OSWAL YARNS Vs. CCE

JUDGEMENT

(1.) THIS is an appeal at the instance of the assessee challenging the order passed by the Commissioner of Central Excise, Chandigarh dated 28.3.2002. Under the above order the Commissioner had confirmed the duty demand of Rs. 27,03,952 under Rule 9(2) of the Central Excise Rules read with Section 11A of the Act. He also imposed a penalty of an equal amount and directed to pay interest under Section 11AB. Aggrieved by the above'the assessee has come up in appeal.

(2.) THE assessee is engaged in the manufacture of woollen yarn in their Unit No. II from March 1995. The dispute relates to Unit No. I where they were undertaking manufacture of shoddy yarn out of mutilated synthetic rags, hosiery cuttings. They had not taken Central Excise registration in respect of Unit No. I and had been effecting clearances thereof without payment of Central Excise duty. Pursuant to visit by the Central Excise officers, show cause notice dated 16.3.99 was issued. It is alleged therein that shoddy yarn being manufactured out of mutilated synthetic rags, hosiery cuttings etc. would come under Heading 55.09 in view of Chapter Note 3 to Chapter 55. Period covered by the show cause notice was 1.4.94 to 31.10.95. It was alleged that during the relevant period the assessee had used synthetic waste after carding etc. Sample of the yarn drawn from a lot of 57.00 kg. On 27.3.96 confirmed pre -dominance of synthetic material in it.

(3.) IT was contended before the Commissioner that duty demand for the period prior to 26.5.95 cannot be sustained as during that period Heading 55.09 related to MM fabrics and not yarn. It was also contended that the extended period of limitation invoked is not sustainable in this case since the officers of the department were very well aware of the activities carried on in Unit No. II of the assessee since they were visiting frequently Unit No. I which is a registered unit. Correctness of the test report of the sample drawn on 27.3.96 was also disputed. It was also submitted that the demand has been wrongly calculated without according abatement of element of duty from the value of impugned goods which is contrary to the decision in the case of Srichakra Tyres Ltd. v. CCE, Madras, 2002 (80) ECC 588 (T) : 1999 (108) ELT 361. The assessee further pointed out that the provisions of Section 11AB is not attracted in the present case as the period of demand was from 1.4.94 to 31.10.95.