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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 ..... paid polyester films with suitable lacquers; the lacquered metallized film was sold as such in the market in that condition by the appellants to its customers. Some of the metallized polyester film was further used by the appellants in their factory for the manufacture of metallic yarn; metallic yarn was sold as such in the market without payment of duty; in addition, the appellants bought duty paid nylon yarn /viscose yarn/ polyester yarn from the market; the yarns were then twisted together with the metallic yarn manufactured as above; composition of twisted yarn, also called as covered yarn, was 67% of metallic yarn and 33% of polyester yarn or nylon yarn or viscose yarn; appellants also regularly received substantial quantity of duty paid lacquered metallized polyester film from M/s. Pan Electronics Pvt. Ltd. and C & N Ganges Pvt. Ltd and sold as a trading activity; apart from receiving duty paid metallized polyester film, lacquered metallized film purchased form the market was also sold by the appellants. Appellants had availed MODVAT credit on input I.e. metallized polyester film used for making lacquered metallized polyester film. The appellants filed necessary classificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered yarn amounted to manufacture; covered yarn is classifiable under sub-heading 5605.90 as other metalized yarn and not under sub-heading 5605.10 and benefit of Notification No.45/86- CE was not available; as the covered has been sold to the related person i.e. Hiro Industries, the valuation needs to be done on the basis of price at which Hiro Industries sold the same to their buyer; covered yarn as per Annexure C to the SCN was removed clandestinely by the appellants and that Cenvat credit of inputs used in the LMPF is required to be revered. 3. Learned Counsel for the appellants submits that there is no manufacturing activity vis a vis covered yarn; 67% by weight of the metallic yarn is twisted with 33% by weight of any one of nylon yarn or viscose yarn or polyester yarn, as the case may be; The essential character of the product continues to be the metallic yarn; Since metallic yarn has already paid duty at nil rate as leviable under the central excise law, no further duty is leviable; In any case, the Covered yarn was classifiable under sub-heading 5605.10 and not under sub-heading 5605.90; classification of the product cannot be based on the test report; Covered yarn was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y nylon filament yarn; it's a known fact that yarn can be made from fibres by a process of spinning or straightaway made into filament yarn by extrusion through spinneret; nowhere, it is stated that the yarn is not a filament yarn; hence, the test report is incorrect in its conclusion that the covered yarn in question is classifiable under sub-heading 5605.90; Sl. No.10 of Notification No.45/96-CE dated 10.2.86 grants exemption to man-made metallic yarn falling under sub-heading 5605.10 subject to the condition specified there in. The condition of the notification is fulfilled since the covered yarn is made from duty paid metallized yarn in question. 3.2. On the allegation of related person, learned Counsel for the appellants submits the appellants are a partnership firm; Hiro Industries is a different partnership firm having different set of partner; it is settled law that partnership firms having different partners cannot be said to be related persons; in any case, the department sought to support the charge of under-valuation by computing that the assessable value on the basis of alleged cost of manufacture; when actual sales price to independent buyers is available, the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is indicated only for a lacquered film; the metallized polyester film does not have any colour and only lacquered film is referred by the colour depending upon the colour of the lacquer; appellants have enclosed, as Annexure 23, a chart along with the factory gate passes relating to Annexure D listing out the colour indicated in the factory gate pass/delivery challan to prove that items represented only lacquered metallized polyester film. The Commissioner finds that even if it is assumed that the appellants have cleared LMPF (finish product) and not the Metalized polyester film (inputs), the fact remains that the finished product have been cleared without payment of duty and hence, credit takes on the inputs is required to be reversed. The appellants submit that since inception of the proceeding, the department argued that the Lacquering amounted to manufacture; there is no proposal in the Show Cause Notice regarding the reversal of credit on the inputs used in the LMPF; Department had not taken alternative pleas of reversal of credit on the inputs used in the LMPF, at any stage of the proceedings. The ground now taken by the Commissioner regarding the reversal of credit on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 132 of the Finance Act, 2001. The appellants rely on the following decisions: (i). CCEC Vs. RG Agarawal - 2009 (234) ELT 215 (Guj) (ii). Agarwal Pharmaceuticals Vs. CCE-2002(146) ELT 190 (T) (iii). Punjab Recorder Limited Vs. CCE - 2001 (132) ELT 41 (T) (iv). Kamlesh Kumar Goel Vs CCE - 2008 (223) ELT 65 (T) 4. The other appellant submits that he is an Individual, who was one of the three partners of M/s. Hiro Industries; In Appeal No. E/477/2011, the main appellant denied contravention of any Rules and have also submitted that the goods as processed and cleared by them do not attract any Central excise duty on the various grounds; as claimed in SCN he was not a market executive & authorized signatory of M/s. Apsara Metallica Industries; he was looking after the marketing side of M/s. Hiro Industries, one of the customers of M/s. Apsara Metallica Industries; his firm used to get goods under cover of Central Excise Invoices of the manufacturers; since his firm was not registered with Central Excise, they were clearing goods on delivery challans and commercial invoices to their customers; there was no financial arrangement or flow back of any kind between his firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confiscation; his firm was shut down in 1995 and at present he was 70 years old retired person have no source of income; penalty imposed on him may be set aside so as to allow him to lead tension free peaceful retired life. 5. Learned Authorised Representative for the department has reiterated the findings of OIO. 6. Heard both sides. Brief issues for discussion in this case are (i). Classification of Covered yarn manufactured by the appellants whether under 5605.10 or 5605.90 or 5605.00. (ii). whether the appellants are eligible for benefit of notification No 45/1986 (iii). Whether appellants are liable to pay duty of Rs. 1,04,525 on the goods alleged to have been clandestinely removed; duty of Rs. 16,58,853 on account of undervaluation of metallized yarn and Rs. 1,21,321 on the alleged undervaluation of covered yarn. (iv). whether the appellants are liable to reverse credit of Rs. 7, 21,507 on inputs. 6.1. Coming to the issue of classification, the Appellants submit that the obtain metallic yarn by micro-slitting lacquered metalised polyester film; Department has accepted its classification under heading 5605.10; they purchased duty paid polyester / viscose / ny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as described above). It further includes certain other forms of yarn made in the same way and used for similar purposes, consisting of two or more parallel metallised yarns held together with a binding of metal thread or strip, and yarn or bundles of yarn gimped with yarn of this heading. Metallised yarn may be gimped. It is used in the manufacture of trimmings and lace and of certain fabrics, as fancy cords, etc. The heading does not include: (a) Yarn composed of a mixture of textile materials and metal fibres conferring on them as antistatic effect (Chapters 50 to 55, as the case may be). (b) Yarn reinforced with metal thread (heading 56.07) (c) Cords, gallons or other articles having the character of ornamental trimmings (heading 58.08). (d) Wire or strip of gold, silver, copper, aluminium or other metals (Sections IIV and XV) 6.2 On going through the above, it is clear that heading 5605 covers metalised yarn, whether or not gimped, being textile yarn, or striped or light heading No.54.06 or 54.07, combined with metal in the form of thread, striped or powder or covered with metal. It is evident that the covered yarn manufactured by the Appellants contained me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of covered yarn for the period April 1990 to March 1991. The Appellants submit that goods have been initially cleared on payment of Excise duty against the gate pass issued by them to M/s. Hiro Industries; since the units are located in the same premises, at the time of physical removal of the material from the premises to outside area, the Appellants issued its factory gate pass so that the security staff permit the movements; clearance of 13483.835 kg of covered yarn by the Appellants tallies with total clearance of M/s. Hiro Industries. The Learned Commissioner has given a finding that the argument cannot be acceptable as it not substantiated by any documentary evidence and that the department has included only 1776.75 kg of covered yarn under clandestine removal and not all the quantity of 13483.835 kg as contended by the Appellants. We find that the Learned Commissioner has a point. 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. Therefore, we find that the Learned Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that extended period can also be not invoked. In the result the allegation of under valuation is not sustained. 6.5. Coming to the demand of duty of Rs. 1,12,321 by holding that exemption under notification No.175/86 is not applicable to the Appellants during the year 1991-92, we find that as discussed above we hold that exemption under notification 45/86 as claimed by the Appellants is applicable to them. Therefore, the exemption contained under 175/86 is also applicable to them. 6.6. Coming to the allegation of confiscability of 777.175 kg of covered yarn seized under Panchanama dated 24.04.1991 we find that out of 1546.21 kg of covered yarn lying in the factory only 769.035 kg was accounted in RG1 register. We find that the Appellants have not given any satisfactory explanation for the same. Therefore, we find that the Learned Commissioner was right in confiscating the 777.175 kg of covered yarn. We find that redemption fine of Rs. 1,00,000 was imposed for goods of a value of around Rs. 3,00,000. We find that this is very high and therefore, restrict redemption fine to Rs. 30,000. 6.7. Coming to the demand of Rs. 7, 21,507 on account of clearance of metalised polye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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