2003 (9) TMI 653 - AT - Central Excise

Summary

Issues:
1. Confirmation of duty on manufacturing and clearing chenille yarn without payment.
2. Imposition of penalty on the appellants.
3. Contention regarding liability to Central Excise duty on trading and manufacturing activities.
4. Retraction of statement made by the proprietor of the firm.
5. Quantification of demand based on total clearance of yarn.
6. Appeal against the impugned order.

Analysis:
1. The appellants appealed against the adjudication order confirming duty amounting to Rs. 99,89,349 on manufacturing and clearing chenille yarn without payment. A penalty of equal amount was imposed. Revenue Officers found 65 machines used for manufacturing chenille yarn during a visit to the unit. The statement of the firm's proprietor admitted to manufacturing and clearing chenille yarn without duty payment for the past 5-6 years. Show cause notice was issued, leading to the impugned order.

2. The appellants argued that trading in cotton yarn and doubling cotton yarn were not liable to Central Excise duty. They contended that they only purchased machines for chenille yarn production in January 1999, making demands before that period unsustainable. They also claimed that the proprietor's statement was retracted, and previous activities were focused on trading and doubling cotton yarn, not chenille yarn.

3. The Revenue argued that the proprietor admitted to manufacturing chenille yarn without duty payment for several years, and the claim of purchasing machines in January 1999 was an afterthought. The impugned order was upheld based on the lack of evidence regarding machine purchase and the proprietor's admission.

4. The Tribunal found no infirmity in the impugned order regarding the timing of machine purchase. However, the quantification of demand was deemed unsustainable as the appellants were also trading in non-dutiable cotton yarn. The matter was remanded for the demand to be recalculated based solely on chenille yarn production and clearance during the relevant period, acknowledging the exemption for trading in cotton yarn.

5. In conclusion, the appeal was disposed of by remand, emphasizing the need for a reconsideration of demand quantification based on chenille yarn production and clearance only, excluding non-dutiable cotton yarn trading activities.