CEAT LTD. Vs. CCE

JUDGEMENT

(1.) These three appeals have been filed against the decision of the Commissioner of Central Excise Mumbai II, made in October -in -Order No. 20/2002 dated 25.2.2002 whereunder he has demanded a sum of Rs. 105,86,37,838.20 towards duty and imposed a penalty of equivalent amount under Section 11 AC of the Central Excise Act. The order also confiscated plant and machinery of both factories of the appellant and fixed the fine at Rs. 1 crore. The impugned order further ordered imposition of penalty on two of the employees namely R.K. Dawan and Velayuthan at Rs. 5 lacs each. The order also imposed penalty of Rs. 10 lacs on the assessee under Rule 173Q of Central Excise Rules.

(2.) The appellant is engaged in the manufacture of tyres and tubes falling under chapter 40 of the Central Excise Tariff Act 1985. They have two factories at Bhandup in Mumbai and Nashik in Maharashtra. In the Bhandup factory of the appellant, the appellant is also engaged in the manufacture of intermediate product called DIPPED TYRE CORD FABRIC out of the raw material purchased from grey nylon tyre cord fabric manufacturers. The grey nylon tyre cord fabric is classified by such manufactures under chapter heading 5902 of the CETA. On the grey nylon tyre cord fabric, basic Excise Duty and Additional Excise Duty under the Additional Duties of Excise (Goods of Special Importance) Act were paid. Central purchase department of the assessee at Bhandup places order for grey nylon tyre cord for both factories namely Bhandup factory as well as Nashik factory. At the Assessee's Bhandup factory the grey fabric is received and it is subjected to process of dipping and coating within that factory. The purchase order indicated that the supplier should deliver the material to Ceat Ltd. Bhandup on behalf of Ceat Ltd., Nashik. The purchase order also requires the supplier to indicate in their invoice the name of the consignee as Ceat Ltd., Bhandup account Ceat Ltd., Nashik. The Nashik factory of the appellant had applied to the Central Excise authorities at Bhandup/Nashik to operate under Rule 57F(3) of the Central Excise Rules read with notification 214/86. Nashik factory does not have the facility to dip and coat the nylon tyre cord fabric. Therefore, it is the practice of the appellants that after procurement of grey nylon tyre cord fabric from the manufacturer to subject such grey fabrics to the process of dipping and coating at Bhandup factory only. The appellants from its Bhandup factory cleared the dipped tyre cord fabric in terms of Rule 57F(4) 57F(3) of the Central Excise Rules manufactured out of the raw material procured/purchased for purpose of its Bhandup factory and also for separately received by it on behalf of its Nashik factory. To put it in other words, Bhandup factory acted in a way as a job worker for Nashik factory, for carrying out the process of dipping and coating of the grey nylon tyre cord fabrics.

(3.) The department issued about 8 show cause notices. The show cause notice dated 31.3.2000 issued by the Anti Evasion wing of the department wherein it was mentioned inter alia that the appellant was evading the Central Excise duty by clearing dipped tyre cord fabric manufactured in their factory at Bhandup, to their factory at Nashik without discharging the Central Excise and the sister unit at Nashik were availing modvat credit wrongly on the inputs namely grey nylon tyre cord fabric, without receiving the said inputs in the Nashik factory and without using the same in the manufacture of the finished goods. As far as Bhandup factory is concerned, show cause notice dated 31.3.2000 charged at paragraph 4.1 thereof that as per the stock records maintained at Bhandup factory, it is revealed that the inputs required for manufacture of dipped tyre cord fabric, were purchased by Ceat Ltd., Bhandup, on their own account and purchase orders for procurement of raw materials were placed on the suppliers directly by the said Bhandup factory based on the requirement of both factories. The notice further charges that the raw materials were received directly and consumed by Bhandup factory on their own account in their factory. Further the appellant has purchase of raw material were made directly by Bhandup factory and the cost of new material were recorded in the purchase cost of Bhandup factory. On the basis of the statements recorded from various officers of the appellant company, the show cause notice charges that the challans were prepared and issued at Bhandup as if raw materials/inputs were supplied by Ceat Nashik. It is further charged by the department that Nashik factory did not purchase any input therefore they could not have sent any inputs either from the factory or from the supplier directly and therefore the appellant have misdeclared the fact by issuing false Annexure -II challans. It is further charged by the department that all inputs were directly purchased and procured by M/s Ceat Bhandup which consumed the inputs, manufactured the DIPPED TYRE CORD FABRIC on their own account. On the basis of other allegations with which we are not dealing, as it is not relevant for the disposal of these appeals and on the basis of the replies filed by the appellant, the show cause notice proposed to demand duty of Rs. 71.53 crores on dipped fabric cleared from Bhandup factory and also proposed to deny, as far as Nashik factory is concerned, modvat credit on dipped nylon tyre cord taken at Nashik factory. The show cause notice also proposed to impose penalty. Subsequent to the said show cause notices, the department issued 7 show cause notices from 11.12.2000 to 21.11.2001 proposing to demand duty of Rs. 3.70 crores from Bhandup on dipped fabric cleared from it to Nashik factory. These show cause -notices also proposed to impose penalty.