Customs, Excise and Gold Tribunal - Mumbai
M/S. Ashima Dyecot Ltd, Shri Atul K ... vs Commissioner Of Central Excise, ... on 28 May, 2001
Equivalent citations: 2001(138)ELT263(TRI-MUMBAI)
ORDER
P.G. Chacko, Member(Jucicial)
1. These are application for waiver of pre deposit of duty and penalty amounts, and for stay of recovery thereof pending the appeals.
2. Out of these appeals, the appeal of M/s Ashima Dyecot Ltd (hereafter referred to as the company) is against the order of the Commissioner, confirming a demand of additional duty amounting to Rs70,08,789.00 on bleached cotton fabrics cleared within the factory of production for captive use during the period August 1996 to February 1998 under Section 11A of the Central Excise Act read with Rule 9(2) of the Central Excise Rules, against the company, and imposing on them a penalty of equal amount under Section 11AC/Rule173Q. The remaining appeals filed by offerers of the company are against the same order of the Commissioner imposing penalties on them under Rule 209A of the Central Excise Rules.
3. We have carefully gone through the records. the company is engaged in the manufacture of 100% cotton fabrics falling under Chapter 52 of the Central Excise Tariff Act's Schedule and interlining cotton fabrics falling under Chapter 59 of the Schedule. During the material period, they cleared bleached cotton fabrics within the factory and used the same in the manufacture of interlining cotton fabrics without maintaining any RG1 register in respect of production of bleached cotton fabrics or any RG23A Part I & II register, and without filing any RT-12 return in respect of the said goods cleared for captive consumption and without payment of duty. The department issued a Show Cause Notice dated 23.7.1999 to the company seeking recovery of the aforesaid amount of additional duty of excise on the cotton bleached fabrics captively consumed in the manufacture of the final product, namely, interlining cotton fabrics for the aforesaid period by invoking the extended period of limitation under the proviso to Section 11-A(1) of the Act. The Show Cause Notice, further, proposed to impose penalties on the company as well as on some of the officers thereof, who are in appeals before the Tribunal at present. The company resisted the Show Cause Notices on the ground that they had, in their declarations filed under Rule 173B of the Rules, claimed exemption in respect of cotton bleached fabrics under Notification 67/95-CE dated 16.3.1995, and on the further ground that the extended period of limitation was not invocable against them inasmuch as they were under the impression that the goods were exempted from payment of additional duty of excise under the notification during the material period and had therefore no wilful intention to evade payment of duty, nor had they wilfully suppressed anything from the department. They had also contended that the department was in the knowledge of their manufacturing activity as well as of the fact that they had claimed the exemption in respect of the goods in question under the aforesaid notification. The Commissioner, who adjudicated the dispute, however, rejected all the contentions of the party and passed the impugned order. He also found that the officer of the company had, by their commissions or omissions, rendered themselves liable to penal actin under Rule 209A of the Rules, and hence imposed penalties on them.
4. We have heard both sides. The learned counsel Mr Deven Parekh has not, for purpose of the present applications, pressed the issue whether the cotton bleached fabrics were, in fact, exempted from additional duty of excise under Notification 67/95-CE ibid. His thrust is on the challenge to the Commissioner's order on the ground of limitation. He submits that, in the declarations filed under Rule 173B of the Rules from time to time, the company had claimed exemption in respect of cotton bleached fabrics under the notification, and that in the flowchart submitted to the department as early as in 1997, they had apprised the department of their manufacturing process in which cotton bleached fabrics manufactured and cleared within the factory of production were used in the manufacture of the final product, interlining cotton fabrics. He further submits that in the audit of records held in 1997, no objection was raised on the question of liability for payment of additional duty of excise on cotton bleached fabrics. Since the department was very well in the knowledge of the manufacturing process, it was not entitled to allege suppression of facts against the company. It is the further contention of the learned counsel for the appellants that the department had, by Show Cause Notice dated 29.9.1998, demanded additional duty of excise on cotton bleached fabrics manufactured and captively consumed in the factory for production of the final product during the period March 1998 to May 1998 on the basis of allegations materially identical to the allegations contained in the Show Cause Notice in question in the present appeals, and therefore the department could not have raised the same allegations of suppression of facts intention for evasion of duty etc. against the company in the subsequent notice issued for the prior period of August 1996 to February 1998. The very issuance of the earlier Show Cause Notice containing identical allegations by itself indicated the knowledge of the department about the manufacturing activity and matters connected therewith of the company. Therefore, the subsequent Show Cause Notice would not be sustainable under the proviso t Section 11A(1) of the Act. In support of this submission, the learned counsel has relied upon the Tribunal's decisions in the case of Srinivasan Cables (P) Lt vs CCE, Hyderabad 2000 (126) ELT 1057 and Bhor Industries Ltd vs CCE, pune 2000 (125) ELT 510. The learned counsel has raised yet another contention. He submits that, even if it is held that additional duty of excise was leviable on cotton bleached fabrics manufactured and consumed captively for the manufacture of final product during the material period, it was open to the company to avail the benefit of Modvat credit of any such duty at the stage of discharging the duty liability on the final product and therefore, n any case a revenue neutrality situation would have arisen. The learned counsel submits that, in such a situation, there could have been no valid charge of intent to evade payment of duty and hence the larger period of limitation was invoked for demanding duty for the material period wrongly. the learned counsel has drawn support to this submission from the decision of the Tribunal's Larger Bench in the case of Jay Yuihshin Ltd vs CCE, New Delhi2000 (119) ELT 718, as well as the Tribunal's decision in the case of SL Packaging Ltd vs CCE 2000 (117) ELT 466. The learned counsel therefore submits that the entire demand is barred by limitation. On this count, the appellants may be granted complete waiver of pre deposit.
5. The learned Departmental representative has reiterated the findings of the adjudication authority and has submitted that in any of the declarations filed by the company under Rule 173B of the Rules, they had not specifically declared that they would be availing the benefit of the notification in respect of additional duty of excise on cotton bleached fabrics meant for captive consumption for the manufacture of the final product. Had the appellants any intention to avail the benefit of Modvat credit on cotton bleached fabrics, they would have maintained RG23A Part I&II registers in respect of the said goods, but they did not do so, nor did they maintain any RG1 register or file any RT12 return in respect of the goods. Such conduct of the party smacked of wilful intent to evade payment of duty on cotton bleached fabrics. The learned Departmental Representative has also challenged the appellants' claim that they were under the bona fide impression that the benefit of the notification was available to additional duty of excise on cotton bleached fabrics manufactured and captively consumed for the manufacture of the final product. The notification, which was issued under Section 5A of the Central Excises and Salt Act, 1944, and not under any of the provisions of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, granted exemption from the whole of the duty of excise specified in the Schedule to the CETA and did not grant any such exemption in respect of the additional duty of excise. The provisions of the notification being clear and unambiguous, there was hardly any justification for the appellants to carry and impression that the benefit of the notification was also available to additional duty of excise on the cotton bleached fabrics. The learned Departmental Representative has therefore justified the impugned order of the Commissioner rejecting the assessees' plea of limitation. He has further sought to distinguish the case law cited by the learned counsel for the appellants.
6. Carefully examined the rival submissions. We note that the appellants have no Prima face case on merits, nor has the counsel for the appellants pressed any such case before us. His focus in on limitation, and that too with particular reference to "revenue neutrality". His submission that the larger period of limitation was not invocable on account of alleged knowledge of the department regarding the manufacturing activity of the assessees is prima facie unacceptable inasmuch as the plea of knowledge of department is no longer a valid plea in view of the settled position of law on the point. As regards the counsel's plea relating to Modvat credit, we find that the appellants have not been able to show that, at any point of time during the material period, they had any intention to avail the benefit of Modvat credit, as evidenced by the fact that the company never maintained the necessary records or took necessary steps for availing such benefit. The plea of the assessees is that this had happened so only because of their bona fide impression that the cotton bleached fabrics manufactured and captively used as inputs in the manufacture of the final product were exempted form the whole of additional duty of excise during the material period. We, however, find that if the assessees had been called upon to pay duty of excise on the cotton bleached fabrics during the material period, they would certainly have taken Modvat credit of such duty and utilised the same for payment of duty on the final product during such period. The provisions of Rule 57E of the Rules are relevant in this context. It appears that sub rule (2) of Rule 57E would have enabled the assessees to take credit of any additional duty of excise paid on the cotton bleached fabrics. Sub rule (3) provides that the provision of sub rule (2) shall not apply in cases where the duty became recoverable from the manufacturer of inputs on account of any short levy, or non-levy by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. When these provisions were referred to by the learned Departmental Representative the learned counsel has submitted that sub rule (3) had come into force sometime in 1997 and therefore the present assessees would be entitled to the benefit of sub rule (2) of Rule 57E, at least till the date on which sub rule (3) came into force, Even if it is assumed that the present demand of additional duty of excise has been occasioned by suppression of facts, or any other reason as specified under clause (3). The learned counsel has submitted that sub rule (2) of Rule 57E of the Rules is applied to the case of the present assessees, about half of the demand for duty will stand offset by the benefit of Modvat credit of the duty payable on cotton bleached fabrics manufactured and captively consumed till the time of coming into force of Rule 57E (3) of the Rules. We find some force in this plea. We also find that the learned counsel has been able to draw support from the Tribunal's decisions in cases of S.L. Packaging Ltd vs CCE (supra) and the larger bench decision in Jai Yushin Ltd CCE (supra).
7. In Jay Yuhshin Ltd vs CCE's case the Larger Bench was considering an issue referred by regular Bench and that issue was stated in para 2 of the order of the Larger Bench extracted below:
"The referral Order had noted that there was a conflict of views between different Benches of this Tribunal on the question raised before the Bench, viz., that in a case where the Department alleges intention to evade payment of duty, whether it was sufficient if the assessee shows that he had an alternative procedure available to him which , if followed, would have allowed him the benefit of set off or Modvat credit, thus making the alleged short levy/non-levy of duty, Revenue-neutral and whether that would be sufficient ground for establishing that there was no intention to evade duty."
8. On the above issue, the Bench records its finding as under:
"(c) With particular reference to Modvat scheme (which has occasioned this reference) it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods;"
9. We find that the above position of law lends much support to the learned counsel's submission that, at least to some extent, the present assessees would bring abut revenue neutral situation, if allowed to avail modvat credit for discharging duty liability on their final product. In a revenue neutral situation, the assessees might be held to have no intention to evade payment of duty, as held by the Tribunal in S.L. Packaging Ltd (supra).
10. Having regard to our findings recorded above, we are of the view that even on the point of limitation, the assessees have no case for complete waiver of pre-deposit, as their plea of revenue neutrality is limited by the provisions of sub rule (3) of Rule 57E of the Central Excise Rules. The period of dispute in this case is August 1996 to February 1998. Sub rule (3) of Rule 57E had come into force in 1997. If it were to be hold that the assessee had indulged in suppression of facts with intent to evade payment of additional duty of excise on cotton bleached fabrics during the material period, then there would be no question of availment of Modvat credit from the date on which the said dub-rule (3) came into force. It follows that the revenue neutrality plea, in such a situation, may hold good only up to the date on which sub rule(3) came into force, and that period is approximately half of the period of dispute, in which event, the plea of revenue neutrality would not be applicable to the other half. Having regard to the totality of the circumstances, we are inclined to direct the company to pre-deposit Rs 15.00 lakhs for purposes of Section 35F of the Act within a period of six weeks from the date of receipt of a certified copy of this order. On deposit of this amount, pre-deposit of the penalty amounts shall stand completely waived.
11. As regards the amounts of penalty imposed on the other appellants, we have found that the findings of the adjudicating authority are prima facie not strong enough to warrant imposition of such penalty on the officers of the company under Rule 209A of the Rules. We therefore waive the requirement of pre deposit of those amounts.