2001 (10) TMI 867 - AT - Central Excise

Issues Involved:
1. Use of power/steam in processing cotton fabrics.
2. Applicability of Notification No. 40/95-C.E. and Notification No. 41/95-C.E.
3. Allegations of suppression of facts.
4. Demand of Central Excise duty and imposition of penalties.
5. Validity of evidence collected by the Department.
6. Interpretation and applicability of amending Notification No. 83/95-C.E.

Detailed Analysis:

1. Use of Power/Steam in Processing Cotton Fabrics:
The appellants, M/s. Saroj Textiles Ltd., were engaged in processing cotton fabrics with and without the aid of power. They declared that only minor processes like padding, mangling, and drying were done with power, while major processes like dyeing, bleaching, and scouring were done without power. The Commissioner of Central Excise held that the assessee used power for dyeing and thus denied the benefit of Notification No. 40/95-C.E.

2. Applicability of Notification No. 40/95-C.E. and Notification No. 41/95-C.E.:
Notification No. 40/95-C.E. provided exemption from duty for minor processes even when undertaken with power, but not for major processes like dyeing, bleaching, or printing if done with power. Notification No. 41/95-C.E. provided exemption for all processes without power. The Department argued that the appellants had facilities for major processes with power, making them ineligible for exemption under Notification No. 40/95-C.E.

3. Allegations of Suppression of Facts:
The Commissioner concluded that the appellants suppressed facts about using power for major processes from the Department, justifying the demand for duty and penalties. However, the appellants contended that they had disclosed all relevant information, surrendered their registration, and obtained necessary approvals from the Department.

4. Demand of Central Excise Duty and Imposition of Penalties:
The Commissioner confirmed a demand of Rs. 1,74,53,871/- for the period from 1-4-95 to 9-2-98 and imposed equivalent penalties on M/s. Saroj Textiles Ltd. and a penalty of Rs. 5,00,000/- on the Director. The appellants argued that there was no evidence of using power for dutiable processes during this period, and the Department's case was based on assumptions.

5. Validity of Evidence Collected by the Department:
The Department relied on indirect evidence, primarily an inspection report from the Kanpur Electricity Department, which indicated over-utilization of power. However, this report did not conclusively establish that power was used for dutiable processes. The Tribunal found that the evidence was insufficient and based on assumptions and conjectures.

6. Interpretation and Applicability of Amending Notification No. 83/95-C.E.:
The amending Notification No. 83/95-C.E., dated 24-4-95, restricted the exemption under Notification No. 40/95-C.E. to factories undertaking only minor processes without any major processes. This notification was not discussed in the show cause notice or the adjudicating order, and thus could not be a basis for the present decision.

Conclusion:
The Tribunal concluded that the Department's case was based on indirect evidence and assumptions without direct proof of using power for dutiable processes during the period in question. The charge of suppression was not substantiated, and the demand for duty and penalties was not justified. The appeals were accepted, and the impugned order was set aside, providing consequential benefits to the appellants as per law.

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