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TMI Blog1993 (5) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... Amritsar (VTM) and another penalty of Rs. 20,000/- on the other appellants in this case M/s. Ram Hukam Textiles Mills, Sarigam under Rule 209A of the Central Excise Rules. There is a penalty further of Rs. 2,00,000/- on Chuni Lal Vohra also under the same Rule who is connected with all the appellant firms. In the same order, the Collector has ordered confiscation of fabrics measuring 54220.20 mtrs seized from the factory of M/s. SRFW, 579.20 mtrs of fabrics seized from a cattle shed belonging to Chuni Lal Vohra, 7345.40 mtrs of fabrics seized from M/s. Ram Hukam Textiles, Sarigam. The goods were provisionally released on furnishing of security. The Collector appropriated an amount of Rs. 65,000/- and an amount of Rs. 81,000/- towards fine in lieu of confiscation of these goods out of the security amount. The Collector also ordered to release of 3579.90 mtrs of fabrics seized from the godown of M/s. VTM on a finding that the goods are not liable for confiscation for want of evidence. 2. The factual background and the basis for the Departmental proceedings initiated against appellants herein are brought out in the show cause notice dated 18-1-1988 issued to the appellants of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were seized under Section 110 of the Customs Act, 1962 as made applicable to central excise cases vide Notification No. 68/63-C.E., dated 4-5-1963 issued under Section 12 of the Central Excises & Salt Act, 1944 on a reasonable belief that they are liable for confiscation under Rule 173Q of the Central Excise Rules, 1944. 3. On enquiry, Shri Chunilal Vohra stated that due to paucity of storage place he had stored some surplus goods in his cattle shed situated at Plot No. 11, Krishna Nagar, Islamabad. On verification of premises the staff recovered from one room 579.20/827.09 sq. mts. of processed woollen fabrics belonging to M/s. VTM and also recovered processed woollen fabrics measuring 3579.90 mtrs/5020.29 sq. mtrs. from one godown situated upstairs in the office of VTM. On demand Shri Vohra could not produce any duty paying documents in respect of this quantity. As such the staff also seized these processed woollen fabrics measuring 579.20 mtrs. and 3579.90 mtrs. under Section 110 of the Customs Act, 1962 as made applicable to Central Excise cases vide Notification No. 68/63-Central Excises dated 4-5-1963 on a reasonable belief that the seized fabrics are liable for confisc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly members in different capacities; that M/s. VTM and M/s. Shalloo Fabrics supply the processed woollen fabrics to Govt. Deptt.; that all the business at Bombay is being looked after by his father Shri Rajinder Pal Vohra and at Amritsar by his grandfather Shri Chunilal Vohra; that all the fabrics manufactured by them at Amritsar are supplied/despatched to various destinations directly from Amritsar units; that Bombay office was being maintained for liasion with DGS & D and setting up new companies or expanding business; that all the invoicing and accounting is done at Amritsar. Only income tax returns are filed from Bombay; that they do not get any copies of invoices from Amritsar. Photocopies of income tax returns filed by M/s. VTM, Shalloo Fabrics and SRFW were handed over to the enquiring officer by Shri Ashok Kumar Mehra, C.A. of M/s. Ashok Kumar Mehra & Co., Bombay. 9. Summons dated 9-10-1987, 27-10-1987 and 18-12-1987 under Section 14 of the Central Excises and Salt Act, 1944 were issued to SRFW, Shalloo Fabrics and VTM Amritsar requiring them to produce all the records pertaining to Central Excise duty payments made by them on processed woollen fabrics during the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Engineer of the office of the TGS, T&C Wing, Thimaya Road, Amritsar mentioned in the terms and conditions of the contracts. (vi) that M/s. SRFW Amritsar never paid appropriate Central Excise duty on the goods offered for inspection but rejected and on goods allowed as flag free allowance. (vii) that M/s. VTM Amritsar had an order of 40,000.00 mts. of serge battle dress 142 cms. width @ Rs. 119/- per mt. from Commdt. COD, Kanpur vide AT No. T8/059/ COAB dated 2-5-1985 (entry on page 70 of register No. 30) mentioned at list of documents resumed from M/s. VTM, Amritsar. Accordingly, they put for inspection quantity of 15,000.00 mts. on 31-1-1987 and Quality Engineer of O/O the TGS T&C Wing Thimaya Road, Amritsar inspected the same on 31-1-1987 to 21-2-1987 and the lot was rejected by the Quality Engineer as per inspection note No. TXAST/12/1/2 dated 21-2-1987 (enclosed Annexure `CC') due to the reason that water repellency test for water absorption was not found according to the specification in the tender. Again another lot of 15,600.00 mts. of battle dress 142 cms width was put for inspection on 28-2-1987 to 30-4-1987 but rejected the same as per inspection note No. TXA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring 5,71,075.76 mts./ 8,23,558.92 sq. mts valued at Rs. 3,45,93,972.95 as detailed in annexure `DD' and `EE' worksheet No. 4 & 6 of annexure `AA' which has been reasonably believed to have got processed from M/s. SRFW, Amritsar whereas during this period M/s. SRFW, Amritsar had issued G.P. 1 in favour of M/s. VTM of excisable processed woollen fabrics measuring 1,90,701.48 mts/275239 sq. mts. valued at Rs. 1,12,32,766.52 on payment of Central Excise duty leviable thereon as detailed in annexure `HH'. 13. Whereas from the above facts it appears that the said M/s. SRFW Amritsar have contravened the provisions of Rule 9(1), 52A, 53, 173B, 173C, 173F, 173G read with Rule 226 of Central Excise Rules, 1944 (as amended) inasmuch as : (i) That they had clandestinely removed processed woollen fabrics measuring 579.20 mts./827.16 sq. mts valued at Rs. 34,375.09 involving Central Excise duty 2956.00 (BED Rs. 1718.75 + AED Rs. 859.38 + AED (T) Rs. 257.81 + Cess Rs. 20.68) from their factory premises without the coverage of G.P. 1, without payment of appropriate Central Excise duty which was seized on 25-7-1987 from Plot No. 11 of Sh. Chuni Lal Vohra. (ii) That they had clan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation of the appellant Company were allowed by the Tribunal. By another Misc. Order No. 184/92-A dated 14-7-1992, the further application by the appellant herein for taking up additional grounds in support of their appeal namely that the goods woollen fabrics involved in these appeals are not classifiable under Item 21 CET was also allowed by the Tribunal. 4. Shri A.K.S. Bedi, the learned Counsel appeared for the appellants M/s. SRFW and learned Counsel Smt. Archna Wadhva appeared for the other appellants. Shri A.K.S. Bedi submitted that the demand of duty of M/s. SRFW is misconceived. He referred to the certificate of incorporation. This unit was functioning from 5-9-1984 and by an agreement dated 23-12-1985 was taken over by M/s. Abhinav Dyeing & Finishing Mills Pvt., Amritsar. The learned Counsel submitted that though as per agreement the liabilities were taken over by M/s. Abhinav Dyeing & Finishing Mills Pvt., Amritsar yet that cannot be a ground for the Department to foist past liability of M/s. SRFW on M/s. Abhinav Dyeing & Finishing Mills Pvt., Amritsar. The learned Counsel pointed out that on this ground the demand against M/s. SRFW for the duty on the goods whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1987 (33) E.L.T. 126 (T)=1987 (13) ECR 918 Cegat (SB-D) - M/s. Makers Development Services (P.) Ltd. v. Collector of Central Excise, Bombay and 1987 (29) E.L.T. 437 = 1987 (11) ECR 62 - Meltron Satellites v. Collector of Central Excise and 1987 (29) E.L.T. 254 in the case of Perfect Cartons, Cochin v. CCE, Cochin. Thus the learned Counsel urged that the liability to pay duty is always on the manufacturer and at the relevant time M/s. Abhinav Dyeing & Finishing Mills Pvt., Amritsar were not manufacturer. Therefore, no duty demand nor any penalty can be imposed on them upto 23-12-1985 when they acquired existing by means of the agreement. It was further argued that in the Collector's order the case has been built up on the basis of processing charges received in relation to the quantity of fabrics sent for processing which was not charged in the show cause notice and relevant information was also not disclosed to the appellants. In any case for the period 23-1-1983 to 31-3-1983 and 1-4-1986 to 26-7-1987 in the case of M/s. VTM, and from 1-1-1987 to 26-7-87 in the case of M/s. Shalloo Fabrics Pvt. Ltd. there is no data given even in the tabular form in the Collector's order also doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Counsel referred to the definition of Woollen Fabrics in Tariff Item 21 CET which is to the effect that woollen fabrics means varieties of fabrics in which wool predominates in weight or which contains more than 30% of wool and 50% or more of non-cellulosic fibre or yarn or both. Therefore, in order to be classified as woollen fabrics there should be either comprised predominately wool or wool with other fibre of yarn. However, in the present case the Collector has charged the duty considering the goods as 100% wool. The learned Counsel in this context relied upon the Government of India decision reported in 1992 (57) E.L.T. 523 in the case of Madura Coats Ltd. which lays down the principle in this matter on the predominance concept. The learned Counsel argued when the goods are held to be 100% wool and when there is no admixture there will be no question of predominance of one material over another. The appellants on the other hand claimed classification of the goods not under Item 21 CET but under Item 68 CET as goods not elsewhere specified and if this ground is accepted, the learned Counsel submitted the duty demanded will be substantially reduced. In this context, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 209A under that Rule. As regards the appellant M/s. Ram Hukam Textiles, the learned Counsel submitted that here also the Collector, while penalising the appellant under Rule 209A has failed to satisfy what are the precautions that the appellants ought to have taken to ensure that the goods he is dealing with are not tainted and without the prescription of such precaution, penalty under this Rule on this appellant is unlawful. Another argument was that seizure was effected on 27-7-1987 and show cause notice was issued on 21-8-1988 after a lapse of six months and that therefore, in terms of provisions of Section 110 of Customs Act as made applicable to Central Excise seizure, the goods should have been returned to the person concerned where there was failure to issue show cause notice within six months. The learned Counsel urged that a notice for extension of time ought to have been given otherwise the order of confiscation and imposition of penalty is invalid. The learned Counsel cited the Tribunal's decision in the case of Grauer & Weil (India) Ltd., Vapi v. Collector of Central Excise, Baroda, reported in 1986 (25) E.L.T. 338 (Tribunal) to argue that since in this case goods had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in terms of the provisions of Rule 230(2) of the Central Excise Rules. The learned Senior Departmental Representative also urged that no new case has been made out by the Collector in his adjudication order, whose conclusions flow from the detailed material data regarding clearances and supplies to customers which have been furnished with the show cause notice. The learned Senior Departmental Representative referred to the various annexures and worksheets accompanying the show cause notice to clearly bring out that the quantity actually supplied by the two units are much more than what has been processed and cleared to them from the processing unit M/s. SRFW. There is also evidence as brought out by way of document that all job charges for processing were paid only to M/s. SRFW. Therefore, the findings of the Collector are in terms of the show cause notice only. The learned Senior Departmental Representative further pointed out that the demand has been computed not only on the basis of ledger entries of the appellants, but also on the basis of figures contained in the Income-Tax Return filed by them which also showed that the payments of job charges have been made only to M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Senior Departmental Representative submitted that no case has been made out for classification under Item 68 CET. The learned Senior Departmental Representative, further, urged that the evidentiary value of Chuni Lal Vohra's statement cannot be minimised merely on the ground that he is of advanced age. There is evidence to show that it was he who handles the affairs of all the units at Amritsar. In this context, the statement of Ranjan Vohra, his grandson, given at Bombay, confirms it. There was also no material retraction from the statement. Further, the learned Senior Departmental Representative contended that the Department's case is not only based on the statements of Chuni Lal Vohra alone, as it is also based on the entries in ledgers, figures in the Income-tax Returns. In regard to the arguments that no penalty can be imposed during the period when Rule 209A was not in force, the learned Senior Departmental Representative argued that the offence arises on the date, it is committed and undoubtedly from April, 1986 onwards, the penalty under that Rule is validly imposable. The element of knowledge about the nature of the goods for the purpose of Rule 209A is also attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants based on the processing charges paid to M/s. SRFW by appellants M/s. VTM and M/s. Shalloo Fabrics and on the basis of goods received on payment of duty from M/s. SRFW to say that all the fabrics have been processed by M/s. SRFW. This the appellants say is a deviation from the show cause notice. Examining this contention a perusal of the Collector's order shows that this aspect has been taken up by him and dealt with in his order apparently in the context of the defence put up by the Appellants. The Collector has observed, `It is claimed that processing charges raised by M/s. SRFW correspond to the fabrics processed and supplied by them after payment of duty. The facts are, however, otherwise, Record of the parties under seizure depict the following position. In this context the perusal of the show cause notice with several annexures also shows that the basis for this finding of the Collector has been laid down therein. The relevant annexures to the show cause notice had furnished the quantity of clearances of grey fabrics and those of processed fabrics between the three units and the quantity cleared on payment of duty of processed fabrics to bring out the charge which the Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there has been short payment of duty also, as the serge Battle Dress is priced higher - a fact not disclosed to the department and which has implications for Revenue since a higher duty would have been collected on the higher price. This situation is also covered by the provisions of Rule 173Q which provides for confiscation and penalty for contravention of any of the rules with intention to evade duty. Therefore, the confiscation of this quantity for the reasons set out in the Collector's order is sustainable. 11. In regard to the quantity of 579.20 mtrs. of process woollen fabrics from Shri Chuni Lal Vohra's cattle shed, though admittedly this seizure followed what he said in his own statement, yet since there is indication that this fabric were found to be old and some of them moth-eaten; it will be reasonable to extend the benefit of doubt to this quantity and release it from confiscation, as has been done by the Collector himself in respect of another quantity of 3579 mtrs of fabrics seized from the godown situated upstairs of the premises of M/s. VTM. Ordered accordingly. 12. In respect of the seizure of fabrics from Ram Hukam Textiles at Gujarat, it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement dated 30-7-1987 of Shri Janeshwar of M/s. Ram Hukam Textiles saying that no other consignment of fabrics of any type had been received in the past except the one which was seized by the Department. This statement has been accepted by the Department also. 14. The question of determination of assessable value of the fabrics in this case had not been pressed during the hearing before the Tribunal and accordingly no findings are called for thereon. The matter regarding assessable value at the hands of job worker stands settled by the Supreme Court in the case of Ujagar Prints v. Union of India - 1989 (39) E.L.T. 493 =1989 (21) ECR 1 (SC) as clarified by the court subsequently. 15. The appellants have also raised a fresh ground regarding classification of the goods under Item 21 CET. It has been contended that as per definition of woollen fabrics under that item in order to merit classification thereunder the fabrics should be such as are either comprised predominantly of wool or of wool with other fabric of yarn as specified therein. Considering that Collector has demanded duty on the fabrics in this case as comprised of 100% wool, its classification under Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprise over 50% of its weight. Therefore, in the light of the above discussion the fresh ground raised on classification has to be rejected as unsubstantiated. 16. On the question of the penalty on these appellants the Collector has invoked Rule 209A Central Excise Rules for imposing this penalty. This Rule came into effect from April, 1986. The period involved in this case is January, 1983 to July, 1987, for which show cause notice was issued on January, 1988. The argument put forth by appellants Chuni Lal Vohra, M/s. Shalloo Fabrics, M/s. VTM and M/s. Ram Hukam Textiles that the above fact itself would have an impact on the penalty on them and quantum thereof has a lot of force and needs to be accepted. A large portion of the period covered by the demand being prior to April 1986, no penalty under Rule 209A for that period can be valid. Also a relevant consideration in the case of appellant Chuni Lal Vohra is his advanced age. Otherwise on merits none of those appellants can validly take the plea of ignorance of the nature of the goods received/stocked/cleared by them having regarding to the very close knit relationship of the family members who amongst them controlled the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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