Custom, Excise & Service Tax Tribunal
) Paramount Mills (P) Ltd vs Commissioner Of Central Excise on 10 July, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal Nos.E/162/2008, E/163/2008 & E/296/2008
[Arising out of Order-in-Original No.1-2/2008-CE dt. 14.1.2008 passed by the Commissioner of Central Excise Madurai]
For approval and signature :
Honble Shri P.K. Das, Judicial Member
Honble Shri R. Periasami, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? :
3. Whether the Members wish to see the fair copy of
the order? :
4. Whether Order is to be circulated to the Departmental authorities ? :
1) Paramount Mills (P) Ltd.
2) Paramount Textile Mills Ltd.
3) M. Thiagarajan, M.D. Appellant
Versus
Commissioner of Central Excise,
Madurai Respondent
Appearance:
Shri S.Muthuvenkatraman, Advocate For the Appellant Shri M. Rammohan Rao, DC (AR) For the Respondent CORAM : Honble Shri P.K. Das, Judicial Member Honble Shri R. Periasami, Technical Member Date of Hearing : 10-07-2014 Date of Decision : 10-07-2014 FINAL ORDER No.40695-40697/2014 Per R. Periasami
1. In pursuance of Hon'ble Madras High Court's order dated 8.4.2014 in C.M.A.(MD) No.840 to 842/2009, these appeals are taken up for hearing and disposal.
2. The brief facts of the case are that M/s.Paramount Mills (P) Ltd. (for short, "PML") are the manufacturers of Grey Cotton Fabrics (other than Denim Fabrics) not subjected to any process falling under Chapter Heading 5207.20 of CETA'1985. The Headquarters (Preventive) unit, Madurai Commissionerate visited the appellant No.1 unit and registered an offence case and found that the appellant No.1 was manufacturing Denim Fabrics falling under Chapter Heading 5702.10 and clearing the same to M/s.K.G. Denim Ltd. (for short, KGDL) without payment of duty. The said goods were sold to KGDL without mentioning the description of the fabrics on the invoices but only indicating sort numbers.
3. During the investigation, it was also revealed that there was another unit by name M/s. Paramount Textile Mills Ltd. (for short, PTML) which was located near the appellant No.1 unit and the said unit also manufactured identical Denim Fabrics in addition to Grey Cotton Fabrics. The same were cleared to KGDL without payment of duty and without declaring the description. Statements were recorded from Shri S.Saravanakumaran, Asst. Weaving Manager, Shri R.Sivaramakrishnan, Finance Manager and Shri M.Thiagarajan, Managing Director of PML. Statements were also recorded from Shri S.Swaminathan, Deputy Weaving Manager, Shri N.R.Janardhanan, Office Manager and Shri E. Thangapandian, Accountant of PTML, and various documents were recovered. According, a show cause notice No.06/2006 dt. 2.8.2006 was issued to PML (Appellant No.1) proposing recovery of duty of Rs.97,22,578/- along with interest on the Denim Fabrics cleared clandestinely during the period from July 2001 to May 2002 and further invoking extended period and also proposing imposition of penalty on its Managing Director Shri M. Thiagarajan (Appellant No.3). Another SCN No.23/2006 dt. 2.8.2006 was issued to PTML (Appellant No.2) proposing recovery of duty of Rs.34,12,380/- on the Denim Fabrics cleared during the same period by invoking extended period and for levy of interest and also for imposition of penalty.
4. The Commissioner of Central Excise, Madurai adjudicated and passed a common adjudication by Order-in-Original No. 1-2/2008-CE dt. 14.1.2008 which is challenged in the present appeals and confirmed the demand of Rs.79,72,224/- in respect of 1st SCN No.06/2006 along with interest and also imposed equal penalty on PML and imposed a penalty of Rs.5 lakhs on Shri M. Thiagarajan, M.D. The adjudicating authority also confirmed the duty demand of Rs.33,04,023/- in respect of 2nd SCN No.23/2006 on PTML along with interest and equal penalty. The adjudicating authority has dropped proceedings for recovery of duty of Rs.17,50,354/- raised against PML and Rs.1,08,356/- raised against PTML and dropped penal action against Smt. Lakshmi Murugesan, M.D. of PTML.
5. M/s.PML, M/s.PTML and Shri M. Thiagarajan, M.D of PML filed appeals before this Tribunal. This Bench of the Tribunal vide common Final Order No.861, 862, 863/2009 dt. 23.7.2009, after hearing both sides upheld the duty demands and penalty in respect of all the appellants and upheld the adjudication order and dismissed their appeals. Aggrieved by this, appellants preferred C.M.A. (MD) No.840 to 842/2009 along with M.P.Nos.1, 1 and 1 of 2009 before the Madurai Bench of the Hon'ble Madras High Court. The Hon'ble High Court vide interim order dt. 3.9.2009 granted interim stay of Tribunal's order dt. 23.7.2009. The Hon'ble High Court in its Final Order dt.8.4.2014 has allowed the CMAs and set aside the Tribunal's order and the matter was remanded back to the Tribunal for fresh disposal. Hence the appeals were taken up for fresh consideration and disposal.
6. Heard both sides.
7. Shri S.Muthuvenkatraman, Ld.Advocate for the appellants submits that the entire show cause notice is hit by limitation of time as there is no suppression of facts. The department is fully aware of the manufacture and clearance of the fabrics. The appellants were manufacturing grey fabrics on job work basis and clearing the same to M/s.KGDL without payment of duty under Rule 4 (5) (a) of Cenvat Credit Rules as the same were further processed by the original manufacturer M/s.KGDL who in turn cleared on payment of duty for domestic market or cleared for export without payment of duty either under Bond or Leter of Undertaking. He submits that the appellants have not carried out any further processing of fabrics and they manufactured only grey fabrics which is not liable for Central Excise duty. He further submitted that they were receiving duty paid cotton yarn from M/s.KGDL and the same were sent for dyeing without availing cenvat credit whereas M/s.KGDL have availed deemed credit. They have only manufactured grey fabrics and the same were returned to the principal manufacturer. He also submits that since they were following the procedure prescribed under the rules as a job worker, they have intimated to the department at every stage. He has relied upon the following letters :
(1) Letter dt. 28.6.2001 issued by M/s.KGDL addressed to the Asst. Commissioner of Central Excise Coonoor Division, Mettupalayam.
(2) Letter dt. 13.7.2002 (3) Letter dt. 6.8.2002 issued by the Superintendent of Central Excise, 27, Rajaram Street, Tirumangalam addressed to PML.
(4) Letter dt. 23.5.2002 issued by the Superintendent of Central Excise, Tirumangalam addressed to PML and (5) Letter dt. 26.7.2001 from M/s.PML addressed to the Superintendent of Central Excise, Mettupalayam Range.
He submits that these documents were placed before the adjudicating authority whereas the adjudicating without considering the documents confirmed the demand by invoking the extended period. He further submits that the department has accepted the availment of deemed credit by M/s.KGDL in the above referred letter and confirmed that they are only job worker and if at all any liability to be fastened, it should be demanded from M/s.KGDL. He also submits that M/s.KGDL have duly discharged the duty on the goods cleared to domestic market or for export without payment of duty. He therefore submits that there is no suppression of facts or there is any intent to evade payment of duty, as the department was kept informed from time to time all their activities and the department has duly accepted the letters and issued a confirmed letter. He relied on the following case laws :-
1. Padmini Products Vs CCE 1989 (43) ELT 195 (SC)
2. Apex Electricals Pvt. Ltd. Vs UOI 1992 (61) ELT 413 (Guj.)
3. Maruti Udyog Ltd. Vs CCE Delhi 2002 (147) ELT 881 (Tri.-Del.)
4. Fedders Lloyd Corporation Pvt. Ltd. Vs Collector of Central Excise, New Delhi 2002 (149) ELT 1426 (Tri.-Del.)
5. Shahnaz Ayurvedics Vs CCE Noida 2004 (173) ELT 337 (All.)
6. Collector of C.Ex New Delhi Vs Fedders Lloyd Corporation Pvt. Ltd.
2005 (182) ELT A38 (SC)
7. CCE Kolkata Vs Web Impression (India) Pvt. Ltd.
2011 (264) ELT 193 (Cal.)
8. CC & CE Vs ITW India Ltd.
2011 (268) ELT 311 (A.P.)
9. CCE Mangalore Vs Pals Microsystems Ltd.
2011 (270) ELT 305 (SC)
10. Ashirvad Enterprises Pvt. Ltd. Vs CESTAT, Kolkata 2013 (288) ELT 172 (Pat.)
11. Commissioner Vs Prasad Polypack Company 2013 (298) ELT A72 (Mad.)
8. Ld.A.R Shri R. Rammohan Rao for the Revenue reiterates the findings of the OIO. He submits that the adjudicating authority has correctly confirmed the demand on the Denim Fabrics manufactured and cleared out of the yarn procured by them which is on principal to principal basis. This fact was not informed to the department. The adjudicating authority already dropped the demand in respect of grey fabric manufactured and cleared to KGDL on job work basis. The appellants have sold the Denim fabrics to KGDL whereas the same were cleared under challans without payment of duty. The production records recovered from the appellants' unit confirmed that manufacture of Denim fabrics of different colours of 3 thread and 4 thread including Grey Warp and Grey Weft. The appellants had suppressed the facts of manufacture of denim fabrics instead they have declared manufacture of grey cotton fabrics other than Denim fabrics. In the ER-1 the appellants have declared the goods as "Unprocessed Cotton Fabric" instead of declaring it as "Unprocessed Denim Fabrics", which is dutiable. The appellants have only mentioned the sort numbers in their invoices and never mentioned the description of the Fabrics with deliberate misdeclaration and wilful suppression of facts. He submits that in the correspondence exchanged between the appellants and the department, as relied upon by the Ld. Advocate, nowhere it was brought to the notice of the department regarding manufacture of "Unprocessed Denim Fabrics" and all the intimations were related to availment of deemed credit by M/s.KGDL. Nowhere, it is stated that the appellants were manufacturing "Unprocessed Denim Fabrics" He relied on the following case laws :-
(1) Nizam Sugar Factory Vs CCE Hyderabad 1999 (114) ELT 429 (Tri.-LB) (2) Nizam Sugar Factory Vs CCE, A.P. 2006 (197) ELT 465 (SC) (3) Bajaj Tempo Ltd. Vs CCE Pune 2001 (133) ELT 749 (Tri.-Mumbai) (4) Mukand Ltd. Vs CCE Belapur 2007 (218) ELT 120 (Tri.-Mumbai) (5) Mathania Fabrics Vs CCE Jaipur 2008 (221) ELT 481 (SC) (6) CCE Ahmedabad Vs M. Square Chemicals 2008 (231) ELT 194 (SC) (7) Union Quality Plastic Ltd. & Others Vs CCE Vapi 2009-TIOL-326-CESTAT-AHM
9. We have carefully considered the submissions made by both sides and examined the documents submitted by both sides including the directions of the Hon'ble High Court vide order dt.8.5.2014. The Hon'ble High Court has set aside the Tribunal's final order dt. 23.07.2009 and remanded the issue for fresh disposal. For proper appreciation, the relevant paragraph of the Hon'ble High Court's order dt. 8.4.2014 is reproduced below :-
"7. Though the learned counsel for the appellants raised several grounds, there is one ground, which appears prima facie to deserve consideration. For sustaining the demand, the department relies upon the extended period of limitation. If extended period of limitation is to be invoked, a case of suppression ought to be made out. According to the appellants, there were documents to show that the appellants were not guilty of suppression and that the department itself had taken note of the production of Denim Fabrics out of non duty paid yarn, procured for export. The grievance of the appellants is that they had also produced documents before the CESTAT to show that the department had knowledge about such procurement for export purposes and that therefore, there was no question of any suppression.
8. The learned counsel for the appellants today produced certified copies of the written submission made by the appellants before CESTAT and certain communications that they placed before the CESTAT. One of the communications, relied upon by the appellants, is the letter dated 23.05.2002, sent by the office of the Superintendent of Central Excise to Paramount Mills Private Limited. The certified copy of this letter shows that it was placed before the CESTAT.
From the above order, it is seen that the Hon'ble High Court while remanding the matter has held that appellants have produced copies of documents and letters addressed to the department both from the appellants as well as from M/s.KGDL which were not considered by the Tribunal to give a finding on the extended period of limitation. We have examined the correspondences relied upon by the appellants as referred to supra. It is on fact that the appellants are manufacturers of grey cotton fabrics other than Denim fabrics falling under Chapter Heading 5207.20 attracting "Nil" rate of duty. Investigation also revealed that the appellants have manufactured and processed Denim Fabrics and cleared the same to M/s.KGDL. It is noticed that the appellants adopted two methods. On the one hand, they have received the yarn from KGDL and manufactured grey denim fabrics on job work basis and returned the same to M/s.KGDL who is the principal manufacturer. They have also manufactured Denim Fabrics on their own account wherein they have purchased the yarn, manufactured the Denim Fabric and sold to KGDL on principal to principal basis. The adjudicating authority has already dropped the demand on denim fabrics manufactured and cleared on job work basis and confirmed the demand in respect of yarn manufactured by the appellants on their own account and sold to KGDL. We find that the appellants are heavily relying on the letters dt. 23.5.2002, letter dt. 6.6.2002 issued by the Superintendent of Central Excise, Tirumangalam, Madurai to PML and also letter dt. 28.6.2001 issued by M/s.KGDL to the Asst. Commissioner of Central Excise, Coonoor Division, Mettuplayam, with a copy marked to the Superintendent of Central Excise, Madurai as well as letter dt.13.7.2002 of KGDL. As seen from the letter dt. 23.5.2002, wherein it is clearly indicated by the Superintendent of Central Excise, Tirumangalam that the appellants were manufacturing grey denim fabrics out of non-duty paid yarn procured by the appellants for exports under Annexure 45. The documents submitted by the appellants are only photocopies of the communications relating to the period 2001 to 2002. Various correspondences between the Range Superintendent and the appellant and M/s.KGDL to the Asst. Commissioner of Central Excise, Coonoor Division are issued on various dates under different pretext either for availing deemed credit or for further processing or of following procedure of job work. These documents were also submitted before the original authority during the adjudication proceedings. The veracity of these documents need to be verified along with the original records available with the department so as to arrive at a conclusion whether there is any suppression of facts or extended period can be invoked in this case for demanding duty or whether there is wilful suppression of facts. Therefore, we are of the considered view that the original authority should verify the original documents, including letters as indicated above, and also to take into consideration the directions of the Hon'ble High Court by its order dt. 8.4.2014 and examine the issue in the light of the above directions and pass fresh orders on the duty confirmed by invoking extended period under proviso to Section 11AC of the Act. Accordingly, we set aside the impugned order in so far as that portion of order confirming the duty demand and imposition of penalty on the appellants No.1 & 2 as well as on Shri M.Thiagarajan, Managing Director of PML (Appellant No.3). Needless to say that the original authority shall give a reasonable opportunity of hearing to the appellants before passing orders in terms of the directions contained in this order.
10. The appeals are allowed by way of remand in the above terms.
(Operative part of the order pronounced
in open court on 10.7.2014)
(R. PERIASAMI) (P.K. DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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