2006 (10) TMI 369 - Commission - Central Excise

Issues Involved:
1. Denial of Notification 8/96-C.E. benefit for Polyvastra.
2. Denial of Notification 8/96-C.E. benefit for Khadi.
3. Duty demand based on folding charges and vouchers.
4. Duty demand on clearances to cooperative societies.
5. Duty demand on clearances to exporters.
6. Duty demand on clearances to Raghavendra Khadi.
7. Duty demand on clearances to Ramaraj Group.
8. Eligibility for cum duty benefit.
9. Eligibility for deemed credit.

Detailed Analysis:

1. Denial of Notification 8/96-C.E. benefit for Polyvastra:
The applicants claimed exemption under Notification 8/96-C.E. for processing Polyvastra, asserting that M/s. Majestic Dyers & Printers (MDP), a branch of SCM Textile Processing Mills, was approved by the Khadi & Village Industries Commission (KVIC). The department argued that SCM Textile Processing Mills were not directly approved by KVIC, and MDP existed only on paper. The judgment concluded that SCM Textile Processing Mills could not claim the benefit of MDP's approval, resulting in a duty liability of Rs. 1,26,82,589/-.

2. Denial of Notification 8/96-C.E. benefit for Khadi:
The applicants processed Khadi fabrics received from KVIC-approved centers but did not have individual consignment approvals. The judgment accepted the applicants' contention that all consignments from approved centers were considered Khadi, and thus, they were entitled to the exemption under Notification 8/96-C.E., nullifying the duty demand of Rs. 1,17,86,457/-.

3. Duty demand based on folding charges and vouchers:
The department demanded duty based on folding charges, assuming these related to woven fabrics processed with power. The applicants accepted the duty liability but contended the folding charges were higher than calculated. The judgment upheld the department's calculation, confirming the duty amount but allowing for elongation factor adjustments, resulting in a revised duty of Rs. 3,03,01,214/-.

4. Duty demand on clearances to cooperative societies:
The applicants accepted the duty liability for processing fabrics supplied by cooperative societies with power, subject to the correct rate of duty and cum duty benefit. The judgment confirmed the liability but adjusted for the elongation factor.

5. Duty demand on clearances to exporters:
Similar to the cooperative societies, the applicants accepted the duty liability for processing fabrics for exporters using power, subject to the correct rate of duty and cum duty benefit. The judgment confirmed this liability with adjustments for the elongation factor.

6. Duty demand on clearances to Raghavendra Khadi:
The applicants admitted to processing fabrics for Raghavendra Khadi using power and accepted the duty liability, citing market conditions and competition. The judgment confirmed the liability with adjustments for the elongation factor.

7. Duty demand on clearances to Ramaraj Group:
The applicants admitted to processing fabrics for Ramaraj Group using power and accepted the duty liability under similar conditions as Raghavendra Khadi. The judgment confirmed the liability with adjustments for the elongation factor.

8. Eligibility for cum duty benefit:
The applicants claimed cum duty benefit, arguing that the value used for duty calculation should be considered inclusive of duty. The department contended that cum duty benefit applies only to sales, not job work. The judgment sided with the department, denying cum duty benefit as the applicants were job workers.

9. Eligibility for deemed credit:
The applicants sought deemed credit under Notification No. 29/96, which the department opposed due to the applicants' admitted suppression and misstatement. The judgment agreed with the department, denying deemed credit due to the applicants' non-compliance with the conditions of the notification.

Conclusion:
The total duty liability was settled at Rs. 4,64,72,058/-. The applicants were required to pay the balance amount of Rs. 3,60,28,995/- within 30 days, with simple interest at 10% per annum on the basic duty portion. Immunity from penalties and prosecution was granted under the Central Excise Act, 1944, subject to compliance and the absence of material misstatements.

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