalee that there is a separate existence of India Textiles and Rainbow is unfounded in fact. Rainbow was not registered to process fabrics and any goods cleared by them would be without Central Excise permission. The other allegations against the company in the Show Cause notice are also indicative of the fact of mala fides on their part and different modus of clearing processed goods without payment of Central Excise duty due.
She has also given her own conclusion at some place and the same have also been reproduced.
21. If there was a wall even in 1996, how it could not be found by the officers when application was made for registration and by the investigating officers and the panch witnesses when they visited the factory has not been explained by the appellants at all. They have also not questioned the evidences given by the various contractors and customers. The submission is that statements have not been recorded from all the contractors and the customers. I am unable to accept this argument. In my opinion the Revenue has done enough to show that as on 17/18-9-1997 and during the course of subsequent investigation upto March, 1998, there was no segregation of the factories. There is no dispute that exemption is available to a factory and it is not the case of the Revenue that Rainbow Textiles is not a new partnership firm, but their case is that there was no bifurcation of Roopalee factory till during the period for which show cause notice has been issued.
22. As can be seen from the evidence submitted by the Jt. CDR and the orders passed by the commissioner, upto September, 1997 all the 3 units were functioning as if they were one. Some of the most important evidences supporting this conclusion are;
(i) Panchas did not find any signboard of India Textiles or Roopalee.
(ii) Panchas did not find wall bifurcating Roopalee and Rainbow Textile Mills.
(iii) There was only one Zero Zero machine and some examples have been cited by Revenue to show that Roopalee had used the machine.
(iv) Some of the bills were corrected after they were raised to change the name of the company.
(v) All contractors were not aware of existence of separate companies.
(vi) Byers thought they were placing orders on Roopalee and did not bother who actually processed.
(vii) Transporter raised bills as he was told but thought all goods were being handed over by Roopalee.
(viii) Admitted by single lot no. was given on receipt of fabrics irrespective of were it was to be processed first.
(ix) Fabrics in the same lot were divided between units and cleared.
(x) Gate register did not contain clearance, unit wise but single entry was made.
(xi) Revised ground plan was submitted by Roopalee on 27/3/1998 only.
(xii) Even after submission of declaration by Rainbow Textile Mills on 26/6/1997, Departmental investigation revealed that there was no change in functioning of units.
(xiii) Till April, 1998, there is no evidence to show that Roopalee and Rainbow Textile Mills Could function independently.
(xiv) No. delivery challans or any other documentation exited for movement of fabrics between the three appellants.
(xv) Appellants submissions cannot be accepted at face value in view of shortages, excesses, description differences, materials and other discrepancies found.
23. As regards India Textiles, I will be discussing the details separately in some detail at a later stage even though the submissions Jt.CDR include the case against India Textiles.
24. Coming to application of time bar, the correspondence between the Revenue and the party ceased in January, 1997 as can be seen from the table. Thereafter till June, 1997there is no correspondence except for the declaration filed by Rainbow Textiles which was done at 26/6/1997. The Department has taken up investigation on 17/18-9-1997 and found that the claim made by the appellants that Rainbow Textiles was a separate factory was false and the period of demand is from February, 1997 only. Only after Rainbow Textile Mills filed declaration on 26/6/1997 claiming exemption, investigation has been taken up. If this is not considered as mis-declaration and suppression of facts, it is difficult to imagine what else can be considered and suppression or mis-declaration. In view of the fact that the investigation has been bade and the demand has been confirmed for the period from February to September, 1997 and during this period except for the declaration filed by the appellant, there was no correspondence between the Department and the appellant, it can be safely assumed that till they received the declaration, the Department presumed that appellants are not availing the exemption. Whereas the facts have been found to be otherwise. Without filing declaration prior to June, 1997 and in spite of the rejection of request for registration by the Department and in spite of the intimation by the Department that they cannot consider Rainbow Textiles as a separate factory, the appellants chose to avail the exemption in the name of Rainbow Textiles, though, as subsequent investigations revealed they were not eligible for the same. The appellants have also cited some decisions in their submissions. In M/s.Prag Jyoti Syntex Ltd. case reported in 2002(146) ELT 701 (Tri. Kol.), the Tribunal had found that paragon processors had a separate factory and it was also held that exemption was available not on the basis of the manufacturer but on the basis of factory. In that case, the Tribunal found that Central excise authorities had issued two registration certificates treating the two units separated by a barbed wire as two factories. In this case, the Department had refused to issue separate registration certificates. In M/s.Vardhman Spg. & Gen. Mills Ltd. case reported in 2000(115) ELT 94(Tri), it was held that after 30 days, registration is deemed to have been accorded. As the table shows that in this case appellants were informed clearly that registration cannot be given in view of the fact that Rainbow Textiles does not have a separate factory. In the case of M/s. Broach Textile Mills Ltd. reported in 1998(79) ECR 411 (Tri) there was no dispute that the claimant did not have a separate factory. As regards M/s.Kanjur Bleaching Co. P. Ltd. case as reported in 2000(117) ELT 47 (Tri.) also, there was no dispute that factories of the same manufacturer were located at different locations. Again there was no dispute about the existence of another factory. In the case of M/s. Swastik Dyeing & Bleaching Factory case reported in 2004 (170) ELT 491 (Tri. Mum.) also the issue was again whether the exemption was qua manufacture or qua factory and there was no dispute that the factories were separate. As regards M/s.Manibhadra Processors case reported in 2005(184) ELT 13(Bom.), what was held therein supports the case of the Revenue that one and the same premises cannot be registered in name of two different persons. The appellants claim that both the factories were segregated had been proved wrong by the investigation conducted by the Revenue. Therefore this judgment is of no help to the appellants. The above discussions show that none of the cases cited by the appellants is of any help to the appellants. Therefore as regards the demand of duty against the appellants on the ground that Rainbow Textiles was not a separate factory and therefore not eligible for exemption claimed by them for the period from February, 1997 to September, 1997 had to be upheld and invocation of suppression for application of extended period is also clearly applicable in view of the clear attempts by the appellants to mis-lead the Revenue which they have failed.
25. Now, I take up the show cause notice issued on 18/9/2002 for the period from 20th September 2007 to 23rd February, 1998. The first major argument advanced by the appellants in this regard was that once a show cause notice has been issued for the period from February, 1997 to September, 1997 in March, 1998 it cannot be said that the facts were not in the knowledge of Revenue and therefore subsequent show cause notices cannot be issued invoking suppression of facts / mis-declaration etc. The appellants have cited several decisions in support of this argument but before the same are considered, it is necessary to see the facts as they emanate from the submissions of the Jt. CDR and the order-in-original together. From order-in-original dt. 27/10/2005 one fact that emerges is that the officers investigating an offence case booked against M/s.Maheshwari Folding House, Narol, Ahmedabad, found that they had received processed fabrics from Roopalee and Rainbow Textile Mills. In response to the summons issued, the appellants produced Central Excise invoices, lot register and delivery challans for the period from 20/9/1997 to 31/3/1998. On scrutiny of the invoices issued by Roopalee and Rainbow Textile mills, it appeared that Roopalee had processed grey fabrics received from the merchant manufacturers in their factory and cleared a part consignment of the finished fabrics on payment of duty and remaining part of the same processed fabrics were cleared to the same merchant manufacturers without payment of duty under the cover of commercial invoices issued by Rainbow Textile Mills. This is was lead to further investigations of the affairs of Roopalee and Rainbow Textile Mills. This is further confirmed by the fact that in the order passed in respect of the period from February to September, 1997, the last statement cited in the show cause notice and the order-in-original was recorded on 2/3/1998 whereas the order-in-original passed in respect of the period from September, 1997 to February, 1998, starts from the statement dt. 7/3/1998 and the last statement has recorded on 30/9/2002. (It has to be remembered that an addendum to the show cause notice dt. 18/9/2002 was issued on 4/10/2002). The discussion above shows that the show cause notice issued for the period from 20th September, 1997 to 23rd February, 1998 started as a follow up action in another case and culminated in the above show cause notice. This clearly shows that even while investigations were going on in respect of clearances and operations during the period from February, 1997 to September 1997 by the Revenue, the appellants merrily continued their operations as before and it should also be noted that it was only on 27/3/1998 that Roopalee submitted revised ground plan and Rainbow Textile Mills submitted registration application on 20th April, 1998 which show that apparently there was no change in the circumstances before that date. The second investigation started after summons issued on 17/2/1998 and 19/2/1998 and this would show that after the Revenue took up investigation for the second period and recovered documents for the period from September 1997 to February, 1998, the appellants took steps to change the ground plan and submit fresh application. This proves the point that the appellants continued to suppress the fact that Rainbow Textile Mills was not functioning as a separate unit and the investigations conducted for the period from September, 1997 to February 1998 culminating in the order dt. 27/10/2005 support the Departments case in the form of statements from the customers, all of whom admitted that they were getting invoices from both Roopalee and Rainbow Textile Mills and the invoices received from Rainbow Textile Mills were covering the goods on which duty was not paid. All of them also stated that they had sent the grey fabrics to Roopalee only. Since the Department already had evidences of employees, contractors etc. for the earlier period showing that all of them were working as if the whole factory was one, no further statements were record. In any case, appellants have not challenged the statements of the buyers and other evidences. The only two grounds, they have canvassed are limitation and fact that Rainbow Textile Mills was a separate unit. In this connection, while I consider all other evidences, to my mind the fact that there was a single lot register maintained by Roopalee and forms basis for processing and Roopalee used to allot different lots to the two units for different types of work and also no delivery challan or documentation was done for this purpose and on many occasions a single lot was divided and cleared in the name of Rainbow Textile Mills and in the name of Roopalee and there was a single gate which maintained a single gate register and which made entry in a single register go to show that for all purposes of the three units were one. It has also been found that the bleaching ghat was common as submitted by the 1d. Jt. CDR and in fact a plethora of evidences has been submitted to show that both Rainbow Textile Mills and Roopalee functioned as one unit.
26. I have already reached the conclusion that for this period also there was suppression of facts and mis-declaration on the part of Rainbow Textile Mills and but for the investigation taken up as a follow up action in another case, probably these facts would never have come out leave alone being within the knowledge of the Department. However, the appellants have also cited several decisions in support of their argument that a show cause notice cannot be issued for a subsequent period invoking suppression of facts on the same set of circumstances or facts which are within the knowledge of the Department. The discussion above clearly shows that in this case the second case was based on fresh investigation and arose as a result of follow up in another case and not a mere continuation of the demand already issued for a earlier period. The show cause notice could be issued only in 2002 since the last statement was recorded in September, 2002. In fact that fact that an addendum had to be issued even though show cause notice was issued on 18/9/2002 because statements were recorded subsequent to this date shows very clearly that the matter was being investigated continuously by the Revenue during this whole period. When the investigation is not completed, how show cause notice can be issued within the limitation period is difficult to appreciate. Several cases were cited before us and I find not of them relevant. In M/s. P&B Pharmaceuticals P. Ltd. case reported in 2003(153) ELT 14(SC), show cause notice issued for the period upto 31st December, 1983 was dropped and subsequent show cause notice was issued in 1988 again on the same ground i.e. the distributor and the manufacture were related persons was dropped and a 4th show cause notice was issued on 12th June, 1990 invoking extended period and demanding differential duty for the period from May, 1985 to December, 1989. No fresh investigation was conducted and no fresh facts were brought to light by the Revenue. In M/s.Nizam Sugar Factory case reported in 2006(197) ELT 465(SC) also, a show cause notice was issued invoking extended period in 1984 holding that impure Carbon dioxide manufacture is liable to duty was not at all adjudicated. A second show cause notice was issue in 1987 again invoking extended period and the demands were confirmed. In this case also no fresh investigation was conducted and fresh facts were brought to light. In M/s. Hyderabad Polymers P. Ltd. case reported in 2004(166) ELT 151(SC) also earlier show cause notice raising demand on a similar issue and for identical amount was dropped and therefore it was held that suppression cannot be invoked. In M/s.ECE Industries Ltd. case reported in 2004(164) ELT 236(SC) the question was whether the parts used for repair or replacement during the warranty period are excisable. In this case also two show cause notices issued for subsequent periods were adjudicated in 1994 and thereafter another show cause notice was issued on 27/5/1994. Again no fresh investigation had been conducted and no fresh facts were brought to light. It may be seen that none of the above cases are comparable on facts to the case of the appellants. Therefore it has to be held that suppression has been rightly invoked.
27. Before I conclude, I have to mention that acceptance of shortage, excess, test report etc. cannot be taken lightly in this case. This is because each and every excess/ shortage/ difference in discrepancy shows that the appellants were not only availing exemption which was not available to them but also were indulging in clearances of goods by giving wrong description and plain and simple clandestine removal. The very fact that the period prior to February 1997 has not been investigated and not covered by any show cause notice goes to show that the Department recognized the fact that prior to this period, the invocation of extended period may not be sustainable in view of the fact that the ground plan submitted by Roopalee in 1991 had been approved by the Revenue and there was correspondence between the Department and Roopalee and Rainbow Textile Mills during the period regarding availability of exemption to Rainbow Textile Mills. These are additional factors which support the case of the Revenue. I have knot discussed several points raised by 1d. Jt.CDR in view of the fact that all shortages/ excesses/ difference in description etc. have not been challenged and the two issues that have been challenged go in favour of Revenue.
28. As regards India Textiles, the appellants claim that only hand processing is done by this unit, no activity which attracts excise duty is undertaken by them. Their case is covered by the order-in-original passed by the Commissioner on 21/9/1999. The remand order passed by the Tribunal as a result of which the impugned order in respect of Roopalee and Rainbow Textile Mills dt. 16/11/2005 was passed is not applicable to them. In fact the remand order was passed by the Tribunal because of the claim made by the appellants that appellants had submitted a letter dt. 1/4/1999 that copies of registers maintained by India Textiles, all the fabrics processed by it and these have not been considered. In concluding whether the fabrics processed by India Textiles were liable to duty, this register would be relevant as also evidence to show whether India Textiles had machinery operated with the aid of power of bleach, dye or otherwise would also have to be looked at. The appellants had also stated before the Tribunal that they would only require an opportunity to explain the evidence already produced. Accordingly, the de-novo adjudication order5 has been passed. However, in preamble to the order of the Tribunal it is noticed that appeal No.E/4306/99 filed by M/s. India Textiles is not included Therefore, for the purpose of considering the appeal of India Textiles, the impugned order would be the order-in-original dt. 21/9/1999. India Textiles is a proprietary firm working within the compound of Roopalee and they have Hand Screen Printing Tables. The investigation has revealed that there was no demarcation between the premises of India Textiles and Roopalee. The machinery of Roopalee were found in the premises of India Textiles. Shri Mohammad hanif Ismailbhai Devdiwala power of attorney holder of India Textiles confirmed that they received fabrics from Roopalee without cover of any challan or documents. During the panchnama proceedings, 9010 Mtrs. Of fabrics were found that any bale number or lot number found to have been received without any document. Further during the search of factory premises of Roopalee on 17/ 18-9-1997, India Textiles had only a few hand printing tables in the gali and the grey godown belonging to Roopalee. There was no sign board nor any dividing line between the sheds to see any difference between India Textiles or Roopalee. The site plan approved by Central Excise shown to the panchas shows 4 sheds and an internal lane. The gali is supposed to segregate India Textiles and Roopalee but in reality hand screen printing machine tables were found on both sides of the gali and also in the godown of Roopalee. This shows that entire factory premises was used by Roopalee and the case of the Rainbow Textile Mills has also been discussed, Shri S.M.Patel, the dying contractor stated that he was only working for Roopalee and no hand processed fabrics have come to him for the last 7 add years while he was working. Statement of Shri D.W.Amraji, calendaring contractor also confirmed this. The other folding contractors also stated that they were working only for Roopalee. The Commissioner also has observed that hand printing and hand bleaching is a time consuming process and 15 common printing tables only upto 1.5 lakh mtrs. can be processed whereas the quantity of 12 lakh L.Mtrs. Supposed to have been produced by India Textiles is does not appear to be a possibility. Further the verification of the register which was the purpose for which the matter was remanded to the commissioner revealed that the appellants could not exp0lain several discrepancies. In fact all the discrepancies have been listed and discussed in the orders passed by Commissioner on remand. The discussion shows that appellant could not explain all the discrepancies even though sufficient opportunities were given to them. The fact that there was a single register giving continuous sl. Nos. to all the fabrics received for processing and only after entry in that register, the Roopalee diverted them to either Rainbow Textile Mills or India Textiles also supports the contention of the Revenue. If the three factories are separate entities, invariably the lot numbers would be different. Further it is also noticed that the verification also has revealed that many times, lots were divided and one portion of the law was cleared on payment of duty by Roopalee and another portion was cleared without payment of duty.
29. In view of the above, findings against India Textiles also have to be upheld.
30. In view of the above discussions appeals filed by all the appellants are rejected.
(B.S.V. Murthy) Member (Technical) DIFFERENCE OF OPINION
Whether the appeals have to be allowed as held by Member (Judicial) or rejected as held by Member (Technical)?
(Archana Wadhwa) (B.S.V. Murthy) Member (Judicial) Member (Technical) Nr... Opinion of 3rd Member on Difference of Opinion between the Bench
in the case of M/s Roopali Dyeing & Printing Works, M/s Rainbow Textile Mils, M/s India Textiles Vs CCE Ahmedabad-I in Appeal No.E/392-396/2006-SM, E/4306/1999.
Date of Hearing: 16.10.2014 Per: Mr.M.V. Ravindran:
1. This Difference of Opinion is placed before me as per the order of Honble President to resolve the following differences:-
(i) Whether all the six appeals can be disposed of together by a common order on the ground that issue involved is identical and arises out of two orders as held by Member (Judicial) or appeals have to be dealt with separately in respect of each impugned order as done by Member (Technical).
(ii) In the facts & circumstances in the appeals, whether it has to be held that extended period of 5 years could not have been invoked in respect of all the show cause notices and impugned orders as held by Member (Judicial) or whether it has to be held that extended period has been rightly invoked in all the show cause notices and upheld as held by Member (Technical).
(iii) In view of the fact that after correspondence between M/s Rainbow Textile Mills and M/s Rupalee Dyeing & Printing Works with the Department, registration was ultimately granted to M/s Rainbow Textile Mills can it be held that it can be deemed that the Revenue was satisfied about the separate status of the two factories and on that ground appellants can be held to be eligible for exemption as observed by Member (Judicial) or it has to be held that M/s Rainbow Textile Mills and M/s Rupalee Dyeing & Printing Works cannot be considered as separate units prior to 23.04.1998 (date of grant of registration to M/s Rainbow Textile Mills) as held by Member (Technical).
(iv) On merits whether duty demand from M/s Rupalee Dyeing & Printing Works for the period from February 1997 to September 1997 is to be upheld or not?
(v) On merits whether duty demand for the period 20.09.1997 to 29.02.1998 can be upheld or not?
(vi) On merits duty demand made against M/s Rupalee Dyeing & Printing Works for clearances in the name of M/s India Textiles in the impugned order dt.26.08.1999 is liable to be confirmed?
(vii) Other small amounts confirmed are to be upheld or not?
(viii) Whether penalties imposed are to be upheld or not?
2. When the matter was called out for hearing on 23.06.2014, ld.Counsel submitted that Difference of Opinion is only in respect of the issue of limitation and hence the matter be placed before regular bench for arriving at conclusion on the issue on merit as ld.Member (Judicial) has not recorded any findings on the merits, while ld.Member (Technical) has recorded the detailed findings on merits.
3. After hearing both sides, on that day, a reference was made to Honble President. To such a reference which was made, Honble President has observed as under:-
The Difference of Opinion recorded on 25.08.2010 is a judicial order spelling out the points on which the two learned Members have apparently differed and which require resolution by a third Member. Even if DOO is wrongly recorded, President has no power to modify the DOO or to direct the Members acting in a judicial capacity to redraft the DOO. President cannot also modify the terms of the DOO and reframe the DOO for reference. If any party to the appeals has a grievance on the correctness of the DOO, the remedy is judicial review. The third Member is required to answer the reference and may perhaps be at liberty to refuse to answer those aspects referred, on the ground that the initial conflict arising from the order dated 31.07.2008 does not present any DOO except on the point of limitation.
4. As can be seen from the above observations of the Honble President, I am required to look into only the question of limitation in this Difference of Opinion.
5. Heard both sides and perused the records.
6. Ld.Counsel appearing on behalf of the appellant would take me through the entire case records as also the impugned order and submit that the appellant was keeping Department informed as to the manufacturing processes undertaken by M/s Rupalee Dyeing & Printing Works and M/s Rainbow Textile Mills. It is his submission that the finishing processes undertaken by M/s Rainbow Textile Mills were subsequently followed up by an application for separate registration by submitting a revised ground plan. It is the submission that the ground plan for separate premises of M/s Rupalee Dyeing & Printing Works and M/s Rainbow Textile Mills was filed in April 1998 and is different from ground plan submitted earlier for approval. It is the case of the appellant that the Revenue authorities were aware of the entire issue of there being manufacturing activity undertaken by M/s Rupalee Dyeing & Printing Works and M/s Rainbow Textile Mills in accordance with the approved ground plan in April 1998. It is the submission that earlier application for ground plan and registration in the name of M/s Rupalee Dyeing & Printing Works and M/s Rainbow Textile Mills was rejected by raising different objections which were further rectified by them. It is the submission that complete correspondence exchanged between M/s Rainbow Textile Mills and Department in or around October 1996 and thereafter shows no suppression was involved wherein it was also specifically brought to the notice that the partners of M/s M/s Rainbow Textile Mills were the same as the partners of M/s Rupalee Dyeing & Printing Works and that the machines and land had been rented to M/s Rainbow Textile Mills by M/s Rupalee Dyeing & Printing Works. It is the submission that despite giving all this information, Department chose not to raise any objection and granted separate registration to both the appellants.
7. Ld.D.R., on the other hand, would draw my attention to the fact that there was mis-leading information from the appellant to the lower authorities. It is his submission that the adjudicating authority has recorded clearly that the applications for separate registrations were nothing but an eye-wash. It is his submission that despite there being no such machinery in the M/s Rainbow Textile Mills, they applied for registration in October 1996 which was rejected hence during the relevant period for which the demand has been raised i.e. from February 1997 to September 1997, the show cause notice invoking extended period was correct. It is also his submission that there was no separate factory in terms of provisions of Section 2(e) of Central Excise Act 1944 as it was not recognized and approved by the proper Central Excise officer hence the finishing operations carried out in the premises of M/s Rupalee Dyeing & Printing Works in the name of M/s Rainbow Textile Mills could not be considered as eligible for exemption and hence plea of time bar does not held good.
8. I have considered the submissions at length and perused the records.
9. On perusal of the records, I find that the claim of the ld.Counsel that they had kept the Department informed about the status of the activities being carried out in the premises of M/s Rupalee Dyeing & Printing Works as well as M/s Rainbow Textile Mills while applying for registration seems to be inconsistent with the findings recorded by the adjudicating authority.
10. Though there is correspondence which has been entered into with the Department by M/s Rupalee Dyeing & Printing Works and M/s Rainbow Textile Mills, the crux of the issue is that the extended period invoked for demand of duty on the clearances indicated on the invoices of M/s Rainbow Textile Mills. It is the case of the Revenue that M/s Rainbow Textile Mills has no infrastructure for manufacturing or undertaking the finishing activity as per the records maintained by them. These findings of the adjudicating authority has some force in as much as the appellant was not able to convince as to the existence of the facility for finishing quite substantial quantity of processed fabrics. In the absence of such infrastructure facility, the obvious findings would be that M/s Rupalee Dyeing & Printing Works has undertaken the finishing which were indicated as being undertaken by M/s Rainbow Textile Mills. In my considered view, the extended period is correctly invoked as the entire case of the Revenue is that the finishing activity which has been intimated by M/s Rainbow Textile Mills even after granting of registration was not undertaken by them but was undertaken by M/s Rupalee Dyeing & Printing Works. On perusal of the records, I find it so as the folding registers and other records indicate the actual activity of finishing having been undertaken by M/s Rupalee Dyeing & Printing Works.
11. Though both sides have relied upon the various case laws for driving home the point on the limitation, on factual matrix as reproduced by me hereinabove, the invocation of extended period in the case in hand is correct. Accordingly, I do not reproduce the ratio of the various case laws which have been cited before me.
12. In view of the foregoing, I concur with the views of ld.Member (Technical) that the extended period has been correctly invoked against the appellants.
13. Registry is directed to place the files before the Bench for passing appropriate orders.
(Pronounced on _______________________) (M.V. Ravindran) Member (Judicial) cbb FINAL ORDER In view of the majority order, all the six appeals are rejected.
(B.S.V. MURTHY) (ARCHANA WADHWA) TECHNICAL MEMBER JUDICIAL MEMER
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