2013 (7) TMI 795 - SC - Central Excise

Manufacturing of Yarn - counts - rate of duty - State of things which has been shown to be in existence within a period shorter than that within which such things or states of things usually cease to exist is still in existence Respondent company is engaged in the business of manufacturing of various counts of cotton yarn falling under heading 52.03 of the Central Excise Tariff Act, 1985 at the relevant point of time. It appears that at the relevant point of time the rate of tax on the yarn manufactured depended on the count/finesse of the yarn. Higher the count higher the duty - Officers of the Central Excise Department inspected the factory premises of the respondent company and recovered two registers and a file - Perusal of the two registers and the files revealed that the assessee was manufacturing higher counts over and above the tolerance limit in respect of the following counts declared to the department and cleared the same without payment of appropriate duty on the higher counts - Held that - The judgment in the case of Ramalinga Choodambikai Mills Ltd 1974 (9) TMI 54 - HIGH COURT OF MADRAS , appears to be a sound view in law and obviously based on the principle enunciated under Section 114 of the Evidence Act, wherein it was held that If the department on inspection of a manufacturing premises on a particular day detects that goods of a particular specification are being manufactured, the department is entitled in law to presume that (until the manufacturer proves the contra) goods of the same specification are continued to be manufactured. In the instant case the content of the recovered FILE and the statements of the employees of the respondent must be examined to ascertain the fact whether the respondent manufactured during the period covered by the FILE - yarn of a higher count than the declared count. There is no any clear finding on record from any one of the authorities below that the materials gathered by the department would establish that basic fact Decided against the Revenue.

Summary

Issues:
- Statutory appeal under section 35L (b) of the Central Excise Act, 1944 against Final Order No.4/2003 of the Customs Excise & Gold (Control) Appellate Tribunal.
- Interpretation of seized documents showing manufacturing details of cotton yarn.
- Dispute over duty payment on higher count yarn.
- Prima facie conclusion by Central Excise Department leading to a show-cause notice.
- Adjudication process and appeals leading to different decisions.
- Tribunal's reliance on previous judgments in dismissing the appeal.
- Comparison of different legal principles applied in similar cases.
- Application of legal presumption in absence of drawn samples.
- Examination of evidence and statements to establish manufacturing facts.
- Tribunal's decision based on defense validity and history of litigation.

Analysis:

The case involves a statutory appeal under the Central Excise Act, 1944 against a tribunal's order regarding duty payment on cotton yarn manufacturing. The dispute arose from seized documents showing higher count yarn production without appropriate duty payment. The Central Excise Department issued a show-cause notice based on findings from registers and files recovered during inspection. The initial demand was confirmed partially by the Collector, leading to a series of appeals and adjudications resulting in varied decisions. The tribunal, relying on previous judgments, dismissed the appeal, emphasizing the binding force of earlier decisions from the Madras High Court.

The judgment highlighted the contrasting decisions in similar cases, such as Cambodia Mills Ltd. and Ramalinga Choodambikai Mills Ltd., regarding duty demands on higher count yarn. The court discussed the legal presumption under the Evidence Act and the necessity of drawn samples to establish manufacturing facts. The absence of drawn samples in the present case led to a critical examination of evidence and statements to determine the manufacturing details. The tribunal's decision was based on the validity of the respondent's defense and the extensive history of litigation, ultimately leading to the dismissal of the appeal due to the paltry amount involved and the substance found in the respondent's defense.

In conclusion, the judgment provides a comprehensive analysis of the legal principles applied in the case, emphasizing the importance of evidence, statements, and the history of litigation in determining duty payment disputes. The court's decision to dismiss the appeal was based on the validity of the respondent's defense and the unwarranted legal questions raised by the tribunal, considering the facts and the long history of the case.