Customs, Excise and Gold Tribunal - Delhi
Srf Ltd. vs Collector Of Central Excise on 3 August, 1999
Equivalent citations: 1999(66)ECC653, 2000ECR834(TRI.-DELHI)
ORDER C.N.B. Nair, Member (T)
1. Manali unit of SRF Ltd. manufactures nylon yarn. Notification Nos. 188A/ 62, 47/90 and 53/91 gave concessional rates to "nylon yarn or polypropylene multifilament yarns of 210 deniers with tolerance of 4% proved to the satisfaction of an officer not below the rank of the Assistant Collector of Central Excise to be meant for use in the manufacture, repair, or both, of fishing nets and parachute cords." The appellants availed themselves of this exemption. The impugned order relates to certain quantities of yarn cleared under this exemption during June 1987 to February 1991.
2. The appellants were clearing the yarn after payment of duty to job workers, for converting them into twine and thereafter supplying them from their godown for use in the manufacture or repair of fishing nets and parachute cords. The impugned order confirmed duty on the differential quantity between the yarn cleared from the factory and twine cleared from the godown, on the ground that the differential quantity represents yarn not used in the manufacture or repair of fishing nets and parachute cords. The appellants have been contending that the differential quantity represents waste of yarn taking place in the process of conversion to twine and such waste is not excisable. They have submitted that the exemption is with reference to yarn "meant for use" for the stipulated purposes and the entire quantity of yarn cleared was meant for such use, thus satisfying the requirement of the notification. The (sic) in process waste of yarn so cleared cannot be held to be not meant for use for the permissible purposes and duty demand raised. They have also submitted that the wastage is only to the extent of 2%. They have relied on the following judgments in support of their interpretation of the meaning of the word "meant for use":
1. Gopalasamy Industries v. MMTC
2. State of Haryana v. Dalmia Dadri Ltd. 1988 (14) ECR 290.
3. Steel Authority of India Ltd. v. CCE 1997 (88) ELT314.
4. Fertiliser Corporation of India Ltd. v. CCE 1999 (30) RLT 480.
3. The appellants have also submitted that the demand being for the extended period of section 11A is entirely time barred as there was no suppression of facts with intent to evade payment of duty. The appellants were in the bona fide belief that there was no duty leviable on the waste involved. They have submitted that the Tribunal has held in Association Cement Co. Ltd. v. Collector of Central Excise that in such cases extended period is not attracted. They have also submitted that they were working under the Physical Control Procedure during the relevant period and on account of that also extended period for demand is not permissible as helding in the following judgments:
1. LML Ltd. v. Collector of Central Excise
2. Vanitha Snuff Works v. Collector of Central Excise
3.A.Rathinam v. Collector of Central Excise .
The appellants have also submitted that the demand is time barred as there is no warrant in the present case to conclude that the short levy, if at all, has taken place on account of collusion, wilful mis-statement or suppression of facts. They have relied upon the following judgments in support of this contention:
1. Padmini Products v. Collector of Central Excise
2. Collector of Central Excise v. Chemphar Drugs & Liniments 1989 (40) ELT 275 (SC)
3. TNHB v. Collector of Central Excise The appellants have also submitted that the imposition of penalty on the appellants was totally unwarranted in the facts of the case.
4. Countering the submissions of the appellants, learned SDR, Shri A.K. Agarwal has submitted that the appellants' submission that the entire yarn could be used only for fishing net and parachute cords and was, therefore, meant for such use is not factually correct. It is on record that part of the nylon twine was sold after payment of duty for industrial use. He also submitted that the decision of the Supreme Court in the case of Steel Authority of India Ltd. is not attracted as the yarn in question had not been issued by the appellants for the purposes indicated in the notification, while raw naptha had been received by Steel Authority of India Ltd. for use in the specified purpose. Shri Agarwal also submitted that the appellants' submission that the demand was time barred is also not justified in view of the reasons given in the impugned order.
5. In his reply, learned Counsel for the appellants, Shri Arvind P. Datar submitted that the sale of certain quantities of twine for industrial purpose does not mean that the original clearance was not meant for the purposes mentioned in the notification, as such sale was limited to quantities not usable for fishing net manufacture or repair and the sale was incidental. That the appellants had paid duty on the quantities so diverted also shows that there was no misutilisation of the exemption in respect of goods other than actually used for the purposes stipulated in the notification. He also submitted that the entire facts of the case were known to the department as they had sought permission from the department for utilisation of the waste yarn in the manufacture of caprolactum in their factory. Shri Datar referred in particular to the letter of the Assistant Collector of Central Excise, C.No. V/18/1/86/(T) dated 8.10.1986 informing the appellants as under:
Gentlemen, Subject: -Central Excise - Permission to remove nylon yarn waste without payment of duty - M/s Shri Ram Fibres - regarding.
Ref. Your letters dated 11.1.1986 and 31.7.1986.
With reference to the above, you are informed that no permission is necessary for utilising the accumulating waste for recovery of caprolactum in your factory as it is only a waste obtained from duty paid yarn. However you will have to intimate the department whenever you receive the said waste into the factory for recovery of caprolactum as required under Rule 51. The waste in question will not get covered under Notification No. 268/72 and the caprolactum recovered from the waste cannot get the nil duty exemption under Notification 36/85. The caprolactum recovered from such wastes will have to be cleared only on payment of duty @ 15% ad valorem as per Notification No. 36/85.
Yours faithfully, Sd.
(A. Vedakrishsnan) Assistant Collector of Central Excise, Madras III Division.
6. We have perused the records of the case and have considered the rival submissions. We find that the appellants have made a strong case on the ground of time bar itself. The department was fully aware of the procedure followed by the appellants, that they were clearing the yarn to job workers, that certain amount of waste arose during the conversion into twine, that certain quantity of twine was being sold after payment of duty for the purposes other than the ones stipulated in the notification, that the appellants were bringing back the waste arising during conversion into twine. The appellants had also sought permission for bringing the waste to the factory. In these facts and circumstances, we are of the opinion that allegation of suppressing facts or mis-statement of facts with intent to evade duty cannot be sustained. Accordingly, the appeal succeeds on time bar itself. The impugned Order is, therefore, set aside with consequential relief to the appellants.