BHAGYALAXMI PROCESSORS Vs. COMMISSIONER OF C. EX., RAJKOT

JUDGEMENT

(1.) 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 N.K. Gajera, partner of Bhagyalakshmi under Rule 26 of the Central Excise Rules, 2002. M/s. Bhagyalakshmi, M/s. Famous and Shri N.K. Gajera are in appeal before us.

(2.) BRIEFLY , the facts and issues are as follows : (i) Bhagyalakshmi and Famous are partnership firms of S/Shri N.K. Gajera, Shambhubhai Gajera and Mohesh Shah in the former and Vrijlal Gajera, Karamsibhai Gajera and Manubhai Shah. However, there is, no partner common to Bhagyalakshmi and Famous. (ii) Bhagyalakshmi and Famous are engaged in processing of grey fabrics on job work basis for M/s. Movement Impex Trading Company (hereinafter referred to as Movement). Separate bills are raised, for job work by Bhagyalakshmi and Famous and separate payments are made to the said firms. (iii) Grey fabrics sent by Movement are received by Bhagyalakshmi, in whose factory they are subjected to mercerizing and bleaching. There is no dispute that no power is used in the process of bleaching though, with respect to mercerizing, the issue is disputed. Consequent to mercerizing and bleaching, the fabric, in wet condition, is manually shifted to the premises of Famous, which are located in the same compound as Bhagyalakshmi. In the said premises, the said fabric is subjected to hydro extraction/drying (by squeezing), and stentering. The dry fabric is returned to Bhagyalakshmi where it is baled, packed and cleared to Movement. (iv) Neither Bhagyalakshmi nor Famous is registered with the Central Excise Authorities. No Central Excise duty has been paid on the above processes at any stage, either by Bhagyalakshmi or Famous.

(3.) THE dispute relates to the period October 1996 to December 2002. During this period, various Notifications, granting exemption to cotton fabrics subjected to various processes, were issued, of which the following Notifications are of relevance to the present case : (i) Notification 5/98 -C.E., dated 2 -6 -1998, (ii) Notification 5/99 -C.E., dated 28 -2 -1999, (iii) Notification 6/2000 -C.E., dated 1 -3 -2000, (iv) Notification 3/2001 -C.E., dated 1 -3 -2001, and (v) Notification 6/2002 -C.E., dated 1 -3 -2002.