Full Judgment Text
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CASE NO.:
Appeal (civil) 5472-5473 of 2000
PETITIONER:
D.P. Lon
RESPONDENT:
Collector of Central Excise & Customs
DATE OF JUDGMENT: 13/03/2003
BENCH:
S.N. Variava & AR. Lakshmanan
JUDGMENT:
J U D G M E N T
AR. LAKSHMANAN, J.
The appellant-firm filed these appeals challenging, inter alia, the judgment
and
order dated 25.2.2000 passed by the Customs, Excise and Gold (Control) Appellate
Tribunal, New Delhi being Miscellaneous Order No. M/12/2000-D in E/ROM/125/99-D in
Application No. E/2618/90-D and final order No. 487/98-D dated 15.6.1998 in Appeal No.
E/2618/1990-D, whereby the Tribunal has held that ‘Taspa’ yarn manufactured by the
appellant was covered under Heading No. 56.06 of the Central Excise Tariff and,
therefore, confirmed the demand of duty of central excise of Rs.5,63,066.40 and penalty
of Rs.50,000/-. The facts of the case in brief are as follows:-
The appellant-firm was issued a licence under the Central Excise Act,
1944 for carrying out the processing work of yarn. According to the appellant,
since 22.5.1986, the doubled and/or multifolded yarns falling under Chapter 54 or
Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985 were wholly
exempted from the duty of excise leviable thereon, provided such doubled or
multifolded yarns were manufactured out of yarn falling under Chapter 54 or
Chapter 55 of the said Schedule on which appropriate duty of excise had already
been paid. Relying upon the aforesaid notifications, the appellant did not pay any
duty of excise on the same and neither did it recover such duty of excise from its
customers. The Collector of Central Excise issued a show cause notice dated
15.7.1988 to the appellant-firm calling upon the appellant to show cause as to
why duty of excise amounting to Rs.5,63,066.40 be not recovered on the goods,
i.e., ’Taspa’ yarn/fancy yarn falling under erstwhile tariff item no. 62 with effect
from 1.3.1986 and under Chapter/tariff sub-heading 56.06 and penalty be not
imposed on them under Rule 173-Q of the Central Excise Rules, 1944. A reply
was sent to the show cause notice that the appellant categorically averred that it
bona fidely believed that the doubled filament yarn was exempted from payment
of duty of Central Excise and there was no intentional contravention of Rule 173
of the Central Excise Rules, 1944.
The appellant-firm further stated that it was engaged in the business of
processing yarns such as crimping, texturising, doubling multifolding etc. and that
the firm had carried out doubling of yarn on a simple crimping machine and that
the simple process of doubling of yarn on crimping machine was covered under
Notification M.F. (C.D.R) I. No. 114/18/86 CX 3 dated 18.4.1986.
The Collector of Central Excise, Vadodara passed an order on 29.3.1990
confirming the demand of duty of Central Excise amounting to Rs.5,63,066.40 for
the period from February, 1986 to September 30,1987 and also imposed a
penalty of Rs. 2 lakhs on the appellant.
Being aggrieved, the appellant filed an appeal before the Central Excise
and Gold (Control) Appellate Tribunal, New Delhi. The Tribunal vide its judgment
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and order dated 15.6.1998 rejected the appeal of the appellant. The Tribunal
while rejecting the appeal relied upon its earlier judgment and order in the case of
Dhamwala Silk Mills Surat Pvt. Ltd. vs. Commissioner of Central Excise,
Vadodara, (1997) 73 ECR 383. Since the impugned judgment of the Tribunal
suffered from error apparent on the face of the record, the appellant filed a
Miscellaneous Application for rectification of mistake, being Application No.
E/ROM/125/99-D and pointed out that the facts of the appellant were closely
comparable to the facts of Pratik Crimpers vs. Collector of Central Excise,
Mumbai, 1998(101) E.L.T. 437, the latter judgment of the Tribunal particularly,
with regard to yarns being run parallel, the manufacturing process being common
and the machineries being the same.
The Tribunal rejected the application for rectification of mistake vide
judgment and order dated 25.2.2000 and held that ’Taspa’ yarn manufactured by
the appellant was covered under Heading No. 56.06 of the Central Excise Tariff
and, therefore, confirmed the demand of duty of central excise of
Rs. 5,63,066.40 and penalty of Rs. 50,000/-.
The present appeal was filed by the appellant in this Court on the basis
that the Full Bench of the Tribunal has, by its final order dated 22.05.2000, upheld
the view taken by it in the case of Pratik Crimpers (supra), which facts and
decision are same to the facts of the case of the appellant.
We have heard Ms. Meenakshi Arora, learned counsel appearing for the
appellant and Mr. M.L. Verma, learned senior counsel appearing for the
respondent.
We have perused the notifications and orders passed by the
Commissioner and the Tribunal and other relevant records. Our attention was
drawn to the pleadings and records by the counsel appearing on either side. The
points for consideration in these appeals are as to whether there was an error
apparent on the face of the record of the judgment dated 15.06.1998 as argued
by the learned counsel for the appellant and that whether the Tribunal has erred
in holding that the ’Taspa’ yarn is classifiable and assessable to duty of excise
under Heading No. 56.06. Learned counsel for the appellant submitted that the
Board’s circulars as well as the fact that there was no core yarn in the disputed
goods and hence the same were classifiable between Chapters 50 and 55 of the
Central Excise Tariff and that the facts of the appellant were closely comparable
to the facts of the case of Pratik Crimpers (supra), the latter judgment of the
Tribunal particularly with regard to the yarns being run parallel, the manufacturing
process being common and the machineries being the same. She also placed
before us the Full Bench decision of the Tribunal which by its final order dated
22.05.2000 upheld the view taken by it in the case of Pratik Crimpers (supra),
which facts and decisions, according to the learned counsel for the appellant, are
similar to the facts of the case on hand. She submitted that the impugned order
suffers from error apparent on the face of the record and hence requires to be set
aside. Arguing further, she urged that the appellant had bona fide believed that
the product in question, namely, filament doubled yarn was exempted from
payment of duty of excise in view of Trade Notice No. 229/88 dated 25.11.1988.
She further submitted that the Tribunal failed to appreciate that in view of the
conflicting decisions on the issue of classification of the filament doubled yarn,
namely, that of Dhamanwala Silk Mills (supra) and the later decision in the
case of Pratik Crimpers (supra), it was appropriate for the Tribunal to follow the
latter decision on the subject. It was contended that the larger Bench of the
Tribunal in the case of Vasania Silk Mills vs. Commissioner of Central Excise,
Surat, 1999 (114) ELT 222 decided the issue and held the ‘Taspa’ yarn to be
classifiable under Chapter 54 and upheld the judgment of the Tribunal in the case
of Pratik Crimpers (supra) while rejecting the view taken in the case of
Dhamanwala Silk Mills (Supra) and since the judgment of the Pratik Crimpers’s
case was later in point of time than the case of Dhamanwala Silk Mills (supra)
and since the Tribunal in the case of Pratik Crimpers(supra), had also
considered the Board’s circular and the earlier contrary judgment in case of M/s
Garden Silk Mills Ltd. Vs. C.C.E., 1995(78) ELT 580(T), therefore, it was
incumbent on the part of the Tribunal to have considered and applied the ratio of
Pratik Crimpers’s case (supra) read with the Board’s circular by passing the
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impugned order. She further submitted that it is incorrect to state that merely
because the process produces special effect slub/loop, the yarn is classifiable
under Heading No. 56.06 and that for the yarn to be classified under Heading No.
56.06, the presence of core yarn is mandatory and that there being no core yarn
in the product manufactured by the appellant, the same is not classifiable under
Heading No.56.06.
Per contra, Shri M.L. Verma, learned senior counsel appearing for the
respondent, submitted that there is no need to refer to any of the judgments cited
by the learned counsel appearing for the appellant inasmuch as the Tribunal
while deciding the present case had gone through the manufacturing process as
well as the contents of the products which led to the decision for classifying the
product under Heading No. 56.06. While in the case of Pratik Crimpers (supra),
no such point was discussed and the decision was given simply on the ground
that the Tribunal had no means of knowing whether the yarn before them was
identical to the yarn before the Tribunal when they gave the cited judgments. He
further submitted that the findings of the Tribunal are not at all contrary to the
Board’s circular dated 19.10.1988 and the Board under the said circular clarified
that the instructions applicable to such type of fancy yarn in which there is a core
yarn and that the instructions contained in Board’s circular F.No.55/9/87-CX-I
dated 30.6.1987 are not sought to be modified by the letter dated 26.4.1988 and
that both the instructions may be read separately. According to him, the Tribunal
had correctly observed in view of the admission of the appellant regarding use of
core yarn for base yarn that the yarn in question is a special yarn falling under
Heading No. 56.06. He further submitted that the orders passed by the
Commissioner as well as by the Tribunal are perfectly correct and that the same
are not liable to be set aside, as requested by the appellant and that the orders
passed by the Commissioner as well as by the Tribunal are not perverse as
alleged.
In support of his contentions, learned senior counsel, relied on some
judgments of this Court. This Court in the case of Reliance Silicon (I) Pvt. Ltd.
vs. Collector, Central Excise, Thane, (1997) 1SCC 215, held that where the
classification of the excisable goods under different excise items involved a
question of highly technical nature requiring scrutiny of the chemical
characteristics of the goods, decisions of the CEGAT cannot be lightly interfered
with unless the findings are perverse or otherwise erroneous in law or based on
no evidence.
In the case of West Bengal Electricity Regulatory Commission vs.
C.E.S.C. Ltd. etc. etc., JT 2002(7) 578, this Court observed that the High Court
merely because it has unrestricted appellate power, should not interfere with the
considered order of the commission unless it is satisfied that the order of the
commission is perverse, not based on evidence or on misreading of evidence,
keeping in mind the fact that the commission is an expert body.
In the case of M/s Asian Paints India Ltd. vs. Collector of Central
Excise, (1988) 2 SCC 470, this Court held that the finding of fact arrived at on
relevant and valid materials cannot be easily interfered with.
We have carefully perused both the orders under appeal. In our opinion,
the Commissioner and the Tribunal have rightly decided that the sample appears
to satisfy the requirements of definition of ‘Fancy Yarn’ as given in the standard
technical literature and appears to be covered under Heading No. 56.06 as
‘special yarn’ of Central Excise Tariff.
In the instant case, on collection of intelligence to the effect that the unit
has been manufacturing and removing excisable goods, namely, fancy yarn of
the category of the special yarns specified under Heading No. 56.06 of the
Central Excise Tariff Act, 1985 without payment of duties of excise leviable
thereon, thereby indulging in a large scale evasion of Central Excise duty, the
officers of the Headquarters Preventive Wing, Baroda on the directions of the
Deputy Collector (Prev.), Central Excise and Custom, Baroda visited by surprise
the factory premises of the unit on 29.9.1987 for checks and inquiry. During the
course of their visit, the officers found that the unit was carrying out processes
of texturising, crimping on man made filament yarn etc. for which the unit had
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installed one Lohia Magnetic Machine Model No. MT.466 in their factory
premises. The officers further noticed that the unit was manufacturing ‘Taspa’
yarn, for which the yarns of the different deniers are taken on the aforesaid
machine simultaneously; one yarn which is running in lower speed is known as
core/base yarn, while the other yarn which is running in higher speed is known
as slub yarn, and that the quantity of core yarn and the slub yarn is in the rario 1
: 1.5, and that in the manufacturing of the said ‘Taspa’ yarn the unit had
specially attached devices Tensor and ceramic guide in the said machine by
importing them from Japan. From the invoices and the sale Register of the unit,
it was noticed by the officers that the unit manufactured and cleared ‘Taspa’
yarn of the description as 20x30 "Nylon x Polyester", 75x75 "Polyester x
Viscose", 90x75 "Polyester Filament x Viscose". In response to the summons
dated 20.9.1987, the unit has produced the invoices and records of purchase
and sale from 1983 to 1987 for scrutiny and examination. On scrutiny of
records and invoices, it was revealed to the officers that the unit had
manufactured and removed ‘Taspa’ yarn of the category of the special yarns
specified under Heading No. 5606.00 of the Central Excise Tariff Act, 1985.
The Department also sought the opinion of the Chemical Examiner, Central
Excise, Baroda, who by his report submitted as follows:
"The sample is in the form of two ply yarn having elongated strips
(knots) at regular intervals. It is made of textured polyesters
filament yarn and viscose filament yarn. The two yarns are
intertwisted deliberately in such a way so as to form strips (knots)
at regular intervals lengthwise having a different appearance than
the normal constructions of folded yarn."
The officers have also recorded the statement of Shri Vipulbhai
Vasantlal Merchant, Partner of the appellant under Section 14 of the Central
Excises and Salt Act, 1944 in which he stated that they are engaged in
processing of yarn such as crimping/texturising for which they have got one
machine of Lohia make Model Ht. 416, which has got 144 spindles; that
mostly they are carrying out crimping process on Nylon yarn of different deniers,
as also on polyester filament yarn of various deniers; and that they have not
done any crimping process on pay. He further replied that for the manufacture
of T6 denier polyester crimped yarn as described in their invoices, they have
used two yarns polyester yarn of 75 deniers and the other viscose yarn of 75
deniers and processed in the same way as described alone in respect of 20x30
quality yarn there is no slub effect, but in the yarn of 75 deniers quality there is
slub effect; and added that they are using the yarns together in their crimping
machine the base yarn is of 75 denier polyester filament and the slub effect
yarn is 75 denier viscose, and that the ratio of quantity of base yarn to slub
effect yarn is 1 : 1.5.
The officers have also recorded the statement of Shri Ishwarbhai
Durlabhbhai Modi, Manager of M/s. Ishwar Textiles of Surat, who had
purchased 20x30 quality ‘Taspa’ yarn from the unit. He stated that they had
purchased yarns only once from the appellant and that the yarn was of the
description of 2000 ‘Taspa’ yarn, which consisted of 20 denier Nylon and 30
denier polyester yarn, that the said yarn had slub effect; that the said yarn was
used as weft in the manufacture of fabrics; that these fabrics also had slub
effect and that the said fabrics were known as ‘Taspa’ fabrics or fancy fabrics.
The statement of Shri Maheshwari V. Mehra, partner of M/s. Shreenath Silk
Mills, Udhna, Surat was also recorded. He stated that they had purchased and
received ‘Taspa’ yarn of the quality of 20x30 deniers and that in this yarn two
yarns were crimped together one was Nylon yarn of 20 deniers and the other
was polyester yarn of 30 deniers; that the said yarn, which is known in the
market as ‘Taspa’ yarn was having slub effect and that they had used this
Taspa yarn of 20x30 quality in the writ in the manufacture of sarees and the
product they manufactured was called Taspa fabrics. In view of the test results
and the process of manufacture, it was revealed to the Department that the unit
had been manufacturing Taspa yarn/Fancy yarn out of duty paid polyester
filament/Nylon/Viscose yarns with a special process which given special design
and shape to the final yarn. The statement recorded by the officers clearly
shows that the Taspa yarn/fancy yarn manufactured and cleared by the unit
was classifiable and chargeable to duty under Heading No. 5606.00 of the
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Central Excise Tariff Act, 1985 as is covered within the meaning of other special
yarns from 1.3.1986 onwards and prior to 1.3.1986, under the category of "All
other goods, not elsewhere specified." The investigation also revealed that the
appellant had not obtained Central Excise licence for such manufacture and
that they were removing such yarns without payment of central excise duty and
in the manner otherwise than as provided in the Central Excise Rules. Thus it
is seen that the appellant-unit had contravened the provisions of Rule 174 read
with Section 6 of the Central Excises and Salt Act, 1944, Rule 173F read with
Rule 9(1) etc. of the Central Excise Rules, 1944 inasmuch as they engaged
themselves in the manufacture of excisable goods, namely, ‘Taspa’ yarn/Fancy
yarn classifiable and chargeable to duty of excise under erstwhile Tariff Item 68
prior to 1.3.1986 and under Chapter/sub-heading 5606.00 thereafter of the
Central Excise Tariff Act, 1985 without their having applied for and obtained a
licence in Form 14 and failed to determine their liability to duty in respect of the
aforesaid goods manufactured and removed by them without payment of duty
leviable thereon. They have also failed to file classification lists and price lists
as required and failed to prepare and issue gate passes in the prescribed form
for the removals of the aforesaid goods and further failed to maintain statutory
accounts of the production and removals of the said goods manufactured by
them in their factory and suppressed to supply the material facts with a
deliberate and willful intent to evade payment of Central Excise Duty.
Therefore, as rightly pointed out by the learned counsel appearing for the
respondent, the conduct of the appellant, as above mentioned, invited the
intervention of the Department since the appellant has committed the offence
of the nature as described in clauses (a), (b), (c) and (d) of sub-Rule (1) of Rule
173Q of the Central Excise Rules, 1944 by reason of willful misstatement and
suppression of facts with an intent to evade payment of duty. We have perused
the reply submitted by the appellant to the show cause notice to the Collector of
Central Excise and Customs, Baroda. In our opinion, the reply submitted by
them is not satisfactory.
It is, therefore, seen that as per the admission of the appellant, the yarn
manufactured by them is special yarn falling under Heading No. 56.06 and
hence the notifications mentioned by them are not applicable in this case. They
also failed to pay excise duty though they were required to pay duty and hence
the action initiated by the preventive wing is correct. It is very clear from the
findings of the adjudicating authority as well as the appellate authority that the
yarn in question consists of core yarn and hence in view of the above
clarification, the said yarn is correctly classifiable under Heading No. 56.06.
The contention of the appellant that they had carried out doubling of yarn on
simple crimping machine and hence fall under Chapters 50 to 55 is not correct
and not acceptable inasmuch as the partner of the said firm in his statement
had specifically stated that for manufacture of the said yarn they had used
special attachment known as Tensor and Ceramic guide which are not required
for simple crimping of single yarn and they also stated that the yarn under
reference are manufactured in such a manner that out of the two yarns, one
yarn acts as a base and the other acts as a covering yarn. Therefore, the
process in the particular case is bound to produce a special effect yarn. The
Collector of Central Excise, in our opinion, has correctly passed the order in
original dated 29.3.1990 after discussing the issue at length and after
considering all the arguments put forth by the notices including the relevant
trade notices and also the Chemical Examiners’ report. Likewise, the Tribunal
also, after giving careful consideration to the submissions made by both the
sides, did not find any merit in the rectification application and thus had correctly
rejected the same. The Full Bench decision of the Tribunal wherein the
decision taken in the case of Pratik Crimpers(supra) will not be applicable to
the instant case inasmuch as it was specifically discussed in the order rejecting
ROM by the Central Excise and Gold (Control) Appellate Tribunal that in view of
the process of manufacture there is a core yarn in the yarn in question and
hence the same is classifiable under Heading No. 56.06 and is liable to duty.
For the foregoing discussion, we are of the view that the yarn
manufactured by the appellant is only ‘Taspa’ yarn/fancy yarn and is classifiable
and chargeable to duty under Chapter Heading No. 56.06 of the Central Excise
Tariff and, therefore, the appellant is liable to pay duty in contravention of Rule
174 read with Section 6 etc. of the Cenrtal Excise and Salt Act,1944.
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We do not find any error of law or any perversity in the reasoning
adopted by the Commissioner or by the Tribunal on the facts of these cases.
On the contrary, in our view, the decision of the Commissioner and the Tribunal
are well sustained on the evidence on record and calls for no interference in
these appeals moved by the appellant. We, therefore, confirm the orders
passed by the Commissioner as confirmed by the Central Excise and Gold
(Control) Appellate Tribunal and reject these appeals.
The appeals are dismissed. However, in the facts and circumstances of
the case, we order no costs.