MAHESHWARI MILLS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) APPELLANT , M/s Maheshwari Mills Ltd. is a manufacturer of yarns of various materials like cotton, cellulosic etc. Part of the yarns produced are also captively woven into fabrics by the appellants. The dispute in the present appeals relates to valuation of yarns. Further, penalties under Section 173Q(2) of the Central Excise Rules and demand for interest under Section 11AB for the period 28.9.96 to 31.3.99 have been made.

(2.) UNDER the impugned orders, Commissioner, Central Excise, Ahmedabad held that M/s Maheshwari Mills had misdeclared the assessable value of the yarns during the period 1.6.94 to 31.3.99 and evaded a large amount of duty amounting to over Rs. 80 lakhs. Accordingly, by invoking proviso (extended period) to Section 11A of the Central Excise Act, Commissioner has demanded the duty so evaded and has imposed a penalty of Rs. 80 lakhs on M/s Maheshwari Mills. Separate penalties have been imposed on its officers. Appeal No. E/2766/01 -NB(A) is by M/s Maheshwari Mills and other appeals are by its officers. 2. The very first contention of the appellant is that invocation of the extended period was not justified in the facts of the present case. It is being pointed out that proviso is attracted only in cases involving suppression/misdeclaration of facts etc. with intent to evade payment of duty. The appellant has submitted that in the present case, full facts about the basis for valuation was known to the Central Excise Authorities. The assessee was all through filing price list before the Central Excise authorities. It was clear from those price lists that duty was being paid based on the value at the spindle stage and cost of subsequent processes like sizing, warping, winding, etc. (which were exempt from central excise) duties were not included. With regard to captively consumed yarn the appellant was computing the cost of yarn upto spindle stage and was discharging duty liability accordingly. The cost was worked out on the basis of cost accounting records certified by the Chartered Accountant every month. The method of costing and the details of cost working were known to the Central Excise authorities and had been verified by them. The appellant's unit was also audited by several audit groups of Central Excise as well as Revenue audit branch of the Accountant General. In these circumstances, it is the appellant's submission that the allegation of suppression of facts cannot arise and the duty demand raised beyond the extended period is required to be quashed on the ground of limitation alone.

(3.) WITH regard to the merits of the case, it is the appellant's submission that under Notification No. 71/94 dated 23.3.94, 35/95 dated 16.3.95, 84/95 dated 18.5.95 and 8/96 dated 23.7.96, cost of processes which the Revenue seeks to include in the assessable value now had been exempted. It is being submitted that in a case where processes are exempted under specific notifications, there could be no demand for including the cost of those processes in the assessable value of the goods. The appellant has submitted that since the costs after the spindle stage remains exempt the value upto spindle stage alone could be taken. They have relied on the decision of the Apex Court in the case of CCE, Hyderabad v. Divya Enterprises, 2003 (87) ECC 705 (SC) : 2003 (153) ELT 497 in support of the submission that assessment will have to be with regard to the product under taxation and not with regard to the product being cleared from the factory. It is being pointed out that in the aforesaid decision, the Apex Court has held that since terry towelling fabrics was not exempt under Notification No. 65/87, duty was required to be paid on the terry towelling fabrics manufactured by the assessee, despite the fact that assessee had paid duty on the next stage of terry towels.