2016 (2) TMI 212 - AT - Central Excise

Clandestine removal of cotton yarn in cones/cheese by mis-declaring the same as in PR Hanks - Wrong availment of benefit of exemption notification no.8/96-CE dated 27.03.1996 - the appellant mis-declared yarn produced by them as in the form of PR Hanks though they had manufactured and cleared the yarn in cone/cheese - also failure to maintain the record of manufacture of excisable goods - Held that - The case for demand of duty based on the allegations of mis-declared clandestine clearance has not been supported by evidence and as such, we are not able to agree with the findings of the Original Authority as already narrated. The Original Authority himself appears to have confirmed the demand based on the text of preponderance of probability leading him to the only possible conclusion that there has been misdemeanour committed by the party by surreptitious removal of dutiable cone yarn in the guise of exempted PR Hanks /yarns/ . On the question of time bar also, we find that the appellant have made out a case against the demand. They have been filing classification list declaration under Rule 173 B mentioning the nature of the product, rate of duty and the concessional notifications claimed by them. Investigation in the case started with the search on 25.03.2000. A show cause notice to confiscate the seized goods and to demand duty on the same was issued on 17.11.2000. Another show cause notice resulting in the impugned order was issued on 28.04.2003. This notice was issued invoking fraud, suppression, etc. for an extended period. Though the first notice was mainly relating to confiscation of the seized goods and to demand duty, there is nothing on record to show substantial additional evidence/facts have come into the position of the Department after issue of the first show cause notice resulting in the second show cause notice for the extended period. As such, we find that the impugned order cannot be sustained on the question of time bar also. In view of the above findings, we set aside the impugned order and allow the appeals. - Decided in favour of assessee.

Summary

Issues:
1. Wrong availment of benefit of exemption notification.
2. Failure to maintain records of excisable goods manufacture.
3. Imposition of penalty on the company and director.
4. Allegations of mis-declaration of yarn form.
5. Demand for extended period.
6. Legality of show cause notices.
7. Clandestine removal of cotton yarn.
8. Non-maintenance of statutory records.
9. Time-barred proceedings.

Analysis:

1. The main issue in this case involved the wrong availment of the benefit of exemption notification by the appellant, who was engaged in the manufacture of cotton yarn. The appellant was accused of mis-declaring the form of yarn produced, leading to the initiation of proceedings for demanding central excise duty.

2. Another crucial issue was the failure of the appellant to maintain proper records of the manufacture of excisable goods. The Original Authority confirmed the demand and imposed penalties on both the company and its director, which were challenged in the appeals.

3. The appeals also addressed the allegations of mis-declaration of yarn form, with the appellant contending that they were not maintaining accounts for certain yarn as no duty was payable on it. They argued that they had the necessary machinery and capacity to manufacture yarn in the disputed form.

4. The legality of the demand for an extended period was questioned by the appellant, who claimed that the first show cause notice issued did not justify invoking an extended period for the subsequent notice. The appellant relied on legal precedents to support their argument.

5. The issue of clandestine removal of cotton yarn was raised, with the Revenue alleging mis-declaration of the form of yarn cleared by the appellant. The appellant provided documentary evidence regarding their machinery and production processes, which were not adequately considered by the adjudicating authority.

6. Non-maintenance of statutory records, specifically the RG-1 register, was highlighted as a concern. The appellant's defense regarding the captively consumed exempted items and procedural lapses in record-keeping was contested by the Revenue.

7. The question of time-barred proceedings was a significant aspect of the case. The appellant argued against the demand based on the extended period, citing the lack of substantial additional evidence justifying the prolonged investigation.

8. The Tribunal analyzed the evidence presented by both sides and concluded that the demand for duty lacked tangible corroborated evidence. The findings of the Original Authority were deemed unsupported, leading to the setting aside of the impugned order and the allowance of the appeals.