Custom, Excise & Service Tax Tribunal
Yashanand Filaments Pvt Ltd., ... vs Commissioner Of Central Excise, ... on 9 February, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/2315 & 2316/03 & E/1422/04, E/560/09 E/CO-340/03 (Arising out of Order-in-Original/Appeal No.06/CEX/2003 dated 26/03/2003 passed by CCE, Aurangabad & O-I-A No.JAK(12)197/09 dated 19/02/2009 passed by Commissioner of Central Excise, (Appeals) Aurangabad) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No 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 Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Yashanand Filaments Pvt Ltd., Aurangabad Appellant Vs. Commissioner of Central Excise, Aurangabad Respondent Appearance:
Shri.Mayur Shoroff, Gajendra Jain, Advocate for appellant Shri.N.A.Sayyad, JDR, for respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 09/02/2011 Date of Decision : 24/03/2011 ORDER NO Per: P.R. Chandrasekharan
1. This appeal is directed against the order-in-original No.06/CEX/2003 dated 26/03/2003 passed by the Commissioner of Central Excise & Customs, Aurangabad.
2. The appellant M/s.Yashanand Filaments (Pvt) Ltd., (YFPL in short) are manufacturers of Nylon Monofilament Yarn. The nylon monofilament yarn manufactured by them have varying diameters, namely, 0.16m, 0.20mm, 0.23mm, 0.25mm, 0.28mm, 0.32mm, 0.35mm, 0.40mm, and 0.45mm. The appellant claimed that these diameters correspond to denierage of 210, 330, 420, 630, 840, 1050, 1260 and 1680. They further claimed that the nylon monofilament yarn of these deniers with a (1) 4% tolerance was exempt from Excise duty vide Notification No.53/91-CE, 4/97-CE, 5/98-CE, 5/99-CE, 6/2000-CE and 3/2001-CE and accordingly they were not discharging any duty liability. The Director General of Central Excise Intelligence conducted a search on the factory premises of M/s.YFPL, on 16/10/2001 during which they recovered incriminating documents and also seized a quantity of 1084.530 Kgs. Of nylon monofilament yarn found unaccounted. After completing the investigation, a show-cause notice was issued vide show-cause notice dated 10/04/2002 wherein duty amounting to Rs.93,36,262/- was demanded in respect of the nylon monofilament yarn of diameters mentioned (supra) cleared during the period from 01/04/97 to 15/10/2001 on the ground that these yarns do not satisfy the criterion of denierage of 210, 230, 420, 630, 840, 1050, 1260, 1680 with a variance of plus minus 4% and, therefore, they have wrongly availed the Excise duty exemption vide notification mentioned supra. The case was adjudicated by the CCE, Aurangabad vide order dated 26/03/2003 wherein he found that nylon monofilament yarn of diameters of 0.25mm, 0.30mm, 0.35mm and 0.45mm do not qualify for the exemption as the denierages worked out with permissible tolerance is not covered by the exemption notification. In respect of yarns of diameters of 0.16mm, 0.20mm, 0.23mm, 0.28mm, 0.32mm and 0.40mm, he found that these diameters satisfied the denierages prescribed in the notification and in respect of these he allowed the exemption availed by the party. Consequently he confirmed a duty demand of Rs.38.98.234/- under Section 11A (1) of Central Excise Act, 1944. The assessee had reversed an amount of Rs.25,94,215/- as the proportionate modvat/cenvat credit involved while clearing the goods in question and the said amount was adjusted against the confirmed amount of duty. The Commissioner also imposed a equivalent penalty of Rs.38,98,234/- under Section 11AC of the Central Excise Act, 1944 and also ordered for recovery of interest under Section 11AB of the said Central Excise Act, 1944. He further imposed a penalty of Rs.50,000/- on Shri Amit Kulkarni, Marketing Executive of YFPL under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2001. The appellant is in appeal against the said order of the Commissioner of Central Excise, Aurangabad.
3. The main contentions of the appellant are as follows:-
3.1 Apart from conducting periodical audits, the Central Excise department has been drawing samples of the goods manufactured by them from time to time. On 10/10/95, the Superintendent of Central Excise had drawn samples of the nylon monofilament yarn of different denier manufactured by them and had sent for testing by the Deputy Chief Chemist, Mumbai, vide letter dated 11/12/95. Further on 30/10/98 a panchnama dated 30/10/98 was drawn at the factory premises of YFPL, wherein samples of nylon monofilament yarn of denierage 204, 423, 627, 819, 1620 were drawn for testing by the department. Whether any test was conducted in respect of the above samples or what happened to the samples is not known to the appellants and, therefore, they presumed that the department might not have found anything wrong with the denierage of the yarn manufactured by them and claimed for exemption.
3.2 The Ld. Advocate for the appellant further argued that the denierages were worked out by the Commissioner in his order by using a mathematical formula, namely, ? x r 2 x h x specific gravity, where r is the radius, h is equal to 9000 and specific gravity is 1.12, 1.13 & 1.14. On the basis of this formula, the denierages have been worked out. The appellant contend that this is not the right way of determination of denierage for the reason that the diameter of the yarn cannot be uniform considering the variance in the machine parameter and also due to the variation of specific gravity ranging from 1.12 to 1.14. The correct way of determination of denierage is by taking 9000 meters of the yarn and finding its actual weight in grams which will give the denierage. In the absence of such a determination and computing the denierage on formula basis where parameters vary cannot be correct and, accordingly, the determination of denierage undertaken by the Commissioner in the said order is not correct.
3.3 They further submit that apart from the drawing samples periodically once in 1995, another in 1998, they have been filing classification declaration at regular intervals. Vide declaration dated 1/4/96, 1/4/97, 16/11/98, 1/4/99, 1/9/2000 & 1/4/2001 under Rule 173B of the Central Excise Rules, 1944, wherein they had mentioned the fact of manufacturing nylon monofilament yarn of denierage 210, 330, 420, 630, 840, 1050, 1260 & 16890 and claimed exemption under relevant notification as existing at relevant point of time. Therefore, the department was fully aware of their activities and in case the department wanted to test their eligibility to exemption, they could have done so. Therefore, there is no fraud, suppression or willful mis-statement of facts on their part and, therefore, the demand is time barred.
3.4 According to them of the total duty confirmed of Rs.38,98,234/-, only a demand of Rs.1,06,623/- is within the time limit and after adjusting the proportionate modvat credit, the duty liability would only Rs.46,834/-. They have also placed reliance on a number of judicial pronouncements, namely, Ramlinga Choodambikai Mills Vs. GOI - 1984 (15) ELT 407 (Mad), Bojaraj Textiles Mills Ltd., Vs. ACCE - 1990 (45) ELT 559 (Mad), Doddaballapur Spinning Mills Ltd., Vs. ACC - 1992 (61) ELT 539 (Kar), Prakash Cotton Mills Vs. CCE - 1995 (78) ELT 65 (T), Anand Nishikawa Vs. CCE - 2005 (188) ELT 149 (SC), CCE Vs.Damnet Chemicals - 2007 (216) ELT 3 (SC), Unique Plastics Industry Vs. CCE - 2002 (145) ELT 604 (T) & Gajendra Enterprises Vs. CCE - 2008 (232) ELT 445 (T) in support of their contention.
4. The Ld. DR on the other hand supports the findings of the Ld. Commissioner and places reliance on the judgement of the Honble apex Court in the case of Amrit Agro Industries Ltd., Vs. CCe, Ghaziabad, 2007 (210) ELT 183 (SC).
5. We have considered the rival submission very carefully.
6. In this case, the show-cause notice has been issued on 10/04/2002 demanding duty for the clearances effected during the period from 01/04/97 to 15/10/2001. The fact that the assessee was manufacturing nylon monofilament yarn of specified denierages and was also claiming exemption on said products was known to the department right from 1995 onwards. The department had also drawn samples of the products manufactured by the assessee, first on 11/10/95 and second on 13/10/98. The purpose of drawal of these samples, as could be seen from the corresponding memo/panchnama, was for testing the denierages of the nylon monofilament yarn to decide on the eligibility for the excise duty exemption . What happened to these samples and what did the test reports indicate with respect to these samples is not forthcoming from the records nor is there any mention about these in the order passed by the Ld. Commissioner. Therefore, there is a lot of merit in the argument of the appellant that bulk of the demand is time barred as the department should have issued a show-cause notice within a period of one year from the relevant date. In the instant case, the show-cause notice has been issued in April 2002 and, therefore, it can cover only the duty demands from April 2001 on wards and we hold accordingly.
7. Coming to the second issue, it has been seen that in respect of the yarn produced by the assessee in terms of diameters it has been found that in respect of most of the diameters other than the diameters of 0.25mm, 0.30mm, 0.35mm & 0.45mm, denierages were found to be satisfying those prescribed in the notification. Therefore, the assessee could not be faulted for believing that in respect of parameters as per the formula worked out by the Commissioner, they would have been eligible for the exemption. Even in respect of the diameter 0.45 mm, it is seen that if the specific gravity of 1.14 is taken, the denierage works out to 1632, which is within the 4% tolerance of denierage of 1680 specified in the notification. Only if the specific gravity is taken as 1.12 or 1.13, the denierage goes out of tolerance limit prescribed in the notification. Therefore, even in respect of diameter 0.45mm the benefit of doubt should be given to the assessee and there is no reason why the benefit should be denied in the absence of actual measurement of denierage or determination of specific gravity by the department rather than arriving at the denierage on the basis of formula. Thus, only in the case of diameters of 0.25mm, 0.30mm and 0.35mm the departments case that the yarn produced is not within the denierage prescribed in the notification with a (1) 4% tolerance limit can sustain. This demand also will sustain only for the period falling within the normal time limit of one year i.e., starting from 1/4/2001 to 15/10/2001.From the records it is seen that the appellant had maintained their production account and also issued invoices in terms of diameter of the yarn and not in terms of denierage. Once the accounts are maintained in that fashion the denierage can be computed only according to the formula adopted by the Commissioner. Needless to say, the assessee will be entitled to the proportionate Cenvat credit, (which they have reversed on availing duty exemption).
8. Thus, we find that the demand confirmed by the Ld. Commissioner needs to be re-quantified. We hold that the demand for the period from April 97 to March 2001 is clearly barred by limitation of time as there was no suppression or willful mis-statement of the facts on the part of the assessee and, hence, the extended time limit could not be invoked under the proviso to Section 11A (1) of the Central Excise Act, 1944. Consequently the penalty imposed under Section 11AC and the penalty imposed on the Marketing Executive under Rules 209A of Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2001 also cannot be sustained and we set aside the same. Even in respect of the demand within the normal time limit, the benefit of exemption notification has to be extended to the assessee in respect of yarn of diameter 0.45mm, which if the specific gravity is assumed as 1.14, comes within the denierage limit of 1680 (1) 4%. Therefore, only in respect of nylon filament yarns of diameter of 0.25mm, 0.30mm and 0.35mm, the duty demand will sustain for the clearances effected for the period from 01/04/2001 to 15/10/2001 subject to the grant of proportionate Modvat credit already reversed by the assessee in respect of these clearances. Accordingly, we remand the case back to the adjudicating authority for re-quantification of demand as discussed above.
9. Thus, the appeals are allowed by way of remand in the above terms.
(Pronounced in Court on .) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 2