PALAYAM TEXTILES PROCESSORS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) M /s Palayam Textiles Processors hereafter, also PTP, undertook processing of grey fabrics such as dyeing, washing, bleaching, etc. They paid duty on the processed fabrics based on the landed cost of raw material plus job charges. Investigation undertaken by the authorities revealed that during the period January 2000 to July 2004, the appellants had adopted incorrect value for payment of duty. During the period, the appellants short paid excise duty of Rs. 8,41,043/ -. The original authority demanded differential duty of Rs. 8,41,043/ - invoking larger period under Section 11A of the Central Excise Act, 1944 (the Act). He imposed equal penalty under Section 11AC of the Act and a penalty of Rs. 25,000/ - under Rule 25 of the Central Excise Rules 2001/2002 on PTP. The duty demanded also included duty on packing charges recovered by the appellants in several cases which had not been included in the assessable value during the material period. Vide the impugned order, the Commissioner (Appeals) affirmed the order of the original authority. Both the authorities denied deemed credit available to the processed fabrics on the ground that the duty had been short paid initially by suppression of facts, fraud, etc. and the same had not been paid at the time of clearance of the impugned goods.

(2.) In the appeal before us, it is submitted that the Commissioner (Appeals) passed the impugned order without applying his mind and had reproduced the order of the original authority. The short payment had occurred due to their bonafide belief that the value of processed fabrics had to be computed based on the quantity (length) of the processed fabrics and not that of pre -shrunk fabrics. This method of computation of value was consistent with the decision of the Tribunal in the case of Gemini Dyeing and Printing Mills v. Commissioner reported in : 1997 (91) E.L.T. 195 (Tri.) A different Bench of the Tribunal had held to the contrary and that view was upheld by the Larger Bench of the Tribunal in the case of Ram Kumar Mills Pvt. Ltd. v. Commissioner of Central Excise, Bangalore : 2005 (183) E.L.T. 356 (Tri. - L.B.). Therefore larger period could not have been validly invoked to demand differential duty from them. They cited several case laws in support of the claim that when the short -payment had occurred due to assessee's bonafide belief, longer period under Section 11A of the Act could not be invoked to demand the duty short paid.

(3.) We have carefully considered the case records and rival submissions. There is no dispute that different Benches of the Tribunal had held different views on the method of computation of value for payment of duty on processed fabrics manufactured from grey fabrics which shrank in the process. The procedure followed by the appellants was in line with the view held by the Tribunal in the case of Gemini Dyeing and Printing Mills Ltd. (supra). The appellants herein had computed the assessable value of processed fabrics taking into account the length of the shrunk fabrics (processed) and applying the unit value (per linear meter) of the grey fabrics. The controversy was finally settled in 2005 when Larger Bench of the Tribunal in the case of Ramkumar Mills Pvt. Ltd. (supra) held that a different view held by the Tribunal in Indian Rayon and Industries Ltd. v. Commissioner, 2002 (150) E.L.T. 388 (Tri. Kolkata) was in consonance with the Apex Court's judgment in Ujagar Prints v. Union of India reported in, 1981 (39) E.L.T. 493 (S.C.). In the circumstances, we hold that the appellants had entertained a bonafide belief that the wrong method they followed for computation of value was correct. Therefore longer period could not have been validly invoked to confirm the impugned demand. Accordingly, we allow the appeal filed by the assessee in part and direct the original authority to compute the liability of the assessee for the normal period. Assessee shall be entitled to the deemed credit as was available to the duty initially paid. As regards packing charges recovered in certain cases prior to 1.7.2000, when transaction value was introduced, we find that the same cannot form part of the normal price as goods had been normally sold without any packing. However packing charges form part of transaction value post 30.6.2000. Collection of these charges was suppressed from the department; these amounts were not reflected in the monthly returns furnished to the department. We therefore sustain demand pertaining to these charges invoking the larger period. As regards the deemed credit, the adjudicating authority shall examine the assessee's entitlement in the de novo proceedings keeping in view the provisions restricting the same to the amount initially short paid on account of reasons other than suppression of facts, fraud etc. The appeal is thus allowed by way of remand. PTP shall be heard before a fresh decision is taken. Appeal is disposed of.