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TMI Blog2013 (9) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... ring was also on the basis of the material on record without substance - In any event, in view of the fact that (i) the processes carried out at Bhagyalakshmi and Famous nave been held to be independent and not liable to be clubbed, (ii) the fabric cleared by Bhagyalakshmi to Famous is admittedly not marketable, (iii) there was no demand confirmed against Famous and (iv) the processes of baling and packing cannot be regarded as amounting to “manufacture”, no case for enforcing any duty demand against Bhagyalakshmi can be said to exist. The demand, as confirmed by the Commissioner against Bhagyalakshmi, along with the penalties on Famous and Shri N.K. Gajera, were not sustainable and the Commissioner’s order does not survive. All the evidences, which were produced by the appellant before the Commissioner had not been contradicted or controverted during the course of hearing by the learned SDR - The invoice dated 16-12-2002, whereunder the motor found in the premises of Bhagyalakshmi was stated to have been purchased, as actually relating to such purchase - the Commissioner’s ground for rejecting the said invoice was only that it had not been produced during the course of investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Advocate, for the Appellant. Shri S.K. Mall, SDR, for the Respondent. ORDER The present appeals are directed against Order-in-Original dated 3-10-2006, passed by the Commissioner of Central Excise, Rajkot. By the said order, the Commissioner has confirmed, against Bhagyalakshmi Processor Industries (hereinafter referred to as Bhagyalakshmi ), a demand of Central Excise Duty of Rs. 5,46,12,662/- along with interest. Goods valued Rs. 20,90,555/- and goods valued Rs. 2,63,764/- seized under different panchnamas were confiscated. He has enforced the bond executed at the time of provisional release of the said goods, and directed appropriation of the security deposit tendered against the same, and imposed penalty, on Bhagyalakshmi, of Rs. 5,46,12,662/- under Section 11AC of the Act along with penalty of Rs. 10,00,000/- under Rule 173Q of the Central Excise Rules, 1944 read with Rule 25 of the Central Excise Rules, 2002. He further imposed penalty of Rs. 5,00,000/- on M/s. Famous Textiles Packers (hereinafter referred to as Famous ) under Rule 173Q of the Central Excise Rules, 1944 read with Rule 25 of the Central Excise Rules, 2002, and penalty of Rs. 5,00,000/- on Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , remained unconditionally exempted from Central Excise Duty throughout the period of dispute in the present case, vide (a) S. No. 106 of Notification 5/96-C.E., dated 2-6-1998, (b) S. No. 102 of Notification 5/99-C.E., dated 28-2-1999, (c) S. No. 103 of Notification 6/2000-C.E., dated 1-3-2000, and (d) S. No. 114 of Notification 3/2001-C.E., dated 1-3-2001. (ii) There was a difference, however, between S. No. 106 of Notification 5/98-C.E. (supra) and S. No. 102 of Notification 5/99-C.E. (supra) vis- -vis S. No. 103 of Notification 6/2000-C.E. (supra) and S. No. 114 of Notification 3/2001-C.E. (supra). This was with respect to the Explanation contained in the said entries. The Explanation to S. No. 106 of Notification 5/98-C.E. (supra) and S. No. 102 of Notification 5/99-C.E. (supra) reads thus : For the purpose of the cotton fabrics subjected to the process of colour fixation by passing steam over such fabrics shall be deemed to have been processed without the aid of steam . As against this, the Explanation to S. No. 103 of Notification 6/2000-C.E. (supra), S. No. 114 of Notification 3/2001-C.E. (supra) and S. No. 114 of Notification 6/2002-C.E. (supra) read thus : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in factories not having facilities for bleaching/dyeing/printing with the aid of power/steam. (c) This conditional exemption was withdrawn, w.e.f. 1-3-2002, insofar as the process of stentering was concerned. 6. Investigations, in the present case, commenced with a visit of the officers, to the premises of Bhagyalakshmi and Famous, on 21-1-2002. On the said occasion, photographs were taken and a Panchnama was drawn up. The following equipment was found in the premises of Bhagyalakshmi. (i) one mercerizing machine, (ii) one packing machine, fitted with electric motor of 10 HP power, (iii) one bleaching machine, (iv) another electric motor of 10 HP power, lying separately, along with electric panel in detached condition, and (v) some open ended fan belts, near the said motor. The following equipment was found in the premises of Famous : (i) one squeezing machinery, (ii) one open stentering machine, and (iii) a 20 KVA diesel generating set. Various stocks of grey fabrics and bleached fabrics were also found in the said premises. 7. Also, statements of S/Shri N.K. Gajera, partner of Bhagyalakshmi, V.K. Gajera, partner of Famous, K.S. Sabapathy Mishra, Produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand earlier confirmed against Famous has been dropped. 12. The reasoning of the Commissioner, while passing the presently impugned order may be set out thus : (i) The statements of S/Shi N.K. Gajera, V.K. Gajera, K.S. Sabapathy Mishra and S.S. Bhadoria admitted that mercerizing, stentering and hydro extraction were carried out with the aid of power. (ii) The affidavits retracting the said statements could not be accepted as, if the said affidavits were in existence, the deponents ought to have lodged protest at the time of recording of subsequent statements. Rather, they admitted, during the recording of the subsequent statements, that the earlier statements were voluntary. Creation of evidence by producing such affidavits was, moreover, not permissible in law. Moreover, the appellant did not produce the said persons in evidence, so that they could be cross-examined by both parties and their affidavits tested. (iii) The invoice dated 16-2-2002, whereunder the electric motor found in Bhagyalakshmi s premises was stated to have been purchased, could not be accepted in evidence, as it was not produced before the visiting Central Excise officers, and did not convince the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished product after baling and folding. 13. Oral arguments have been advanced with Written Submissions which have been filed both, by the appellant as well as the Revenue before us. 14. The main grounds canvassed by the appellant may be enumerated thus : (i) In view of the admitted position that the fabric, in the form in which it was cleared by Bhagyalakshmi to Famous, was not marketable, no duty could, in any case, be demanded on the said clearances. (ii) The issue of whether the processes in Famous were carried on with, or without, the aid of power, was irrelevant, as no duty had been confirmed against Famous, and the Revenue was not in appeal. (iii) The oral evidence was not credible. The statements of S/Shri N.K. Gajera, V.K. Gajera, K.S. Sabapathy Mishra and S.S. Bhadoria had been retracted, by affidavit, at the first very opportunity. The findings of the Commissioner, on this issue, were not sustainable, as there was no requirement, in law, for the appellant, having tendered by affidavit in evidence to produce the deponent of the affidavit as its witness, as, if the Revenue desire to cross examine the said deponent, he could always have been summoned therefor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, for mercerizing, since beginning, was unfounded. Rather, the said motor had been purchased by Bhagyalakshmi under invoice dated 16-12-2002, which had been unjustifiably disregarded on the ground that it was not shown to the visiting Central Excise authorities. (d) The photographs taken at the time of visit also indicated that the 10 HP motor found loose was unconnected to any apparatus or machinery in the premises. Moreover, the fan belts lying beside the motor was also open ended, so that they could not be used to run any motor. (e) In any case, there could be no question of any demand for the period prior to October 2001, in view of the certificate dated 22-9-2001 issued by Gujarat Vidyut Board supra. (f) The appellant relied, to buttress its submission, on affidavit dated 5-12-2005 of Shri Narayanan Neelakantan Nair, tendered by way of expert evidence. (vii) Insofar as the processes carried out at Famous were concerned, the question of whether they were carried out with or without the aid of power, was not significant, as there was no duty demand on Famous. Besides, the photographs placed on record also indicated that the stentering machine was run on LPG, and not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the appellants submitted that the learned SDR had not made any submissions regarding the principal allegation of the activities in Bhagyalakshmi and Famous being continuous. He also refuted the submission of the learned SDR that the averments regarding installed load, non-exceeding thereof, etc., had been raised for the first time, by pointing out, from the paper book, that these submissions had been raised even before the learned Commissioner at the stage of adjudication. The submissions regarding lifting of water, baling and packing, as raised by the SDR, not forming part of the allegations against the appellant before the lower authorities, the right of the learned SDR to raise the same before this Tribunal was seriously questioned. It was also submitted that lifting of water and caustic soda was deemed to have been carried on without the aid of power, even where power was used therein, under the relevant exemption notifications. 17. Having heard learned Counsel and learned SDR and perused the relevant records, we proceed to decide the issues in controversy. At the very outset, three important features of the case deserve to be noticed. (i) It is the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or two reasons. Firstly, as was admitted by the learned SDR himself, this was never the case of the department at any earlier stage, and it is not open for the Revenue to canvass a entirely new case before this Tribunal; it would be equally impermissible for this Tribunal to examine any such new case, regarding which the assessee was never put to notice. Secondly, even on merits, in view of the admission by the learned SDR, to the effect that the processes of baling and packing did not amount to manufacture, the submission that they would nevertheless have to suffer duty, not being specified in the exemption Notifications, is obviously fallacious. As has already been noticed hereinabove, manufacture and marketability are twin conditions, both of which required cumulatively to be fulfilled for duty to arise. Once it is accepted that no manufacture was involved in the process of baling and packing, no duty liability could obviously arise merely because of non-specification of these processes under the exemption Notifications. The question of exemption can arise only where an activity is, in the first instance, dutiable. Where the activity does not amount to manufacture, and is not, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : In light of the facts and circumstances of the case, I find that Noticee No. 1 and Noticee No. 2 were partnership concerns engaged in processing of grey cotton fabrics on job work basis. The Noticee No. 1 was being received the grey cotton fabrics for processing from various customers and the processing thereof. The cotton fabric was being bleached and mercerized by Noticee No. 1 with the aid of power and thereafter mercerized and bleached fabric as such in wet condition (emphasis supplied) transferred to Unit No. 2 where immediately the fabrics were taken for squeezing to remove extra water from the fabrics and thereafter stentering the fabrics, after stentering the fabrics were once again brought back to the premises of Noticee No. 1 for bailing/folding on the machine installed at Noticee No. 1, being operated with the aid of electric motor, after completion of these processes the fabric was packed and returned back to the customers. Here it is worth to appreciate that while transferring the mercerized and bleached cotton fabrics, in wet condition to Unit No. 1, Noticee No. 1 had not been preparing any document/challan as well as under any circumstances wet cotton fabrics c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to Famous by way of conveyor belt or otherwise. It is an admitted position that the fabrics, after being processed at Bhagyalakshmi, were manually removed to Famous for being subjected to stentering and hydro extraction therein. There is, further, no allegation of commonality of managerial control, common financing or flowback of finances from Bhagyalakshmi to Famous or vice versa. Rather, the Commissioner himself has found, categorically, in the above extracted paragraph 3.9.1 of the impugned Order-in-Original, that Noticee No. 1 and Noticee No. 2 were partnership concerns engaged in processing of grey cotton fabrics on job work basis . Once the separate identity of Bhagyalakshmi and Famous as partnership concerns in their own right was recognized, and the fact that each of them was engaged in processing of the grey fabric on job work basis was also acknowledged, it is difficult to comprehend the subsequent finding of the Commissioner Bhagyalakshmi was liable to be regarded as the actual processor of the fabrics. Where two units are separately processing goods , and neither of them is a dummy of the other, Central Excise law does not contain any provision for clubbing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictly speaking, it was not open to the learned SDR to raise an entirely clearly factual argument for supporting the impugned demand before us, we have heard arguments thereon and, consequently, we proceed to examine the said issue. 25. The submission of the learned SDR was that though baling and packing did not amount to manufacture , they would, nevertheless, be dutiable. In view of the fact that no exemption in regard to baling or packing was to be found in any of the relevant Notifications. As we have already recorded, this submission is obviously without merit, as there can be no duty liability without manufacture, and the question of any exemption, sans liability to duty in the first instance, certainly does not arise. 26. Despite the assertions of the learned SDR on the point, we have ourselves examined the issue of whether baling and packing could amount to manufacture or not. There is no dispute about the fact that the fabric does not undergo any physical or chemical change as a result of mere baling or packing as these only involved the processes of folding and stacking of the fabric and packing thereof. These processes would also, nevertheless, be liable to be reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing words bleaching, mercerizing, dying, printing, water proofing, shrink proofing, organdie processing or any other process or any one or more of these processes . All these processes result in a lasting change to the fabric in question, so that the words any other process have also to be interpreted as referring to a process resulting in such a change rather than encompassing processes such as merely baling and packing, which result in no change to the fabric, either physical or chemical. That the noscitur a sociis doctrine may legitimately be invoked in taxing statutes is well settled. The doctrine was itself illuminatingly explained by the Hon ble Supreme Court in State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610 : This rule, according to Maxwell, means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in Words and Phrases (Vol. XIV, p. 207) : Associated words take their meaning from one another under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the process of mercerizing, stentering and hydro extraction. The learned Counsel for the appellant has contended that these statements, having been retracted at the first available opportunity, by way of affidavits, could not be relied upon to the appellant s prejudice. On this issue, the finding of the Commissioner are that : (i) the documents produced before him were uncertified/un-authenticated photocopies of affidavits, (ii) if these affidavits were actually sworn immediately and were, in fact, in existence, there was no reason as to why the deponents thereof did not lodge protest at the time of recording further statements or with the senior departmental functionaries regarding the statement having been recorded in illegal manner, (iii) it was unconvincing to assume that so many persons were forced to sign false statements over such a long period of time, (iv) the retractions, therefore, were solely with the intention of targeting the adjudication process in a planned manner, and were not produced during investigation, as this would allow the investigating authority to collect corroborative evidence to sustain the case, (v) the law did not permit a person to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording of the subsequent statement, regarding the voluntary nature of the earlier statement. As the Commissioner himself has not gone into the acceptability of the said retractions, we rest our finding on this point by observing that there has been a miscarriage of justice. 36. Tested on this touch stone, we find that the evidence as regards the usage of power in the process of mercerizing carried out in Bhagyalakshmi, is woefully insufficient to sustain the case of the Revenue. The allegation of high level of electricity consumption, etc., can hardly be taken into account, as neither the Show Cause Notice nor the impugned Order-in-Original, indicates that any analysis was conducted to ascertain what the normally acceptable level of electricity consumption would be, or how the consumption by Bhagyalakshmi was disproportionate in this regard. Bhagyalakshmi specifically contended, even before the Commissioner, that the 10HP motor which was found lying loose in its premises could not be regarded as having been connected to the mercerizing machine, as this would result in the total connected load reaching 23.5 HP which would be in excess of the load sanctioned by the Gujarat Vidyu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, does not appear, to us, to have any legs to stand on. 38. Insofar as the usage of power in the process of stentering at Famous is concerned, as has already been noticed hereinabove, even if stentering were assumed to have taken place with the aid of power, that would not make any difference, as no demand has been confirmed against Famous. That apart, the only evidence to support the allegation of usage of power in stentering is the statements of the personnel of Bhagyalakshmi and Famous which, for the reasons already stated hereinabove, cannot be relied upon as the sole evidence to sustain the charge levelled by the Revenue. As against this, the learned Counsel for the appellant has pointed out to us that the photographs taken at the time of search/visit indicated that LPG Cylinders were used in stentering process. However, as we have already pointed out, no demand having been confirmed against Famous, this issue is not of any substantial significance. 39. In the backdrop of the above findings, we are persuaded to accept the submissions of the learned Counsel appearing for the appellant, and to hold the allegations against the appellants, as levelled in the Show Cause Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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