SUTHAM NYLOCOTS Vs. CCE

JUDGEMENT

(1.) THIS appeal is directed against the order in original No. 51/2001 dated 29.11.2001 passed by the Commissioner of Central Excise, Coimbatore whereby the Commissioner has classified Nylon x Nylon and nylon x cotton fabrics manufactured and cleared by M/s Sutham Nylocots (hereinafter referred to as appellants ) under heading 5911.90 of the CET Act, 1985. He has also demanded a duty of Rs 68,09,407 under proviso of Section 11A of the CE Act, 1994 besides imposing equal penalty under Section 11AC of the CE Act, 1944 apart from demanding interest under Section 11AB of the Act.

(2.) THE brief facts of the case are that the appellants who are a partnership concern are manufacturers of industrial fabrics of nylon x nylon and nylon x cotton and were clearing the same without payment of duty. The company was registered, as an SSI Unit is the year 1994 for manufacture of Grey Industrial Fabrics. The entire Fabrics manufactured by the appellants were sold to M/s Habasit lakota Pvt. Ltd. The Officers of the Central Excise Department visited the unit on 27.2.2001 and studied the manufacturing process . It was learnt that for the buyers of the goods i.e. M/s Habasit the said fabrics are the main raw materials for the manufacture of spindle tapes transmission belts which are used as spares in the spindle drive system of the textile machinery. The security of the records revealed that they have filed two declarations the first one on 9.1.97 and the other one on 8.7.98 seeking exemption from licence Registration under Rule 174 declaring that they were manufacturing grey fabrics of nylon and cotton and nylon x nylon falling respectively under 6208.10 and 5406.10 and claimed full exemption under Notifications applicable for grey unprocessed fabrics falling under chapters 52 and 54. It was observed by the officers that the goods manufactured by the appellants are not eligible for exemption. A statement was recorded from Shri K.N. Narayanswamy, Managing Director of the appellants on 27.2.2001 Wherein he has stated inter alia that the company was floated in the year 1994 to cater to the needs of the customers requiring Industrial fabrics, and that they manufactured nylon x nylon and Nylon x cotton fabrics and sold them to the companies. He has also stated the process of manufacture including the use of various kinds of machines such as twisting machine wrapping machine, folding arid testing machine for twisting and folding the industrial fabric to M/s Habasit lakota. He has also stated that during the period from Jan, 97 to May, 97 they had manufactured industrial fabrics on their own account and that they ware not registered with Central Excise for manufacture of Industrial fabrics. He has further stated that the goods manufactured by them were as per the specifications of their buyer viz. M/s. Habasit lakota and as per the specifications for manufacture of nylon x nylon fabrics they used 210 D Nylon 6 yarn for warp and weft and for manufacture of nylon x cotton fabrics they used 210 D 6 yarns for warp and 2/3 cotton yarn for weft. In support of his statement he also produced a letter -dated 12.11.1988 from their customer wherein the specifications as noted above was given. Statment was also obtained from Shri N. Subramaian, Managing Director of M/s Habasit lakota Pvt. Ltd., the customers of the appellants wherein he has stated that they were manufacturing among other things synthetic Spindle tapes which is also known as transmission belts, leather transmission belts etc. and that the industrial belts are used for the manufacture of their final product 'Spindle tapes' for use in the textile industry. In short, his statement corroborated with the statement of the Managing Director of the appellants. Proceedings were therefore, initiated against the appellants by issue of show cause notice dated 11.5.2001 and the proceedings culminated in the order impugned against which the present appeal has been filed challenging the classification of the goods as held by the original authority and also invocation of longer period of limitation. They have also challenged the imposition of combined penalty under Section 11AC of the Act and 173Q of the Central Excise Rules, 1944.

(3.) ON the date of hearing i.e. on 19.7.2002, Shri Arvind P. Datar, learned Sr. Counsel for the appellants produced a communication dated 17.7.2002 from the appellant's Company duly signed by the partner stating that the appellants are not contesting the classification of the goods as decided by the department and they would only contest the allegation of suppression of facts. Notes on submission was also submitted by the learned Counsel for the appellants in the court on 19.7.2002, wherein it is stated that "Classification made by the department under Chapter 59 of the tariff is accepted to avoid further litigation with the department".