2019 (4) TMI 1844 - AT - Central Excise

Processing of man made fabrics with the aid of power/steam - entitlement of benefit of exemption Notifications No. 48/90-CE dated 20.03.2019, notification No. 28/94-CE dated 01.03.1994 and notification No. 41/95-CE dated 16.03.1995 - HELD THAT - The appellant since very beginning has been claiming that the electricity charges were only towards the electricity used by them for fans / exhaust fans. The normal expenditure on electricity for lighting purchased which cannot by any stretch of imagination be equated with the use of power generation for processing of fabrics. Also, there is no specific charge against the appellant that the processes such as washing, dyeing, mercerizing and printing were being carried out by the appellant with the aid of power. Since it has already been established that the majority of fabrics (barring 16 entries) processed by the appellants were of cotton and therefore, use of same in ageing the printed fabrics is legally permissible to the appellant. Also, for the period 1993-1994, 19951996 and even prior to this period, the appellant was engaged in processing of cotton fabrics only. The appellant has maintained proper record of fabrics received, processed and sold in a systemic way where the contents and nature of fabrics is categorically mentioned. We are surprised that the Department did not take note of the fact that most of the fabrics processed by the appellant have mention of cotton fabric. There are no evidences to substitute the charge that the appellants were mainly engaged in the processing of man made fabrics where only 16 entries of man made fabrics processed by the appellant is available out of 559 entries. The appellants have not violated any of the condition of exemption notification. Also, there is no misdeclaration as register of goods received and delivered‟ have specific mention of type of fabrics used in processing of such fabrics - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether during the years 1993-1996, the appellant processed cotton or man-made fabrics?
2. Whether during the years 1993-1996, the appellant processed fabrics with the aid of power or steam?
3. Whether the appellant is entitled to the benefit of exemption notifications?

Analysis:
1. The appeals sought to quash an Order-in-Original confirming a demand of ?2,85,35,347 and imposing penalties under relevant Central Excise Rules. The Department alleged that the appellants evaded excise duty by processing man-made fabrics using electricity and husk/coal. The Department's conclusion was based on various violations by the appellants, such as using power/steam in fabric processing.

2. The Department found that registers, balance sheets, and statements proved that the appellants processed man-made fabrics with power/steam, thus not qualifying for exemption notifications. The issues to be decided included the nature of fabrics processed and eligibility for exemptions. The advocate presented detailed evidence from registers showing majority processing of cotton fabrics, disputing the Department's claims of processing man-made fabrics.

3. The Tribunal noted discrepancies in the Department's reliance on entries mentioning polyester fabrics, overlooking the majority of entries indicating cotton fabrics. The appellants primarily used electricity for lighting and fans, not in fabric processing. The Tribunal found no evidence of major processing of man-made fabrics, with only 16 entries out of 559 indicating such processing. The appellants maintained proper records, and the use of steam for aging printed fabrics was permissible for cotton fabrics under exemption conditions.

4. The Tribunal concluded that the Department's demand for excise duty was unfounded, as the appellants predominantly processed cotton fabrics and did not violate exemption conditions. The registers clearly stated the type of fabrics processed, showing no misdeclaration. Therefore, the Order-in-Originals were deemed legally unsustainable and were set aside, allowing both appeals.

5. The judgment was delivered by Hon'ble Mr. C.L. Mahar, Member (Technical), and Hon'ble Mr. Ashok Jindal, Member (Judicial). Mr. Jagmohan Bansal represented the Appellant, and Mr. Vijay Gupta was the Authorized Representative for the Respondent. The Tribunal's decision favored the appellants, highlighting the importance of maintaining accurate records and complying with exemption conditions to avoid unwarranted demands for excise duty.