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TMI Blog2010 (8) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent. [Order per : B.S.V. Murthy, Member (T)]. - M/s. Shanti Processors Ltd. (SPL for short) was engaged in the manufacture of clearance of cotton fabrics and man-made fabrics upto 31-3-95. After 1-4-95, the factory premises were leased to M/s. Bhavana Textiles Pvt. Ltd. (BTPL for short) as per the lease agreement dt. 29-3-95. Searches were conducted in the factory premises and office premises of BTPL on 8/9-12-95 and certain records were recovered. Further, investigation was conducted and show cause notice was issued on 16-10-98, which has been adjudicated by the Commissioner. Revenue is in appeal against adjudication order passed by the Commissioner since he dropped further proceedings against SPL. 2. The case of the department before Commissioner is briefly explained as under : SPL had cleared 11,41,730 sq. mtrs of man made fabrics and 10,86,502 sq.mtrs of cotton fabrics during the year 1994-95 by claiming full exemption from payment of Central Excise duty under Notification No. 297/79-C.E., dt. 24-11-79 as amended and Notification No. 253/82-C.E., dt. 8-11-82 as amended. As a result of investigation conducted, it is the contention of the department that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected when dyeing, printing, bleaching, mercerizing processes are undertaken. He also submitted that there is no evidence of boilers available with DE. There is no evidence of consumption of lignite made by DE. The total consumption of fuel in the form of fire wood and coal by DE during the year 1994-95 was Rs. 7,802/-. Further, the DE in their audit report, have not shown payments made for lignite, supervision charges and design development charges to SPL, but all these expenses have been included under the heading processing chares , which would strengthen the department s case to show that SPL collected difference between actual processing charge and amount shown in the document s in the guise of lignite, supervision charges and design development charges. Further, the Commissioner also erred in ignoring the technical literature and opinion dt. 1-8-97 issued by Silk Art Silk Mills Research Association (SASMIRA) on 1-8-97, wherein it was opined that dyeing and stentering process was essential for the finishing of the fabrics and the same were integrally connected with the operation of calendaring process. He submits, while Commissioner ignored technical opinion which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the appellant that DE had hired services of persons of SPL for design development and supervision of their factory to justify huge amount paid towards such services. Another submission that was made was that the purchase of colours, chemicals to the tune of 1.47 crores during the year is justified by the quantum of fabrics processed. While deciding the issue, adjudicating authority did not keep note of the material facts, disclosed in the show cause notice which was that both SPL and DE are situated in the same compound and DE did not have infra-structure required by them for finishing fabrics. 5. Learned advocate on behalf of the appellant submitted that the case of the department in the show cause notice was that the appellant had undertaken several processes such as bleaching, dyeing and printing, padding, calendering, stentering etc. whereas the appeal of the department is on the ground that the appellants had taken up stentering process and stentering was not one of the process eligible for exemption. He drew our attention to the relevant exemption notification. Notification No. 253/82 exempts cotton fabrics which undergo specified processes therein and stentering is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the department has not been able to show any irregularity as far as law and procedure are concerned. Especially for this kind of situation, D3 declaration was prescribed and it was also provided that assessee had to wait for 24 hours after filing D3 declaration before putting the goods in to use. In such a situation unless the department is able to show all D3 declarations filed by the SPL were not verified or when verified there was discrepancy, it will not be appropriate to uphold the allegation that SPL had received grey fabrics which were not at all processed and undertook processes which were not recorded. After all, verification of D3 declaration would have clearly revealed the factual position. It would have not only revealed that the goods came directly from the merchant manufacturer, it also would have proved that SPL was not maintaining the records properly. Further, there is not even a whisper about any omission in filing statutory declaration under Rule 173B/173C and filing RT-12 return. While the department s case in the show cause notice was that the appellant had undertaken different manufacturing processes, the appeal is mainly centering on the process of sten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so not supported when we consider the statement. The statement says that DE used to send the goods for padding, calendaring and for other processes as per the requirement of the merchant manufacturers. This cannot mean that in all cases, the fabrics sent by DE were sent for different types of processing. No investigation as regards activities of DE have been carried out. After all, if the department s claim is correct, the fabric after processing would have gone to DE and from DE would have gone to merchant manufacturer and would have taken the same route while being sent by the merchant manufacturer to SPL. If that is the case, while the goods were coming from merchant manufacturer to SPL, they must have come via DE and if DE had undertaken any process they must have maintained records for the purpose. If the department could show at least some evidences wherein the fabrics without undertaking any process were sent to SPL by DE, then the fabrics were sent was for undertaking different processes and not padding, calendaring, stentering alone could be considered. No doubt the transactions relating to lignite, supervision and design development, definitely create a suspicion and al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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