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TMI Blog2005 (8) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... al shrinkage of less than 1.5%. Statements of the following persons were recorded. (i) Shri A. Farookdeen, Processing Manager (ii) Shri R.D.Thiagarajan, Sr. Officer (Processing) (iii) Shri M. Rajamanickam, Production Co-ordinator (iv) Shri P. Chandran, Partner The statement of the above persons revealed that fabrics with residual shrinkage of less than 1.5% were manufactured by the appellants' firm. The Officers drew eight samples of the fabrics of different sizes for testing the residual shrinkage in their in-house laboratory. The test results revealed that the residual shrinkage for all the finished fabrics was within 1.5%. Again samples were drawn and sent to the Chemical Examiner, Customs House Laboratory, Chennai for further test. Out of 10 finished samples of 9 fabrics had the residual shrinkage nil. The appellants maintained a note book indicating the shrinkage of the sample. The test results obtained by the departmental officers were in accordance with the test report contained in the shrinkage note book. Shri A. Farookdeen, Processing Manager had admitted that they had manufactured shrinkage proof fabrics having residual shrinkage 1.5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Chemical Examiner, New Delhi. Retest was done as desired by the appellants. After observing the principles of natural justice, the jurisdictional Commissioner issued the impugned order. In the impugned order, the Commissioner held that the Appellants are not entitled for the benefit of Notification No. 8/96 and suppressed facts with an intent to evade duty. The details of the impugned order are as follows:- Sl. No. SCN Dated Duty Confirmed Rs. Amount of duty dropped Rs. Period Penalty Rs. 1. 15-12-1999 1,90,54,897 1-6-1987 to 10-5-1999 3,07,41,541/- 2, 31-12-1999 93,194 7,67,187 4-6-1999 to 30-6-1999 50,000/- 3. 27-1-2000 78,032 11,13,212 7/99 35,000/- 4. 3-3-2000 1,98,326 5,34,299 8/99 1,00,000/- 5. 4-4-2000 3,04,725 12,58,512 9/99 to 10/99 12,58,512/- 6. 1-6-2000 Dropped further proceedings initiated. 7. 28-11-2000 Dropped further proceedings initiated 8. 26-4-2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith intent to evade payment of Central excise duty? The ld. Advocate invited our attention to the letters dated 14-10-96, 29-10-96, 4-2-97 and 18-3-97 addressed by the appellants to the Department to establish the bona fide of the appellants. In the first letter dated 14-10-1996, the appellants informed the Assistant Commissioner of Central Excise, Coimbatore III Division of their intention to set up a factory for the manufacture of cotton processed fabrics at Somayampalayam with an annual capacity of 12 lakhs metres. It was further informed that the commercial production would commence in the month of January, 1997. They also informed that some machineries had already been received and they would like to avail Modvat credit on 29-10-96. The second declaration under Rule 57Q was filed in respect of certain machineries. Even they had declared that the capital goods should not be used for the production of a final product which is exempt from payment of duty. Further, two more declarations were sent on 4-2-97 and 18-2-97. After 18-2-97, the appellants did not communicate with the department. In other words they did not inform the department of the commencement of production. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it only on 15-10-1999 for the investigation, which culminated in the issue of show cause notices. No doubt it is the responsibility of the appellants to have informed the department regarding the commencement of the production. They should also have clarified in writing from the Department about the dutiability of their finished product. This is definitely a lapse on their part. However, there is no documentary evidence or otherwise to show their intention to evade payment of central excise duty. They have submitted that their production is meant for manufacture of export garments. This submission has not been negatived by any evidence collected by the department. In these circumstances, it is very difficult to sustain invocation of the extended period. The following case law cited by the appellants are relevant :- (a) Padmini Products v. CCE - 1989 (43) E.L.T. 195 (S.C.) (b) Tamilnadu House Board v. CCE, Madras - 1994 (74) E.L.T. 9 (S.C.) (c) Cosmic Dye Chemicals v. CCE, Bombay - 1995 (75) E.L.T. 721 (S.C.) (d) Collector v. Fedders Lloyds Corpn Ltd. - 2005 (182) E.L.T. A.38 (S.C.) (e) Ugamchand Bhandari v. CCE, Madras - 2004 (167) E.L.T. 491 (S.C.) Hence for the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying the process desizing, scouring, bleaching, dyeing and finishing on the fabrics. Even if no processes have been carried out on the fabrics the very fact that these facilities are available in the factory is good enough to deny the benefit of Notification to the fabrics manufactured by the appellants. Therefore we are in agreement with the adjudicating authority on the second issue. (iii) Whether the appellants manufactured shrink proofing fabrics? As per Note 3 of Chapter 52 shrinkage proofing shall amount to manufacture. The shrink proof fabric is liable for duty. Therefore, if there is evidence that the appellants manufactured shrink proof fabrics and cleared them they are liable to pay duty. Shrink proof fabrics would be classifiable under Heading 5207.29. Ld. Advocate invited out attention to C.B.E.C. Circular No. 15/110/61-CX dated 27-4-64 according to which shrink proof fabrics will be subjected to duty as processed fabrics only if they are "marketed" as shrink proof fabrics having residual shrinkage of 1.5% or below. It was submitted that the shrinkage in respect of the fabrics manufactured by the appellants is 3% and above. Therefore, as per the Board's Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith any evidence that the appellants cleared the goods for home consumption, in the interest of justice and fair play, the appellants should be given an opportunity to produce evidence regarding use of the fabrics produced by them in the manufacture of garments and also proving of export of such garments. Therefore, this issue is remanded to the jurisdictional Commissioner. The jurisdictional Commissioner shall give an opportunity to the appellants to demonstrate the facts of export of the garments manufactured out of the fabrics produced in the appellants' factory. Duty is demanded only on the quantity of fabrics which are not shown to the satisfaction of the Commissioner for having used in the manufacture of export garments. After examining these aspects the Commissioner shall compute the duty liability, if any. With these observations, we remand the matter to the Commissioner by setting aside the duty demand. iv. Whether the appellants are liable to pay interest and penalty? In view of our findings that the appellants were under the bona fide belief that no duty was payable on the fabrics manufactured by them. The imposition of penalty is not justified. As regards th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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