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TMI Blog2009 (7) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal to principal’ in as much as there was sale of goods. PM & PTM have procured their own material and manufactured Denim fabrics and cleared the same without payment of duty. The quantity of denim and sized fabrics received for weaving from KGD and returned to KGD on job work basis has not been taken into consideration while calculating the demand of duty. The contention that the appellants placed purchase orders under Rule 4(5)(a) of the Cenvat Credit Rules, 2004, is only partially correct in as much as they received dyed yarn from KGD for job work and after the completion of job work, the fabrics were returned to KGD and the above movement is covered under Rule 4(5)(a) ibid. However, the same procedure cannot be adopted for the yarn pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specification of fabrics required by KGD pointed to manufacture of warp dyed fabrics commercially known as 'denim fabrics'. The Assistant Weaving Manager of PM admitted that the fabrics manufactured in PM conformed to the description contained in Note 4 to Chapter 52 of the first schedule to CETA, 1985, which defined "denim" as "fabrics of different colours, of 3-thread or 4-thread twill, including broken twill, warp faced, the warp yarns of which are of one and the same colour and the weft yarns of which are unbleached, bleached, dyed grey or coloured a lighter shade of the colour of the warp yarns". The purchase order placed by the Managing Director of PM on M/s. Sai Lakshmi Industries Ltd., Bangalore, showed that the contract was fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule to CETA, 1985. The office manager admitted that the fabrics manufactured by PM were cleared without payment of duty and he agreed to pay duty before issue of Show Cause Notice in case the fabrics were liable to duty. The Finance Manager and authorized signatory of PM also accepted that certain sort numbers of fabrics manufactured by PM fell under the category of denim fabrics. Shri E. Thangapandi, who was authorized by the Managing Director of PM to give a statement, deposed inter alia that he agreed with the statement of the Assistant Weaving Master of PM that the sort numbers identified by him were of denim fabrics; that he knew that PTM was also engaged in the manufacture of denim fabrics; that fabrics were cleared from PTM under fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amount on PM, and penalty of Rs. Five lakhs on Shri M. Thiagarajan, confirmed a duty demand of Rs.33,04,023/- on PTM together with interest and penalty of equal amount. He, however, dropped the proceedings for recovery of duty of Rs. 17,50,354/- raised against PM and Rs. 1,08,356/- raised against PTM and also dropped penal action in lieu of redemption fine and penal action proposed on Smit Lakshmi Murugesan of PTM. Hence these appeals. 4. We have heard both sides. 5. The evidence on record clearly shows that the PM and PTM were manufacturing yarn dyed fabrics commercially known as Denim Fabrics. The Assistant Weaving Manager accepted that yarn dyed fabrics manufactured by PM as per the purchase orders of KGD, were Denim Fabrics c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procured their own material and manufactured Denim fabrics and cleared the same without payment of duty. The quantity of denim and sized fabrics received for weaving from KGD and returned to KGD on job work basis has not been taken into consideration while calculating the demand of duty. The contention that the appellants placed purchase orders under Rule 4(5)(a) of the Cenvat Credit Rules, 2004, is only partially correct in as much as they received dyed yarn from KGD for job work and after the completion of job work, the fabrics were returned to KGD and the above movement is covered under Rule 4(5)(a) ibid. However, the same procedure cannot be adopted for the yarn procured by PM/PTM on their own account and they cannot be treated as job w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 about the sale of fabrics, nothing has been mentioned as to whether duty will be paid thereon. The monthly returns also described the goods as unprocessed cotton fabrics instead of declaring the same as unprocessed denim fabrics which amounts to deliberate mis-statement. We therefore, reject the submissions of the appellants that the demands are barred by limitation. 8. As regards Shri M. Tyagarajan, the evidence on record clearly establishes that there was the only person who knew that both PM and PTM have manufactured yarn dyed fabrics for KGD and purchase orders for purchase of yarn suitable for Denim weaving were also placed by him. He is therefore, rightly held liable to penalty. 9. In the light of the above discussion, we up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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