2022 (12) TMI 972 - AT - Central Excise

Levy of Central Excise Duty - finishing process of stentering of fabrics sent by M/s. Shrinathji Textiles and removal of such finished fabrics under the delivery slips to various parties from its premises - process amounting to manufacture or not - HELD THAT - The learned commissioner (appeals) has relied upon the statement dated 05.06.2002 of Mr. Kailash S. Jalan, power of attorney holder of M/s. Shreenathji Textiles, in which he has stated that M/s. JTL has carried out process of stentering etc on the hand bleached/dyed/screen print fabrics sent by M/s. Shreenathji Textiles in the factory of M/s. JTL. However, on perusal of records it transpires that it is not the case in the show cause notice that M/s. JTL carried out process other than stentering nor is there a specific case or evidence referred in the SCN that M/s. JTL carried out processes on the fabric falling under chapter 54 55 of CETA, 1985 which otherwise also do not specifically include stentering as a process amounting to manufacture. In absence of such a case in the SCN and in absence of evidence to show that M/s. JTL carried out process other than stentering of fabrics falling under chapter 52 or carried out process on the fabric falling under chapter 54 or 55, demand of duty as against M/s. JTL cannot be sustained. The entire case of the revenue is that the seized delivery slips are in respect of fabrics subjected to Stentering in the factory of M/s. JTL is based on statements of the Director of M/s. JTL, proprietor and power of attorney holder of M/s. Shrinathji Textiles, some buyers and warehouse keeper. Despite specific direction to consider the plea of the appellants as per this tribunal order dated 25.07.2018, none of these persons have been examined as witness or cross-examination was given by adjudicating authority in terms of section 9D of the Act. It can be seen that statements having not been retracted, as held by the authorities below, is not the exception provided under section 9D of the Act and therefore, their testimony has to be excluded from consideration. It can be seen that excluding the statements, there is no evidence to show that the delivery slips were in respect of fabrics subjected to Stentering in the premises of M/s. JTL. Moreover, Yogesh Shah who is supposed to have written the delivery slips and who is supposed to have supervised, on behalf of M/s. Shrinathji Textiles, the process of stentering at the premise of M/s. JTL, has also not been examined in the investigations and in adjudication - there is otherwise no reliable evidence showing the said quantity of 11,12,820 L meters fabrics was stentered by the appellant in its premise. In the circumstances, duty demand cannot be sustained upon M/s. JTL. Since duty demand cannot be sustained, penalties upon the appellants are also liable to be set aside. Appeal allowed.

Summary

Issues:
1. Liability of M/s. JTL for central excise duty in relation to the finishing process of stentering of fabrics sent by another entity.
2. Examination of witnesses and adherence to the procedure mandated by section 9D of the Act.
3. Allegations of carrying out other finishing processes specified under different chapters of the Central Excise Tariff Act, 1985.

Analysis:
1. The case involved a dispute regarding the liability of M/s. JTL for central excise duty concerning the stentering process of fabrics sent by M/s. Shrinathji Textiles. The appellate tribunal examined the contention that stentering does not amount to manufacture, and while acknowledging this, the tribunal found that M/s. JTL was also conducting other finishing processes under different chapters, making it liable to duty. However, the tribunal noted that the show cause notice did not specifically allege M/s. JTL of carrying out processes on fabrics falling under certain chapters, and in the absence of evidence supporting this claim, the demand of duty against M/s. JTL could not be sustained.

2. The issue of examination of witnesses and adherence to the procedure mandated by section 9D of the Act was crucial. Despite specific directions from the tribunal to consider the plea of the appellants and examine witnesses, the adjudicating authority failed to do so. The tribunal emphasized that statements not retracted, as held by the authorities, do not meet the exceptions provided under section 9D of the Act. Citing relevant judgments, the tribunal concluded that the testimony of witnesses must be excluded if not examined or cross-examined as required by law.

3. Regarding the allegations of carrying out other finishing processes, the tribunal highlighted the lack of reliable evidence to support the claim that the delivery slips were in respect of fabrics subjected to stentering at M/s. JTL's premises. The absence of examination of key individuals and contradictions in statements further weakened the revenue's case. Ultimately, the tribunal found that the duty demand could not be sustained against M/s. JTL, leading to the setting aside of the penalties imposed on the appellants.

In conclusion, the appellate tribunal set aside the Order-In-Appeal passed by the Learned Commissioner (Appeals) and allowed the appeals with consequential relief. The judgment emphasized the importance of following due process, examining witnesses, and providing substantial evidence to support duty demands in excise matters.