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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 ..... 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 1-4-01 to 31-12-01 and the actual consumption for the entire period of dispute namely 1-8-2000 to 26-4-2002 was worked out as 39,36,944.5 kgs. while only 19,67,752 kgs. of cotton was accounted in the statutory records. Statements of various officers of MSML and CPSML were recorded. Statements were also recorded from dealers in cotton yarn. 2. The result of the investigation was that (a) MSML received cotton without invoices and in the name of Prathiv Spinning Mills (P) Ltd., CPSML etc. and used the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 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 the duty demand confirmed against them is not sustainable as they cannot be considered as 'manufacturer' and that it is CPSML who is the 'manufacturer' of the goods. They rely upon Memorandum of Understanding dt. 8-7-2000 entered into between K. Rajagopal Chetty, Managing Director of MSML and P. Balakrishnan of CPSML according to which MSML allowed CPSM to run the mills as per the conditions mentioned therein. The MoU was further extended. During the period in dispute, CPSML had purchased material such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby 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 concerns as on the said date. 3. The TRANSFERORS will also take over all the amounts due to the Mills from their associate concerns as on 17th July 2000. 4. The TRANSFERORS hereby undertakes to, settle the crystallized liability of the Mills to its bankers, Syndicate Bank, Madras Main Branch and State Bank of India, Industrial Finance Branch, Chennai, and further to relieve the TRANSFERORS FROM ALL THE PERSONAL guarantees, corporate guarantees and other guarantees executed by the TRANSFERORS and their associated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relation to the manufacture of final products, specified in column (2) of the said Table, (i) on which duty of excise is leviable in whole or in part; or .......... from the whole of duty of excise leviable thereon, which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). (2) The exemption contained in this notification shall be applicable only to the said goods in respect of which, - (i) the supplier of the raw materials or semi-finished goods gives an undertaking to the Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dential 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 sent by CPSML to MSML in terms of Notification No. 214/86 dt. 25-3-86. Therefore, we agree with the department that the duty demand has been correctly quantified. In the light of the above discussion, we uphold the duty demand confirmed on MSML and as well as penalty imposed thereon, and dismiss Appeal No. E/84/07. Appeal No. E/309/07 of the Revenue is allowed by enhancing the penalty to Rs. 2,90,92,416/- (Rupees Two Crores, Ninety Lakhs, Ninety two thousand, Four hundred and Sixteen only) being duty demand confir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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