2004 (8) TMI 107 - SC - Central Excise

Short payment of duty on account of non-disclosure of 126.66 MTs. of production of Polyster Filament Yarn (in short POY ) in the RG-I register and removal without payment of duty thereon Held that - Tribunal has not approached the controversy in the proper perspective. Various aspects which have been highlighted above and specifically noted by the Collector were really not considered by the CEGAT. Its conclusions that there was no allegation of fraud, misdeclaration or intention to evade duty, prima facie do not appear to be correct. The material being wound on tubes was yarn. It did not cease to be yarn because it broke off before the required weight was achieved. It only became waste if it got entangled or messed up or if the tubes of less weight were cut. It was for the assessee to show categorically that this had happened. The log sheets deal with tubes. But without question the weight shown in the log sheets is of yarn. This prima facie indicates that tubes having yarn of less than 1 kg. are also being logged. Thus the Collector was right that the log sheets show presence of yarn on tubes, even of 1 kg. or less. The Collector had specifically noted that, if the assessee had destroyed the tubes of 1 kg. or less of POY, the reason why production was shown in the daily log sheets was not explained. Thus fresh hearing of the appeal by the CEGAT would be the appropriate course. The relevant aspects like presence of the articles in the finishing room, effect of mention in the log sheets and effect of non-maintenance of required records and the allegations contained in the show cause notice to apply extended period of limitation must be considered in proper perspective. At the same time, if the assessee wants to place reliance on any material on record, the CEGAT should also consider it. Accordingly, so far as para (iv) of the show cause notice is concerned, we remit the matter back to the CEGAT for fresh hearing and adjudication in accordance with law. It would consider the relevant aspects on the basis of materials already on record and to be placed by the parties in support of their respective stands, and to take a decision afresh in accordance with law.

Summary

Issues:
Challenge to legality of order passed by CEGAT quashing order-in-original dated 21-5-1993 by Collector of Central Excise Bombay-III.

Analysis:
The case involved a show cause notice alleging short payment of duty on non-disclosure of production of Polyster Filament Yarn (POY) and removal without payment of duty. The Collector confirmed the demand of duty and imposed penalties under Central Excise Rules. The primary issue was whether the demand was within the period of limitation and if the goods removed were waste or dutiable. The Collector's order was challenged before CEGAT, where the assessee argued lack of specific allegations for extended limitation period and that the goods were waste, not yarn. The Central Excise authorities contended that there was suppression of sale and removal of dutiable goods without payment. CEGAT accepted the assessee's stand and set aside the Collector's order.

The appellant argued before the Supreme Court that CEGAT overlooked relevant aspects, such as misdeclaration or unauthorized removal, and that the goods cleared were sold as yarn, not waste. The Tribunal failed to consider the necessity of maintaining separate records for waste. The Court noted discrepancies in the log sheets indicating presence of yarn on tubes, even of 1 kg. or less. The Court found that CEGAT did not consider all relevant aspects highlighted by the Collector and remitted the matter back to CEGAT for fresh hearing and adjudication.

Regarding another allegation of removal of POY for texturisation without payment of duty, CEGAT's decision was upheld as the assessee disclosed the purpose of removal, as indicated in verified documents. The Court directed CEGAT to hear the matter afresh concerning the alleged unauthorized removal of POY in smaller bobbins and evasion of duty, if any.

In conclusion, the Supreme Court disposed of the appeal without costs, directing CEGAT to conduct a fresh hearing on the issue of unauthorized removal of POY in smaller bobbins and evasion of duty, while upholding CEGAT's decision on the other allegation.