2011 (3) TMI 875 - AT - Central Excise

Mis-declaration with an intent to evade duty - whether the pleating process undertaken by the appellant amounts to manufacture or not. - Held that - the fact that chemical examiner had not given the details of the technical literature on which he depended upon to give his opinion, goes to show that reliance on the opinion of chemist alone may not be sufficient. - in view of the fact that the department has not filed an appeal against the decision of the Tribunal, wherein considering the view of chemist that chemical treatment and resin finishing are necessary to give pleated fibres permanently and in the remand order, a direction was given to examine this aspect, the only option available to the Commissioner was to examine whether resin finishing and chemical treatment was given by the appellant or not and if no such treatment was given, obviously the conclusion has to be in favour of the appellant. Extended period of limitation - demand based on the statement of partner of job worker - held that - The statement of the partner is totally ex-culpatory. - the suppression of facts or mis-declaration with an intent to evade duty has not been established. - Decided in favor of assessee.

Issues Involved:
1. Whether the pleating process amounts to manufacture.
2. Whether the process of pleating was temporary or permanent.
3. Whether the demand for duty is time-barred due to lack of suppression of facts or mis-declaration.

Issue-wise Detailed Analysis:

1. Whether the pleating process amounts to manufacture:
The Department observed that M/s Tirupati Prints had shown receipts for pleating grey fabrics under non-excisable job charges. According to Note 4 in Chapter 54 of the Central Excise Tariff Act, 1985, the Department considered pleating as manufacture, making pleated fabrics liable to Central Excise duty. The Tribunal previously remanded the matter, directing the original adjudicating authority to determine whether the pleating process was temporary or permanent. The Commissioner, in the impugned order, concluded that the process involved heat setting and thus amounted to manufacture, rejecting the appellant's contention that no heat setting was done.

2. Whether the process of pleating was temporary or permanent:
The Tribunal noted that the Commissioner did not consider the report of Dr. R.S. Gandhi, which stated that pleating was temporary. The burden of proof to show that pleating was not temporary was on the Revenue. The Commissioner failed to examine whether resin finishing and chemical treatment, necessary for permanent pleating, were applied. The Tribunal emphasized that the chemical examiner's report indicated that chemical treatment and resin finishing were essential for permanent pleating, which the Commissioner did not adequately address. The Tribunal found that the Revenue did not provide sufficient evidence to prove that the pleating was permanent.

3. Whether the demand for duty is time-barred due to lack of suppression of facts or mis-declaration:
The demand covered the period from 1.3.01 to July 2004, with the show cause notice issued on 16.6.06. The Tribunal noted that the appellant had documented the pleating charges as non-excisable in their financial records, and the activity was conducted with proper documentation. The Tribunal found that the appellant's belief that pleating did not amount to manufacture was genuine and not intended to evade duty. The Tribunal concluded that the Department did not establish suppression of facts or mis-declaration with intent to evade duty, making the demand time-barred.

Conclusion:
The Tribunal set aside the impugned order, ruling in favor of the appellant on both merit and limitation grounds. The Tribunal held that the pleating process did not amount to manufacture, the Revenue failed to prove that the pleating was permanent, and the demand was time-barred due to lack of suppression of facts or mis-declaration. The appeals were allowed.

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