ANGLO FRENCH TEXTILES Vs. CCE

JUDGEMENT

(1.) THE appellant is a unit [Unit C] of M/s. Pondicherry Textile Corporation Ltd. and is a composite mill manufacturing cotton yarn and cotton fabrics. The Corporation has two other units A and B. The appellant receives cotton yarn from units A and B and also produces cotton yarn themselves. All the fabrics manufactured out of such yarns by the appellant -unit are cleared to units A and B on payment of duty w.e.f. 1.3.2002. The department issued a show -cause notice for recovery of differential duty of over Rs. 27 lakhs under Section 11A with interest under Section 11AB of the Central Excise Act from the appellants, alleging that the unprocessed cotton fabrics cleared by them to their sister units during March 2002 to February 2003 had undergone processes amounting to 'manufacture' in the latter units and, therefore, they (appellant) were liable to pay duty on the value determined @ 115% of the cost of production of unprocessed cotton fabrics cleared by them to the sister units. The SCN, which also proposed penalty on the assessee, was issued by the department, upon finding that the appellant had adopted a lesser value for payment of duty on such unprocessed cotton fabrics. The original authority confirmed the demand of duty and imposed on the assessee a penalty of Rs. 10,000/ -. The first appellate authority sustained the decision of the lower authority. In the present application, the appellant seeks waiver of predeposit and stay of recovery in respect of the duty and penalty amounts.

(2.) LD . counsel for the appellant submitted that, as any duty paid by the assessee on the fabrics would be available as Cenvat credit to their sister units, there was a revenue -neutrality situation and, therefore, waiver of predeposit and stay of recovery should be allowed. It was further submitted that, in such a situation, it could not be said that the appellant had undervalued their goods with intent to evade payment of duty. In this connection, reliance was placed on the Tribunal's decision in Kores (India) Ltd. v. Commissioner 2004 (178) ELT 901 (Tri. -Bang.). Ld. counsel also pleaded financial hardships. He produced copies of the Annual Report 2004 -2005 of the Pondicherry Textile Corporation Ltd. The Profit and Loss Account given in this report for the year ended 31st March 2005 indicates a loss of Rs. 222.5 Crores. Ld. SDR submitted that, as the demand of duty was raised without invoking the larger period of limitation, the question whether the assessee had any intention to evade payment of duty was not relevant. On merits, it was submitted, the assessee had no prima facie case inasmuch as, where goods were transferred to sister units, valuation was liable to be done on the basis of 115% of the cost of production as indicated in Board's Circular No. 643/34/2002 -CX dated 1.7.2002. In this connection, ld. SDR relied on the Tribunal's decision in BOC India Ltd. v. Commissioner 2004 (168) ELT 478 (Tri. - Kolkata).

(3.) AFTER examining the records and considering the submissions, we have not found prima facie case for the assessee. The subject goods were, admittedly, cleared to sister units. Such transfer did not involve "sale" as held by the Tribunal in the case, of BOC India Ltd. (supra). Such goods were to be valued under Rule 8 of the Valuation Rules read with the proviso to Rule 9 of the Valuation Rules as per the Board's circular considered by the Tribunal in the above case. The lower authorities have determined the assessable value of the goods in question, in terms of the circular. As regards the plea of financial hardships, we find that the Profit and Loss Account presented before us pertains to M/s. Pondicherry Textile Corporation Ltd. having several manufacturing units. Ld. counsel has not been able to show that the account showing loss of Rs. 222.5 Crores for the year ended 31.3.2005 relates exclusively to the appellant -unit. In other words, the plea of financial hardships of Unit -'C' is yet to be established. 3. Nevertheless, having found substance in the plea of revenue -neutrality and having regard to the fact that the appellant -unit is a Govt. of Pondicherry Undertaking, we are inclined to adopt an extremely lenient approach. Accordingly, the appellant is directed to predeposit only Rs. 5,00,000/ - (Rupees Five lakhs only) [out of over Rs. 27 lakhs] within 8 weeks. Report compliance on 12.6.2006.