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TMI Blog2019 (6) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, metalised yarn of man-made filaments falls under 5605.10. The classification requires to be arrived in terms of section notes and chapter notes and the references to the respective headings or sub-headings - the impugned goods are classifiable under 5605.10 and are covered by the exemption notification 45/1986 Central Excise dated 10.02.1986. Clandestine removal - covered yarn - period April 1990 to March 1991 - HELD THAT:- The averment that the total clearances of the Appellant to M/s. Hiro Industries tally with the invoices issued by M/s. Hiro Industries cannot be accepted. We find that the Appellants have not accounted for the clearance of 1776.75 kg of covered yarn - the Learned Commissioner had correctly confirmed the duty of ₹ 1,04,525 on the Appellants. Under-valuation - it has been alleged that the Appellants have under-valued the goods in as much as they have cleared 90% of the covered yarn to M/s. Hiro Industries @ ₹ 150 to ₹ 200/Kg and that M/s. Hiro Industries sold the same to other buyers at ₹ 425/kg - related party transaction - Extended period of limitation - HELD THAT:- The department has not made out any case to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the penalty be also restricted to ₹ 1,00,000 - other penalties also set aside. Appeal allowed in part. - APPEAL NO. E/477, 151/2011 - A/86024-86025/2019 - Dated:- 31-5-2019 - Dr. D.M. Misra, Member (Judicial) And Shri P Anjani Kumar, Member (Technical) Shri M. N. Sukhaja, Adv for Appellant Shri N. N. Prabhu Desai, Supdt (A.R) for Respondent ORDER Per: P Anjani Kumar, Member (Technical) These two appeals are directed against OIO 05/2008 passed by Commissioner of Central Excise, Mumbai-IV. 2. Brief facts of the case are that the appellant No 1, M/s. Apsara Metalica Industries (E/477/11), carried out manufacturing of lacquered film and metallic yarn; appellants purchased duty paid polyester films from M/s Venlon Polyester Films Ltd, on payment of duty , from their factory at Mysore and directly sent to M/s. Pan Electronics Pvt. Ltd and C N Ganges Metallizing Pvt. Ltd., Hosur.; the job workers of metallized film, cleared the same to the appellants on payment of duty; The appellants thereafter undertook the activity of colouring these duty paid polyester films ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner relied upon a test report. However, no copies of sample and test report was given to the appellants. 2.2. On an appeal filed by the appellants, CEGAT, vide order dated 4.4.2000, remanded the matter directing the Commissioner to furnish a copy of the test report to the appellants. Copy of the Report was given to the appellants and passed the Order-in-Original dated 7.3.2002, confirming the demand of duty and imposing higher amount of penalty. On an appeal filed by the appellants again, CESTAT, vide final Order dated 30.8.2006, held that the process of lacquering would not amount to manufacture and remanded the matter of classification of covered yarn, with an observation that as regards the classification of the special type of yarn being manufactured by the appellants, from the test report given and the description of the yarn, we find that the dispute of classification of the yarn cannot be limited to Heading 5605.10 or 5605.90 and the classification of the yarn will have to be reconsidered, also, under Heading 5605.00 and the relevant HSN Notes. Commissioner passed Order-in-Original dated 2.4.2008, confirming the demand of ₹ 25.97,206 holding that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Examiner says that Sample of the yarn sent alongwith your letter cited above examined and found that the sample under reference is a metallized polyester yarn and composed of a core of metallized polyester yarn around which two nylon filament yarns are loosely twisted together. This is not a gimped yarn as the metallized yarn has not been covered fully with the two nylon filament yarn nor two nylon filaments have been fully covered by metallized polyester yarn. It may therefore fall as other metallized yarn under Chapter sub-heading 5606.90 ; It is well settled that the function of the Chemical Examiner is to furnish the analysis of the samples tested and not the classification of the goods. Classification of goods is the function of the Commissioner. Hence, the classification indicated in test report cannot be adopted; In any case, the test report does not go against the appellants. On the other hand, the test report jumps to conclusion to suit the case of the department; test report categorically states that the covered yarn is not a gimped yarn; hence, the exclusion provided in heading 56.05 is not applicable to the present case; test report clearly states that the yarn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 2,24,478, as per Annexure H-1 to the SCN, is incorrect. Revenue is trying to compare the value allegedly shown in Annexure C vis- -vis the value as per the excise duty gate passes for sale to parties other than Hiro Industries; the appellants had already established in relation to Annexure C that the entries shown therein relate to sale of Hiro Industries as the entire Annexure relates to Hiro Industries. Therefore, arriving at the undervaluation in Annexure H-1, the department is in fact taking into account the sale price of Hiro Industries to its customers and comparing it with the sales price of the independent customers of the appellants. This basis is entirely incorrect. 3.5. Learned Counsel for the appellants submits that it has been alleged that the appellant has removed the metallized polyester film itself as such after taking MODVAT credit on the same and without reversing the MODVAT credit; this allegation was made on the premise that in the factory gate pass and delivery challans seized by the Department and listed in this Annexure, the description of the goods has been given as metallized polyester film; it was pointed out that the very same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per kg is considered, then also there will be no differential duty payable whatsoever. 3.7. Learned Counsel for the appellants submits that the entire demand is barred by limitation; there is no suppression of facts; nonpayment of duty, if any, is only due to the appellant s bona fide claim, that the covered yarn is exempt from duty, which was made repeatedly in the past; even if the Department is to view that covered yarn is not exempt from duty, this duty can be demanded only within the normal period of limitation; Assistant Collector vide order dated 17.1.92 granted the exemption to covered yarn. Confiscation of the seized goods is invalid and incorrect since the goods have already been provisionally released; goods are not available for confiscation; order of confiscation by the Commissioner is invalid. In the remand proceedings, the Commissioner has imposed penalty of ₹ 20 Lakhs, while in the earlier proceedings, penalty imposed on the appellants was ₹ 3 lakhs. The excess penalty imposed in the impugned order is not sustainable and violates natural justice. The present proceedings have been continued with the department consequent to the introductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000=00 penalty was imposed upon him; in the second OIO dated March 2002, amount of ₹ 72,23,979=77 was confirmed as duty payable by the main appellant and an amount of ₹ 4,00,000=00 penalty was imposed on him; in the third OIO (impugned order) amount of ₹ 25,97,206=00 was confirmed as duty payable by the main appellant and an amount of ₹ 4,00,000=00 (Four Lakhs) penalty was imposed on him; fact that in de novo proceedings, penalty was increased from Rs. Eighty Thousand to Four Lakhs ( five times), even when the amount of duty from the manufactures was decreased substantially by nearly to one-third, needs to be noted; a perusal of SCN, which is signed by the Collector, Central Excise, Mumbai I Shri Gurbax Singh and attested by Shri C. K. Ninhavne, Assistant Collector, Central Excise, Mumbai I , his name, Shri P.N. Chabria, is overwritten by someone with no signature or date (internal page 7 para 11(iv), internal page 9 para 12 and para 13; it is crystal clear that the said Collector was satisfied that there was no evidence against him in the case and thus did not wish to issue any Notice to show cause for imposition of any personal penalty; On this count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting of same textile material. The Appellants submits that in view of the above the product falls under 5605.10. It is required to go through the relevant HSN Notes of the heading 56.05 Metalised yarn, whether or note gimped, being textile yarn, or strip or he like of heading 54.04 or 54.05, combined with metal in the form of thread, strip or powder or covered with metal. This heading covers: (1) Yarn consisting of any textile material (including monofilament, strip and the ike and paper yarn) combined with metal thread or strip, whether obtained by a process of twisting, cabling or by gimping, whatever the proportion of the metal present. The gimped yarns are obtained by wrapping metal thread or strip spirally round the textile core which does not twist with the metal. Precious metals or placed metals are frequently used. (2) Yarn of any textile material (including monofilament, strip and he like, and paper yarn) covered with metal by any other process. This category includes yarn covered with metal by electro-deposition, or by giving it a coating of adhesive (e.g. gelatin) and then sprinkling it with metal powder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no doubt that nylon/polyester/viscose are man-made filaments. Therefore, metalised yarn of man-made filaments falls under 5605.10. The Appellants submits that metalised yarn predominates the covered yarn manufactured by them; the yarn is used for weaving of fabrics wherein shining line are pattern of metalised yarn is required; the metalised yarn by itself is very brittle and delicate; being very very thin it would not be useful in weaving fabrics; therefore, it is covered with other man-made filaments for giving extra strength and does not break-up while weaving. The revenue does not contend the fact that the predominant material in the covered yarn manufactured by them is man-made filament. In the instant case, metalised yarn is taken and twisted with 33% of polyester/nylon/viscose yarn obtained from market. As per the Chapter Note and HSN Note there is no doubt that metalised yarn falls under 5605. If the metalised yarn is covered with man-made filament yarn, it would falls under 5605.10 as contended by the Appellants. If the activity of covering was done by other than man-made filaments, the same would have been classifiable under 5605.90. Therefore, we uphold the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries to others should be treated as normal price. The Appellants contended that they have sold to independent buyers at the same rate; M/s. Hiro Industries are not related to Appellants; M/s. Hiro Industries is a partnership firm having 3 partners and are having separate registration for sales tax, income tax purpose; the Appellants firm has two partners and are not common with M/s. Hiro Industries; the Appellants have no stake or interest in M/s. Hiro Industries and vice-versa; the dealings are on a principal to principal basis. The Appellants contended that the following case are in their favour. (i)Mahavir Industries (RMD) v/s. CCE, BBSR-II 2004 (170) E.L.T. 27 (Tri. Kolkata). (ii) CCE-II, Chennai v/s. Beacon Neyrpic Ltd. 2006 (193) E.L.T. 16 (S.C.) (iii) Raliwolf Ltd. UOI 1992 (59) E.L.T. 220 (Bom.) (iv) R.B. Agarwala Co. P. Ltd. v/s. CCE. Bhubaneshwar II 2007 (217) E.L.T. 417 (Tri. Kolkata) (v) CCE, Kanpur v/s. Palial Glass Works 1997 (94) E.L.T. 96 (Tribunal) (vi) Shiva Tobacco Company v/s. CCE, New Delhi 1996 (87) E.L.T. 177 (Tribunal) 6.4. We find that depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised yarn cleared as such or after lacquering. However, the Appellants submit that the issue raised by the Learned Commissioner is beyond the scope of the Show Cause Notice. On-going through the Show Cause Notice we find that the Appellants contention are correct. Learned Commissioner has travelled beyond the scope of the Show Cause Notice. Therefore, the demand is liable to be set aside. 6.8. The Learned Commissioner has imposed a penalty of ₹ 20, 00,000 on the Appellants in terms of Rules 173 Q, 9(2), 52A, 210 226. As per the above discussions the sustainable demand is now limited to ₹ 1, 04,525 we find that the penalty be also restricted to ₹ 1,00,000. 7. Coming to the other appeal E/151/2011 we find that the Appellants submitted that penalty imposed on him has been increased in successive remand proceedings. He submitted that the impugned OIO is perverse, bad in Law; there are 3 OIOs passed by different (persons) Original Authorities; twice the Hon ble CESTAT, Mumbai remanded the matter on various grounds; in the first OIO dated October 1992, amount of ₹ 72, 23,979=77 was confirmed as duty payable by Main appellant and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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