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2015 (1) TMI 678 - AT - Central Excise100% EOU - Levy of interest on payment of duty made after wrong Availment of exemption under Notification No. 8/97-CE dated 01.03.1997 - Held that - in respect of wrong availment of Notification No. 8/1997-CE dated 01.03.1997 and Notification No. 15/2012-CE dated 01.03.2012, the appellants admitted the duty liability before the adjudicating authority and paid the duty before issue of show cause notice. They only contended the demand of interest in both the issues and penalty in respect of Notification No. 15/2012. The appellants are liable to pay the interest on demand confirmed and already paid by them on both the issues. However, the penalty imposed on the demand of ₹ 70,204/- is liable to be set aside, as there is no suppression of facts. Non-utilization of yarn received without payment of duty under CT-3 certificate, in the manufacture of Terry Towel - Held that - while dyeing and bleaching the terry towels, the weight of the finished products gets reduced to the extent of PVA content, which is dissolved in the water. If the above fact has taken into account, the wastage gets reduced to below 25%. We also find that the department has not adduced any findings for removal of excess yarn or excess clearance of yarn or finished goods without payment of duty. - The department accepted the fact that the appellants have used PVA in the manufacture of Terry Towel. We are of the considered view that without producing adequate evidence on the excess utilization of cotton yarn or diversion of yarn, the duty cannot be demanded purely on the input-output norms without any corroborative evidence. We also find that the Board s circular referred above clearly supports that the appellants being 100% EOU, they are allowed wastage upto 25% and in the present case the percentage of waste is well below the prescribed limit after excluding PVA content. Therefore, we hold that the demand of ₹ 48,50,530/- confirmed by the adjudicating authority is set aside. Consequently, the penalty imposed on the appellants and Mr. K. Jayaraj is also liable to be set aside. - Decided partly in favour of appellants.
Issues Involved:
1. Wrong availment of exemption under Notification No. 8/97-CE dated 01.03.1997. 2. Wrong availment of exemption under Notification No. 15/2002-CE dated 01.03.2002. 3. Non-utilization of yarn received without payment of duty under CT-3 certificate, in violation of input-output norms prescribed under SION. 4. Diversion of imported cotton to M/s. Sona Textiles and consequent demand of customs duty. Issue-wise Detailed Analysis: Issue 1: Wrong Availment of Exemption under Notification No. 8/97-CE dated 01.03.1997 The appellant admitted and paid the duty liability of Rs. 6,84,805/- before the issuance of the Show Cause Notice and contested only the demand of interest under Section 11 AB of the CEA, 1944. The Tribunal upheld the demand of Rs. 6,84,805/- and interest, stating that payment of duty before the issue of the show cause notice does not exempt the appellant from paying interest. The Tribunal relied on the decision in Alembic Ltd. Vs. CCE, Vadodara, which supported the mandatory nature of interest once duty is payable. Issue 2: Wrong Availment of Exemption under Notification No. 15/2002-CE dated 01.03.2002 The appellant argued that they had duly intimated the department about the availment of the notification and indicated it in all invoices. They contended there was no suppression of facts and no intention to evade duty. The Tribunal upheld the demand of Rs. 70,204/- and interest but set aside the penalty, noting that there was no suppression of facts. The Tribunal referred to the Apex Court judgment in M/s. Pahwa Chemicals Private Ltd., which supported the appellant's contention. Issue 3: Non-utilization of Yarn Received under CT-3 Certificate in Violation of Input-Output Norms The appellant disputed the demand of Rs. 48,50,530/- for alleged violation of SION norms. They argued that the usage of PVA fibre, which dissolves during processing, should be considered in calculating wastage. The Tribunal found that the department did not dispute the dissolution of PVA fibre and that the actual wastage was below the 25% limit prescribed by the Board's Circular dated 29.12.1986. The Tribunal concluded that the demand based on SION norms without corroborative evidence was unsustainable and set aside the demand of Rs. 48,50,530/-, interest, and penalty. Issue 4: Diversion of Imported Cotton and Demand of Customs Duty The adjudicating authority dropped the proceedings related to the customs duty demand of Rs. 7,60,806/- for the alleged diversion of imported cotton to M/s. Sona Textiles. This issue was not contested in the appeals. Conclusion: The Tribunal modified the impugned order as follows: - Issue 1: Demand of Rs. 6,84,805/- and interest upheld. - Issue 2: Demand of Rs. 70,204/- and interest upheld; penalty set aside. - Issue 3: Demand of Rs. 48,50,530/-, interest, and penalty set aside. - Penalty imposed on K. Jayaraj set aside. The appeals filed by M/s. Saradha Terry Products Ltd. were partly allowed, and the appeal filed by Shri K. Jayaraj was allowed.
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