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TMI Blog2009 (4) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... of specific information that they were manufacturing and clearing yarn without accountal thereof in their books of accounts, without following Central Excise procedure and without payment of Central Excise duty. Shortage of cotton was noticed on the date of visit. Cone labels with the names of Shalini Textiles and Vishnu Textiles and HDPE bags meant for packing cotton yarn with the name of MSML, Shalini Textiles and Vishnu Textiles were noticed in the packing section of the factory; residences of the Deputy Sales Manager and Factory Manager of MSML and of P. Balakrishnan, Managing Director of C.P. Spinning Mills (P) Ltd. (hereinafter referred to as CPSML) were visited and documents such as personal diaries and computer printouts and delivery challans etc. relating to annual production and clearance of cotton yarn were recovered. Shortage of cotton and cone yarn was also detected in MSML during second visit of the officers on 26-6-02. During the period from 1-8-2000 to 26-4-2002, MSML received 39,41,871 Kgs. of cotton (this quantity excluded 7,72,002 kgs. of cotton sent to other mills). Actual consumption as brought out from various statements was 20,31,051 kgs. during the period 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay duty shifts to CPSML in view of the fact that CPSML had filed declaration under Notification No. 214/86-CE dt. 25-3-86 undertaking to discharge duty liability on the yarn received in their factory and that computer printouts relied upon for the purpose of quantification of duty could not be relied upon as the safeguards prescribed in the above rule were not followed, were rejected by the Commissioner who hence upheld the duty demand together with interest, and imposed penalty of Rs. 2,79,92,416/- on MSML under Rule 9(2), 52A, 173Q and 210 of the Central Excise Rules, 1944, Rule 25 of the Central Excise Rules, 2001 and 2002 Rules read with Section 11AC of the Central Excise Act, 1944, and penalty of Rs. 2.75 lakhs on P. Balakrishnan, Penalties of Rs. 10 lakhs each on P.K. Mahamune and D. Krishnan (proprietor of SP Trading Company) and Rs. 5 lakhs on M. Kathiresan. The mills and the individuals have filed appeals against duty confirmation and penalty; Revenue is in appeal against the reduction of the penalty from amount equal to duty. 4. We have heard both sides and record our findings as under :- (i) Who is the manufacturer of the goods in question? MSML contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TRANSFERRORS and Shri P. Balakrishnan representing the existing shareholders of M/s. C.P. Spinning Mils Private Limited, Dindigul hereinafter known as the TRANSFEREES. Whereas the TRANSFERORS have decided to transfer their interest in Mettur Spinning Mills Limited, having its registered office at No. 234, Mint Street, Chennai 600 003 (hereinafter referred to as the Mills) to a prospective person who would be interested in taking over and run the mills and whereas the TRANSFEREES have evinced interest and hereby agrees to take over the mills in as is where is condition and to run it as a going concern. Whereas the parties herein deem it expedient to enter into a memorandum of understanding (MOU) for the aforesaid purpose as per the terms and conditions setforth hereunder. 1. The TRANSFERORS hereby undertake to settle whatever balance due to the Term Lending institutions of mills namely IDBI, IFCI, ICICI and to the NBFCs and give no dues clearance certificates from all the institutions, to the TRANSFEREES 2. The TRANSFERORS hereby undertake to bear and clear all the trade creditors of the Mills existing as on 17th July 2000 as well as the liabilities due to their associate c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and that is manufacture of cotton yarn by MSML for others such as S.P. Trading and S.P. Textiles, proprietary concerns of Shri D. Krishnan, dealer in cotton cone yarn who has stated that yarn was manufactured at MSML s premises as per his directions. Yarn dealer namely Mahamune has deposed regarding purchase of cotton yarn from MSML during the relevant period. Yarn buyer Kathiresan has also stated that he made purchases of cotton yarn directly from MSML. The defence of MSML that they are not independent job workers/manufacturers, therefore, falls to the ground. Accordingly, we reject the submission that CPSML is to be treated as the manufacturer , and held that it is MSML who is the manufacturer of the cotton yarn in question. (ii) CPSML is required to discharge duty liability as per declaration filed by them in terms of Notification :- Notification No. 214/86-CE reads as under :- In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Govt. hereby exempts goods specified in column (1) of the Tale hereto annexed (hereinafter referred to as the said goods ) manufactured in a factory as a job work and :- (a) used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered. We, therefore, reject the argument of MSML that CPSML is required to pay duty on clandestinely removed yarn and hold that it is MSML who is liable to pay duty thereon. (iii) Quantification of demand :- MSML challenges the evidentiary value of computer printouts on the ground that the conditions prescribed in Section 36(b) of the Central Excise Act, 1944 are not satisfied. However, we note that the printouts were not generated from the computer during investigation but were recovered from the residential premises of the officers of MSML and CPSML/office premises. The Revenue s stand is further corroborated by other evidence such as notings in private diary of M. Swaminatan, Deputy Sales Manager of MSML, his letter dt. 22-3-01 to CPSML drawing the attention of N.S.B. Sundaresan, records of the brokers who had supplied cotton, which was not accounted, records maintained by dealers who had purchased cotton yarn on cones, transporters documents and the fact of deposit of sale proceeds in the account opened in the name of M. Ramakrishnan. M/s. MSML have not challenged the corroborative evidence. Further, no duty has been demanded on the yarn converted from the cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X
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